' MUHAMMAD KHALID MEHMOOD KHAN, J.---The appellant is a Financial Institution in terms of section 2 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (hereinafter referred to as the F.I.O.) instituted a suit for recovery of Rs.26,20,896 against the respondents along with cost of suit and cost of funds in terms of section 9 of the F.I.O. Claiming that respondent No.1. Is a proprietorship concern with respondent No.2 its proprietor, On the request of respondents in. 2002 the appellant allowed financial facility in the shape of cash finance against the pledge of paday and super basmati rice, as detailed in para 3 of the plaint. The details of pledge stocks and mortgage of property and other charge documents are also available in the plaint. It is claimed that respondents availed the facility in full but failed to adjust as per the terms of finance; hence a decree for recovery of Rs.26,20,896 along with costs of fund and cost of suit was prayed for against the respondents.
2. The respondents filed application for permission to defend the suit claiming that respondent Bank has misappropriated the pledge stock and claimed the adjustment of misappropriated pledge goods, the learned Banking Court accepted the respondents application for permission to defend the suit and framed the following issues; "ISSUES:
(1) Whether the suit is not maintainable due to the non-compliance of the provisions under section 9 subsection (2) of the Financial Institutions (Recovery of Finances) Ordinance, 2001? OPD
(2) Whether the statement of account annexed with the plaint has not been prepared in accordance with the law? OPD
(3) Whether the plaintiff has violated the terms and conditions mentioned in the sanction advices? OPD
(4) Whether the plaintiff has no cause of action to bring the suit? OPD
(5) Whether the plaintiff has made any embezzlement and replacement in the pledged stock of rice? If so to what effect? OPD If issue No.5 is proved in affirmative, what action can be taken against the officers of the plaintiff bank? OPD
(7) Whether the plaintiff is stopped to bring the suit on account of his word and conduct? OPD ' Whether the plaintiff is entitled to recover a sum of Rs.26,20,896 along with the mark up, all expenses, costs and liquidated damages from the defendants till the final liquidation of the liability? OPP ' Whether the plaintiff has concealed and suppressed material facts from the court and by committing fraud filed this case and as such is guilty of concealment of facts? OPD"
3. Both the parties adduced their respective evidence and the learned Banking Court on 21-1-2009 passed the decree as under; "For the above said reasons I decree the suit of the plaintiff for the recovery of Rs.23,39,039 as principal, mark up from 18-3-2003 to 31-7-2003 at the agreed rate, cost of fund from 1-8-2003 till final liquidation less the value of embezzled stock amounting to Rs.15,93,750. The parties are left to bear their own cost. The defendants are directed to pay the decretal amount up till 24-2-2009.
The plaintiff shall file the detailed statement of account regarding the outstanding amount against Habib Bank Limited v. Medina Rice and Ice Mills the defendants. The Tota rice and Husk were not pledged by the defendants. The other stock of 750 bags would be returned to the defendants after payment of the decretal amount."
4. The appellant bank assailed the judgment and decree dated 21-1-2009 through the present appeal.
5. Learned counsel for the appellant vehemently contends that the facility was secured against the mortgage of immovable property and the pledge of stocks was an additional security. Learned Counsel disputes the quality and quantity of the pledged rice and submits that respondents committed fraud with the appellant at the time of creation of pledge in its favour, the goods were of inferior quality and all bags were not filled with rice but it were filled with Tota rice and husk, the respondents admitted this fact at the time of inspection of the pledge stocks. The appellants have taken care of the pledge stocks of as an ordinary prudent man; it is the respondents who misappropriated the pledge stocks as per their own admission. Learned counsel for appellants relied on Mst. Talat Nasreen v. United Bank Limited (2003 CLD 94), Prudential Commercial Bank Ltd. v. H dari Ghee Industries Ltd. And 9 others (1999 MLD 1694) and Messrs United Bank Ltd. v. Messrs Amin Corporation Ltd. And others (1983 CLC 1559).
