ASHRAF ALI vs BANK OF INDIA LTD. AND 2 OTHERS

(a) This judgment will dispose of Suits Nos. 178/65 and 179/65. The facts leading to the filing of the above suits are shortly as follows :-

(b) Suit No, 1781155 : ' This is a suit for the recovery of Rs, 2,98,260 comprising of Rs, 2,70,000 being the amount of the purchase price paid by the plaintiff for 15000 scrips of Karnaphuli Paper Mills Ltd. And Rs, 28,260 being the amount of interest at 6% for the period from 20th November, 1963 to 16th August, 1965. It has been averred that on or about 19th November, 1963, defendant No, 3 agreed to sell 15000 shares of Karnaphuli Paper Mills Ltd. To the plaintiff @ Rs, 18 per share and that defendant No, 3 represented that the aforesaid shares would be delivered by defendant No. 1, who in turn assured that 15000 shares would be delivered by them to the plaintiff's banker, defendant No, 2 on payment of the aforesaid price. It has been further averred that defendant No, 3 by letter dated 19th November, 1963 instructed defendant No, I to deliver the aforesaid 15000 shares against payment of Rs, 2,70,000 to the plaintiff and that the plaintiff instructed defendant No. 1 to give the delivery of aforesaid 15000 shares to his Banker defendant No, 2 against payment and that the plaintiff also instructed defendant No, 2 by his letter dated 19th November, 1962 to take the delivery of the aforesaid shares from defendant No. 1 against payment, for which the plaintiff enclosed his cheque of Rs, 2,70,000. It has also been averred that on or about 20th November, 1963 defendant No, 2 sent their cheque/pay order for Rs, 2,70,000 on behalf of the plaintiff to defendant No, l requesting the said defendant to deliver 15000 shares of Karnaphuli Paper Mills Ltd and that on or about 20th November, 1963 defendant No. 1 alongwith their letter dated 20th November, 1963 purported and pretended to send 15000 shares/scrips of Karnaphuli Paper Mills Ltd. With their list and defendant No, 2 received the said alleged shares/ scrips and paid for the same. It has been further averred that it was understood that defendant No. 1, was in possession of genuine shares scrips of 15000 shares of Karnaphuli Paper Mills Ltd. And that defendant No, 2 would pay for the same and take the delivery thereof. It has also been averred that defendant No. 1 had advanced money against these shares and accepted them as good security. It has been further averred that on or about 15th June, 1964 the plaintiff learnt that the purported shares/ scrips of 15000 shares of Karnaphuli Paper Mills Ltd. Delivered by defendant No. 1 against .The receipt of Rs, 2,70,000 from the plaintiff through defendant No, 2 were forged certificates and were of no legal effect and did not represent or related to 15000 shares of Karnaphuli Paper Mills Ltd. And that thereupon the plaintiff called upon defendant No. 1 to exchange the aforesaid forged shares for genuine shares or to refund the plaintiff's money, but defendant No. 1 declined to do so. It has been further averred that defendant No, I having received Rs, 2,70,000 from the plaintiff was bound in law as a banker to deliver genuine and valuable securities and that according to the banking pracnce '1cndant No, 2 had to check and take delivery of valuable and genuine share scrips. It has been also averred that in case defendant No. 1 had forged deeds and acted negligently and in violation of the obligations and representations and committed breach of duty which they owed towards the plaintiff and that by their acts of omission and commission wrongfully deprived the plaintiff of Rs, 2,70.000 and made wrongful gain of that amount from the plaintiff. It has also been averred that defendant No, 2 had no authority from the plaintiff to take forged shares, and forged transfer deeds and to debit the plaintiff's account for such payment. On the basis of the above averments the plaintiff has claimed the above reliefs.

(c) Defendant No, I had filed a written statement on 20th January, 1966 but after filing an amendment application (C. M. A. 120/70) which was allowed by an order dated 12th February, 1970 filed an amended written statement on 16th February, 1970, wherein defendant No. 1 has averred that it gave no assurance to the plaintiff for delivery of any share. However, it has been admitted that defendant No, 3 on 19th November, 1963 asked defendant No. 1 to deliver 15000 shares of Karnaphuli Paper Mills Ltd. From his account to the plaintiff' against the payment of Rs, 2,70,000. The content of para 3 of the plaint has been admitted. 1-towever, paras Nos. 5 and 6 of the plaint, as framed have been denied. It has been averred that on 21st November, 1963 defendant No, 2 on behalf of the plaintiff paid Rs, 2,70,000 to defendant No. 1 to the account of defendant No, 3 against the delivery of the shares and that defendant No, 2 acknowledged the receipt of 1 5000 shares under their stamp and initials and that defendant No. 1 did not purport or pretend to sell 15000 shares, but only acted as bankers on instructions of defendant No, 3 to deliver the shares. It has been further averred that there was neither understanding between defendant No. 1 and the plaintiff that defendant No, I was in possession of genuine securities nor defendant No. 1 had agreed to deliver and transfer genuine scrips of 15000 shares of Karnaphuli Paper Mills Ltd. And that defendant No. 1 was expected to deliver only those securities that were lodged with them by defendant No,

3. It has also been averred that the shares in question were given to defendant No. 1 by defendant No, 3 as bankers for being held in his account, as his agent and on his behalf, and that in pursuant to his instructions contained in his letter dated 19th November, 1963 and in .Accordance with the plaintiff's letter addressed to defendant No. 1 the same shares were delivered to the plaintiff's bankers (defendant No, 2) against the payment and that these shares were accepted by the plaintiff's bankers without any objection and receipt therefor, was passed acknowledging that all the shares were received by them. It has been further averred that the plaintiff is estopped from questioning this now and that defendant No. 1 were neither liable to exchange the forged shares for genuine security nor to refund the plaintiff's money and that they acted only as agent of defendant No, 3 under his instructions and delivered what they had received. It has also been averred that there existed no privity of contract between them and the plaintiff regarding the sale of these shares. It has also been averred that the defendant No, I merely acted as agent of defendant No, 3 without any obligation to the plaintiff and made no representations to the plaintiff regarding the genuineness of the share scrips in question and defendant No. 1 did not gain anything, the total of Rs, 2,70,000 received from the plaintiff was credited to the account of defendant No, 3 at a current account with defendant No. 1 and that he used to overdraw his account from time to time on the security of shares which he used to deposit with defendant No, I and that in the same manner, defendant No, 3 deposited 15000 shares, which were received by defendant No 1 in ordinary course of business. It has also been averred that the amount of Rs, 2,70,000 received was credited to the account of defendant No, 3, who drew out the amount in ordinary course and in fact overdrew his account. It has also been averred that the suit is maintainable and it is hit by section 69 of the Partnership Act.

(d) Defendant No, 2 in their written statement have raised legal plea about the maintainability of suit, but have admitted that they had acted in the transaction in question as an agent for the plaintiff. It has been averred that defendant No, 2 acted in good faith in accordance with the instructions of the plaintiff. It has been averred that the plaintiff was member of the Karachi Stock Exchange Ltd. And by and through his staff deals in shares, stock and securities and that the plaintiff and his staff had special knowledge and experience of checking and verification of share scrips and securities and the transfer forms or deeds. It has been further averred that in the course of dealings between the plaintiff and the answering defendant the plaintiff by himself through his staff had directed and made arrangement for checking and verification of share scrips and the transfer forms or deeds by a member of the staff of the plaintiff and on the strength of such checking and verification, these defendants used to be directed to accept delivery of the shares and to make payment on behalf of the plaintiff. It has been further averred that on or before 21st November, 1963 defendant No. 1 sent to the branch office of the answering defendants, their representative with their letter of 20th November, 1963 and that defendant No. 1 represented and warranted that they were handing over to the answering defendant 15000 shares of Karnaphuli Paper Mills Ltd. Shown in the list attached to their letter. It has been further averred that the agent of the answering defendant in-charge of their branch telephoned the office of the plaintiff and spoke to Mr. Rajabally his Manager and requested him to depute in terms of the directions a member of his staff to check and verify the share scrips and the transfer forms or deeds and to accept delivery on behalf of the plaintiff and that the plaintiff deputed one Syed Ahmed Hussain, who checked and verified the scrips shares and transfer forms or deeds and accepted the delivery of the same and as a token thereof signed at the foot of the letter dated 19th November, 1963 of the plaintiff to the answering defendant, and that thereupon, the answering defendant issued pay-order for Rs, 2,70,000 in favour of defendant No. 1, whose representative endorsed the receipt for the same at the foot of the letter dated 20th November, 1963, of defendant No. 1 to the answering defendant. It has been averred that the answering defendant acted in good faith in accordance with directions of the plaintiff and no liability attaches to them as alleged or at all. It has been further averred that on the facts and the circumstances, there was no negligence on the part of defendant No, 2 and that negligence if any was on the part of the plaintiff and of his staff acting on his behalf, and that the alleged forgery was not such as could be discovered at the time of the delivery. It has been denied that defendant No, 2 acted negligently or committed breach jointly with defendant No. 1 or made any representation or deprived the plaintiff or caused him loss. It has been averred that the answering defendant made payment of the sum of Rs, 2,70,000 to defendant No. 1 by a pay-order and that said defendant No. 1 was payee of the said pay-order. Has also been averred that the consideration for the above payment delivery was effected by defendant No. 1 and/or defendant No, 3 of 15000 shares of Karnaphuli Paper Mills Ltd. And that as no such shares were delivered and that shares delivered were discovered to be forged the payment made was without consideration or for consideration which failed and that said defendant No, I had interest as the pledgee and that they had the right of sale of the said shares. It has also been averred that defendants Nos. 1 and 3 committed breach of conditions and warranties applicable. It has also been averred that the answering defendant are entitled to indemnity and contribution from defendants Nos. 1 and 3 jointly and severally to the full extent of decree that may be passed against them.

(e) Defendant No, 3 has also filed a written statement but, has not led any evidence. Defendant No. 1 in his written statement has denied para 1 of the plaint and has averred that the transaction was "a Badla deal" and that the rate was Rs, 18 and the centre rate agreed to be, was Rs, 18.50. It has also been averred that the settlement was made at a difference of 50 Paisa higher or lower as the case may be. It has been further averred that there was no mention and/or direction of shares or any particular distinctive numbers and that the shares were to be settled in connection with Badla transaction at Rs, 18 per share to be re-settled to defendant No, 3 at Rs, 18.50 per share after one month, and that the said shares under Badla transaction were re-purchased at Rs, 18.50 per share from the plaintiff. It has also been averred that thereafter fresh badlas were used to be made every month and defendant No, 3 was charged by the plaintiff difference in market rate and also out of Badla settlement an interest and that the last transaction was made on 26th May, 1964 under which Badla the shares delivery was agreed to be on 30th June, 1964. It has been averred that the alleged sale agreement of 21st November, 1963 was washed out by subsequent fresh Badla transactions and that the plaintiff has no cause of action on the basis of delivery of 21st November, 1963. It has been further averred that prior to the transaction in question defendant No, 3 had a number of transactions with the plaintiff under which large number of shares were delivered by the plaintiff to defendant No, 3, who used to deposit his shares with his Bank. It has also been averred that defendant No, 3 had deposited large number of shares with his Bank when blank transfer deeds were also deposited with the banks and that latter were authorised to verify the shares from the companies. It has been denied that on 15th June, 1964 Inc plaintiff learnt that the share scrips of 15000 shares delivered by defendant No, I were forged. It has been averred that the plaintiff had not given any particulars of the alleged forgery. It has been denied that defendant No, 3 is responsible for the alleged forgery or that he is liable to make good the alleged loss suffered by the plaintiff.

2. (a) <Suit No, 179/65.-In the above suit defendants Nos. 2 and 3 are the same who are defendants Nos. 2 and 3 in Suit No, 178/65. However, defendant No, I is American Express Co. Inc. Instead of Bank of India, which is defendant No. 1 in the aforesaid Suit No, 178 of 1965.

' This is a suit for the recovery of Rs, 3,90,687.50 comprising of Rs, 3,56,250 being the price paid for 19000 shares of Karnaphuli Paper Mills Ltd. To defendant No. 1 and Rs, 34,437.50 being the amount of interest at 6% per annum for the period from 9th January, 1964 till 16th August, 1965. It has been averred that on or about 8th January, 1964 defendant No, 3 agreed to sell 19000 shares of Karnaphuli Paper Mills Ltd. At the rate of Rs, 18.75 per share totalling Rs, 3,56,250 and that said defendant No, 3 represented that 19000 shares of Karnaphuli Paper Mills Ltd. Would be delivered by defendant No. 1 to the plaintiff's Banker, defendant No, 2 on payment of the aforesaid price. It has been further averred that defendant No, 3 by a letter dated 8th January, 1964 instructed defendant No. 1 to deliver 19000 shares of Karnaphuli Paper Mills Ltd. Against payment of Rs, 3,56,250 to the plaintiff and endorsed a copy of the letter to the plaintiff. It has also been averred that the plaintiff instructed defendant No, 2 by his letter dated 8th January, 1964 to take delivery of 19000 shares of Karnaphuli Paper Mills Ltd from defendant No. 1 against the payment, for which the plaintiff enclosed his cheque for Rs, 3,56,250, and that on 8th January, 1964 defendant No, 2 sent a cheque for Rs, 3,56,250 on behalf of the plaintiff to defendant No. 1 requesting defendant No. 1 to deliver 19000 shares of Karnaphuli Paper Mills Ltd. It has been further averred that on 8th January, 1964 defendant No. 1 without sending any bill or their covering letter or list of distinctive numbers of shares purported and pretended to send 19000 shares scrips of Karnaphuli Paper Mills Ltd. And merely acknowledged the receipt of plaintiff's cheque against the delivery of alleged share scrips and defendant No, I received the said alleged share scrips. The plaintiff has made identical averments and has also raised identical legal pleas in the present suit, which has been done in Suit No, 178/65 and therefore, it will be futile to repeat the same. On the basis of the aforesaid averments and legal pleas the plaintiff has claimed the above reliefs.

(b) Defendant No. 1 in their written statement has denied that they had given any assurance or made any representation to the plaintiff regarding the delivery of 19000 shares of Karnaphuli Paper Mills Ltd. It has been averred that defendant No, 3 had deposited with the answering defendant 19000 shares of Karnaphuli Paper Mills and that by writing dated Nth January, 1964 defendant No, 3 instructed the answering defendant to deliver the said 19000 shares of Karnaphuli Paper Mills Ltd.

To the plaintiff against payment of Rs, 3,56,250 and that the said writing also contained an endorse.

Ment by the plaintiff that these shares be delivered to the Habib Bank Ltd. K. S. E. Br. It has been averred that on the same date the Habib Bank Ltd. Stock Exchange Branch tendered a pay-order for Rs, 3,56,250 and took the delivery of the said shares. It has been admitted that 19000 shares were delivered by answering defendant to defendant No, 2 on 8th January, 1964, however, it has been denied that it was necessary that the same defendant should have sent any bill or any covering letter of list of distinctive numbers of shares to defendant No, 2 or to the plaintiff. It has also been averred that the answering defendant were not itself selling any share to the plaintiff or to defendant No, 2 but were acting on the instructions of defendant No, 3 for delivering the said shares to the plaintiff. It has been denied that the answering defendant gave any understanding to or agreed with the plaintiff or with defendant No, 2 to deliver or transfer the share scrips of 19000 shares of Karnaphuli Paper Mills Ltd. And that there was anything apparent to indicate that the shares certificates were not genuine and that the answering defendant merely acted on defendant No, 3's advice and instructions in delivering the said share scrips to defendant No, 2 and that there was no question of the answering defendant transferring the said shares to the plaintiff or to defendant No,

2. It has been further averred that the answering defendant was instructed by defendant No, 3 to deliver to the plaintiff/defendant No, 2 the 19000 Karnaphuli Paper Mills Ltd.

Share scrips, which had been deposited with the answering defendant by defendant No, 3 and that the. Answering defendant did not itself enter into any transaction either with the plaintiff or with defendant No 2 and therefore, there was no question of the answering defendant being required to exchange the share scrips delivered to defendant No, 2 for other shares scrips. It has been averred that claim of the plaintiff and of defendant No, 2 if any is against defendant No,

3. Who was and is the only contracting party in the transaction and that payment of Rs, 3,56,250 has been made to defendant No, 3 and the claim for refund if any is against defendant No,

3. It has been further averred that the answering defendant was merely an intermediary for receiving payment against the delivery of share scrips and did not hold out any assurance or representation to any party regarding the transaction in question and that there was no obligation on the answering defendant to warrant the genuineness of the share scrips and that in any case the share scrips on their face are apparently in good order. It has been denied that the answering defendant acted negligently or that they were under any obligation or duty towards the plaintiff or made any representation to the plaintiff.

