ivil Appeal No 3566 of 1989
712 From the Judgment and Order dated 1721989 of the Gauhati High Court in FA No 7 of 1972
KN Bhatt HN Salve AK Sil and G Joshi for the Appel lant
section Parekh for the Respondent
The Judgment of the Court was delivered by K JAGANNATHA SHETT J
The question of law which is concerned in this appeal is whether in the circumstances of the case the appellant Bank was required to act as agent of the respondent or as bailee in respect of goods entrusted for delivery to the respondent against payment
In 1945 the respondent was carrying on the business of wholesome and retail dealership in textile yarn and cloth at Agartala and in the course of that business he was appointed as a Government nominee to indent for and lift the quanti ties of cloth and yarn to Agartala from different mills situated in Bengal Bombay Ahmedabad and other places
For the purpose of that business the respondent had maintained Current Account No 391 with the Agartala Branch of the United Commercial Bank Limited which has since been styled as UCO Bank  the appellant in this appeal
The case of the respondent plaintiff was that there was an oral agreement with the Bank on September 2 1950 under which the latter inter alia was to receive bills documents and air receipts sent by or on behalf of the plaintiff from his agents or suppliers and would release andor take delivery of goods sent by them as and when the goods arrive at Agartala
The Bank would hold or keep the said goods stored in its godown for and on behalf of and on account of the plaintiff for his benefit etc
It was also alleged that payment of the bills in respect of goods dispatched to the Bank should be made by the plaintiff
He should be given delivery of the goods and air receipts by the Bank according to his convenience and requirement
It was further stated that under the said terms and conditions the Banker consti tuted himself and acted as an express trustee andor agent of the plaintiff in relation to the said goods and air receipts and thus stood in fiduciary relationship with the plaintiff
713 Complaining non delivery of goods even after receiving payment thereof the plaintiff brought a suit for accounts damages compensation and delivery of goods or their equiva lent in money valued at Rs26819897
The Bank has denied all the allegations and asserted that it never acted as an agent trustee or depositee of the plaintiff in respect of the goods and documents
The exist ence of fiduciary relationship between the parties was also denied
It was however stated that certain parties from Calcutta were supplying goods to various parties in Agartala including the plaintiff and they used to send bills with air receipts Covering the goods to the Bank for presentation to the drawees and the Bank would deliver the same against payment
The Bank collected bill amounts on behalf of those parties in the usual course of business
It was further admitted that some parties from Calcutta engaged the Bank to collect the amounts of the bills drawn on the plaintiff to clear the goods dispatched by them from the Airways on their behalf to store them in Bank s godown and to allow the drawee plaintiff to take delivery of the goods against payment of their costs and charges including the salaries of the godown staff handling and insurance charges etc
Those charges and costs were recovered from the plaintiff by the Bank on behalf or  the parties sending the goods to the plaintiff
The Bank maintained that it had dealt with such goods of the Calcutta parties recovered monthly charges at the instructions of the drawers and the drawee plaintiff and debited to the account of the plaintiff
When there was no amount available in the plaintiff s account or when the plaintiff defaulted in retiring the bills the said charges were recovered from the drawers
The goods in the custord of the Bank on behalf of the Calcutta parties which were paid for by the plaintiff would be delivered to the plaintiff and the goods for which no payment was made by the plaintiff would be returned to the drawers of the bills
The trial court framed among others the following three issues 9 Was there any agreement andor arrangements between the parties as alleged in the plaint 10 Was the defendant a trustee andor agent of the plaintiff as alleged in the plaint and 11 Was there any fiduciary relationship between the parties as alleged by the plaintiff 714 The trial court recorded findings on all these issues in the affirmative and in favour of the plaintiff
On Issue No 9 as to the existence of agreement it was observed The evidence on record shows that regular accounts of goods for the plaintiff would be maintained by the defendant Bank
Although the purpose of current account No 391 of the plaintiff cannot alter the nature being that of debtor and creditor attributable to the account the factum of the account and its operation also indicate that there was an agreement between the parties
This does not however exclude necessary agreement or arrangement by the bank with the Calcutta parties
Debits in the account of the plaintiff started to be made from 13950 in connection with transac tions of the plaintiff whereas the alleged agreement be tween the bank and ST Bros occured in March 1951
All these factors lead to the inference that there was an agree ment or arrangement between the bank and the plaintiff regarding payment of bills and charges for the account of the plaintiff and otherwise and regarding storing of those goods received by the Bank in its godowns of which the plaintiff came to be owner and for delivery of those goods as and when required by the plaintiff
These are the minimum terms deducible from the evidence on record