6. Learned counsel for the respondent submits that admittedly the appellant is pawnee and as such appellant alone is responsible for the shortage of the pledge stocks, the appellant is trying to made out a new case in appeal, admittedly the shortage of the pledge goods was in the knowledge of appellant at the time of institution of the suit but the appellant concealed the said fact from the court and tried to obtain the decree without returning the pledge goods, learned counsel submits that in case the pawnee is not in a position to return the pledge goods, the pawnee is not entitled to recover the finance. Learned counsel has relied on Habib Bank Ltd. v.
Kashif Steel Industry and others (PLD 2001 Lahore 224), Messrs Crystal Enterprises and 6 others v.
Platinum Commercial Bank Ltd. And 2 others (2002 CLD 868), Mst. Talat Nasreen v. Untied Bank Ltd.
And others (2003 CLD 94), Mian Aftab A. Sheikh and 2 others v. Messrs Trust Leasing Corporation Ltd. And another (2003 CLD 702), Bashir Ahmed Mughal v. S.M.E. Bank Ltd. Through General Manager and 2 others (2005 CLD 1689), Messrs Fybron Pvt. Ltd. Through Managing Director and others v.
National Bank of Pakistan through Zonal Chief (2006 CLD (Lahore) 127), A. M. Burq and another v.
Central Exchange Bank Ltd. And others (PLD 1966 (W. P.) Lahore 1), Messrs Muhammad Siddique Muhammad Umar and another v. The Australasia Bank Ltd. And others (PLD 1966 SC 684) and Central Bank of India v. Syed Muhammad Abdul Jalil Shah and others (1999 CLC (Lahore) 671).
7. Heard and record perused with the assistance of learned counsel for the parties.
8. The facility i.e. Cash Finance (pledge) is an admitted fact between the parties. The appellant admits the delivery of pledge goods, admits its lock and key and possession of the pledge goods. It is also an admitted fact that at the time of filing of suit the shortage and the alleged replacement of super basmati with Tota and husk was in the knowledge of appellant but the appellants have not pleaded the said fact in their plaint. However, in reply to application for permission to defend the suit, the appellants in their replication stated as under: "4. The contents of this are also incorrect, hence denied. The pledged stock was taken away by the defendants so that the stock could be sold and the proceeds thereof were to be deposited in the A/c. This was done on assurance of the defendants that the money was not deposited, as promised, hence misappropriated by the defendants. On inspection it has emerged that the defendants apart from lifting 3950 bags of Rice instead of 1175 deceitfully managed to store 1095 bags of Husk instead of Rice in the godown and the plaintiff is contemplating initiation of criminal action against the defendants. The defendants have acknowledged shortage of the pledge stock on 2-4-2004. Copy of stock report on 2-4-2004 in the godown of the defendant is attached."
9. Before discussing the evidence of parties, we may examine the law of pledge.
10. The bailment is defined under Section 148 of the Contract Act, which is read as under; "148. "Bailment', "bailor" and "bailee" defined.---A "bailment" is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them, the person delivering the goods is called the "bailor". The person to whom they are delivered is called "bailee"
11 Section 172 of the Contract Act is read as under; "172. "Pledge", Pawnor" and Pawnee" defined. ---The bailment of goods as security for payment of debt or performance of a promise is called pledge." The bailor is in this case called the "pawnor."
The bailee is called the "pawnee".
12. The above said provision of law shows that pledge is a bailment of goods as security for repayment of debt or the performance of a promise.
13. As per law the bailment is the delivery of goods by one person to another for a purpose as per the contract that, when the purpose is accomplished shall be returned or otherwise disposed of according to the directions of the person delivering them.
14. From the perusal of the aforesaid two provisions of law it is clear that pledge is bailment and the purpose of creation of pledge is security for the payment of debt as is defined in section 172 of the Contract Act.
15. Under Section 160 of the Contract Act, the pawner is bound to return the pledge goods to the pawnee on repayment of debt or performance of the purpose, but where the pawnee failed to repay the debt the pawner is within his rights to sell the pledge goods after reasonable notice to the pawner or retain the goods and file the suit for recovery of debt as provided under section 176 of the Contract Act, but the question arose where the pawner is not in a position to return the pledge goods whether the pawner's right to sue and recover the debt without returning the pledge goods remain alive or not?
