UCO Bank v/s Hemchandra Sarkar, (1990) 3 SCC 389

CaseUCO Bank v Hem Chandra Sarkar, (1990) 3 SCC 389
CourtBefore the Supreme Court of India
Case NumberCivil Appeal No. 3566 of 1989
BenchJustice K. Jagannatha Shetty and Justice M. Fathima Beevi
Author of the judgementJustice K. Jagannatha Shetty
Decided onApril 25, 1990
Advocate for the appellantKN Bhatt, Senior Advocate (HN Salve, AK Sil, and G. Joshi, Advocates, with him)
Advocate for the respondentS. Parekh
Author of the briefAditya Gor

The present case concerns itself with the difference between bailor-bailee relationship and trustee and/or agent relationship.

Brief facts and Procedural History:

In the year 1945, Hemchandra was carrying out the business of textile yarn and cloth at Agartala. During that course, he was appointed as the government nominee to indent for and uplift the quantities of cloth and yarn received from different mills situated in Bombay, Bengal, Ahmedabad and Other places. For this business, the respondent maintained a current account with the UCO bank in Agartala. (Para 2 & 3)

On September 2, 1950, there was an oral agreement between the bank and Hemchandra wherein bank was asked to receive bills, documents and air receipts from the agents and suppliers of Hemchandra and the bank was also asked to accordingly release goods whenever they reach Agartala. The bank was to hold and keep the said goods in the godown for the benefit of plaintiff. It was further states that the banker constituted himself as the express trustee and/or the agent of the respondent and thus there stood a fiduciary relationship between them. (Para 4)

At a point of time, it was observed that the goods were not delivered by the bank even after receiving payments for the same. Thus the respondent filed a suit for accounts, damages, compensation, and delivery of goods or their equivalent money which was valued at Rs 2, 68, 198.97. The bank contended that there existed no such oral agreement with the respondent. The bank also denied the contentions with regards to the existence of fiduciary relationship. It was rather contended by the bank that all such activities were done in the normal course of its business. (Para 5 & 6)

According to the decision of the trial court, there existed an agreement between the parties, the bank acted as a trustee and/or agent of the plaintiff and there was also a fiduciary relationship between them. These observations were further affirmed by the High Court. (Para 6, 7, 8, 9, 10 and 11)

The bank after obtaining a special leave has appealed to the Supreme Court. (Para 12)

Issue before the Supreme Court:

  1. According to the factual matrix, was the bank required to act as an agent or a bailee of the respondent in the task of delivery of goods against the payment made by Hemchandra? (Para 1)

Arguments of the appellant:

  1. It was contended that the oral agreement as alleged by the respondent is expressly contrary to the banking transactions. There existed no special relationship between the bank and the respondent. Further all the activities were carried by the bank in regular course of its business. (Para 13)

Ratio given by the author of the judgement:

The interference drawn by the lower courts in reaching the conclusion that there existed a fiduciary relationship between the parties is erroneous according to the Supreme Court. According to the Supreme Court, the bank conducted all the activities in normal course of business and there was no special relationship which can be established from it. Further it is also true that the bank in the present case acted as a bailee and not as a trustee or an agent of the respondent. One of the most important distinctions between an agent and the bailee is that the bailee does not represent bailor. Moreover the bailee has no power to make contracts on behalf of the bailor nor can he be made liable for any act he does. In the instant case, there is nothing to indicate that the bank represented the Calcutta parties or the plaintiff with authority to change the contractual or legal relationship of the parties and therefore, there is no justification to hold that the bank acted as agent of the plaintiff.  (Para 14 & 15)

But these observations do not decree the suit in favour of the bank. It was observed from the facts that the bank even after receiving payments failed to deliver the goods to the agents of the plaintiff. The bank was responsible for these actions on the basis of following three principles:

  • The banker bailee gratuitous or for reward is bound to take same care of the property entrusted to him as a reasonably prudent and careful man may fairly be expected to take of his own property of the like description.
  • A paid bailee must use the greatest possible care and is expected to employ all precautions in respect of the goods deposited with him.
  • If the property is not delivered to the true owner, the banker could not avoid his liability in conversion. (Para 16)

Held:

The appeal was dismissed with cost, with the Supreme Court agreeing with some reasons given by the lower courts. (Para 18)

 

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