Case: The New Marine Coal Co. (Bengal) Private Ltd Vs. Union Of India

1. This appeal arises out of a suit filed by the appellant, the New Marine Coal (Bengal) Private Ltd., against the respondent, the Union of India, on the original side of the Calcutta High Court to recover Rs. 20,343/8/-. The appellants case was that it had supplied coal to the Bengal Nagpur Railway Administration in the month of June, 1949, and the amount claimed by it represented the price of the said coal and sales-tax thereon. The appellant also made an alternative case, because it was apprehended that the respondent may urge that the contract sued on was illegal and invalid since it did not comply with S. 175 (3) of the Government of India Act, 1935. Under this alternative claim, the appellant alleged that the coal had been supplied by the appellant not intending so to do gratuitously and the respondent had enjoyed the benefit thereof, and so, the respondent was bound to make compensation to the appellant in the form of the value of the said coal under S. 70 of the Indian Contract Act. The appellants case was that since the said amount had to be paid to it at its Esplanade Office in Calcutta, the original side of the Calcutta High Court had jurisdiction to entertain the said suit. Since a part of the cause of action had accrued outside the limits of the original jurisdiction of the Calcutta High Court, the appellant obtained leave to sue under Cl. 12 of the Letters Patent.2. In its written statement, the respondent admitted the delivery of the coal to the Bengal Nagpur Railway Administration and did not dispute the appellants case that it had forwarded to the respondent bills in regard to the amount alleged to be payable to the appellant for the said supply. The respondent, however, pleaded that the contract on which the suit was based was illegal inasmuch as it had been entered into in contravention of the provisions of S. 175 (3) of the Government of India Act, 1935; and it was urged that S. 70 of the Indian Contract Act had no application. Besides, the respondent alleged that following the usual practice and course of dealings between the parties, an intimation card was issued and sent to the appellant by the respondent requesting the appellant to obtain payment on presentation of a proper receipt and authority against its bills in question. Thereafter the respondent on receipt of the said intimation card and a proper receipt executed on behalf the appellant, paid the amount covered by the said bills by an account payee cheque on the Reserve Bank of India drawn in favour of the appellant which was delivered to the person purporting to have authority to receive payment on behalf of the appellant. The respondent thus alternatively pleaded satisfaction of the claim, and so, urged that the appellant had no cause of action for the suit.3. On these pleadings, seven substantive issues were framed by the learned trial Judge. Issues 1 and 2 which were framed in respect of the jurisdiction of the Court were not pressed by the respondent, and so, no findings were recorded on them. On issue No. 3 the learned trial Judge found that the contract on which the appellant based his claim was invalid and unenforceable. Issue No. 4 in regard to the alleged payment of the Bills was found against the respondent. On issue No. 5, the trial Court held that the respondent was bound to pay to the appellant the amount claimed by way of compensation. Issue No. 6 which was raised by the respondent under S. 80 of the Code of Civil Procedure was not pressed, and therefore, no finding was recorded on it. Issue No. 7 which was framed on the appellants allegation that its claim had been admitted by the respondent was answered against the appellant. In the result, the main finding on issue No. 5 decided the fate of the suit and since the said finding was in favour of the appellant, a decree was passed directing the respondent to pay to the appellant Rs. 20,030/8/-. This amount, according to the decree had to carry interest @6% per annum.4. This decree was challenged by the respondent by an appeal before a Division Bench of the said High Court. The appeal was heard by P. B. Mukharji and Bose JJ. Both the learned Judges agreed that the respondents appeal should be allowed and the appellants claim dismissed with costs, but their decision was based on different grounds. Bose J., held that the contract sued on was invalid and that the calim made by the appellant for compensation under S. 70 of the Indian Contract Act was not sustainable. He also found that the appellants contention that the said contract which was initially invalid had been duly ratified had not been proved. It is on these grounds that Bose J. came to the conclusion that the appellants claim could not be granted. Incidentally, it may be added that Bose J., was not prepared to consider the plea of negligence which was raised by the respondent for the first time in appeal.