16. An identical issue came up before a, Full Bench of this Court reported as A. M. Burg and another v. Central Exchange Bank Ltd. And others (PLD 1966 (W. P.) Lahore 1), and the Bench held as under; ' It is, therefore, clear that the right to proceed against the property is not merely accessory to the right to proceed against the debtor personally. Thus, a pledger cannot compel the pledgee to exercise the, power of sale or its adjustment as a means of discharging or satisfying the amount due to him. The pledger therefore is competent in law to sue for his debt without selling the pledged property and adjusting its price towards the payment of the debt. He has, however, to keep the property pledged intact so that he may be able to hand over the security to the pledge on payment of the debt by him" The principle in equity is that the creditor is not entitled to recover the amount of his secured debt when he cannot return the security."
17. Lord Cave in Ellis E and Company's Trustees v. Dixon Johnson (1925) AC 489 P.493) on similar issue had observed as under: "I have always understood the rule in equity to be that if a creditor holding security sues for his debt, he is under an obligation on payment of the debt to hand over the security; and if having improperly made away with the security, he is unable to return it to his debtor, he cannot have judgment for the debt. If that rule had been strictly applied on the hearing of the action, the action must have been then and there dismissed."
18. The Hon'ble Supreme Court of Pakistan in Messrs Muhammad Siddique Muhammad Umar and another v. The Australasia Bank Ltd. (PLD 1966 SC 684), on the same issue opined as under:- "Even assuming that some goods were pledged with the bank as security for the advance, this does not, in our opinion, absolve the defendant from his liability to clear his dues. The banker only acquires a lien over such pledged goods for the recovery of his dues and has a right after notice to the debtor to sell those goods to reimburse himself. But it is only where such a sale is actually held that the debtor can claim an adjustment of the sale proceeds of the goods against the amount claimed by the bank. There is no evidence in the present case that any goods were in fact sold by the bank or that the bank still retains any goods as such security."
19. In a case reported as Central Bank of India v. Syed Muhammad Abdul Jalil Shah and others (1999 CLC 671), the Court held as under; "21. From the foregoing it is quite clear that the findings of the learned first Court on this point cannot be sustained. We are therefore of considered opinion that the appellant was competent to institute the suit without returning/rendering the amount of pledged goods to respondent No.1.
However, respondent No.1 was entitled to claim set off with regard to his pledged stock with the bank." (underline is ours)
20. In a case reported as Messrs Crystal Enterprises and others v. Platinum Commercial Bank Ltd.
And others through General Attorney (2002 CLD 868) the same issue was discussed and opined as under; "4. Learned counsel for the appellant next argued that the respondent-Bank is under law required to account for the imported goods in its custody. This may be so. However, this is a matter, which can only arise in the execution proceedings, when the collateral security is realized in such proceedings through the same."
21. This issue also came up before the Hon'ble Supreme Court of India in a case reported as Lallan Prasad v. Rahmat Ali and others (AIR 1967 SC 1322); "17. There is no difference between the common law of England and the law with regard to pledge as codified in sections 172 to 176 of the Contract Act. Under section 172 a pledge is a bailment of the goods as security for payment of a debt or performance of a, promise. Section 173 entitles a pawnee to retain the goods pledged as security for payment of a debt and under section 175 he is entitled to receive from the pawner any extraordinary expenses he incurs for the preservation of the goods pledged with him. Section 176, deals with the rights of a pawnee and provides that in case of default by the pawner the pawnee has (1) the right to sue upon the debt and to retain the goods as collateral security and (2) to sell the goods after reasonable notice of the intended sale to the pawner. Once the pawnee by virtue of his right under section 176 sells the goods the right of the pawner to redeem them is of course extinguished. But as aforesaid the pawnee is bound to apply the sale proceeds towards, satisfaction of the debt and pay the surplus, if any, to the pawner. So long, however, as the sale does not take place the pawner is entitled to redeem the goods on payment of the debt. It follows therefore that where a pawnee fil"s a suit for recovery of debt, though he is entitled to retain the goods he is bound to return them on payment of the debt.