(c) Defendant No, 2 have filed written statement admitting therein that they acted as the agent for the plaintiff, but have made identical averments on facts and on law, which they have made in Suit No, 178/65. They have also claimed indemnity and contribution from defendants Nos. 1 and 3 jointly and severally in case they are to be held liable. However, it will be pertinent to state a few facts herein, which are different from the first suit. It has been averred that on 8th January, 1964 defendant No, 3 and one Mohammad Vali Khan a member of their staff deputed by defendant No. 1 came to the branch office of the answering defendant and represented that they had 19000 shares of Karnaphuli Papers asking payment for them at Rs, 18.75 per share. It has been further averred that the agent of defendant No, 2 Incharge of their branch telephoned the office of the plaintiff for direction, thereupon the plaintiff through his Manager Mr. Habib Ali Mohammad authorised in this behalf, instructed the answering defendant that defendant No, 3 was his valued client and delivery must be taken and payment made and that he further stated that, he was sending a member of the staff of the plaintiff to check and verify the scrips of the shares and the transfer forms or deeds and to take delivery on behalf of plaintiff and that the member of the staff of the plaintiff deputed as aforesaid was one Mr. Syed Ahmed Hussain who checked and verified the scrips of the shares and transfer forms or deeds and accepted delivery and endorsed receipt for the same on the letter of plaintiff dated 8th January, 1964, whereupon answering defendant debited the cheque of the plaintiff in their books and issued pay-order for Rs, 3,56,250 in favour of defendant No. 1, whose representative said Mohammad Vali Khan endorsed receipt for the same on the letter of the plaintiff. It has been averred that the answering defendant acted in good faith and as per instruction of the plaintiff. Etc.

(d) Defendant No, 3 has also filed a written statement but, did not lead and evidence in the above suit as well. In his written statement defendant No, 3 has denied that on 19th November, 1963, he agreed to sell 19000 shares scrips of Karnaphuli Paper Mills Ltd. To the plaintiff as alleged at Rs, 18.75 per share. It has been averred that the transaction between plaintiff and defendant No, 3 was a 'Badla transaction' made on 7th January, 1964 whereby difference of Re.

00.24 was pa?Able by defendant No, 3 to the plaintiff. It has been further averred that the above shares were to be settled in connection with the Badla transaction at Rs, 18.75 per share to be re- settled to defendant No, 3 at Rs, 18.99 per share after one month (10th February, 1964 delivery) and that the said shares under the Badla transaction were repurchased at Rs, 18.99 per share from the plaintiff and that thereafter fresh Badla transactions were used to be made every month and defendant No, 3 was charged by the plaintiff difference in the market rates and also difference of Badla settlement, and that the last transaction was made on 26th May, 1964 under which Badla shares delivery was agreed to be made on 30th June, 1964. It has been averred that the alleged delivery made on 8th January, 1964 was washed out by the subsequent fresh Badla transactions. In the above written statement defendant No, 3 has also denied the fact that he was responsible for the forgery or that he was liable.

3. In Suit No, 178/65, 7 issues were framed by the Court on 7th August, 1967 and whereas in Suit No, 179/65, 23 consent issues were adopted on 19th September, 1966. However, on 20th February, 1980, 3 additional issues by the consent of the learned counsel for the parties were framed by me in Suit No, 178 of 1965 and in Suit No, 179 of 1965, it was ordered that issues framed in Suit No, 178 of 1965 with the above 3 additional issues would be treated as issues for above Suit No, 179 of 1965 as well.

It was also agreed by the parties that the evidence in one case was to be read into for the other case. The following are the aforesaid issues framed by the Court on 7th August, 1967 and the 3 additional issues adopted by me on 20th February, 1980 :- "(1) (a) whether the defendant No, 2 acted as plaintiff's agent in the transactions in suit ?

(b) If so, whether the defendant No, 2 complied with the plaintiff's directions in the business of agency ?

(2) Whether delivery of shares was taken by the defendant No, 2 ott acceptance of shares by the representative of the plaintiff ? If so, what is the effect ?

(3) Was the plaintiff negligent in the transactions in the suit. If so, what is the effect ?

(4) Whether the share certificates in suit are forged certificates ? If so, when the forgery was discovered and what is its effect on the suit ?

(5) Were there any warranties from defendants Nos. I and 3 with regard to the genuineness or number of shares in dispute in this suit ? If so, was there any breach of these warranties and with what consequences ?

(6) To what relief the plaintiff is entitled to and from which of the defendants ?

(7) To what relief the defendant No, 2 is entitled to against defendants Nos. 1 and 3" ?

Additional issues framed on 20th February, 1980.

(I) Were the defendants or any of them under a liability to deliver genuine shares ?

(2) Whether the suit is hit by section 69 of the Partnership Act, if so, what is the effect ?

(3) Whether there was any privity of contract between the plaintiff and defendant No. 1"?

My findings on the above issues are as follows :-

4. (a) Additional Issue No, 2.-It will be appropriate to take up Additional issue No, 2 relating to section 69 of the Partnership Act. It has been urged by Mr. Afzal Nabi learned counsel for defendant No. 1 in Suit No, 178/65 that the suits are hit by section 69 of the Partnership Act and, therefore, the same are liable to be dismissed. On the other hand, it has been urged by Mr. Mohammad Ali Sayeed learned counsel for the plaintiff that the above section has no application to the instant cases. In support of his contention Mr. Afzal Nabi has invited my attention to plaintiff's statement P.

W. 15 Exh. 44 at page 17, wherein he has deposed that : - "It is not correct that I had any partner when I filed the suit. I was the sole proprietor of my business, when I filed this suit. When Masood Iqbal's fraud was discovered the business was being carried on by my firm and not by me as sole proprietor. But I had to take the entire liability for the loss on these transactions My brother's name is Asghar Ali Ganji. It is not correct that he continued as my partner until 1965. It is not correct that I had taken my son into partnership in 1965. A partnership deed was executed when I had entered into partnership with my sons.

' This was in or about 1968."

' Mr. Afzal Nabi has also invited my attention to the plaintiff's replication dated 11th March, 1970 in reply to the amended written statement filed by defendant No, I in the above suit, wherein it has been averred by the plaintiff that he was carrying on business in partnership with his brother Asgharali from 1st January, 1952 until 30th January, 1959 and that in the year 1959 his brother left Pakistan and thereafter had no interest whatsoever in the business, which was being carried on by the plaintiff, but ostensibly the partnership continued until 30th June, 1965 when the partnership was formally dissolved by a document in writing which document in spite of his best efforts was not traceable. On the basis of the above averment in the replication, it has been urged that according to the plaintiff's own averment the partnership continued until 30th June, 1965 and whereas the suit transaction of Suit No, 178/65 was entered into in November, 1963 and the other transaction, which is the subject-matter of Suit No, 179/65 was entered into in January, 1964. On the other hand, Mr. Mohammad Ali Sayeed has urged that there was in fact no partnership after 30th January, 1959 and that in any case the suits' claims do not relate to the enforcement of a contract or a right arising from a contract as a partner in a firm, but the suits are for the restoration of an advantage or for the recovery of compensation in respect of void contracts within the ambit of section 65 of the Contract Act, 187L. In support of his above contention Mr. Mohammad All Sayeed has invited my attention to an order dated 18th November, 1969 Passed by the Inspecting Assistant Commissioner of Income Tax (General Range I) and Member Committee "B Karachi" under M L R 32, on the basis of a declaration filed by the plaintiff to the effect that from 1959 onwards he was the sole proprietor of the firm and was not a partner, and also the Assistant Income-tax Officer, J. I.

Division, Karachi's order dated 12th January, 1970 for the year 1965-66. From the above two orders, it seems that the Income-tax Department accepted the plaintiff's stand that he was the sole proprietor of the firm in question after the departure of his brother in 1959. The bona fide of the plaintiff's above stand cannot be doubted as defendant No. 1 in Suit No, 178/6 had not raised any plea in respect of section 69 of the Partership Act in their written statement but in January, 1970 Mr. Afzal Nabi learned counsel for defendant No. 1 cross-examined the plaintiff on the question of the partnership and its registration. Therefore, it is evident that prior to January, 1970 the plaintiff had no reason to approach the Income-tax Department for the purpose of saving the two suits for getting an order that he was the sole proprietor of the firm at the material time. The order of the Assistant Commissioner is of 18th November, 1969 whereas the order of the Assistant Income-tax Officer is dated 12th January; 1970. Defendant No. 1 in Suit No, 178/65 filed an amendment application C. M. A. 120/70 on 15th January, 1970 which is subsequent to the aforesaid two orders. It was urged by Mr. Mansoorul Arfin learned counsel for defendant No. 1 in Suit No, 179/65 that the intention of the plaintiff to keep the partnership ostensibly until 30th June, 1965 was to evade income-tax and, therefore, he cannot take the advantage of his own fraudulent/illegal act. This contention might have some force if the plaintiff before any objection about section 69 of the Partnership Act was raised, had not approached the Income-tadi authorities and had not paid necessary income tax after the filing of the declaration under M. L. R.

32.

(b) (i) Reverting to Mr. Mohammad Ali Sayeed's aforesaid second contention that section 69 of the Partnership Act cannot be pressed into service as the plaintiff's claim is in the nature of a claim within the ambit of section 65 of the Contract Act, it may be observed that he has relied upon the case of the Province of West Pakistan and another v. Messrs Asghar Ali Mohammad All & Co. (1), the case of Messrs Ch. Allahbux Moulabux v. Messrs Aijaz Maulabux and another (2), the case of Nazir Ahmed Khan and 2 others v. Mohammad Ashraf Khan and 3 others (3) and the case of Ahmed and another v. Messrs Karachi Steam Navigation Co Ltd. (4).

(ii) Reverting to 1968 Karachi case, it may be stated that in the above case the plaintiff brought an action for the recovery of compensation or restoration of advantage upon the discovery that the agreement was void, a plea about section 69 of the Partnership Act was raised by the defendant in the suit. The matter came up in appeal before the High Court and while dealing with the above question a Division Bench (comprising of A. S. Farooqui and Anwarul Hach JJ.) observed that the principle of restoration in section 65 of the Contract Act is equitable principle which applies notwithstanding the agreement or the contract was void and that the right arising therefrom is not for the purpose of enforcement of the {{FOOT NOTE}}

(1) PLD 1968 Kar. 196 (3) PLD 1975 K

(2) PLD 1973 Kar. 468 {{FOOT NOTE}} contract, but the right under the agreement or the contract itself and, therefore, the suit was not hit by section 69 of the Partnership Act.

(iii) Reverting to the 1973 Karachi, it may be stated that in the above case Dorab Patel, J. (as his Lordship then was) was pleased to hold that the bar of section 69 of the Partnership Act was not applicable to a dissolved firm and that the object of clause (a) of the above section 2 was to remove disabilities imposed by subsections (1) and (2) of section 3 with regard to a dissolved firm.

(iv) The same view was taken by a Division Bench in the aforesaid case reported in PLD 1978 Kar.

387. In my view it has been rightly pointed out by Mr. Afzal Nabi that the above two cases have no application to the present cases as the plaintiff's two suits in question have not been framed on the premises that they were for the enforcement of any right of a dissolved firm and, therefore, the exemption provided for in the aforesaid clause (a) to section 69 of the Partnership Act, cannot be pressed into service.

(v) With reference to 1975 Karachi, it may be observed that a Division Bench comprising of Dorab Patel, Jamaluddin Ahmed, JJ. Concurred with the aforesaid D. B. View of 1968 referred to hereinabove and held that section 69 of the Partnership Act is not attracted to a suit for the enforcement of the right under section 65 of the Contract Act.

(c) In my view the aforesaid 1968 and 1975 Karachi cases support Mr. Mohammad Ali Sayeed's contention that the provisions of section 69 of the Partnership Act are not attracted to a case for restitution. It will suffice to observe that it cannot be denied that the plaintiff's claim in the two suits in question is for compensation or restitution of the advantage received by defendants Nos. 1 and

3. I will deal with the above aspect more in detail hereinafter while dealing with Issues N os. 5 and 6 and additional Issues Nos. 1 and 3. In view of the above discussion my finding on this issue is in the negative.

5. (a) issue No, 4.-There is unrebuttable oral and documentary evidence on the record to prove that the shares certificates in the suit are forged. Furthermore, none of the defendants in their written statement have averred that the shares certificates were not forged. The shares certificates are Exhs. 30/1 and 30/340. The visual examination of the same indicates that there are overwritings thereon. Furthermore, the statements of the following witnesses also prove that the shares certificates are forged :

1. Mohd. Sharif P. W. ASI Police Malkhana Exh.

40.

2. Abdul Ghaffar P. W. 4 Exh.

12.

3. P. W. 10 Shoukat Ali A. S. I. Exh.

39.

4. P. W. 13 Hafiz Aziz Ahmed Exh.

42.

5. P. W. 15 plaintiff Exh.

44.

' In addition to the above plaintiff's oral evidence, the defendants' witnesses have themselves stated that the shares certificates were forged. In this regard reference can be made to the testimony of D. W. I Rustom Leemonwalla Exh. 117, an ex-employee of the Bank of India, (Defendant No. 1 in Suit No, 178/65). Abdul Sattar Exh. 118 the agent of Messrs Habib Bank (defendant No, 2 in the two suits) and Mail(' Hussain Exh. 119, Manager, Amercian Express 'defendant No. 1 in Suit No, 179/65).

There is also reliable documentary evidence on the record to corroborate the above oral evidence.

(b) As regards the second part of the above issue, namely, when was the fraud discovered and its effect on the suit, it may be observed that from the oral and documentary evidence on the record, it is evident that the fraud was discovered some time in June 1964. In this regard Exhs. 37/1, 44/9, to 44/10, 44/11 to 44/15, 44/18, 44/22 to 44/26 may be referred to. Exh. 37/1 is a letter of Messrs Karnaphuli Paper Mills Ltd. Dated 9th June 1964 addressed to Messrs Eastern Federal Union Insurance Co. Ltd. In reply to their letter dated 4th June 1964 stating therein that the shares certificates numbers mentioned by them in their list alongwith their aforesaid letter dated 4th June 1964 related to 339 shares and not to 33900 shares. Exh. 44/11 is plaintiff's letter dated 12th June 1964 addressed to defendant No, 2 enquiring from whom they had taken the delivery of the shares in question. The other letters also indicate that the forgery was discovered in June 1964. The plaintiff's witnesses as well as defendants Nos. 1 and 2's witnesses have also deposed that the forgery was discovered in June 1964. However, it was urged by Mr. Mohammad Ali Sayeed that the Bank of India as well as the American Express Co. Knew about the forgery before June 1964, i,e, in fact at the time when the above shares were sold to the plaintiff. In support of the above contention he has invited my attention to the fact that the American Express was pressing for the substitution of Karnaphuli Paper Mills Ltd.'s shares by some other shares and that the American Express did not deliberately furnish the list of the shares containing the numbers at the time of effecting the delivery of the same and thereafter in spite of a request. It was also urged by Mr. Mohammad Ali Sayeed that the Bank of India was also pressing for the clearance of the loan amount. On the other hand it was urged by 'Ws. Afzal Nabi and Mansoorul Arfin that the above contention is untenable inasmuch as defendant No. 1 in both the suits continued to provide overdraft facility to the defendant No, 3, Masood Iqbal even after the sale of the shares in question and that in fact further shares of Karnaphuli Paper Mills Ltd. Were accepted by the American Express. It will suffice to observe that there is no reliable evidence on the record to conclude that either the Bank of India or the American Express had the knowledge of the forgery before the sale transactions in question. My finding on this issue is that the shares certificates in the two suits are forged and that the forgery was discovered sometime in June 1964 and the effect of the above forgery on the suits is that the plaintiff is entitled to the refund of the price paid by him for the forged shares certificates or to claim compensation or restitution. The question from whom the plaintiff is entitled to recover the same will be dealt with hereinafter under Issues Nos. 5 and 6 and additional. Issues Nos. 1 and 3.

6. (a) Issues Nos. 1 and 2.-There is no controversy on Issue No. 1 (a). It has been admitted by defendant No, 2 in the written statement that they acted as the plaintiff's agent in the transactions under reference. However, as regards Issue No. 1 (b) and Issue No, 2 there is controversy between the parties concerned, i,e, the plaintiff and defendant No,

2. It had been urged by Mr. Mohammad Ali Sayeed learned counsel for the plaintiff that the object of involving defendant No, 2 in the transaction was to ensure that the shares certificates and the transfer deeds in respect thereof were proper. Whereas it has been urged by Mr. Rahimtoola learned counsel for defendant No, 2 in both the suits that the instruction of the plaintiff was that the defendant No, 2 on the receipt of shares would ask the plaintiff's representative to check the shares and the transfer forms and upon his acceptance, they would pay the price of the shares. It may be observed that the plaintiff's instructions to defendant No, 2 for the transactions in question are contained in the plaintiff's letter dated 19th November 1963 addressed to defendant No, 2 in respect of 15000 shares Exh. 41/1 (which are the subject-matter of Suit No, 178/65). Whereas the plaintiff's letter dated 8th January, 1964 addressed to defendant No,

2. Exh. 41/4 contains the instructions relating to the taking of delivery of 19.000 shares. The above letters read as follows :- Exh. 41/1. Dated 19th November 1963.