To this extent the issue is answered in favour of the plaintiff Issue No 10 was determined as follows It is in evidence that the Bank collected bills made remittances to mills applied for purchasing drafts on behalf of the plaintiff met expenses of storing the goods by debiting account No 391 of the plaintiff collected treasury bills of the plaintiff and vide Ext
P 56 series made adjustment of bills by debiting account No 391 without cheques issued by the plaintiff and did similar other works
All this leads to the reasonable inference that the bank also acted as agent of the plaintiff
In this suit such agency of the defendant involved a relation of trust and confidence and the goods which came to be owned by the plaintiff on payment of value thereof and which remained in the hands of the bank were impressed with trust for the benefit of the plaintiff
As matter of fact the defendant bank s position 715 was that of an intermediary owing duties to both the Cal cutta parties and the plaintiff Issue No 11 as to the fiduciary relationship between the Bank and plaintiff it was remarked The bank collected cheques issued in its favour and under advice of the plaintiff remitted the money to the mills and the Calcutta parties to meet the value of the bills drawn by the mills and the agents of the plaintiff Calcutta parties
It has to be noted in this connection that the Calcutta parties acted as agents of the plaintiff in so far as they acted on behalf of the plaintiff in lifting the controlled commodities from the mills and arranging for their dispatch to Agartala
The bank also made adjustment of bills by debiting account No 391 without any cheques being issued by the plaintiff vide Ext
P 56 series and met the expenses of storing the goods by debiting from the account No 391 of the plaintiff
From Ext
P 61 stock register it is seen that the bank stocked goods on account of the plain tiff in its godowns on those premises according to the learned counsel for the plaintiff there is no escape from the conclusion that the bank stood in a fiduciary relation ship with the plaintiff
Learned counsel for the defendant bank urged that save and except relationship of banker and customer there was no other relationship between the plain tiff and defendant bank
But in view of the materials on record I find that there was fiduciary relationship between the plaintiff and the defendant bank
This issue is decided in favour of the plaintiff Accordingly the suit was decreed in part directing delivery of goods or the value equivalent to Rs126500
A Commis sioner was also appointed to take accounts with regard to the transactions
The High Court of Calcutta has affirmed the decree of the trial court
As to the question of relationship between the Bank and customer the High Court observed In our opinion if we find that the plaintiff paid the value of the goods and the appellant bank neither delivered the goods nor rendered accounts a fiduciary relationship could exist between the plaintiff and the bank in respect of the 716 goods for which value was paid by the plaintiff The Bank by obtaining leave has now appealed to this court
In opening the appeal Counsel for the appellant urged that the case of the plaintiff based on oral agreement which is expressly contrary to banking transactions ought not to be relied upon
It was claimed that the Bank was a collect ing agent for the supplier of goods and not an agent or trustee for the respondent
Adjustment of bills by debiting to the current account without cheques from the respondent would not change the ordinary relationship of bank and customer
There was no special relationship  created either by opening the current account or storing the goods meant for delivery to the plaintiff and there was nothing to take the parties outside the usual course of banking business
It was further argued that the Bank received and took charge of the goods only as bailee and any inference of fiduciary relationship between parties was unwarranted and unjusti fied
Counsel for the appellant appears to be very particular to get rid of the finding recorded by the Courts below as to the fiduciary relationship in bank and customer relation ship
We agree with him that the High Court and the trial court were not justified in holding that a fiduciary rela tionship could exist between the parties in respect of goods for which the suit claim was based
This inference was drawn primarily from the debit entries in the plaintiff s current account
Reference was made to collection of bills remit tances to mills meeting expenses of storing the goods and debiting the same to the current account even without cheques from the plaintiff
These acts according to the trial court would lead to an inference that the Bank acted as agent of the plaintiff and there was thus fiduciary relationship between parties
But we do not find anything in this method of operation to take the parties outside the ordinary relationship of banker and customer
Lord Chorley says that the main mass of daily banking activity in branch banks is concerned with the operations of current accounts which thus provide a sort of hub round which the wheels of the whole set up of commercial banking revolve  
There is no accepted definition of a current account though in its normal form it is easily recognised in practice
The principal feature of such an account is the fact that the customer gets his money repaid from it or any advances which he is receiving from his banker by way of loan and this is so whether the repayment is to himself or to a third party
Normally the repayment is made through the machinery of the cheque and conversely unless otherwise indicated by the customer it is implied that 717 cheques paid in are for the credit of the current account and that they will be so credited  
We have seen that overdrawings by the customer when allowed by the banker are treated as loans  They will be debited to the current account