The right to sue on the debt assumes that he is in a position to redeliver the goods on payment of the debt and therefore if he has put himself in a position where he is not able to redeliver the goods he cannot obtain a decree. If it were otherwise, the result would be that he would recover the debt and also retain the goods pledged and the pawner in such a case would be placed in a position where he incurs a greater liability than he bargained for under the contract of pledge. The pawnee therefore can sue on the debt retaining the pledged goods as collateral security. If the debt is ordered to be paid he has to return the goods or if the goods are sold with or without the assistance of the court appropriate the sale proceeds towards the debt. But if he sues on the debt denying the pledge, and it is found that he was given possession of the goods pledged and had retained the same, the pawner has the right to redeem the goods so pledged by payment of the debt. If the pawnee is not in a position to redeliver the goods he cannot have both the payment of the debt and also the goods. Where the value of the pledged property is less than the debt and in a suit for recovery of debt by the pledgee, the pledgee denies the pledge or is otherwise not in a position to return the pledged goods he has to give credit for the value of the goods and would be entitled then to recover only the balance. That being the position the appellant would not be entitled to a decree against the said promissory note and also retain the said goods found to have been delivered to him and therefore in his custody. (underline is ours)
22. In a case reported as Khusiram v. Swaroop Naraya (1989 WLN (IC 332) it is held as under; "3. At the time of admission of this appeal, the only substantial question of law framed was as to whether the plaintiffs' suit for more recovery of money without paying for the sale of the pledged articles was maintainable because the remedy was concurrent?"
23. It has been categorically held by their Lordships of the Supreme Court in Lallan Parsad's case (supra) that "if a Pawnee sues on the debt denying the pledge, and it is found that he was given possession of the goods pledged and had retained the same the Pawner has the right to redeem the goods so pledged by payment of the debt. If the Pawnee is not in a position to re-deliver the goods, he cannot have both the payment of the debt and also the goods. Where the value of the pledge property is less than the debt and in a suit for recovery of debt by the pledgor the pledgee denies the pledge or is otherwise not in a position to return the pledge goods, he has to be entitled then to only the balance. That being the position the Pawnee would not be entitled to a decree on the basis of the promissory note and also retain the goods found to have been delivered to him and, therefore, in his custody. The High Court in Lallan Parsad's case had found that the goods were delivered to the appellant under pledge and the appellant was not entitled to any relief in view of his stand that the goods were never pledged with him. The High Court had dismissed the suit of the appellant." It was held by their Lordships of the Supreme Court that "if the Pawnee is made entitled to maintain the suit while denying the pledge, the Pawner would be completed not only to pay the amount due under the promissory note but lose the pledge goods as well." The appeal filed by the plaintiff was dismissed by the Supreme Court.
24. Thus the law applicable and the judgments of our Superior Courts and the Indian Supreme Court establishes that it is a settled principle of law that where the pawnee sues for recovery of debt allowed against the security of pawned goods, the creditor is required to keep the pawned goods intact for returning the same to pawner subject to natural wear and tear, who retain the right to redeem the pledged goods unless sold after reasonable notice, as per law the creditor can maintain its suit subject to adjustment of the sale proceeds of the goods.
25. The second question is if the pawned goods are lost, damaged or otherwise not available for delivery to the pawner, in equity, the pledgee cannot seek recovery of the debt secured against the security of pawned goods whether the pawner is entitled to an equitable set off by way of adjustment of the value of the lost or damaged pawned goods?
26. In the above said situation, the law provides as under: "Sections 151 and 152 of the Contract Act are read as under;
151. Care to be taken by bailee. In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances take of his own goods of the same bulk, quality and value as the goods bailed.
152. Bailee when not liable for loss etc., of thing bailed. The bailee, in the absence of any special contract is not responsible for the loss, destruction or deterioration of the thing bailed if he has taken the amount of care of it described in section 151."