"To, The Agent Habib Bank Ltd., Stock Exchange Branch, Karachi.

' Dear Sir, ' We enclose herewith a copy of letter written to the Bank of India Ltd., who will deliver you 15000 shares of Karnaphuli Paper Mills Ltd. Against payment of Rs, 2,70,000. We enclose herewith or cheque for this amount. Yours faithfully,"

' The contents of Exh, 41/4 read as follows :- 6th January 1964 ''Ref. Delivery of 19,000 shares K. Papers : ' With reference to or conversation with your goodself we shall thank you to take delivery of 19,000 shares (nineteen thousand shares) of Karnaphuli Papers at Rs, 18.75 (Rupees eighteen and severity-five paisa) per share, i,e, against the payment of Rs, 3,56,250 (rupees three lacs, fifty-six thousand two hundred and fifty only) from 'Messrs American Express Company Inc., Karachi.

' We are enclosing herewith cheque No, 355972 for above-mentioned amount in your favour for payment to them.

' Thanking you. End. 1 Cheque."

' From the above two letters, it is clear that the instructions about the mode of taking of delivery of the shares or on the point what was required of defendant No, 2 were given/mentioned. As regards 19000 shares, according to defendant No, 2, on 8th January 1964 defendant No, 3 and the representative of defendant No. 1 came to defendant No, 2 Branch and informed the agent.That it had brought 19000 shares for the delivery and that defendant No, 2 had no instructions by that time, defendant No, 2's manager phoned to the plaintiff's manager Habib Ali Mohd. And enquired what was to be done. Thereupon, defendant No, 2's agent was informed that the plaintiff was sending their Representative Ahmad Hussain for checking the shares. Alongwith him he also sent the instruction letter dated 8th January 1964 containing the plaintiff's instructions it may be observed that defendant No, 3 through the letter dated 8th January, 1964 addressed to the Manager American Express Co. Instructed them to deliver 19000 shares of Karnaphuli Paper Mills Ltd. At Rs, 18.75 per share against the payment of Rs, 3,56,250 a copy of which was endorsed to the plaintiff Exh. 44/36. According to the oral evidence the following endorsement on the above letter is in the handwriting of the plaintiff : "Please deliver the above to Messrs Habib Bank Ltd. K.B E . Branch who have or instructions. Sd/ 8th January 1964.

(b) It was urged by learned counsel for the plaintiff that the plaintiff's representative did not check the shares certificates and the transfer deeds in question. But took the delivery of the same on being informed by defendant No, 2's agent that they had checked the shares certificates and the transfer forms which were in order. On the other hand it was urged by Mr. Rahimtoola that as per standing instructions of the plaintiff on the receipt of the shares certificates in question, defendant No, 2's agent sent for the plaintiff's representative who checked the shares and transfer forms and when he accepted the same, the payment was made by defendant No, 2 to defendant No, I in each suit. In this regard the evidence of PW 14 Ahmad Hussain, a representative of the plaintiff Exh. 43 and the evidence of Abdul Sattar Exh. 118 are relevant. P.W. 14 has deposed that he has been employed in the office of the plaintiff for the last 17 years and that he deals in shares, namely, accepting and delivery of the shares during the course of business transactions and that he remembered to have collected 15000 shares, which were sold by Masood lqbal to the plaintiff through Habib Bank Ltd. Exchange Branch in 1964. He has further deposed that Habib Bank Ltd. Had sent the peon to the plaintiff's office informing about the receipt of the shares, and thereupon, he went to Messrs Habib Bank Ltd. And met Sattar Bhai the Manager of the Bank, who handed him over these shares saying that he had checked them and that there was nothing wrong with them. He has also deposed that Sattar Bhai told him to count them, which he did and brought the shares to his office. As regards the 19000 shares he has deposed that he had also collected the above shares belonging to defendant No, 3 from Habib Bank Ltd. In January 1964 in the same manner as the earlier transaction and that he went to Sattar Bhai who handed him over these shares and pointed out certain persons, who according to him were from the American Express Co and informed him that the shares had been brought by them and that he further informed him that he had checked these shares which were in proper order and that he might take these after-counting them. In cross-examination to Mr. Rahimtoola the above witness admitted that it was his duty to take the delivery and to check the shares certificates and transfer forms. Whereas Abdul Sattar Exh. 118 has deposed that in 1963 he was agent to Habib Bank in Stock Exchange Branch and that they acted as agent for the plaintiff in the matter of taking delivery of the shares and making payment for them and that the plaintiff deals in shares and stocks and had given instruction that whenever delivery of the shares was ordered they should call their men for checking the shares and after he checked and passed on a receipt, we might make payment. He has further deposed that when the shares in question were tendered in their office, he telephoned the manager of the plaintiff one Rajabali, who deputed his representative Ahmad Hussain, who took the delivery and that before taking the delivery, he checked the shares certificates and transfer forms. He has further deposed that he bad personally checked the shares and did not find the shares were formed and that the forgery was detected some where in May or June, 1964 when he was on leave. In order to appreciate the above two versions given by the plaintiff and defendant No, 2 respectively, it may be pertinent to refer to certain documents, which have direct bearing on the point in controversy.

(c) In this regard reference may be made to Exhs. 44/11, 44/13, 44/18, 44/20, 44/21 and 110. Exh. 44/11 is a letter from the plaintiff addressed to defendant No, 2 inter (ilia requesting them to let him know from whom defendant No, 2 had received the delivery of the shares and the names of the individuals who brought the shares. Exh. 44/13 is reply dated 17th June, 1964 sent by defendant No, 2 to the plaintiff in which defendant No, 2 admitted that they had taken delivery of 15000 and 19000 shares from the Bank of India and the American Express after checking them but did not give in the aforesaid information asked for by the plaintiff in his aforesaid letter Exh, 44/11. Exh. 44/18, is the plaintiff's letter dated 14th July, 1964 addressed to defendant No, 2 pointing out that the information asked for in his letter dated 12th June, 1964 has not been fully answered in defendant No, 2's aforesaid letter dated 17th June, 1964. The above letter was followed by the plaintiff's reminder dated 21st July, 1964 Exh. 44/20. Exh. 110 is a letter from defendant No, 2 dated 24th July, 1964 addressed to the plaintiff informing him that they did not know the names of the representatives of the Bank from whom the delivery of 15000 and 19000 shares of Karnaphuli Paper Mills Ltd. Was taken and that as regards the place of delivery the same was tendered in their branch premises.

The above documents support the plaintiff's version that defendant No 2 took the delivery of the shares in question from defendant No. 1 in both the suits and his representatives did not check the shares certificates and transfer forms before defendant No, 2 made payment. If that would have been the case, defendant No, 2 would have naturally replied to the plaintiff's aforesaid letters Exhs.

44/11, 44/18 and 44/20 and would have come out with the plea that the plaintiff's representative took the delivery of the shares from defendant No, l's representatives after checking the same.

Since above shares were coming for delivery from the two reputable banks who were having the same in their custody for few years as the pledgees, it is probable that the plaintiff's representative had not checked the shares and the transfer forms before taking the delivery from defendant No, 2.

(d) But the question which requires consideration is, as to whether defendant No, 2 was guilty of any negligence or that they had complied with the plaintiff's direction. It may be observed that from Exhs 41/1 and 41/4, which contained the plaintiff's instructions quoted hereinabove, it is evident that no specific instructions were given to defendant No, 2 to check the genuineness of the shares certificates or the transfer forms. They were asked to take the delivery of the shares against the payment. However, defendant No, 2 acting as agent were under obligation to act diligently. In this regard section 212 of the Contract Act may be referred to, which provides that an agent is bound to conduct the business of the agency with as much skill as is generally possessed of persons engaged in same business unless the principal has notice of want of skill and that the agent is always bound to act with reasonable diligence and to use such skill as the posses. Ses and to make compensation to his principal in respect of the direct consequences of his neglect, want of skill or misconduct, etc. It has been urged by Mr. Mohammad Ali Sayeed that the object of bringing in defendant No, 2 in the two transactions was to ensure that the shares certificates and the transfer forms were genuine and whereas it has been contended by Mr. Rahimtoola that the plaintiff himself being a stock broker of standing and repute was in a better position to check the genuineness of the shares certificates and the transfer forms and that there has not been any negligence on the part of defendant No,

2. A visual examination of the shares which are on the record indicates that there are overwritings of the names as well as in the numbers of the shares.

When I first examined the above shares my impression was that the above alterations should have put the parties to an inquiry, but it was submitted by Mr. Rahimtoola that when originally these shares were produced in the Court in 1969 the overwritings were not legible. Since I had not seen the shares in their original form when they were exhibited in 1969' nor there is any expert evidence on the record on the above point I cannot comment upon the above submission of Mr. Rahimtoola.

However, there is unanimity in the version of the plaintiffs' witness Ahmed Hussain and defendants Nos. 1 and 2's witnesses, namely, Rustem Lemonwally Exh.

117. Abdul Sattar Exh. 118 and Majid Exh. 119 on the fact that forgery was such that it was not noticeable by visual examination without minute scrutiny. P. W. 14 Ahmed Hussain Exh. 43 has deposed that it was correct that it was part of his duty to check all shares and to see that they were genuine and that he alone used to attend the business of checking the shares certificates in the plaintiff's office for the last 17 years. He has further deposed that he had checked and noted that each share certificate represented 100 shares. He also checked them to see who were the actual owners and who had sold them to the plaintiff and that during the course of this checking he did not notice anything suspicious and that he had signed the receipt in token of having accepted the delivery of the shares. It may be noted that in spite of the fact that the function of P.

W. 14 Ahmed Hussain was to take delivery and to check the genuineness of the shares for a considerable time, he was unable to detect the forgery and the shares and, according to him, he checked the numbers of the shares as well as the names of the actual owners of the shares.

Similarly, D. W. Leemonwalla Exh. 117 (an employee of defendant No. 1 in Suit No, 178/65) has deposed that the shares were received in pledge and that they were checked by the clerk of the Bank and by him and that when he checked these shares he did not detect any forgery in them.

Similar is the version of D. W. Abdul Sattar Exh. 118, P. W. 4 Abdul Ghaffar Exh. 12, incharge of the shares section of Dawood Cotton Mills Ltd. The then Managing Agent of Karnaphuli Paper Mills Ltd.

Had deposed that it is only on comparison of Exh. 33 with their record that they could say whether Exh. 33 is in order or not and that the rubber stamp of Exh. 33 and Exh. 28 appears to be the same.

On the basis of the above evidence it was urged by Mr. Rahimtoola that no negligence or want of care and skill can be attributed to defendant No, 2 since the plaintiff's own witness Ahmad Hussain has stated that he could not detect the forgery in spite of checking the number and the names of the owners. It was urged by Mr. Mohammad Ali Sayeed on the basis of the evidence of D. W. Rustom Leemonwalla that unbroken shares Nos. And broken distinctive Nos. Of the shares in question were sufficient abnormality to put defendant No, 2 to inquiry as to the genuineness. This may be correct but I cannot overlook the fact that these shares were coming from the two reputable banks who were having the same in their custody for quite some period as the pledgees and therefore, unless there would have been some conspicuous abnormality in the transfer form and the shares certificates, defendant No, 2 could not have detected forgery inasmuch as the plaintiffs, aforesaid witness Ahmed Hussain could not detect forgery. No cross-examination has been directed to Abdul Sattar to show what was not done by defendant No, 2 which was expected of from them as an agent. It seems that defendant No, 2 as well as the plaintiff and Messrs Eastern Federal acted in good faith and did not minutely examine the shares certificates and transfer forms as the same had come from the custody of two rebutable banks, who were having the same as the pledgee for a few years, and, therefore, they apparently presumed that the two banks in question must have checked the shares thoroughly before advancing the overdraft facility against the security of the said shares for a number of years. In view of my above discussion my finding on Issue No, I (b) is in the affirmative whereas on Issue No, 2, is in the negative.

7 Issue No, 3.-The issue, as framed is confined about the negligence of the plaintiff but whereas learned counsel for the plaintiff Mr. Mohammad Ali Sayeed has urged that there was negligence on the part of defendant No 1 in addition to the negligence on the part of defendant No, 2, which has already been discussed hereinabove under Issues Nos. 1 and 2. His further submission was that there was no negligence on the part of the plaintiff. In support of the contention that defendant No. 1 in both the suits were negligent Mr. Mohammad Ali Sayeed has referred to the statement of D. W.

Leemonwala, wherein in the cross-examination, he has deposed that if the shares in question had been held in an angle in sunlight, it would have been possible to detect the forgery as some erasing had been effected therein and that while shares numbers are in unbroken series but the distinctive numbers are in broken series, and that had this discrepancy been detected, it would have been sufficient to raise doubt with reitard to the genuineness of the shares, and that if the discrepancy had been detected it would have been a clear-cut proof of the shares being doubtful.

He has also invited my attention to Exh. 34/129 defendants No, l's letter dated 22nd August, 1963 whereby 4 mandate forms were sent by the Bank of India in Suit No, 178/65 to defendant No, 3 for getting his signature for collecting the dividend, to which no reply was sent by defendant No, 3, but thereafter, the Bank of India did not take any further action. It has been urged that if the above mandate forms would have been followed up the forgery would have been detected by the Bank of India.

' As regards the American Express, it has been urged that the above admission on the part of D. W.

Leemonwala as a banker would also be applicable to the American Express and that the latter Bank had an internal audit system which should have detected the forgery during the checking of the shares periodically as the shares remained with the American Express for about 3 years. He has also invited my attention to the fact that American Express did not furnish the list of shares containing the share numbers and distinctive numbers and that when they were requested after the discovery of the forgery, they came out with the plea in their letter dated 18th July, 1964 Exh. 97 that they had no such record. Whereas their witness Majid Hussain Exh. 119 has admitted that the Bank had the list of numbers and had also maintained appropriate register.

' It is true that according to the oral evidence the visual examination without minute examination could not have revealed the forgery but if the fact that shares numbers were in unbroken series whereas the distinctive numbers were in broken series, would have been noticed it would have revealed the forgery. As I pointed out hereinabove that the plaintiff and defendant No, 2 were receiving the shares from the two reputable banks directly who were in custody of the shares for quite some time as the pledgee and, therefore, it is not improbable that defendant No, 2 and the plaintiff might have not checked the shares and the transfer forms minutely under the belief that the same were in order, on the assumption that the same must have been checked by the pledgee banks However, there was no such reason available to defendant No. 1 in both the suits and, therefore, they could have detected the forgery, particularly when the shares remained with them, for a number of years, which were subject to pen odical audit checking. In my view some element of negligence can be attributed to the defendant No. 1 in each of the suits, more so when it has also come on record that all the other shares of other companies which were pledged by defendant No, 3 with the American Express were also found forged.

' It has been urged by the learned counsel for the defendant No. 1 Messrs Afzal Nabi and Mansoorul Arfin that the plaintiff being an expert in stocks and securities was guilty for negligence in not detecting forgery as he was better equipped to discover the same. I have already pointed out hereinabove that there could be bona fide reason on the part of the plaintiff and defendant No, 2, namely, that the shares were coming from two reputable banks as the pledgees and therefore, under the circumstances of the instant cases it is very much doubtful that any negligence can be attributed to the plaintiff, particularly in view of the fact that shares remained within him for a few hours as according to the evidence on the record the same were delivered to Messrs Eastern Federal InsuranceCo. Ltd., on the very day when the plaintiff received the delivery thereof. My finding on this issue is in the negative. However, as regards negligence on the part of defendant No, 2 in both the suits no finding is required under the above issue but it may be relevant for the purposes of dealing with Issues Nos. 5 and 6, and additional Issues Nos. 1 and 3 herein-be low.

8. Issue No, 7-Since I have held that defendant No, 2 have not committed any breach of their obligation as an agent for the reasons discussed under Issues Nos. 1 and 2 hereinabove in para. 6, this issue has become redundant. However, it may be observed that it was by Messrs Afzal Nabi and Mansoorul Arfin that the provision of rule 176 of Sind Chief Court Rules (O. S.) cannot be pressed into service as there is no agreement for indemnifying or making contribution between defendants Nos. 1 and 2. Mr. Mansoorul Aran has referred to sections 43 and 124 of the Contract Act in support of his above contention. Section 43 provides that when two or more persons make a joint promise, the promisee in the absence of an express agreement to the contrary may compel any or more of such joint promisers to perform whole of the promise and each of two or more promisers may compel every other joint promiser to contribute equally with him to the performance of the promise unless contrary intention appears from the contract, etc. Whereas section 124 defines a contract on idemnity. It provides that a contract by which one party promises to save the other from loss caused to him by the conduct of the promiser himself or by the conduct of any other person is called a contract of indemnity". It was urged by Mr. Mansoorul Arfin that defendant No, 2's case does not fall in either of the above two sections of the Contract Act. Whereas Mr. Rahimtoola learned counsel for the defendant No, 2 has invited my attention to the case of Khwaja Mohammad Igbal v. M. A. Shirazee and another (1) wherein a Division Bench (comprising of Wahiduddin Ahmed and Ilahi Bux Khamisani) was pleased to hold that the right of indemnity need not necessarily arise out of the contract between the parties but the right should be enforceable either by law or in equity. The above ruling supports Mr. Rahimtoola's contention. It will suffice to observe that if I would have passed a decree against defendant No, 2, the latter would have been entitled to indemnity against defendant No. 1 provided they would have established their case against defendant No. 1 under any law or under any recognised equitable principle enforceable.