Indeed it is through the current account and by means of overdrafts on it that loans and advances are nor mally made by bankers to their customers
Law of Banking by Lord Chorley 6th ed
at 167 168
In Paget s Law of Banking 9th ed
at 82 83 it is stated that the current or drawing account may be either a credit or an overdrawn account
A credit account is made up of moneys paid in by the customer the proceeds of cheques and bills collected for him coupons collected interest and dividends paid direct to the banker and from various other sources less any money properly paid out
Moneys from different sources once they have found their way into the current account are treated as one entire debt
 This is the normal method of banking operation and the maintenance of the current account in this case appears to be not outside this principle and therefore no inference could be drawn that the Bank stood in fiduciary relationship with the plaintiff
Next question for consideration is whether the Bank acted as agent of the plaintiff in respect of the goods in question Here also Counsel appears to be right in his submission
Banks take charge of goods articles securities as bailee and not as trustee or agent
Bailment is the delivery or transfer of possession of a chattel or other item of personal property with a specific mandate which requires the identical res either to be returned to the bailor or to be dealt with in a particular way by the bailee as per directions of the bailor
One important distinguish ing feature between agency and bailment is that the bailee does not represent the bailor
He merely exercises with the leave of the bailor under contract or otherwise certain powers of the bailor in respect of his property
Secondly the bailee has no power to make contracts on the bailor s behalf nor can he make the bailor liable simply as bailor for any acts he does
See Fridman s Law of Agency 5th ed
p 23
In the instant case there is nothing to indicate that the Bank represented the Calcutta parties or the plain tiff with authority to change the contractual or legal relationship of parties and therefore there is no justifi cation to hold that the Bank acted as agent of the plain tiff
But that however does not mean that the Bank could succeed in this appeal
Having regard to the finding of fact recorded by the Courts below it is immaterial whether the Bank acted as bailee or in any other capacity
On the evi dence adduced by the parties it has been 718 established that the plaintiff did pay the price of the goods in respect of which he based his claim in the suit
The Bank however took the plea that the goods were deliv ered to one Shishu Ranjan Sen who was the authorised agent of the plaintiff
But at the relevant time the plaintiff had his own agent called Dhani Ram and he did not receive the goods
The Bank has neither examined Shishu Ranjan Sen nor Dhani Ram
The Bank examined one Dhawan DW 2 to prove some initials of Shishu Ran jan Sen on certain documents but his evidence has not been accepted
The fact therefore remains that the Bank having received the price of the goods from the plaintiff has failed to deliver the same to him
This finding has not been seriously disputed and indeed cannot be disputed since the Bank having chosen not to call Shishu Ranjan Sen or Dhani Ram to give evidence
The evidence adduced by the Bank was thus insufficient to establish the factum of delivery of goods to the plaintiff
The banker bailee gratuitous or for reward is bound to take the same care of the property entrusted to him as a reasonably pru dent and careful man may fairly be expected to take of his own property of the like description
See Halsbury s Laws of England 4th ed
3 para 93
In fact 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 cannot avoid his liability in conversion
See i The Law Relating to Banking by TG Reeday 4th ed
p 81 ii Law And Practice relating to Banking by FE Ferry 5th ed
p 21
In the light of these principles the Bank could not avoid the liability to return the goods as agreed upon or to pay an equivalent amount to the plaintiff
Even if we assume that the goods were delivered to a wrong person the Bank has to own the responsibility to pay the plaintiff
The liability of banker to customer in such a case is absolute even if no negligence is proved
In Hals bury s Laws of England supra para 94 it is stated where the bank delivers the goods to the wrong person whereby they are lost to the owner the liability of the bank is absolute though there is no element of negligence as where delivery is obtained by means of an artfully forged order
In law the banker could contract out of this liability but he would be unlikely to do so in practice
 Before parting with the case we may also state that in practice bankers do not set up the statute of limitations against their customers or their legal representatives and we see no reason why this case should be an exception to that practice
In the result the appeal is dismissed with costs but not for all the reasons stated by the trial court and the High Court
NPV Appeal dis missed


Summary:
Certain disputes having arisen between the Union of India and the Contractors in respect of the Contract awarded to the letter for the execution of certain civil works pertaining to the Metro Railway Project in Calcutta the same were referred for decision to two Arbitrators appointed by the High Court of Calcutta
The Contractors filed their itemised claim before the Arbitrators for a total sum of Rs20567554
The Arbitrators awarded a sum of Rs5747198 to the contractors in full and final settlement of all their claims which included a sum of Rs676540 as interest vide item 1
They directed that the award shall be complied with within sixty days of its publication fail ing which simple interest  11 percent per annum shall accrue thereon excluding interest amount of Rs676540 till the date of payment or decree upon award which ever is earlier