27. The bare reading of Section 152 of the Contract Act shows that the pawnee has to take care of the pawned goods as a man of ordinary prudence, which would he takes under the similar circumstances of his own goods in all respect as to quality, quantity and value in the absence of any special contract in this behalf. In the presence of any special contract, it has to be seen whether the said contract is in violation of basic rights of the parties under the law. In an eventuality that pawned goods have been lost or damaged and the pawnee has taken care of the pawned goods as a man of ordinary prudence which he is obliged to take care of his own property and has not violated any obligation under a contract if any, in that case subject to proof in court the liability for such loss may not be the pawnee's liability and the pawner has to bear the said loss and the pawnee is entitled to recover its debt.
28. The Sindh High Court while dealing the similar issue has held in Prudential Commercial Bank Ltd. v. Hydari Ghee Industries Ltd. And others (1999 MLD 1694) as follows; "The seal put by the Customs Authorities, likewise, can always be removed upon payment of the customs dues. The underlying fact however remains that the pledged goods are available and can be returned unless proved otherwise. I must record here that except for oral assertion, nothing is shown to presume pilferage of loss of the subject palm oil. Thing brings me to the issue if the plaintiff is to be called upon in the circumstances of the case to prove that it had acted diligently and had taken as much care of the goods entrusted to it as a man of ordinary prudence would take of his own goods of similar quality and value."
29. In Messrs United Bank Ltd. v. Messrs Amin Corporation Ltd. And others (1983 CLC 1559) it is opined as under; ................ The stocks were damaged but the damage was on account of the self-heating and there was no responsibility of the plaintiff-Bank in respect of such loss."
30. It is settled principle of law that where the pawnee claims the loss or damage to the pawned goods it is the duty of the pawnee to establish that he has fulfilled his obligations both statutory and C contractual otherwise he will not be entitled to get the benefit of section 152 of the Contract Act.
31. Now it has to be seen whether the appellant Bank has claimed the benefit of section 152 of the Contract Act or not? The contents of plaint shows that the plaintiff filed a suit on 5th of July 2004 whereas the goods were found short on 2-4-2004 meaning thereby it was in the knowledge of appellants that goods have been stolen or have been replaced with Husk and Tota Rice but the appellants have not asserted or disclosed these facts in their plaint. It is the respondent who disclosed this fact that the appellants are not in a position to return pledge stocks as they have removed and replaced the same. In reply to application for permission to defend the suit, the appellants came with the version that the respondents have delivered the pledge stocks to respondents for selling the same in market and to deposit the sale proceed towards the adjustment of liability. The pledge stocks was handed over to respondents on their assurance that "the money received from the sale will be utilized for the clearance of outstanding dues. This money was not deposited, as promised, hence misappropriated by the defendants." It was further asserted that "on inspection it has emerged that the defendants apart from lifting 3950 bags of Rice instead of 1175 deceitfully managed to store 1095 bags of Husk instead of Rice in the godown and the appellant is contemplating initiation of criminal action against the defendants. The respondents have acknowledged shortage of the pledged stock on 2-4-2004. Copy of stock report on 2-4-2004 in the godown of the respondent is attached." Further, the appellants have claimed exemption on the basis of clause 4 of the pledge letter which provides that "the respondents have indemnified the plaintiff against all losses, injury, damages or deterioration/ depreciation that may be caused to the pledged goods as a consequence or result." Even if for the sake of argument the replication may be deemed to be considered a plaint, even then in the replication, the case of the appellants is that the respondents have taken delivery of the goods on the assurance that they will sell the goods in market and will deposit the sale proceed thereof towards the adjustment of the liability. The respondents have lifted 3950 bags of rise instead of 1175 and deceitfully managed to store 1095 Husk bags instead of rice. In the entire plaint it is nowhere mentioned that how many bags were pledged and how many bags were released and against which delivery order. The stock Register Exh.D-32 shows that 2025 bags of Super Rice Baspatti of 50-KG each were pledged on 9-1-2604 and on 2-4-2004, 930 bags of rice consisting of 750 of Super Rice and 180 of Tota Rice; hence only 930 bags were available under the lock and key of the appellants. This Register did not show when the remaining bags were released and under which delivery order. Exh.D-33 containing two pages is a Stock Register of Muqadum which shows that 2025 bags were in possession of the appellant bank and no bag was released or handed over to respondent. If for the sake of arguments, it is accepted that it is the respondent who replaced Super Baspatti Rice bags with Tota Rice and Husk, even then, the Stock Register Exh.D-33 did not help the petitioner as no where it is mentioned that 1095 bags of Husk are available in the godown in addition to other bags of rice.