9. (a) Issues Nos. 5 and 6 and additional Issues Nos. 1 and 3 : ' The above issues can be conveniently taken up together. There cannot be any controversy on the question that there was a warranty/condition on the part of defendant No, 3 to the effect that the share scrips and the transfer forms in respect thereof were genuine and further that there cannot be any dispute on the question that defendant No, 3 was under obligation to deliver the genuine shares. However, the controversy in respect of the above issues. Is centered around the liability of defendant No. 1 in both the suits. In this regard very elaborate arguments were advanced by the learned counsel for the parties.

(b) Mr. Mohammad Ali Sayeed has urged the following points :

(i) that defendant No. 1 as the pledgee of the shares in question had disposable interest in them and their position was alike, a holder of a bill of exchange for value, and, therefore, in fact defendant No, I were the seller of the shares in question and not defendant No, 3.

(ii) that there was an express representation/assurance given by defendant No. 1 to the plaintiff (before be agreed to purchase the shares in question) to the effect that the shares and the transfer forms were in order and that there has been breach of the aforesaid representation/assurance.

(iii) even if it is to be held that defendant No. 1 were acting as the agent for defendant No, 3, the agency was coupled with interest and that there was privity of contract between the plaintiff and - defendant No 1.

(iv) that the contract was void and/or money was paid under a mistake and/or in respect of a contract of which consideration failed, and therefore, inter alia sections 65 and 72 of the Contract Act are attracted to and the plaintiff is entitled to the restitution and/or to recover the compensation from defendants Nos.. 1 and 3.

(c) Whereas Mr. Rahimtoola has urged the following contentions

(1) the Bank of India, made written express representation and whereas the American Express made express oral representation, which was subsequently confirmed in writing and that there has been {{FOOT NOTE}}

(1) PLD 1968 Kar. 1 {{FOOT NOTE}} breach of the aforesaid representation on the part of defendant No. 1 in both the suits.

(ii) that not only there was a breach of the aforesaid representation but there was misrepresentation on the part of defendant No. 1.

(iii) that defendant No. 1 admittedly acted as an agent for defendant No, 3 in the two transactions in question and, therefore, the following principles can be pressed into service (a)If an agent has personal interest or has acted personally he is personally liable ; (b)if an agent receives money personally because of his personal interest, he will be liable even if he has altered his position materially ;

(c) if money is paid to an agent because of his misrepresentation or fraud, it can be recovered from him even if he has altered his position materially ; (d)if money is paid to an agent because of fraud or misrepresentation of the principal, it can be recovered from him if he has not altered his position materially ;

(e) any adjustment made by an agent against an overdraft facility shall not constitute a material alteration.

(d) On the other hand, Mr. Afzal Nabi learned counsel for defendant No. 1 in Suit No, 178/65 has urged the following points :

(i) that as there was no privity of contract between the plaintiff and defendant No. 1, no warranty on the part of defendant No. 1 can be attributed ;

(ii) that defendant No. 1 has not made any representation nor has given any assurance about the genuineness of shares and the transfer forms to the plaintiff before the sale transaction ;

(iii) that though defendant No. 1 in the correspondence preceding the filing of the present suit and also in the written statement have admitted that they acted as an agent for the plaintiff ; but this Court should ascertain the real nature of the status of defendant No. 1 and that in fact defendant No. 1 did not act as an agent but merely acted as a banker for its customer and that the act to deliver the shares and to receive the payment was a ministerial act ;

(iv) that defendant No, I cannot be made liable merely because of the fact that they had received certain payments on behalf of their customer against the delivery of the shares as they are protected under section 131 of the Negotiable Instruments Act ;

(v) that the alleged negligence on the part of defendant No, I not to detect the forgery at the time of accepting the shares as a security for the overdraft facility does not give any cause of action to the plaintiff against defendant No. 1 as they did not owe any duty to the plaintiff ;

(vi) that the plaintiff cannot maintain their claim simultaneously under the law of Contract as well as under the law of Tort but can press into service one of the aforesaid law ;

(vii) that the plaintiff is not entitled to invoke equitable relief as he has not come with clean hafids.

(e) Whereas Mr. Mansoorul Arfin learned counsel for defendant No. 1 in Suit No, 179/65 has advanced the following arguments ;

(i) that a pledgee of shares of a public limited company cannot be equated with a holder of bill of exchange for value and, therefore, defendant No, I cannot be treated as a seller of the shares in question ;

(ii) that defendant No, I under Exh. 44/36 received two instructions namely ;

(a) to deliver 19000 shares of Karnaphuli Paper Mills Ltd,

(b) to receive the payment of Rs, 3,56,250 and that the above acts were merely ministerial acts on the paft of defendant No. 1 ;

(iii) that Exh. 44/34 indicates that in fact there was no sale transaction but it was a financing transaction ;

(iv) that even if Exh. 44/34 is to be construed as a sale transaction, the sale had atready taken place one day prior to the instructions given to defendant No. 1 through Exh. 44/36 ;

(v) that since the plaintiff has admitted that there - were several Badla transactions in respect of the shares in question, the alleged sale transaction stood superseded by the subsequent transactions, and, therefore no action can be maintained on the original transaction ;

(vi) that even if it is to be held that defendant No. 1 was acting as an agent for defendant No, 3, payment made by the plaintiff's agent to defendant No. 1 constitutes payment to defendant No, 3 and, therefore no action can be maintained against defendant No. 1 ;

(vii) that there was no misrepresentation on the part of defendant No. 1 within the meaning of section 18 of the Contract Act ;

(viii) that in any case the plaintiff had the opportunity to discover the alleged misrepresentation and, therefore, he cannot sustain the present action on the alleged misrepresentation ;

(ix) that the plaintiff's suit is not based either on section 65 or section 72 of the Contract Act but has been framed on the basis of the alleged misrepresentation and negligence on the part of defendants Nos. t and 3 and, therefore, the aforesaid sections cannot be pressed into service ; ,

(x) that in any case the contract was not void but was voidable and, therefore, section 65 of the Contract Act has no application ;

(xi) that even otherwise, section 65 of the Contract Act, speaks of restoration to the person from whom the amount was received and, therefore, the plaintiff cannot maintain an action against defendant No. 1, but only defendant No, 3 is entitled to maintain action, if any.

10. (a) Reverting to the contention of Mr. Mohammad Ali Sayeed, that defendant No, I as the pledgee of the shares in question had disposable interest and their position was alike to a holder of a bill of exchange for value and, therefore, in fact defendant No. 1 were the sellers of the shares and not defendant No, 3 in both the suits, it may be observed that whereas according to Mr. Mansoorul Arfin the above contention is not tenable. Mr. Mansoorul Arfin has referred to sections 172, 173, 174 and 175 of the Contract Act, in support of his contention. Section 172 defines what is a pledge, whereas section 173 defines the right of a pledgee, i,e, right to retain the goods for the debt, interest and for all expenses incurred. Furthermore, section 176 provides that if a pledgee makes default in payment of the debt or fails to perform at the stipulated time of the promise in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the date of the promise and retain the goods pledged as a collateral security, or he may sell the thing on giving the pawnor reasonable notice of the sale. Whereas section 177 gives a right to the pawnor to redeem the pledged goods before, they are sold. It was urged by Mr. Mansoorul Arfin that in view of the aforesaid relevant provisions of the Contract Act, it cannot be urged that the position of a pledgee of goods is alike to a holder of bill of exchange for value. In furtherance of the above argument, he has referred to the case of the Odessa Woolston (1), the case of Jaswant Rai Maniklal Akhaney v. The State of Bombay (2), and case of A. M. Burg and another v. Central Exchange Bank Ltd. And others (3) :

(1) In the aforesaid 1916 Appeal Cases, it was held by the Privy Council that the Prize Court does recognise the claim of a pledgee of a cargo seized of prize and that the legal ownership of the Cargo was at the time of seizure in the enemy subject and these rules apply to a pledgee who is holder of bills of lading and named therein as assignee of the cargo and that in determining the national character the legal ownership is the sole criterion.

(ii) Whereas in 1956 Supreme Court of India. It was held that the securities pledged with the bank towards the repayment of overdrawn contract stipulate that securities to be disposed of only under certain conditions, the right of pledgee bank to dispose of the pledged shares will arise on the happening of the event agreed namely, on the pledgor bank failing to maintain the proper margin or be making default in repayment of the outstanding amount on demand of the pledgee Bank.

(iii) Whereas in the aforesaid Lahore case it was held by a Division Bench while construing section 178 of the Contract Act, that, the right of a pawnee (pledgee) either to bring a suit upon debt or to sell the pledged property upon reasonable notice are concurrent and that a pawnee must return the pledged property on payment of debt by pawner.

(b) The ratio decidendi of the above cases is that the general ownership in the pledged goods remains vested in the pledgor and whereas the pledgee acquires special property/interest in the pledged goods to the extent of the amount of loan advanced, interest thereon and other expenses incurred in accordance with law, and that the right to. Sell the pledged goods will accrue to the pledgee upon default in payment of the {{FOOT NOTE}}

(I) 1916 A C 145 (2) AIR 1956 SC 575

(3) PLO 066- Lah. {{FOOT NOTE}} loan amount and upon service of notice under section 176 of the Contract Act. In other words it cannot be contended that once the goods are pledged, the pledgee becomes the owner and that he can dispose of the goods withdut any notice under the aforesaid section. I am, therfore, not inclined to subscribe to the contention urged by Mr. Mohammad Ali Sayeed that defendant No. 1 as the pledgee of the shares were in fact the seller of the shares in question. It is an admitted position that defendant No. 1 had not disposed of the shares in question after service of a notice on defendant No, 3 under section 176 of the Contract Act, and, therefore, it cannot be urged that in the instant cases the sale of the shares was made by defendant No. 1. However, defendant No. 1 were not strangers to the transaction. They had special property/interest in the pledged shares and without their consent defendant No, 3 could not have sold the shares in question.

(c) It was also urged by Mr. Mansoor-ul-Arfin that in fact the shares are chores in action and not goods, and, therefore, not capable of being pledged. In support of his above contention he has referred to the case of P. N. Krishna Pattar v. Kannambra Nayar Veetlil Villa Amma Kutti Neithlar's son Kunhunni Elaya Nayar and others (1), wherein a Single Judge of the Madras High Court while construing sections 172 and 178 of the Contract Act, 1872 has observed that the word "goods" in sections 172 and 178 connotes property capable of physical possesssion' and transferable by manual delivery and that pledge passes only special property in goods and that shares certificates are not goods within the meaning of sections 172 and 178 and further that mere deposit of share certificates does not create valid pledge. In my view the facts of the above Madras case are distinguishable from the instant cases inasmuch as in the present cases not only the alleged shares were deposited but also the alleged blank B transfer forms duly verified were also lodged with defendant No. 1 in both the suits. Furthermore, in my view, the learned Judge has not taken into consideration the definition of the goods given in section 2 (7) of the Sale of Goods Act, 1930 which proves that goods mean every kind of movable property other than actionable claims and money and includes (electricity, water, gas) stock and shares, etc. The words electricity, water and gas have been added to by the Amending Ordinance of 1962 in the aforesaid section 2 (7), but the original definition of goods included stock and shares. In this regard it may also be pertinent to refer to the case of Maneckji Pestonji Bharucha and another v. Wadilal Sarabhai & Co. (2) in which it was held that it would be an upset of stock exchange transactions if it were suggested that a broker who sold shares of general description did not implement this bargain by supplying the buyer the share certificates and the transfer forms signed by the registered holders of the shares and that the title to get on the register of the shares maintained by a company consists in the possession of a certificate together with a transfer signed by the registered holder. It was also held that in India chooses in action are goods by virtue of section 78 of the Contract Act. In my view shares certificates alongwith the blank transfer forms duly verified from the Company concerned constitute goods capable of being pledged

(d) Mr. Mausoor-ul-Arfin has also referred to sections 89, 53 (a) of the Negotiable Instruments Act in order to demonstrate that the shares of a public limited company cannot be equated with bills of exchange. It will suffice.To observe that the above contention of Mr. Arfin appears, to be correct. {{FOOT NOTE}}

(1) AIR 1941 Mad. 249 (2) AIR 1926 P C 38 {{FOOT NOTE}}

11. (a) Reverting to the second contention of Mr. Mohamm ad Ali Sayeed that there was express.

Representation/assurance given by defendant No. 1 to the plaintiff that the shares certificates and the transfer forms were in order. It may be observed that reliance has been placed on the evidence of the P. W. 15 plaintiff Exh. 44 who has deposed that Masood Iqbal (defendant No, 3) had told him that the shares were pledged with the bank of India and, therefore, he inquired from the Bank of India about those shares and the Bank's Manager Mr. Colah had confirmed to him that these 15000 shares were lying with the Bank in Mr. Masood Iqbal's overdraft account and that he also confirmed that the transfer deeds of these shares had been signed by Mr. Masood Iqbal and that his signature on the transfer deeds had been duly verified by the Karnaphuli company and, that whereas regarding the American Express he has deposed that before finalising the transaction with Mr. Masood Iqbal, he had verified from Mr. Sequeira of the American Express that these 19000 shares were lying with them with transfer deeds duly verified and that he had also confirmed that they were in order and that upon the aforesaid assurance of Mr. Sequeira he agreed to purchase 19000 shares at Rs, 18.75 per share. It has been urged by Mr. Mohammad Ali Sayeed that as defendant No, I in both the suits have failed to examine M/s. Colah and Sequeira, the above statement of the plaintiff remained unchallenged and therefore, the plaintiff's contention that such assurance was given should be accepted. Whereas Messrs Afzal Nabi and Mansoor-ul-Arfin have drawn my attention to the fact that in the correspondence ensuing after the discovery of the forgery, the plaintiff had never come out with the averment that any express assurance was given by Mr. Sequeira on behalf of the American Express. It has also been pointed out that even in the legal notice served by the plaintiff the aforesaid important fact was conspicuously missing. My attention was also invited to the fact that Masood Iqbal was known to the plaintiff since 1954 and was dealing with the 'plaintiff and according to the statement of plaintiff, Masood lqbal defendant No, 3 had never let him down before the transactions in question. The fact that the plaintiff has never mentioned about the aforesaid alleged express assurances of Messrs Colah and Sequeira in the correspondence or in the legal notices and the fact that Masood Iqbal was known to the plaintiff since 1954 and was having business dealings with him since then indicate that probably the plaintiff did not obtain any aforesaid alleged assurance from the two banks in question. I am unable to agree with Mr. Mohammad Ali Sayeed's contention that merely because of the fact that defendant No. 1 in both the suits have not examined the aforesaid two gentlemen, it should be presumed that the statement made by the plaintiff is correct.

(b) However, the question, which requires consideration is, as to whether any representation can be attributed on the part of defendant No. 1. According to Mr. Rehimtoola defendant No. 1 (the Bank of India) in Suit No, 178/65 had made written representation about the genuineness of the shares and whereas defendant No. 1 (the American Express) in Suit No, 179/65 had made oral representation, which was confirmed by them in their subsequent letters. In support of his above contention Mr. Rahimtoola has relied upon Exhs. 43/1, 44/12 and 117/3 in order to show that Bank of India had made representation in writing, and whereas in support of his second contention, namely, that the American Express made oral representation which was subsequently confirmed in writing, has relied upon Exhs. 93 and 97, Exh. 43/1 is a letter of the Bank of India dated 20th November, 1963 addressed to the Agent to Messrs Habib Bank Ltd. Stating therein, as follows : "Dear Sir, ' Ref. : 15,000 shares of Karnaphuli Paper Mills Ltd. As per list attached. At the request of Mr. Masood lqbal Ahmed, we hand over you herewith the above-mentioned shares and shall be pleased to receive your pay-order for Rs, 2,70,000 in or favour.

' Please acknowledge receipt on the duplicate of this letter. Yours faithfully. (Sd.) Manager."

' Exhibit 117/3 represents the receipt of the cheque for Rs, 2,70,000 signed by the representative of the Bank of India on 21st November, 1963 on Exh. 34/1. Whereas 'Each. 44/12 is a letter of the Bank of India dated 29th June, 1964 addressed to the plaintiff stating therein that as an agent of Masood lqbal they handed over 15000 shares of Karnaphuli against payment.

