A consigned goods for the value of Rs. 50,000/-by railway. He pledged the R.R. with Bank for Rs. 30,000/-. The goods were lost in transit. The Bank sues Railway for recovering Rs. 50,000/-. Decide.

1. Facts of the Case

• A, the consignor, dispatched goods valued at Rs. 50,000/- through the Railways to a destination.
• The Railway Receipt (R.R.), which serves as a document of title to the goods, was pledged by A to a Bank as security for a loan of Rs. 30,000/-.
• During transit, the goods were lost due to negligence or mishandling by the Railway authorities.
• The Bank, as the pledgee of the Railway Receipt, filed a suit against the Railway Administration seeking Rs. 50,000/-, the total value of the goods.
• The issue arises as to whether the Bank can recover the entire value of the goods (Rs. 50,000/-) or only the pledged amount (Rs. 30,000/-) from the Railway.

2. Issues in the Case

1. Whether the Bank, as the pledgee of the R.R., has the right to sue the Railway Administration for the loss of goods.
2. Whether the Bank can claim the entire value of the goods (Rs. 50,000/-), or is it limited to its financial interest (Rs. 30,000/-).
3. What is the extent of the Railway’s liability under the Indian Contract Act, 1872 and the Indian Railways Act, 1989, in relation to the consignor and pledgee.

3. Legal Principles Covered to Support Case Proceedings and Judgements

Relevant Legal Provisions:

1. Section 148 – Indian Contract Act, 1872 (Bailment Defined):
   • Delivery of goods by one person to another for some purpose, upon a contract that they shall be returned or disposed of according to the direction of the person delivering them.
   • The Railway, in this context, acts as a bailee and owes a duty of care to the consignor.
2. Section 151 – Indian Contract Act, 1872 (Care to be Taken by Bailee):
   • The bailee (Railway) must take as much care of the goods bailed as a man of ordinary prudence would take of his own goods.
3. Section 152 – Indian Contract Act, 1872 (Liability of Bailee):
   • If the bailee fails to take such care, he is liable for the loss or damage to the goods.
4. Section 172 – Indian Contract Act, 1872 (Pledge Defined):
   • The bailment of goods as security for payment of a debt or performance of a promise.
   • The pledgee (Bank) acquires special property rights in the goods to the extent of the debt.
5. Section 178 – Indian Contract Act, 1872 (Pledge by Person in Possession under Voidable Contract):
   • A pledge by a person in lawful possession of goods or a document of title (such as R.R.) is valid, provided the pledgee acts in good faith.
6. Indian Railways Act, 1989 – Sections 93 to 99:
   • These sections deal with Railway’s responsibility as a carrier, making it liable for loss or non-delivery unless it proves absence of negligence.

Legal Analysis:

• The Railway Receipt (R.R.) is a document of title representing ownership of the goods in transit.
• When A pledged the R.R. to the Bank, the Bank became a pledgee with special property rights in the goods to the extent of its advance (Rs. 30,000/-).
• Therefore, the Bank is entitled to sue the Railway for loss of the goods, as it stands in the shoes of the owner (A).
• However, the Bank’s right extends only to the value of its financial interest, i.e., Rs. 30,000/-, and not to the entire value of Rs. 50,000/-.
• The balance Rs. 20,000/- would remain recoverable by A, the consignor-owner.
• The Railway, being a bailee, is liable for loss unless it proves that due care was taken under Sections 151–152 of the Contract Act.

Supporting Case Laws:

1. Union of India v. Bank of India, AIR 1988 SC 344:
   • The Supreme Court held that the Railway Receipt is a document of title, and the pledgee (Bank) has a right to sue for loss or non-delivery of goods.
   • However, recovery is limited to the extent of the pledgee’s interest in the goods.
2. Morvi Mercantile Bank Ltd. v. Union of India, AIR 1965 SC 1954:
   • The Court observed that when a Railway Receipt is pledged with a bank, the bank acquires special property and can sue for damages to that extent.
3. Union of India v. Sri Sarada Mills Ltd., AIR 1973 SC 281:
   • The carrier (Railway) as a bailee is liable for loss unless it shows that reasonable care was taken.
4. Bank of Bihar v. Damodar Prasad, AIR 1969 SC 297:
   • The pledgee’s rights are limited to the pledged amount, even if the value of goods exceeds it.

4. Possible Judgement

• The Bank, being a pledgee of the Railway Receipt, has locus standi to sue the Railway Administration for loss of goods.
• However, the Bank’s claim cannot exceed its financial interest, i.e., Rs. 30,000/- (the amount advanced).
• The remaining value of Rs. 20,000/- remains recoverable by A, the consignor.
• The Railway Administration, as a bailee, will be liable for the loss unless it proves that it exercised the due care required under Sections 151 and 152 of the Indian Contract Act, 1872.
• Therefore, the court may decree Rs. 30,000/- in favour of the Bank, with the balance claim left to be pursued by A.

Final Decision:

Judgement:

• The Bank is entitled to recover Rs. 30,000/- (its pledged amount) from the Railway.
• The Railway is liable for loss of goods unless it proves absence of negligence.
• The remaining Rs. 20,000/- can be recovered separately by A, the owner of the goods.

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