32. Learned counsel for appellants has argued with vehemence that Exh.D-34 shows that on 2-4- 2004 the respondents have admitted the theft and replacement of stocks. Exh.D-34 is stock report which is signed by Muqadum, Rashid Ali godown keeper, Muhammad Javaid Supervisor and authorized signatory of the respondents Tariq Farooq. It is nowhere mentioned that the respondent accepted that he has replaced the goods. Stock report dated 6-3-2004 confirms that 2025 bags of Super Baspatti Rice were available with the Bank, meaning thereby after 6-3-2004 and up to 2-4- 2004 the goods were replaced or shortfall occurred but surprisingly the appellants have not taken any action against their Muqadum who is the real person to inform or explain about the alleged shortage and replacement in the pledge stock. The entire responsibility, under section 152 of the Contract Act is on the appellants to prove that shortage is not due to their negligence but it is the appellant who managed to replace the goods or stolen the same.
33. P. W.1 Zahid Hussain Chaudhry, who is the Officer Incharge (Operation) of appellant Bank has admitted that on 1-4-2004 the Bank got insured the stocks available with them i.e. 2025 bags of Rice of Super Baspatti but when the stocks were checked on 2-4-2004, it was found that stocks in godown is 750 of Super Baspatti Rice and 180 bags of Tota Rice and 1095 bags of Husk but he has not deposed that respondent removed the goods. P. W.4 is the Muqadum Supervisor, he deposed that he was Muqadum of the pledge stocks, on 2-4-2004 the stock was checked in the presence of Tariq Farooq owner, Habib ur Rehman RGM, Zafar Ullah Khan RGM (Credit), Muhammad Shah Pirzada RAGM, Zahid Hussain Chaudhry, Manager College Road Branch and on that date 1095 bags were found short but surprisingly no explanation of the Muqadum was called, the document of Exh.D-15 is stock report which is not the admission of respondent that he removed the goods. The goods were found short in possession of the Muqadum and it is only the Muqadum who has to explain regarding the shortage of goods. It was the duty of the appellant to ask from Muqadum about the shortage or replacement of the goods allegedly detected on 2-4-2004 but the appellant never asked from the Muqadum nor the Muqadum explained or alleged in his statement that respondent had stolen or replaced the goods when he appeared as P.W.4. P.W.4 only deposed that 1095 bags were found short. The question arose in whose custody the goods were found short and who is the responsible for the safe custody of the Pledge stocks. Admittedly the goods were in possession of the Muqadum on behalf of appellant Bank and as such the appellant Bank and Muqadum both are bound to prove that goods were replaced or removed by the appellant or any other person especially when they admitted Exh.D-27, Exh.D-28, Exh.D-29 and Exh.D-30 the inspection reports dated 27-3-2004, 21-2-2004, 28-2-2004 and 6-3-2004 that the stocks are of Super Baspatti Rice containing 2025 bags each weighing 50-KG. Not a single iota of evidence is available on record that appellant had taken care of the goods under their pledge charge that appellants have fulfilled their obligation both statutory and contractual and they have taken care of the goods as a man of ordinary prudence. Under section 151 of the Contract Act, the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances took of his own goods of the some bulk quality and value as the goods bailed.