' Reverting to Mr. Rahimtoola's contention that the American Express made oral representation which was confirmed subsequently in writing, it may be stated that Mr. Rahimtoola has relied upon the evidence of the Habib Bank's agent Sattar Exh. 118, who has deposed that on 8th January, 1964 three gentlemen came to his branch. Out of the three two were from the American Express and one was Masood lqbal and that they represented that they had brought 19000 shares of Karnaphuli Paper Mills Ltd. Which were to be delivered to the plaintiff. He has also referred to the aforesaid Exhs.

93 and 97. Exh. 93 is a letter of the American Express dated 23rd June, 1964 addressed to the agent of Habib Bank Ltd. Which reads as followc "Dear Sir, ' 19000 shares of Karnaphuli Paper Mills Ltd.

' In reply to your lettertslo. A. S. 460 of June 19, 1964, we regret we are unable to furnish the distinctive numbers of the 19000 shares of Karnaphuli Paper Mills Ltd. Sent to you by us on January, 8, 1960, as we have no record of these numbers. Very truly yours (Sd.) P. A. Sequeira, Assistant Manager, ' Whereas Exh. 97 is another letter of the American Express dated 16th July, 1964 addressed to the agent to Habib Bank Ltd., which reads as follows :- "Dear Sir, ' 19000 shares of Karnaphuli Paper Mills Ltd.

' In reply to your letters No, A. S./487 and A. S./537 of June, 29, 1964 and July 14, 1964 respectively, we regret we are unable to furnish the scrips numbers of 19000 shares of Karnaphuli Paper Mills Ltd.

Sent to you by us on January 8, 1964 as we have no record of these numbers. Very truly yours (Sd ) P. A. Sequeira, Assistant Manager."

' In this regard it may also be pertinent to refer to two more documents, which are also relevant to the point in issue, namely. Exhs. 119/80 and 119/87. Exh. 119/80 is a credit memo dated 8th January, 1964 sent to Masood Iqbal Ahmed defendant No, 3 by the American Express. In the body of the above document the following re marks appear.

"Pay order received from Habib Bank Ltd. Against 19000 shares of Karnaphuli Paper Mills Ltd."

' Whereas Exh. 119/87 is a printed form of the American Express under the caption outward receipt for documents, securities and bullion, etc. Dated 8th January, 1963, in which receipt for 19000 shares of Karnaphuli Papers Mills Ltd. Has been signed by the agent of Messrs Habib Bank Ltd.

(c) On the basis of the above documents and the statements of P. W.

15. D. W. Leemonwala Exh. 117 and D. W. Majid Hussain, it can be urged that when defendant No. 1 sent their representatives for the delivery they represented that they were delivering the shares of Karnaphuli Paper Mills and'not fake/suprious shares. However, further question arises as to whether the aforesaid representation can be construed as a representation/misrepresentation within the meaning of section 18 of the Contract Act. It has been urged by Mr. Mansoor-ul-Arfin that there was no representation or misrepresentation on the part of defendant No, I. In support of the above contention he has referred to section 18 of the Contract Act which reads as follows : "Section 18. 'Misrepresentation' means and includes-

(1) the positive assertion. In a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true :

(2) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of any one claiming under him ;

(3) causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement."

' It was further urged by Mr. Mansoorul Arfin that the alleged agreement of sale, if any was already concluded before defendant No. 1 were instructed by defendant No, 3 to deliver the pledged shares to the plaintiff's agent, defendant No, 2, and therefore, the aforesaid section 18 of the Contract Act has no application to the instant cases. In furtherance of his above submission he has referred Pollock and Mulla on Indian Contract and Specific Relief Acts. 9th edition 159-163, Spencer Bower and Turner, 2nd Edition 210, and the case of Behn and another v. Kemble and others (1). {{FOOT NOTE}}

(1) 141 E R 816 {{FOOT NOTE}} ' He has also invited my attention to P.W. 15 plaintiff's statement to the effect that one day prior to the date of deliver, Bought Notes in respect of the two transactions in question were prepared, He has also drawn my attention to the Bought Note dated 7th January, 1964 Exh. 44/6 in respect of 19000 shares. It is true that Exh. 44/6 indicates that on 7th January, 1964 the plaintiff had purchased 19000 Karnaphuli shares from Masood lqbat at Rs, 18.75 and that the plaintiff has admitted in his statement that this is so, but at the same time, I cannot, overlook the fact that the subject-matter of the sale were the pledged shares in both the transactions. From the evidence in the record, it is evident that defendant No, 3 had offered to sell the pledged shares to the plaintiff (which were with the two banks). If that is so the contract between the plaintiff and defendant No, 3 could not have been completed without the pledgee's consent to such transaction as they had special property/intereSt in the shares. Furthermore, under the agreement between the plaintiff and defendant No, 3 the sale price was to be paid to defendant No. 1 who were entitled to credit the same in the account of defendant No, 3 which was already overdrawn in pursuance of the overdraft facility extended by the two banks to defendant No,

3. It was also urged by Mr. Mansoorul Arfin that Exh. 44/6 indicates that no specific 19000 Karnaphuli Paper Mills shares were sold and, therefore, any 19000 shares could have been delivered by defendant No, 3 to the plaintiff in the performance of his agreement. It is correct that Exh. 44/6 does not specify which of the 19000 shares of Karnaphuli Paper Mills were to be delivered by defendant No, 3 to the plaintiff but the above document is to be read with the other documentary and oral evidence on the record, which entered into the transaction in respect of specific goods, i.e the goods which were identified and agreed upon by the parties namely, the shares pledged with the two banks. In this view of the matter, as pointed out hereinabove the Bought Note dated 7th January 1964, Exh. 44/6 or Bought Note in respect of 15000 shares (which has not been pointed out and presumably is not on the record) brought about contracts subject to the consent of the two pledgee banks as there is nothing on the record to show that the two banks had given their consent to the above two transactions on or before the two Bought Notes were prepared. On the other hand it was urged by Mr. Mansoorul Arfin that the Amercan Express even did not know as to why defendant No, 3 on 8th January, 1964 instructed the aforesaid bank to give the delivery of the pledged shares.

(1) Reverting to Pollock and Mulla on the Indian Contract and Specific Relief Acts, it may be observed that the author in the above treatise has observed that with regard to the contracts general principle is that if one party has introduced the other to enter into a contract by misrepresentation, though innocently, any material fact, specially within his knowledge, the party misled can avoid the contract. But this rule is not extended to a case in which the facts were within the means of knoWledge of both the parties. It has also been observed at page 163 of the above book that in order to constitute misrepresentation there must be some active misstatement of fact or at all events such a partial and fragmentary statement of fact as that withholding all which is not stated makes that' which is stated absolutely false and that mere silence is no misrepresentation.

(ii) Whereas in Spencer Bower and Turner on Estoppel by Representation in Article 222 at page 213, it has been observed that, by express representation or by conduct, or in action, the holder of corporate securities and the corporation issuing them, as the case be, may be precluded from afterwards disputing as against the other party, the legality or validity of the issue of shares, debentures, . Bonds, negotiable instruments or whatever securities may be.

(iii) Whereas in the aforesaid case reported in 141 English Reports, it has been held that no action will lie for a false representation, unless the party making it knows it to be untrue and makes it with the intention of inducting the person to act upon it and the latter does so act upon it and sustains damages in consequence thereof.

(d) It will suffice to observe that Mr. Mansoorul-Arfin's contention that there was no active representation or misrepresentation on the part of defendant No. 1 which prompted the plaintiff to finalise the transaction in question to some extent appears to be correct, but at the same time it cannot be denied that defendant No. 1 in the two suits while acting as agents having special interest in the pledged shares represented at the time of effecting delivery that they were delivering 15000 and 19000 genuine shares respectively of Karnaphuli Paper Mills Ltd.. And were receiving payment for the same. Furthermore, in any case there was a mistake on the part of the plaintiff's agent as well as on the part of defendant No. 1 inasmuch as the plaintiff's agent, I e.

Defendant No, 2 made payment under the mistake that they were receiving genuine shares and the transfer forms, and whereas defendant No. 1 also acted under the mistake believing that they were receiving payment in consideration of the delivery of the genuine shares.

12. (a) Reverting to the learned counsel for the plaintiff's contention that in any case defendant No, in both the suits were acting as the agent and that the agency was coupled with interest, and, therefore, there was a privity of contract between the plaintiff and defendant No. 1. On the other hand, as pointed out hereinabove, it has been urged by Mr. Afzal Nabi that though in the correspondence ensuing after the discovery of the forgery and even in the written statement, defendant No. 1 in Suit No, 178/65 have admitted that they acted as agent but in fact they had not acted as such and that this Court should ascertain the real nature of their status Whereas Mr. Mansoor-ul-Arlin has submitted that defendant No. 1 in their letters as well as in the written statement have not admitted the position that they acted as an agent for defendant No, 3 in the transaction in question and that defendant No 1 were merely discharging ministerial act by handing over the pledged shares against the payment in respect thereof. .So the moot point is, in what capacity defendant No. 1. In the two suits acted in the transactions. In my view it is not open to the Bank of India after having admitted their position as an agent in the correspondence. And the written statement to urge that in fact they did not act as such in the transactions in question. Even otherwise, in my view, the above contention has no merit. As regards the contention of Mr. Mansoor-ul-Arfin learned counsel for the American Express that his client had not factually acted as an agent but had performed ministerial act, it may be observed that in support of above contention Mr. Mansoorul-Arfin has urged that delivery of the shares and of the transfer forms and the receipt of the payment in respect thereof could have been done by any person even by a peon and that in fact the Amercian Express were acting as an intermediary or as a post office. In support of the above contention Messrs Afzal Nabi and Masoor-ul-Arfin have relied upon the case of Re : The Deirdre Samuel The Trustee v. Isidore Kerman (1) in which a Single Judge of the Chancery Division while considering the position of a bankrupt's solicitor, who received certain jewellery from the husband of the bankrupt and handed the same to the person nominated by the bankrupt, held the act of receiving of the jewellery and of handing of the same to the bankrupt's nominee constitutes merely a ministerial act and does not make it an act of conversion rendering him liable to be sued' for the tort of conversion. In my view the above case has no application to the case inasmuch as in the aforesaid case the solicitor had no personal interest in the transaction. The question before the Court was as to whether there was any legal obligation on the part of the solicitor to pass on the jewellery to the trustees in bankruptcy and not to the bankrupt's nominees.

In the instant case it has been pointed out by me that the Bank of India as well as the American Express had special property/interest in the pledged shares and that the payment against the above shares was to be received by the two banks not merely as ordinary bankers but as agents who had personal interest in the transactions.

(b) It may be pertinent to refer to sections 182, 185 and 186 of the Contract Act Section 182 provides that an agent is a person employed to do any act for another or to represent another in dealing with third person, and that the person for whom such an act is done or who is so represented, is called his principal. Whereas section 185 lays down that no consideration is necessary to create an agency and whereas section 186 provides that the authority of an agent may be express or implied. If we apply the above definition of an agent given in the Contract Act, in my view it cannot be urged that defendant No. 1 in both the suits had not acted as such. I am not impressed by the argument of Mr. Mansoorul Arfin that the American Express were acting as an intermediary, or as a post office. The above contention has overlooked the fact that the two G pledgee banks were having special property/interest in the pledged shares and that they were entitled to see as to whether they were getting the market price of the shares or not. I inquired from Mr. Mansoor-ul Arfin as to whether the American Express would have delivered 19009 shares in question to the plaintiff's agent if defendant No, 3 would have instructed them to deliver the said shares against the payment of Rs, 25,000 only, his reply was that they might have delivered the same. In my view this is not correct. When a pledgee relinquishes/transfers his rights in respect of pledged goods, he ensures that the pledged goods at least should fetch the price equivalent to his dues or in any case equivalent to the market price. In the instant case from the statement of account of the American Express Exh. 119/25, it appears that on the date of the delivery of the shares defendant No, 3 had overdrawn a sum of Rs, 4,44,567 in his account with the aforesaid bank and therefore, it is highly improbable that the American Express would have delivered 19000 shares valuing Rs, 3,56,250 against the receipt of a meagre sum of Rs, 25,000. Similarly defendant No, 3 had overdrawn over Rs, 1,50,000 from his account with the Bank of India (Exh. 34/5) on 21st November 1963, i,e, the date of transaction in respect of 15000 shares. It is evident that learned counsel for defendant No, l's contention that defendant No. 1 did not act as an agent for defendant No, 3 is untenable. Defendant No. 1 in both the suits acted as agent, having personal interest. {{FOOT NOTE}}

(1) (1945) 2 All E L R 71 {{FOOT NOTE}}

(c) It was urged by Messrs Mohammad Ali Sayeed and Rehimtoola that defendant No. 1 being an agent having personal interest can be sued. Whereas it was urged by Messrs Afzal Nabi and Mansoorul Arfin that defendant No. 1 cannot be sued as there was no privity of contract and that in any case defendant No. 1 are protected under section 131 of the Negotiable Instruments Act. Before taking up the above respective contentions, it will be appropriate to deal with the latter part of Messrs Afzal Nabi and Mansoorul Arfin's contention, i,e, defendant No. 1 are protected under section 131 of the Negotiable Instruments Act. In this regard it may be pertinent to refer to the aforesaid section 131, which reads as follows :- -Subject to the provisions of this Act relating to cheques crossed 'account payee' where a banker in good faith and without negligence receives payment for a customer of a cheque crossed generally or specially to himself, and the customer has no title or a defective title thereto, the banker shall not incur any liability to the true owner of the cheque by reason only of having received such payment."

It may be noticed that the above section can be pressed into service when a banker receives payment for a customer of a cheque crossed generally or specially to himself and the customer has no title or defective title thereto. In the instant case the two banks had received the pay-orders in their own name and not as a banker, but as an agent having personal interest in the pay-order and, therefore, section 131 has no application to the instant case.

' Reverting to the question as to whether an agent having personal interest can sue or be sued, it may be observed that it is a well-settled law that an agent who acts in the capacity of a principal in a transaction or in the capacity of an agent having personal interest in the transaction can sue and be sued. In this regard it may be advantageous to refer to para 1 at page 184 of the Treatise on the law of Agency of Fridman, third edition, which reads as follows :- "Agent's special interest.-This necessity for contracting personally, in order to give the agent a right to sue on his own behalf, is absent where the agent has some special property in the subject- matter of the contract, or a lien upon it, or some beneficial interest in the completion of the contract. Certain kinds of agents, such as factors and auctioneers, have a special property in the goods which are subject-matter of the agency, for the purpose of protecting their own interest in the agency. In consequence the law allows them to sue in their own name and on their own behalf on contracts made in respect of the goods. For example, in Williams v. Millington an auctioneer was held able to sue for the price of his principal's goods which had been sold to the third party, who knew that the auctioneer was selling on behalf of somebody else. Lord Loughorough pointed out that an agent could sue on the contract made for his principal where he had possession of the goods coupled with an interest in them, or a special property in them with a lien for the charges of the sale and his commission. Brokers, however, have no such interest, or property in the goods with which they deal ; hence, failing the personal liability of a broker upon the contract he has made on behalf of his principal he will not be able to sue the third party.

' To this there is one exception. For it appears that insurance brokers are in a special position, and irrespective of the nature of the contracts made by them they may sue upon them.

' If an agent having personal interest can sue, the converse will also be true.

(d) Messrs Mohammad Ali Sayeed and Rahimtoola have referred to the case of Colonial Bank v.

The Exchange Bank of Yarmouth, Nova Scotia (1), the case of Cliver v. Governor & Co. Of The Bank of England (2), the case of Lord Mayor & Sheffield v. Barclay and anther (3), the case of Kerrision v.

Glyn Mills Currie & Co. (4), the case of National Westminster Bank Ltd. v. Barclays Bank International Ltd. And others (5), the case of Buller v. Harrison (6), the case of Bavins Junr. & Sims. v. London and Sourth Western Bank Ltd. (7), the case of Kleinworst' Sons & Co. v. Dunlop Rubber Co. (8) and the case of Official Assignee of the High Court of West Pakistan and others v. Loyds Bank Ltd. (9). They have also referred Article 123 of Bowstead on Agency, 14th Edition, p.

390.

' On the other hand M/s. Afzal Nabi and Mansoorul Arfin have referred to the case of J. R. Thomson and others (Trustees) v. Clydesdle Bank Ltd. (10) and the case of East India Company v. Tritton and others (11).