On an application being made to the High Court for making the Award a rule of the Court
the learned single judge confirmed the award except that the principal sum awarded was reduced by Rs520000 with the direction that the amount so awarded will carry interest  11 per annum from the date of reference till the date of the award
639 The Union of India preferred an appeal to the Division Bench which reduced the amount awarded under item cxii from Rs2396000 to Rs239000
Thus the principal amount to be awarded to the contractors was finally put at Rs3070798 and this amount was directed to carry interest  11 per annum from the date of the reference till the date of the award
Aggrieved by the order of the Division Bench reducing the amount awarded under item cxii from Rs2396000 to 239600 the contractors preferred an appeal to this Court
The Union of Indian on the other hand preferred a cross appeal praying i that interest should not be payable on the amount of Rs3070798 fixed by the High Court but only on Rs2394258 left after deducting therefrom the amount of Rs676540 awarded by the Arbitrators in respect of item No L and ii that
though the arbitrators had also awarded interest on the principal sum till the date of payment or decree on award in case payment was not done within sixty days of the publication of the award
the contractors should be held entitled to interest upto the date of the award only and not beyond it because both the learned single judge and the Division Bench have held so and the contractors have preferred no appeal therefrom
Taking up the contractor s appeal first this Court came to the conclusion that the Division Bench had exceeded its jurisdiction in interfering with this part of the award and restored the amount awarded by the arbitrators under item cxii
Dealing with the appeal of the Union of India this Court ruled that there was really no dispute left about Union of India s first contention as to what was the correct amount on which interest was payable to the contractors after its findings in the contractor s appeal and placed the figure at Rs4550658
Dealing with the second contention as to what was the period with reference to which interest would be payable to the contractors on the above amount it was noticed that the arbitrators had allowed interest from 51082 date of termination of contract to 26384 date of award under item L and had also allowed interest from the date of the award till the date of payment or decree whichever is earli er
The learned single judge had deleted the interest for the period 51082 to 6583 date of reference but held that the arbitrators had jurisdiction to award interest from the date of the reference till the date of award and also post award interest
As the objection of the Union of India 640 before the Division Bench in the LPA on the question of interest was only that the arbitrators had erred in awarding interest from 651983 to 2631984 the High Court had not decided that the contractors were not entitled to interest beyond the date of award and therefore this contention of the Union of India failed and was rejected
The Court
HELD The grant of pendente lite interest would be justified only when reference to arbitration is made in the course of a suit
The principle indicated is that since a court has
under section 34 of power to grant pendente lite interest in a suit
an arbitra tor to Whom a reference to arbitration is made in the course of the suit would be clothed with all the powers of the court including one to grant such interest
Generally speak ing
it would only seem reasonable that the power to grant interest pendente lite should be treated as ancillary to the award of damages or compensation which
but for the delay in the litigation Whether in court or by way of arbitration
the claimant should have received much earlier
However
though pendente interest has been made available in court proceedings
its extension to arbitration law appears to have acquired some technical limitations resulting in denial of pendente lite interest in most arbitration cases
Pendent lite interest cannot still be awarded by an Arbitrator appointed by the parties under a private agreement for which there may be no justification in equity
Anomalies have arisen because formerly an Arbitrator could not be treated as a court to which the code of civil procedure applied and because now the Interest act 1978 while including arbitration proceed ings within its ambit has apart from a reference to section 34 omitted to provide specifically for pendente lite interest
This has been clearly brought out by Chinnappa Reddy J in Abhaduta Jena which outline the principle the learned judge had in mind for permitting pendente lite interest by arbi trator
Abhaduta Jena has been followed in later cases also and its scope has been recently explained in Sharma s Case  and the Gujarat Water Supply case where pendente lite interest was denied
655H 656A F Gujarat Water Supply  Sewage Board vs Unique Erectors   Firm Madan Lal Roshan Lal Mahajan vs Hukumchand Mills Ltd lndore   Allen Berry  Co Pvt Ltd vs Union of India  N Chellappan vs Secretary Kerala State Electricity Board  Anr   Hindustan Tea Co vs
K Shashi Kant Co  Anr  Hindustan Steel Works Construction Ltd vs C Rajasekhar Rao 1987 4 SCC 93 Sudarsan Trading Co vs Government off Kerala  Anr  Ms Alppi Prashad  Sons Ltd vs 641 Union of India   Bhagat Trading Co vs Union of India AIR 1984 Delhi 358 Union of India vs Bakshi Ram 1957 LIX PLR 572 Executive Engineer vs Abhaduta Jena 1988 1 SCC 418 Nachiappa vs Subramaniam  Satinder vs Amrao   Union vs Bungo Steel Furniture P Ltd   Ashok Construction Co Ltd vs Union  State vs Saith  Skelton P Ltd   Food Corpora tion of India vs Surendra Devendra  Mohendra Tansport Co and State of Rajasthan vs Sharma  Co   referred to