34. As far as the argument of learned counsel for appellant that respondent while executing the pledge letter has exempted the appellant from all losses as to the theft and shortage is concerned, the effect of that exemption has to be seen subject to degree of care taken by the appellant. No doubt the respondent while executing pledge letter has admitted as under: "I/We shall at all times during the continuation of this pledge and so long as any money shall remain due and owing to you, insure and keep insured all the Pledged Goods to the full extent of their value against fire, theft and all other risks, as you may require, with such insurance company as may be approved by you and in your name and shall duly and punctually pay the premia payable in respect thereof at least one week before the same shall become due or payable and shall handover to you the polity or policies of insurance and receipts for premia paid in respect thereof to you. I/We agree not to raise at any time any dispute as to the amount of your insurable interest. If default be made in payment of such premia or in keeping the Pledge Goods so insured, then and in such case it shall be lawful but not obligatory upon you to pay such premia and to keep the same so insured and expenses incurred by you for the purpose together with an addition of 20% thereto as liquidated damages shall be charged to and paid by me/us, as if the same were part of the amount due to you."
35. The bare reading of the above said clause shows that the above exemption is subject to section 152 of the Contract Act which provides as under "If has taken the amount of care of it described in section 151". Section 151 provides that "the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as goods bailed."
36. The primary duty of the pawnee/bailee is that he should not be negligent in taking care of the goods. In Coldman v. Hill [1919] 1 KB 443 it is held as under: "The general duty of the bailee for hire appears to be extremely well put by Lord Halsbury in the unreported case of Morison v. Walton (1) in the House of Lords, which is quoted by Buckley L.J. In his judgment in Travers (Joseph) & Sons v. Cooper. (1) He says: "It appears to me that here there was a bailment made to a particular person, a bailment for hire and reward, and the bailee was bound to show that he took reasonable and proper care for the due security and proper delivery of that bailment; the proof of that rested upon him." In Travers (Joseph) & Sons v. Cooper (1) the question as to the onus of proof arose with reference to a barge which was under the custody and control of the bailee at the time of the loss.
' It was his duty as bailee to prove that his breach of duty did not cause the loss, not the plaintiff's duty to show that it did. This appears to be merely an application of the principle Omnia praesumuntur contra spoliatorem, under which a man who, having converted property, refuses to produce it that iis exact value may be known, is liable for the greatest value that such an article could have: Armory v. Delamirie (1); Hammersmith Ry. Co. v. Branc. (2) this decision appears to me exactly to cover this case, and to show that the county court judge in his accurate and careful judgment took the right view of the legal position."
37. Lord Denning in Mendelssohn v. Normand Ltd. [1969] 2 All ER 1215 held as under: "In my opinion, any behaviour by words or conduct is sufficient to be a misrepresentation if it is such as to mislead the other party about the existence or extent of the exemption. If it conveys a false impression, that is enough. If the false impression is created knowingly, it is a fraudulent misrepresentation; if it is created unwittingly, it is an innocent misrepresentation. But either is sufficient to disentitle the creator of it to the benefit of the exemption."
38. The exemption claimed thus is subject to proof that bailee was not negligent. In the present case the case of the appellant is not that they have taken care of the goods as a man of ordinary prudent, but the appellants in plaint have not claimed any shortage or theft of pledge goods and in replication of application for permission to defend the suit, they come with exemption clause of pledge letter but have not produce any evidence in support of their claim.
39. The bailee is not an insurer of the goods, the bailee is not responsible for loss caused by an accident but he has to show when goods bailed are lost that there were no negligence or default on his part, it is thus the duty of the bailee to take step to recover the goods and if he can inform the owner, in time he must do so, and if he has failed to inform the owner, he must act as an agent of necessity and takes the steps which are reasonable owner would take in defence of the property of value in question. A bailee is bound to take reasonable mean to protect his bailor's property and in case of loss, the onus is on the bailee to prove that it occurred due to his negligence or want of ordinary care.
40. From the evidence available on record, it is established that in the first instance knowingly the appellants have not claimed any shortage or replacement of pledge stock by the respondent. The appellants filed plaint and not mentioned the facts alleging replacement or loss of pledge goods, when in reply to application for permission to defend the suit, the appellants claim that the respondent has replaced and removed the pledge stock, it become bounden duty of E the appellant to prove that it is the respondent who misappropriated and replaced the pledge goods of inferior quality which the appellant failed to prove.
41. The learned trial Court has thoroughly discussed the evidence produced by the parties and has rightly passed the decree. The upshot of the above said discussion is, this appeal fails and is dismissed.