13. (a) (1) Reverting to the case reported in 11 A C 1886, it may be observed that the facts of the case are that the plaintiff-Bank being under instructions from R to remit his money to a bank at Halifax, through the mistake of its agent paid them to a New York Bank for transmission to the defendants, who being advised thereof debited the New York Bank and credited R in account with the amount thereof and being afterwards advised of the mistake claimed to retain and used the money in reduction R's account with them. It was held by the Privy Council that the defendant bank was bound to return the above amount and that the plaintiff bank had sufficient interest in the money to recover them as money received to their use :

(iii) Reverting to (1902) L R Ch. D, it may be stated that the facts of the above case were that 'S' a Stock broker approached the Bank of England on a power-of-attorney for the sale and transfer of consols standing in the name of the plaintiff and another person, a solicitor, the form of power-of- attorney having been obtained in the ordinary course from the bank by S, upon the instructions of the solicitor, who represented to act on behalf of the plaintiff as well as himself, but the plaintiff knew nothing about it. The power-of-attorney purported to be signed by both the shareholders. On the basis of the above power-of-attorney, the Bank .Allowed S to execute the transfer in the bank books as the attorney for the stock-holder, S received the purchase money under the power and paid it to the solicitor who applied it to his own use. {{FOOT NOTE}}

(1) (1886) 11 A C 84 (2) (1902) I L R 610

(3) 1905 A C 392 (4) 81 K B 1 (465)

(5) (1974) 3 A E R 834 (6) 98 E R 1243

(7) (1900) 1 Q B 270 (8) 97 L T R 263

(9) PLD 1969 SC 301 (10) 1893 A C 282

(11) 27 PR 353 {{FOOT NOTE}} Subsequently, it was discovered that the plaintiff's signature to the power-of-attorney had been forged, whereupon under an action by the plaintiff against the bank the latter was ordered to transfer to him console of a like sum and also to pay him all bank dividends together with the cost of the action. The bank then claimed indemnity as against S under a third party notice. No blame was attributed either to S or to the bank for what had happened. Held by the Court of appeal that a warranty to be implied as against S that the authority upon which he demanded of the bank the performance of their statutory duty was valid and that this implied warranty rendered him liable to indemnify the bank. It may be advantageous to reproduce herein below the extracts from the judgment of Sterling L. J. Who quoted with approval the following observation of Lord Esher in the case of F. I. R. Banks Executors v. Humbhreys :- ' The rule to be deduced is, that where a person by asserting that be has the authority of the principal induces another person to enter into any transaction which he would not have entered into but for that assertion, and the assertion turns out to be untrue, to the injury of the person to whom it is made, it must be taken that the person making it undertook that it was true. And he is liable personally for the damage that has occurred."

' After quoting the above observation of Lord Esher, Sterling, L. J. Observed as follows :- "Now, did not what took place between Mr. 'Starkey (professing to act on behalf of his principals) and the bank amount to a "transaction"? It seems to me that it would be a narrow reading of the word to hold that this was not a "transaction" ; because, if the asserted power had been really valid, the result would have been to bring about a change in the legal position of the then registered holders of the stock, so that the new transferee would have become the legal owner of the stock, and to the new transferee the bank would henceforth have been under the obligation to pay the dividends. It unfortunately turned out that the power was invalid, and the result to the 'bank I have already stated. The consequence, therefore, of what took place was that the bank changed its legal position with reference to this stock, and very much to their injury, because judgment has been obtained against them.

(iii) Reverting to 1905 A C 392, it may be observed that the facts of the above case are that the banker in good faith sent to a corporation a transfer of corporation stock which purported to have been executed by T and H, the two registered holders of the stocks with a request to the corporation to register the stock in the name of the banker. Thereupon the corporation in good faith acted upon this request and granted a fresh certificate to the banker, transferred the stock to third parties and they were registered as holders of the shares. Afterwards it was discovered that T had forged H's signature, and H recovered against the corporation the judgment whereby they were compelled to by equivalent stock and register it in H's name and to pay him the missing dividend with interest. It gas held by the House of Lords that both the parties having acted bona fidley and without negligence the banker was bound to indemnify the corporation against the liability to H upon implied contract that the transfer was genuine. Lord Davey in his judgment inter alia made the following observations :- "I am further of opinion that where a person invested with a statutory or common law duty of a ministerial character is called upon to exercise that duty on the request, direction, or demand of another (it does not seem to me to matter which word you use), and that without any default on his own part acts in a manner which is apparently legal but is, in fact, illegal and breach of the duty, and, thereby incurs liability to third parties, there is implied by law a contract by the person making the request to keep indemnified the person having the duty against any liability which may result from such exercise of the supposed duty and it makes no difference that the person making the request is not aware of the invalidity in his title to make the request or could not with reasonable diligence have discovered it."

(iv) Referring to (1912) 81 K B, it may be stated that the appellant brought an action for the recovery of 500 shares deposited by him on 31st October, 1907 under a mistake of fact in the defendant- Bank to the credit of the account therein of a certain firm of banker carrying on business in New York called Kessler & Co. After discovering the fact that Kessler & Co. Was bankrupt, demanded the payment back from the defendant-Bank, who declined to accede to the appellant's request on the ground that Kessler & Co. Was indebted to the defendant-Bank and they purported to adjust the above amount in the account of the aforesaid firm. It was urged by the appellant that he paid the money to the defendant-Bank under a mistake of fact that Kessler & Co. Was operating, but without the knowledge of either of the plaintiff or defendant committed an act of bankruptcy. Lord Atkinson made inter alia the following observations :- "The several cases cited deal with the respective rights of Bank and customer inter se, and with those rights alone. They do not touch the question whether a banker to whom money is paid to the credit of his customer's account at that customer's request in mistake of fact, is in a better position that his customer would be, and is entitled to hold it, though his customer, had it been paid to him direct, would have, under the circumstances, been bound to refund it. That was the principle contended for by the respondents before your Lordships. No authority was cited in support of it. It seems to me contrary to reason and justice, and in the absence of binding authority ,upon the point I refuse to accept it as the law. I am, therefore on the whole case of opinion that the decision of the Court of Appeal was wrong and should be reversed, and that of Mr. Justice Hamilton restored, and that this appeal should be allowed with costs," may also be advantageous to quote hereinbelow the observation of Lord Shaw : "I agree with the opinion that money so paid can be successfully re-demanded. I do not think that it would be correct, either in law or in business, to permit the recipient, though a banker to impound money which his principal could not have honestly or legally retained. This rule applies generally, even although the recipient, whether banker or agent, was as here, ignorant at the time of receipt of the disability of the principal to do the thing for which, and for which alone, the money was deposited, or was himself under a mistaken impression on that subject.

(v) Referring to (1974) 3 A E L R, it may be observed that the facts of the above case were that the plaintiff were a bank, B who was resident of Nigeria was a long standing customer of the plaintiff and had an account at one of their branches in London. Had spare cheque book which was issued by the branch. Unknown to B one of the blank cheques was stolen from the cheque book. The second defendant was a businessma n in Nigeria who were keen to transfer substantial fund out of Nigeria. In view of the strict control regulations after the Nigerian Civil War there was a black market of foreign currency and that the second defendant was constantly on the look out for opportunities to acquire sterling. In that situation there was market for the cheques drawn on Loudon. An intermediary brought to the second defendant B's stolen cheque which had been made out for 8.000. It was uncrossed and unendorsed. H's signature had been forged. The forgery was undetectable except to an expert graphologist. The second defendant agreed with the intermediary that he would send the cheque to London for collection and that it was made subject to condition that he would pay the intermediary Nigerian 10.400. Accordingly, the second defendant sent the cheque to his bank the tirst defendant in London with a request to present it on special clearance and credit his account with the amount and to advise him immediately on its being honoured. The cheque was duly presented. Although the amount of the cheque was such as to be quite out of character with the way B had operated his account in the past and B had no recognised overdraft facility entitling him to draw a cheque for that amount but the plaintiff had no hesitation in honouring the cheque for the reason that there was no reason to suspect that it was not genuine. B was known to the plaintiff-Bank as a customer of integrity and that the plaintiff's branch had ample collateral security to cover B's indebtedness. About two weeks later B learnt of the payment and informed the plaintiff that the cheque was a forgery. In an action by the plaintiff for the recovery of 8,000 as money paid under a mistake of fact the second defendant contended that the plaintiff were estopped from making claim since by honouring the cheque the plaintiff had represented that it was a genuine and in reliance on that representation he had acted to his detriment. It was held by Kerr, J. That the mere fact that a banker had honoured a cheque on which his customer's signature had been, undetectably forged did not carry that much ample representation by the banker to the payee that the signature was genuine, and there was no bar to the plaintiff's right to recover the money as having been paid under a mistake of fact.

(vi) Referring to 98 E R it may be stated that the facts of the above case were that the plaintiff filed an action against the defendant to recover back a sum of 2.100 paid to him on a policy of insurance as agent for the insured. The aforesaid sum was paid by the plaintiff thinking the loss was fair, the notice of which was given by the defendant to the plaintiff on 20th April, a part of the money was paid at that time and the remainder was paid on 6th May, on which date the defendant passed the whole sum in his account with Ml's. Ludlow and Shaw and gave credit to them for it against a sum of 3000 in which they stood indebted to him. The question at the trial was as to whether action could be maintained against the defendant as an agent of the insured which question depended on, whether the defendants having placed this money to the account of his principal, in the manner before stated was equivalent to the payment of it over. It was held that in general the principal of law is that if any money be mispaid to an agent expressly for the use of his principal and the agent has paid it over, he is not liable in an action to pay the person who has mispaid it for the reason that one man should not be loser by the mistake of another person and that the person who made the mistake without redress, but his remedy is against the principal.

And, on the other hand it is just that as the agent ought not to lose he should not be a gainer by the mistake and, therefore, if after the payment to be made to him and before he has paid the money over to his principal, received notice/ knowledge of the mistake, the agent cannot afterwards pay it over to his principal without making himself liable to the real owner of the money.

(vii) Referring to (1900) 1 Q B it may be observed that the facts of the above case were that the plaintiff received from a company which was indebted to them an order addressed to the company's banker for the payment of the amount of their debt. The order was not a cheque within the meaning of Bill of Exchange Act, 1882 for the reason that the payment was made conditionally upon signature of a receipt appended to the order. The order was stolen from the plaintiff the receipt being then assigned. However, it was subsequently, communicated to the defendant banking Company, with a forged endorsement and receipt thereof for collection on behalf of a customer of theirs whom they credited with the amount of it. The customer did not know that the order had been stolen. The aforesaid order was presented to the defendant's Bank, to the Bank, to which it was addressed, and the amount specified was thereupon paid by that banker to them.

Subsequently, the plaintiff gave notice to the defendant that the order was stolen. Nothing in the meantime had taken place to debar the defendants from cancelling the credit given to their customer as before mentioned. It was held by the Court of Appeal that the plaintiff were entitled to recover the amount received by the defendants upon the order as money received for the plaintiff's use. Collins, L. J. Has made the following observations : ' As I have said, however, it does not appear to me necessary to decide this point, because I am clearly of opinion that the defendants are liable for the amount for which judgment has been given against Them upon the count for money had and received. They have wrongfully so dealt with a document belonging to the plaintiffs that they have received its full face value ; and I think that the result is that the money so received by them by reason of that wrongful user of the plaintiffs document c.In be treated as money received by them to the use of the true owners of the document. That being so, what is the answer which the defendants set up to the claim of the plaintiffs for the money belonging to them which the defendants have in their hands ? The only answer which they set up appears to be the fact that they have credited their customer with the amount of it. Apart from any other argument, the answer which the plaintiffs' counsel made to this appears to be misconclusive, namely, that a credit to be given to a customer by a bank is in its nature provisional only, and depends upon the question whether the cheque or other document finally results in a right to recover and retain the money, The customer is only credited with the amount subject to the risk of that afterwards turning out not to be so. There does not appear in this case to have been any settlement of account between the defendants and their customer which debarred them from recovering from their customer the amount with which they had credited her.

Consequently, there does not seem to me to be anything which prevents the plaintiffs from recovering that amount from the defendants."

(viii) Referring to 79 L T R, it may be observed that the facts of the above case were that the appellant B & Company, who were both bankers financed K, a merchant making adieances against the goods. K. Sold a parcel of goods to the respondent and directed them to remit the price to B & Co. Who had equitable mortgage on these goods. However, the respondent by mistake, acting on good faith paid the money to the appellants who received it in good faith believing it to represent the price of the goods of which they had made advances to K. It was held by the House of Lords that the respondents were entitled to recover the money from the appellant as money from the appellant as being the money paid under a mistake of fact. It will be advantageous to produce herein-below an extract from the judgment of Lord Atkinson, which reads as follows :- "They seem to establish that, whatever may in fact be true position of the defendant in an action brought to recover amount paid to him under a mistake of fact, he will be liable to refund it if it be established that he dealt as a principal with the person who paid it to him. Whether he would be liable if he dealt as an agent with such person will depend upon this, whether before the mistake was discovered, he had paid over the money which he received to the principal, or settled such an account with the principal as amounts to payment or did, something which prejudiced his position that, it would be inequitable to require him to refund.

(ix) Reverting to 1969 SC, it may be stated that the facts of the above case were that a certain amount was attached by the Sind Chief Court from the account of the defendant with the respondent-Bank. The respondent-Bank on the basis of a forged letter purported to have been sent by the Nazir of the Court released the money. The plaintiff in the suit brought an action for the recovery of the money against the respondent-Bank which was decreed by a learned Single Judge. However, in appeal L. P. A. Bench reversed the judgment and dismissed the suit of the plaintiff/appellant. Being aggrieved by the judgment of the L. P. A. Appellant-plaintiff filed appeal in the Supreme Court which was allowed, and it was held that the respondent-Bank acted recklessly and unwarily in giving effect to the Court's order without taking note of certain obvious factors which could have put the Bank on an inquiry to ascertain about the genuineness of that letter. It was further observed that it was of these cases wherein even if it were assumed that the bank had acted innocently there was another innocent party involved in the transaction, whose interest had to be put into balance and safeguard and in such cases one that could prevent the loss himself suffered, and that the rule of equity which applies as between two innocent persons in such cases is that one who could prevent the loss must suffer and not the other who was powerless to do so.

(x) Reverting to Rowsred on Agency, it may be advantageous to reproduce Article 123 of the above book, comments on rule 2 (c) of Article 123 and Article 130 : "Art. 123.-(1) Except as provided in this Article, an agent is not personally liable to repay money received by him for the use of his principal,

(2) Where money is paid to an agent for the use of his principal, and the circumstances are such that the person paying the money is entitled to recover it back, the agent is personally liable to repay such money in the following cases :-

(a) Where the agent contracts or acts personally, and the money is paid to him in respect of or pursuant to the contract or transaction.

(b) Where the money is obtained by duress or by means of any fraud or wrongful act to which the agent is party or privy.

(c) Where the money is paid under a mistake of fact, or under duress, or in consequence of some fraud or wrongful act, and payment is demanded of the agent, or notice is given to him of the intention of the payer to demand repayment before he has in good faith paid the money over to, or otherwise dealt to his detriment with' the principal in the belief that the payment was a good and valid payment."

Rule (1).

(2) (a)

(2) (b)

"(c)"Where money has been paid under a mistake of fact to an agent, it may be recovered back from that agent unless he has in the meantime paid it to his principal, or done something enquivalent to payment to him, in which case the recourse of the party who has paid the money is against the principal only." This rule has been applied to a wide variety of agents. Although the majority of the dicta concern money paid under mistake, the formulation of this Article is simply that of earlier editions and it may well be that in all cases where the very fact of payment creates an immediate liability to repay. The agent is liable, and can only escape by proving payment over in the circumstances mentioned. Where the liability to repay arises subsequently, however, e.g., because of breach of contract, it seems clear that the agent is not liable even though he still has the money.

Payment order.-For the agent to be immune from suit by reason of payment order the mere fact that he has credited the principal with the amount is not sufficient to discharge him from liability ; he must have 'paid over the money which he received to the account of the principal, or settled such an account with the principal as amounts to payment, or done something which so prejudiced his position that it would be inequitable to require him to refund'. Thus he may have given new credit, or credited the sum to his principal in a settled account, or spent it on the instructions of his principal. But where the agent has paid the money to the principal and received it back again, he again becomes liable."

(b) From the above cases and books the following principles are deduciable (i)If a bank receives a remittance to the credit of its customer under a mistake, the Bank is liable to refund the same and it cannot withhold the same on the plea that the amount in dispute has been adjusted in reduction of its customer overdraft.

(ii) If money is paid under a mistake of fact to a bank for transmission to another bank/party the recipient bank is liable to refund the same if it has not already transmitted and that it cannot withhold the same on the plea that the bank/party to which the money was to be transmitted was liable to pay a sum equivalent or more than the amount in dispute.

(iii) If a bank makes payment on the basis of a forged cheque, it can maintain an action for the refund against the payee notwithstanding that the latter has acted in good faith and has altered his positio materially.

(iv) When a bank makes payment under a forged cheque, it does not hold out any representation to the payee of the cheque to the effect that the drawer's signature is genuine and that the payee cannot plead estoppel against the bank.

(v) If a bank collects payment under a stolen order and credits the amount to the customer's account on whose behalf it ha collected the money, it (bank) is liable to pay the amount to the owner of such an order if nothing in the meantime had taken place to debar the Bank from cancelling the credit given to its customer prior to the receipt of the notice of the theft.

(vi) If a company/corporation effects transfer of shares on th basis of forged documents, it is liable to make good the losses suffered by the holder/owner of such shares notwithstanding it acted in good faith and that there was no negligence on its part.

(vii) If a bank broker/or other person causes transfer of shares on the basis of a forged power-of- attorney or any other forged document without knowledge of the forgery, he is liable to make good the losses to the Company/Corporation, which acted upon the forged documents, notwithstanding that there was n negligence on his part.

(viii) When a person approaches a Company/Corporation with th request that certain shares be transferred from the name of th holder/owner in favour of another person, he impliedly represents that the documents presented by him are genuine and not forged.

(ix) If a choice is to be made between the two innocent parties a transaction involving forgery the one who could prevent the loss must suffer and not the other, who was powerless to do so.

(x) If money is mispaid to an agent expressly for the use of his principal and the agent has paid it over, he is not liable to an action to pay the person, who has mispaid.

(xi) If an agent after coming to know that the money has been mispaid to him, passed it over to his principal, he render himself personally liable to the person who has mispaid the money.

(xii) An agent is also liable to be sued :-

(a) If he contracts or acts personally or has his personal interest in the transaction.

(b) Where the money is obtained by duress or by means of any fraud or wrongful act and the agent is a party or privy to such acts.

(c) If money is paid under mistake of fact, or under duress or in consequence of some fraud or wrongful act of the principal but in spite of the receipt of notice from the payer, the agent passed it over to the principal.

(d) Where loss or injury caused to any third party is incurred by any ivroneful act or omission of an agent while acting on behalf of the principal.

(e) Now I intend to take up the two cases cited by Messrs Afzal Nabi and Mansoorul Arfin on the point in issue :

(i) Reverting to 1893 A C, it may be observed that in the above case the facts were that the appellants as trustees held 50 shares in the Commercial Bank of Scotland instructed a stock broker in Edinburgh to sell the shares and to deposit the proceed in certain colonial bank in the names of the appellant. The shares were sold by the broker in the ordinary course of business dealing between him and any member of the stock exchange, who knew him only in the transaction and accordingly gave a cheque payable to the broker of his order. The cheque was paid by the broker to the credit of his account with the respondent-Bank. At the time when the cheque was paid in the broker's account with the respondent bank the overdrawn amount exceeded the amount so paid.

The broker having become insolvent, the appellants claimed to be entitled to have the amount of the cheque repaid by the respondent-Bank. The respondent-Bank were aware that the cheque was the proceed of the sale of the shares, but did not know and had made no inquiries whether the money paid was in the broker's hand as agent or otherwise. The House of Lord affirmed the decision of the Court of Session to the effect that the respondent-Bank were entitled to retain the money in discharge protanto of the debt due to them from the broker. Lord Herschell L. C. Made the following observations - "It cannot, I think, be questioned that under ordinary circumstances a person, be he banker or other, who takes money from his debtor in discharge of a debt is not bound to enquire into the manner in which the person so paying the debt acquired the money with which he pays it. However that payment is entitled to retain in discharge of the debt which is due to him. But it is said that in the present case the bankers took with notice that the sum which they received was a sum of money not belonging to their debtor personally, but which he held or had received for other persons, and that, having had this knowledge or notice, they are not entitled to retain it in discharge of Mr. Thomson's debt. My Lords, I cannot assent to the proposition that even if a person receiving money knows that such money has been received by the person paying it to him on account of other persons, that of itself is sufficient to prevent the payment being a good payment and properly discharging the debt due to the person who receives the money. No doubt if the person receiving the money has reason to believe that the payment is being made in fraud of a third person, and that the person making the payment in handing over in discharge of his debt money which he has no right to hand over, then the person taking such payment would not be entitled to retain the money, upon ordinary principles which 1 need not dwell upon. But in the present case there appears to be an absolute absence of any evidence of that kind."

' It may also be advantageous to reproduce hereinbelow an extract from the judgment of Lord Watson :- "The broker knew that he was insolvent, and that he was using his customers' money to pay his own debt to the Bank without any reasonable expectation of his being able to replace it. That was an undoubted fraud upon the appellants ; but, in my opinion, the broker's fraud is of no relevancy in this case, unless it is coupled with bad faith on the part of the respondents. The onus of proving that they acted in mala fide rests with the appellants. It is not enough for them to prove that the respondents acted negligently ; in order to succeed, they must establish that the respondents knew, not only that the money represented by the cheque- did not belong to the broker, but that he had no authority from the owner to pay it into his bank account."

In my view the facts of the above case are distinguishable from the instant cases, inasmuch as in the above case the respondent-Bank had no personal interest or no special property/interest in the subject-matter of the transaction. The cheque was deposited by the broker in his Account as an ordinary customer, whereas in the present case as I have pointed out hereinabove, the two banks in question were not strangers to the transaction but without their consent the deals could not have been finalised :

(ii) Reverting to the case reported in 27 R R, it may be stated that the facts of the above case were that certain bills of exchange drawn upon and accepted by the E. I. Company in favour of W. H. In India, were afterwards endorsed to D and C by an agent of W. H. Under a supposed authority given by the power-ofattorney, which was seen and inspected by the acceptors and D & C endorsed the bill to B &,:o. Their heirs only when the latter as their agent present them for payment when due. B & Co. Put their names on the back of the bills presented to them for payment. And received the amount, which they soon after paid over to their principals. Howver, it was afterwards discovered that the powerof-attorney given by W. H. Did not authorise his agent to endorse the bill, and the administrator of W. H. In an action against the acceptor recovered the amount. Thereafter the acceptor brought an action against B & Co., and upon the basis of the supposed undertaking by them that they as holders were entitled to receive the amount of the bills, the jury found that the plaintiff paid on the faith of the power-of-attorney and not of the endorsement by the defendant and that the latter paid over the money before they had notice of the validity of the first endorsement held under these circumstances the plaintiff could not recover against defendant.

The ratio decidendi of the above case is that the recipient of the money who was not at fault cannot be made liable for the wrongful act of the other if he has already parted with the money by the time of the receipt of knowledge/notice of the want of authority. In my view the case is also not applicable to the instant cases.

14. (a) Reverting to the contention to the learned counsel for the plaintiff that the action is also competent because the contract was discovered to he void and/or the money was paid under a mistake and/or in respect of a contract, of which consideration failed, and that sections 65 and 72 of the Contract Act can be pressed into service, it may be observed that on the other hand, Messrs Afzal Nabi and Mansoorul Arfin have urged that the above sections have no application to the instant cases. It will be advantageous to reproduce hereinbelow sections 65 and 72 of the Contract Act which read as follows :- "65. When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.

72. A person to whom money has been paid or anything delivered by mistake or under coercion, must repay or return it."

In order to attract'section 65 the agreement should be discovered to be void or it should become void. Whereas in order to invoke section 72 what is required is that the money or the thing should be delivered by mistake or under coercion.

(b) It was urged by Messrs Mohammad Mi Sayeed and Rahimtoola that in the instant case the two contracts were discovered to be void when it transpired that the share certificates and the transfer forms were forged. Whereas-it_was urged by Mr. Mansoorul Arfin that the two contracts in question cannot be termed as void, but they were voidable. In support of the above contention Messrs Mohammad Ali Sayeed and Rahimtoola have referred to the case of Giraj Baksh v. Kazi Hamidali (1) the case of Debi Prasad A&arwala v. Haji Syed Mehdi Hassan and others (2), the case of B. Raja Mohan Manucha and others v. B Manzoor Ahmad Khan and others (3) and the case of Province of West Pakistan and another v. Messrs Asghar All Mohammad Ali (4). Whereas Mr. Mansoor-ul-Arfin has referred to the case of .Thakurani Harnath Kour v. Thakur Indar Bahadur Singh

(5) and the case of Mahanth Singh v. U. Ba Yi (6).

In support of his contention Mr. Mansoor-ul-Arfin has also referred to section 2 (g) and ( j) and section 19 of the Contract Act. It was urged by him that section 2 (g) defines a void agreement by providing that an agreement unenforceable by law is said to be void, whereas section 2(j) defines a contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

Furthermore, section 19 defines which of the contracts are voidable by providing that when a consent to an agreement is caused by coercion, fraud or misrepresentation tt,e agreement is voidable at the option of the party whose consent was caused. It was contended by Mr. Mansoor-ul Arfin that the instant cases do not fall either within the purview of section 2 (g) and (j) and that at the most the same fall within the ambit of section 19 and, therefore, the contracts in question were at the most voidable, and were not void. On the other hand, it was urged by Messrs Mohammad All Sayeed and Rahimtoola that the contracts in question were void and recourse can be made to section 20 of the Contract Act which provides where the parties to an agreement act under a mistake as to matter of fact essential to the agreement, the agreement is void. It will suffice to observe that the question as to whether section 65 can be pressed into service or not is not free from doubt. One view can, be that in order to constitute a valid contract the subject-matter of the contract should exist if the contract relates to the specific good. The view I am inclined to take does not require any decision on the above controversy.

' It is also doubtful as to whether recourse can be made to section 20 of the Contract Act, inasmuch as it seems that defendant No, 3 had known about the forgery and, therefore, prima facie it cannot be contended that the parties to the agreement were under a mistake to a matter of fact essential to the agreement. It was urged by Mr. Mohammad Ali Sayeed that in any case there was a mistake on the part of the plaintiff's agent and on the part of defendant No. 1 inasmuch as the plaintiff's agent was under a mistake that they were getting genuine shares and transfer forms against the payment and whereas defendant No, I were under the mistake that they were receiving money against genuine shares and transfer forms, and, therefore, section 20 can be pressed into service, It may be mentioned that according to the learned counsel for the plaintiff there were three {{FOOT NOTE}}

(1) I L R 1887 All. 340 (3) A 1 R 1937 Oudh 410 (5) A 1 R 1922 P C 403

(2) AIR 1940 Pat. 81 (4) PLD 1968 Kar. 196 (6) A R 1939 P C 110 {{FOOT NOTE}} contracting parties in the transaction file. The plaintiff, defendant No, 3 and defendant No. 1. If that is so it is very much doubtful that section 2 of the Contract Act, which speaks of parties to an agreement can be applied to a case in which one of, the parties was not under any mistake, namely, defendant No, 3 in the instant case.

(c) However, in my view, recourse can be made to section 72 of the Contract Act which merely provides that if the money is paid by mistake or under coercion it is recoverable. It cannot be denied that in fact the money was paid under a mistake by the plaintiff's agent that they were getting genuine shares and transfer forms. It may be pertinent to mention that no ruling was cited on section 72 of the Contract Act by either of the parties. However, English rulings relied upon by the learned counsel for the plaintiff support the above view which I am inclined to take. In this regard I have already discussed hereinabove inter alia the case reported in 81 K B 465, however, reference to the case of Norwich Union Fire Insurance Society Ltd. v. W. M. H. Price Ltd. (1) may be pertinent.

The facts of the above are that certain quantity of lemons were shipped from Massona to Sydney and insured under a policy of Marine Insurance. From the information received in Sydney it was known that the lemons had been damaged by peril insured against and the insurer paid the insured value to the insured, but subsequently it was discovered that the lemons were not damaged by the peril insured; but deteriorated in the normal course, and, therefore, the same were sold. It was held that the Insurance Co. Was entitled to recover the amount paid as it was paid under a mistake of fact.

(d) (i) Mr. Muhammad Ali Say eed in support of his contention that the plaintiff is also entitled to recover the price as in any case the consideration of the two contracts had failed, has relied upon the case of Gurney and others v. Womersley and another (1885) 24 L J 46 and the case of Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. 1943 A C 32 and the case of Comptoir D, Achat Et De Vente Dun Boerenbond Beige S/A v. Luis De Ridder Limited 1949 A C 293.

(ii) Reverting to 24 L J, it may stated that the facts of the case were that the defendants, bill brokers, having received from A, a bill of exchange drawn and endorsed by A. For the purpose being discounted took it to the plaintiffs, who were money lenders, with whom the defendants had previously had similar dealings, and acting as principals the defendants procured the bill to be discounted by the plaintiff, without however, endorsing or guaranteeing it though they were asked by the plaintiffs. Subsequently the acceptance of the bill turned out to have been forged by A and the bill proved valueless. It was held that the plaintiffs were entitled to recover the amount paid upon the discount of the bill upon failure of consideration.

(iii) Referring to 1934 A C, it may be observed that the subject matter of the contract was certain machinery purchased by a Polish Company from an English Company. The aforesaid machinery could not be exported because in the meantime the Second World War broke out. It was held by the House of Lords that the {{FOOT NOTE}}

(iv) (1) 1934 A C 455 {{FOOT NOTE}} purchaser was entitled to recover back the money paid under the contract on the ground that the consideration for which it was paid wholly failed and that the above right had no base on any event in the contract which was entered into between the parties.

(vi) Reverting to 49 A.C., it may be stated that in the above case by a contract made in April 1940 the sellers an Argentina Company sold to the buyers the Belgium Company 500 tons of Rye for shipment CIF Antwerp. Under the terms of the contract the buyer paid 4999,33 US. i,e, 8 i,e, the cost less freight plus a proportion of insurance. The delivery order directed to the seller's against at Antwerp was communicated to the buyers against the payment of this sum. While the goods were in transit the goods were discharged at Lisbon because of the fact that Germany invaded Belgium and occupied the aforesaid town, i,e, Antwerp. It was held by the House of Lords that the contract was not a C.I.F. Contract but a contract to deliver goods at Antwerp and that the payment was not made for the documents-relating to the goods, but for the delivery of the goods themselves and that there was frustration of the adventure and not part performance and that the consideration had wholly failed so that the buyers were entitled to recover the amount paid.

' From the above-cited and discussed cases, it is clear that the money is recoverable if the same is paid under a mistake or if the consideration has wholly failed.

15. (a) There are few remaining contentions of Messrs Afzal Nabi and Mansoor-ul-Arfin which are to be dealt with before concluding this judgment. It was vehemently urged by Mr. Mansoor-ul-Arfin that the transactions in question were not sale transactions, but they were financing transactions and that in any case in view of the admission on the part of the plaintiff that there were several Badla transactions in respect of the shares in question the alleged sale transactions stood superseded by the subsequent transactions and, therefore, no action can be maintained on the original causes of action. In support of the above contention be has referred to Exh. 44/34, which is plaintiff's letter dated 18th November 1963 addressed to defendant No, 3, which reads as follows ASHRUFFALI ABDULLAH GANGEE, Member, Karachi Stock Exchange Ltd., Stock & Share Brokers, 37, Karachi Stock Exchange Bldg. Behind Loyds Bank Off Mcleod Road, Karachi-2 (Pakistan).

18th November, 1963.

' Masud Iqbal Ahmad Esq., KARACHI : ' Dear Sir, ' We enclose herewith or Contract Note for Badla of 15,000 shares Karnaphuli Paper Mills Ltd., for one month on the following terms :

(1) The rate of interest would be @ 15% per annum.

(2) Delivery would be taken by us @ Rs, 18 and return to you at the expiry of one month from the date thereof.

(3) The "Centre" rate would be 18.50 and settlement would be made at a difference of 50 paisa higher or lower as the case may be.

(4) The same shares would be returned to you as would be delivered to us.

(5) Pending delivery responsibility of collecting dividends rights etc. If any, would be your responsibility. Please confirm this arrangement on the duplicate copy of this letter. Yours faithfully, (Sd.)

' Mr. Mansoor-ul-Arfin has also invited my attention to the plaintiff's statement P.W.

15. Exh. 44, wherein in the cross-Examination the above witness has stated as follows " P.

20.-Witness volunteers. Although I have produced duplicate of for bought notes, this does not mean that 60,000 shares were taken delivery of. When Masood Iqbal had sold these shares to me he had told me that he would by them back after a month and there is a contract to that effect. On the expiry of the month he did not take back delivery of these 15,000 shares and asked for another month's extension. As he did not take up delivery on the expiry of the month, the contract was renewed for another month, therefore another contract had to be executed for the next month, then on the expiry of the second he sought another month's extension, then he took another extension. In all, in the case of the 150(0 shares he took six extensions, and the last extension was in May for the month of June in which month the fraud was discovered. During this period he had to make payments of differences in interest and he did not commit any default in these payments.

However he did not take delivery of the shares and always went on asking for extension of time."

' Pp. 26 & 27.-To the best of my knowledge the only Badla transaction I had with Masood Iqbal were the two transactions in dispute. It is not correct that the Badla transactions with regard to the 15000 shares had begun before November, 1963. The transaction of 15000 shares did not start as a forward transaction. The transaction was a Badla transaction both between Masood lqbal and me and between Eastern Federal and me. The transaction of 19000 shares was also of the same nature. On both occasions the shares were sent to the Eastern Federal with a bill, and those bills were signed by my delivery department."

' Mr. Mansoor-ul-Arfin has referred to Bought Notes Exhs. 44/1, 44/30, 44/31 and 44/32, whereas Mr. Afzal Nabi in addition to the above exhibits has referred to Bills Nos. 5821 dated 19th November, 1969 and 5915 dated 7th January 1964, (which have not been exhibited), whereby the plaintiffs purported to sell 15000 and 19000) shares of Karnaphuli Pape' Mills Ltd. Respectively to defendant No,

3. Frorn the Bought Notes as well as from the aforesaid Bills and from the statement of P.W. 15 quoted hereinabove, it seems that the very shares were the subject-matter of subsequent sale transactions.

(b) From the evidence on the record, it is evident that the shares in question were purchased by the plaintiff in the manner already discussed by me earlier and in turn the same were sold to Messrs Eastern Federal Insurance Co. Ltd. Who paid the price of the shares to the plaintiff, who in turn paid the same to defendant No. 1 in both the suits. Since the plaintiff had agreed to sell the very shares to defendant No, 3, he also entered into similar transaction with Messrs Eastern Federal Insurance Co. For purchasing the very shares. In this regard a reference may be made to Messrs Eastern Federal Insurance Co. Ltd.'s letter dated 13th June 1964 Exh. 44/9. In my view the basic transactions are the transactions in question. The plaintiff after purchasin the shares paid the price to defendant No. 1 and took delivery of the shares and in turn received the price of the same shares and effected the delivery of the said shares to Messrs Eastern Federal Union Insuranc Company on the very day when he received the delivery from defendant No, I and that after the discovery of the forgery the plaintiff refunded the price of the 15000 and 19000 shares to M/s. Eastern Federal Insuranc Co. Ltd. As is evident from Exhs. 112/1 and 112/2. Exh. 112/1 is a letter dated 7th January, 1965 of Messrs Eastern Federal Insurance Co. Ltd acknowledging the receipt of a cheque for the amount involved and Exh. 112/2 is a receipt issued by the aforesaid Insurance Co., for the receipt o the said amount. In view of the above facts, it cannot be urged that the transactions in question were not sale trarbactiops but transactions o financing inasmuch as. As pointed out by me earlier, that the payment of the price of the shares was made against the delivery of the shares interse between the plaintiff and defendants Nos. 1 and 3 on the one hand and Messrs Eastern Federal Insurance and the plaintiff on the other hand. However, in the subsequent purported sale transactions between the plaintiff and defendant No, 3 and Messrs Eastern Federal and the plaintiff neither the shares were delivered nor the payment of the price was made by either of the parties. The above transactions were on paper only. It is true that the plaintiff has admitted that he was recovering monthly difference in the rate from defendant No, 3 for the reason that he was not taking the delivery of the shares and was postponing the same from month to month, but in my view neither the sale nor purchase transactions reflected in the aforesaid Bk..Aght Notes and the bills nor the recovery of the difference would undo the two sale transactions in question, as the foundation of the above subsequent transactions was the existence of the genuine shares, which in fact did not exist.

16. Mr. Mansoor-ul-Arfin has also urged that the payment of the price of the shares to defendant No 1 on behalf of defendant No, 3 constitutes payment to defendant No, 3, and, therefore, no action can be maintained against defendant No. 1 for the refund of the same. In support of his above contention he has referred to the law of Agency by Fridman, 3rd Edition at page 167 wherein the learned author has made the following observations : "In the first place, if the agent had authority to receive payment on behalf of the principal, then, in effect, payment to the agent is payment to the principal, in accordance with the general principle$ of agency, and the third party will be held to have dischatged his liability to the principal. "Authority" here. Bears the meaning which had already been explained and discussed. That is to say, the agent's authority- to receive payment may be express, implied prep apparent."

' The above quoted extract in my view does not support defendant No, l's case inasmuch as it provides that if a third party makes payment to an authorised agent be is discharged from his liability to the principal. In the instant case as pointed out by me earlier at serveral places that defendant No. 1 were acting as agent who had personal interest in the transaction. Furthermore, the point in issue in the instant cases is that if the money is paid under a mistake or if the consideration has wholly failed for which money was paid, whether the payer can maintain an action against the agent who had received the money.

17. It was also urged by Messrs Afzal Nabi and Mansoor-ul-Arfin that the plaintiff cannot seek any equitable relief as he has not come to the Court with clean hands. In support of their above contention they pointed out that the plaintiff did not get the transactions in question registered with the Karachi Stock Exchange in order to avoid ,payment of Laga amounting to about Rs, 33,000 and that he has suppressed material facts inasmuch as he has not disclosed in the plaints that there were certain Badla transactions subsequent to the two transactions in question. In my view even if it is to be held that the intention on the part of the plaintiff was to avoid the payment of Laga, it would not make the plaintiff's hand dirty. The evasion of payment of Laga (i,e, fee) cannot be equated with the evasion of a public revenue. Laga is payable by a member of th Stock Exchange, which is a limited company. Furthermore, non-disctosur of Badla transactions in the body of the plaint does not constitute suppression of the material facts as the suits are based on the two sale transactions in question and not on Badla transactions, and, therefore, in my view it was not incumbent to disclose the above facts in the plaint. However, the plaintiff while appearing as a witness when asked in the examination stated about the badla transactions. It may be observed that the contesting defendant i,e, defendants Nos. 1 and 2 have not raised any such plea in their written statement.

18. It was urged by Mr. Afzal Nabi that the plaintiff cannot maintain the action simultaneously under the law of Contract as well as under the law of Tort. In support of the above contention he has referred to the case of Ganga Trading Co. v. United Commercial Bank Ltd.. And others (1) wherein it has been held that the principle underlying section 65 of the Contract Act is that a right to restitution may arise out of the failure of a contract though the right by itself is not a contractual obligation and that the principle does not apply to a case where the claim for the recovery of money is based on tort. In my view the above ruling does not propound that a party cannot have a cause of action for the breach of contract as well as under the law of tort. It is not uncommon that a wrongful act may constitute a breach of contract as well as it may be a wrongful act under the law of tort. If an example is needed, we may take the case of a person, who receives personal injuries on account of the negligence and rash/reckless driving of a bus or train. In such a case the aggrieved person has cause of action under the law of contract for the breach of the contract as well as under the law of tort for negligence. But the underlying principle is that a person cannot recover amount of damages twice. So a party by maintaining an action under the law of Contract and simultaneously under the law of Tort will not get double amount of damages. {{FOOT NOTE}}

(1) AIR 1957 Tri. 3/ {{FOOT NOTE}}

19. (a) Reverting to Messrs Mohd. All Sareed and Rahimtoola's contention that the plaintiff's action is also sustainable under the law of tort as there was negligence on the part of defendant No, I and/or defendant No. 1 made careless representation. It may be observed that in support of the above contention Mr. Rahimtoola has referred to the case of Hedley Byrne & Co. Ltd. v. Neiler and Partner Ltd. (1). The facts of the above case were that the appellants were advertising agents, who had placed substantial forward advertising orders for a company on terms by which they, appellants were personally liable for the cost of the order. They asked their bankers to inquire into the company's financial stability and their bankers made inquiries. The respondents who were company's bankers give favourable references but on the condition that these were "without responsibility. After relying on the aforesaid references the appellant placed orders which resulted into loss of 17,000, they brought an action against the respondent for negligence. It was held by the House of the Lords that a negligent though honest misrepresentation spoken or written may give rise to an action for damages for financial loss caused thereby, apart from any contract or fiduciary relationship. Since the law will imply a duty of care when a party is seeking information from a party possessed of special skill trusts him to exercise due care. However, in the above case the appellants' claim failed as there was express disclaimer of the responsibility at the time when references were answered.

(b) It may be observed that at the initial stage of the development of the law of tort 'negligence' was an ingredient of some of the then recognised torts. However, in the case of Donyghue v.

Stevenson (2) it was held that a manufacturer of Chattels was under a duty to the ultimate user or- consumer even though there was no contractual relationship between them. In the above case the manufacture of ginger beer was held liable to pay damages to the consumer who became sick because she found decomposed remains of a snail in the ginger beer which she was drinking, the ginger beer was purchased by her by friend, and not by her. The above case established 'negligence' as an independent tort. The above case related to an eatable or drinkable items but this principle was extended to other articles by the Privy Council in the case of Grant v. Australian Knitting Mills Ltd. And others (3). In the above case the appellant contracted dermatitis of an external region as a result of wearing a woolen garment which when purchased from the retailer was in defective condition owing to the presence of excess sulphate which was left negligently in the process of manufacture. It was held that the retalier who sold the above garment was liable for the breach of implied warranty or condition under the South Australia Sale of Goods Act, 1895 and whereas the manufacturer was liable under the law of tort. The scope of the tort of negligence has now been extended in the aforesaid case of Hedley Byrne & Co., by the House of Lords by bringing in careless misrepresentative though innocent resulting into financial loss within the scope of the tort of negligence.

(c) However,. It was urged by Messrs Afzai Nabi and Mansoorui Arfin that the plaintiff cannot maintain an action under the law of tort on account of alleged negligence simpliciter, but the plaintiff is required to {{FOOT NOTE}}

(1) 1964 LR AC 465 (2) 1932 A C 562 (3) 1936 LR AC 85 {{FOOT NOTE}} show what duty defendant No, I owed to the plaintiff and what was the precise relationship which resulted into the state duty. In support of the above contention Mr. Mansoor-ul-Arfin has referred to Charlesworth on Negligence, 6th Edition, p. 84, para. 135 and the case of Selengor United Rubber Estates Ltd. v. Cradock and others (1). The learned author in the above treatise on the law of negligence has observed that "there can be no doubt, as has been stated above in paragraph 16, ante, the damage must be suffered before the Court will recognise as actionable tort of negligence and likewise, action for negligence must fail unless a duty to take care, has been established.

Whereas in the aforesaid case, 1965 Law Reports, it has been held that where a plaintiff alleges breach of duty he has to specify with precision the relationship under which the duty arose. It will suffice to observe that the plaintiff has neither pleaded nor has deposed about the relationship under which the defendant No. 1 owed duty to P the plaintiff and, therefore, negligence simpliciter if any on the part of the defendant No. 1 will not entitle the plaintiff to press into service law of tort.

20. (a) It was also urged by Mr. Mansoorul Arfin that the suit as framed does not warrant granting of any relief either under section 66 or section 72 of the Contract Act. It will suffice to observe that the plaintiff in the plaint has clearly averred that his agent had paid money thinking that they were getting genuine shares and not spurious. It has also been pleaded that the defendants are liable to make good the loss suffered by the plaintiff. In this view of the matter it cannot be urged that this Court cannot grant relief even if a case is made out.

(b) Accordingly my finding on Issue No, 5 and additional Issue No. 1 is that defendant No, 3 and defendant No. 1 (who were acting as agent having personal interest) were under obligation to deliver genuine shares, and further, that there was ample warranty/condition on the part of defendant No, 3 in regard to genuineness or number of shares in dispute. Furthermore my finding on Issue No, 3 is that in the strict sense there was no privity of contract between the plaintiff and defendant No, I, but at the same time, it cannot be denied that the latter was a party to the transaction in as much as without their consent, the transaction could not have been completed being the pledgee of the shares in question with the possession and that they were acting as agent having personal interest.

(c) The question which remains to be considered is what relief or reliefs the plaintiff is entitled to and against which of the defendant/ defendants. While discussing Issues Nos. 1 and 2, 1 have already held that the plaintiff has failed to make out a case against defendant No,

2. However, in my view the plaintiff has made out a case against defendants Nos. 1 and 3. The point which requires consideration is, whether the decree against defendant No. 1 in each suit should be to the extent of the full price or only to the extent of the balance of the price after adjusting the amounts drawn by defendant No, 3 from his account with defendant No. 1 during the period commencing from the receipt of the price by defendant No. 1, till the discovery of the forgery. It is evident from the statement of accounts filed by the two banks that after the receipt of the price by defendant No, I bank, defendant No, 3, has drawn certain amounts. It may be pertinent to refer to Exh. 34/5, which is a statement of account filed by the Bank of India (defendant No. 1 in Suit No, 178/65). {{FOOT NOTE}}

(1) 1965 L R Ch. D 896 {{FOOT NOTE}} which indicates that on 20th November, 1963 defendant No, 3 had overdrawn a sum of Rs, 1,63,642.45. A credit entry of Rs, 2,70,000 being the price of 15,000 shares was made on 21st November, 1963. After the above credit entry defendant No, 3 withdrew certain amounts and deposited certain amounts. On 9th June, 1964 defendant No, 3's account showed a debit balance of Rs, 73,714 53. If defendant No, I are to be put back in the position in which they were at the time of the receipt of the price, i,e, on 21st November, 1963 the debit balance against defendant No, 3 should be Rs, 1,63,642.45 in place of the aforesaid debit balance amounting to Rs, 73,784.53 In other words, there will be a difference of a sum of Rs, 89,857.93 in the two debit balances.

(d) Exhs. 119/25/1 to 119/25/4 are the balance sheets filed by the American Express (i,e, defendant No. 1 in Suit No, 179/65) which show a debit balance of Rs, 4,44,564 on 9th January, 1964, i,e, the date on which the price of 1900 shares, namely, Rs, 3,56,250 was received by the American Express. After the receipt of the above amount by defendant No. 1, defendant No, 3 had withdrawn a total sum of Rs, 1,52,817 by 8th May, 1964, i,e, by the last date of the entry in the account, which indicates that the American Express had discovered forgery by the end of May, 1964. If we adjust the above amount of Rs, 1,52,817 against the aforesaid price amounting to Rs, 3,56,250 a balance of Rs, 2,03,433 remains available.

(e) If defendant No. 1 would have acted simpliciter as an agent, the plaintiff could not have a decree against the Bank of India for more than the aforesaid difference in amount, namely, Rs, 89, 857.93 or at the most for a sum of Rs, 1,26,215.47, i,e, Rs, 200,000 being the overdraft limit sanctioned by the Bank of India in favour of defendant No, 3 minus Rs, 73,784.53 being the debit balance on 9th June, 1964. Whereas in the case of the American Express, the plaintiff would have been entitled to a decree of Rs 2,03,433 i,e, Rs, 1,56,250 being the price of 19000 shares received by the said bank minus Rs, 1,52,817 being the amount withdrawn by defendant No, 3 during the period commencing from the receipt of the price till the discovery of the forgery or at the most a decree for Rs, 2,03,733 I e. Rs, 4,44,567 being the debit balance on 9th January, 1964 I e. The date on which the American Express received price of 19000 shares, minus Rs, 2,40,834 being the debit balance on 28th May, 1964 i,e, the last date of entry in the account. This would have been in consonance with the ratio decidendi of some of the cited and discussed cases, herein-above, wherein it has been held that if an agent after the receipt of money under mistake or of which consideration fails alters his position materially before the receipt of the notice for the refund by the person entitled to claim, the above material alteration is to be taken into account. In other words, if he has paid over the amount to the principal he cannot be sued. However, in the instant cases, the position of defendant No. 1 is not of an agent simpliciter but an agent having personal interest in the subject-matter of the transaction as the pledgee of the shares with possession. In this view of the matter defendant No. 1 could maintain an action against the plaintiff for the recovery of the price of the shares. Similarly, in my view, the plaintiff can maintain an action against defendant No. 1, for the refund of the price. The above conclusion seems to be also in consonance with the view found favour with their Lordships in the case reported in PLD 1969 SC referred to hereinabove in para. 13 (a) (ix), in which inter alia it has been held that if a choice is to be made between the two innocent parties in a transaction involving forgery, the one who could prevent must suffer. In the instant cases defendant No, I, who had the shares in their custody for quite considerable period as the pledgee could detect forgery for the reasons mentioned by me hereinabove in para. 7, and whereas the plaintiff did not have the custody of the shares for more than a few hours as the same were handed over to Messrs Eastern Federal Insurance Ltd. On the very day when he received the delivery from defendant No. 1. As regards defendant No, 3 there cannot be any doubt that a decree for full amount of the price can be passed against him. It may be observed that defendant No, .3 has not led any evidence in the two suits nor his learned Advocate advanced any arguments, though he attended some of the hearings.- ' In view of the above discussion Ipass a decree in Suit No, 178/65 for a sum of Rs, 2,70,000 with 6% simple interest thereon from the date of the suit till payment and proportionate costs against defendants Nos. 1 and 3, jointly and severally. However, I am not inclined to grant interest for the period prior to the filing of the suit, i,e, for the period from 20th November, 1963 to 16th August, 1965 claimed in the suit, in the absence of any agreement about the payment of interest between the parties. Suit is dismissed against defendant No, 2 with no order as to costs.

' Whereas I pass a decree in Suit No, 179/65 for Rs, 3,56,250 with 6% simple interest thereon from the date of suit till payment and proportionate costs against defendants Nos. 1 and 3, jointly and severally, but I am not inclined to grant interest for the period from 9th January, 1964 to 16th August, 1965 for the aforesaid reason. Suit is dismissed against defendant No, 2 with no order as to costs.