Court's reasoning:
15. Mr. Setalvad contends that a plea of negligence should have been raised by the respondent in its pleadings and the appellate Court was, therefore, in error in allowing such a plea to be raised for the first time in appeal.our opinion, there is some force in this contention. Negligence in popular language and in common sense means failure to exercise that care and diligence which the circumstances require. Naturally what amounts to negligence would always depend upon the circumstances and facts in any particular case. The nature of the contract, the circumstances in which the performance of the contract by one party or the other was expected, the degree of diligence, care and attention which, in ordinary course, was expected to be shown by the parties to the contract, the circumstances under which and the reason for which failure to show due diligence occurred are all facts which would be relevant before a judicial finding can be made on the plea of negligence. Since a plea of negligence was not raised by the respondent in the trial Court, the appellant is entitled to contend that it had no opportunity to meet this plea and dealing with it in appeal has, therefore, been unfair to it.16. Apart from this aspect of the matter, there is another serious objection which has been taken by Mr. Setalvad against the view which prevailed with Mukharji J. He argues that when a plea of estoppel on the ground of negligence is raised, negligence to which reference is made in support of such a plea is not the negligence as is understood in popular language or in common sense; it has a technical denotation. In support of a plea of estoppel on the ground of negligence, it must be shown that the party against whom the plea is raised owed a duty to the party who raises the plea. Just as estoppel can be pleaded on the ground of misrepresentation or act or omission, so can estoppel be pleaded on the ground of negligence; but before such a plea can succeed, negligence must be established in this technicalis another requirement which has to be proved before a plea of estoppel on the ground of negligence can be upheld and that requirement is that "the negligence on which it is based should not be indirectly or remotely connected with the misleading effect assigned to it, but must be the proximate or real cause of that result"**. Negligence, according to Halsbury, which can sustain a plea of estoppel must be in the transaction itself and it should be so connected with the result to which it led that it is impossible to treat the two separately. This aspect of the matter has not been duly examined by Mukharji J., when he made his finding against the appellant.It is in the light of this legal position that the question about estoppel raised by the respondent against the appellant in the Appellate Court may be considered. Can it be said that when the appellant received the intimation card, it owed a duty to the respondent to keep the said card in a locked drawer maintaining the key all the time with its Director? It would not be easy to answer this question in the affirmative; but assuming that the appellant had a kind of duty towards the respondent having regard to the fact that the intimation card was an important document the presentation of which with an endorsement as to authorisation duly made would induce the respondent to issue a cheque to the person presenting it, can the Court say that in trusting its employees to bring letters from the letter box to the Director, the appellant had been negligent? As we have already observed, in dealing with the present dispute on the basis that the intimation card had been dropped in the letter box of the appellant, it is possible to hold either that the said card was collected by the Peon and given over to Mr. Parikh, or it was not. In the former case after Mr. parikh got the said card, it had been removed from Mr. Parikhs table by someone, either by one of the eimployees of Mr. Parikh or some stranger. In the latter case, though, technically, the card had been delivered in the letter box of the appellant, it had not reached Mr. Parikh. In the absence of any collusion between Mr. Parikh and the person who made fraudulent use of the intimation card, can the respondent be heard to say that Mr. Parikh did not show that degree of diligence in receiving the card or in keeping it in safe custody after it was received as he should have? In our opinion, it would be difficult to answer this question infavour of the respondent. In ordinary course of business, every office that receives large correspondence keeps a letter box outside the premises of the office. The box is locked and the key is invariably given to the peon to collect the letters after they are delivered by postal Peons. This course of business proceeds on the assumption which must inevitably be made by all businessmen that the servants entrusted with the task of collecting the letters would act honestly, Similarly, in ordinary course of business, it would be assumed by a businessmen that after letters are placed on the table or in a file which is kept at some-other place, they would not be pilferred by any of his employees. Under these circumstances, if the intimation card in question was taken away by some fraudulent person, it would be difficult to hold that the appellant can be charged with negligence which, in turn, can be held to be the proximate cause of the loss caused to the respondent. In our opinion, therefore, Mukharji J., was in error in holding that the respondent could successfully plead estoppel by negligence against the appellant. As we have already observed, the question as to whether the claim made by the appellant against the respondent under S. 70 is concluded by the decision of this Court in the case of M/s. B. K. Mondal and Sons, AIR 1962 SC 779   in favour of the appellant,and so, it must be held that the Division Bench of the High Court erred in dismissing the appellants claim.In the courts below, elaborate arguments were urged by the parties on the question as to whether the contract, theof the suit, was invalid and if yes, whether a claim for compensation made by the appellant could be sustained under S. 70 of the Indian Contract Act. Both these questions are concluded by a recent decision of this Court in the State of West Bengal v. M/s. B. K. Modal and Sons, AIR 1962 SC 779  .As a result of this decision, there can be no doubt that the contract on which the suit is based is void and unenforceable, and this part of the decision is against the appellant. It is also clear under this decision that if in pursuance of the said void contract, the appellant has performed his part and the respondent has received the benefit of the performance of the contract by the appellant, S. 70 would justify the claim made by the appellant against the respondent. This part of the decision is in favour of the appellant. It is, therefore, unnecessary to deal with this aspect of the matter at length.The position of the evidence in respect of this point is no doubt unsatisfactory. It appears that Mr. Parikh who is the Director of the appellant company since 1948 is also the Director of K. Wara Ltd., which manages eight collieries like that of the appellant. K. Wara Ltd., has its office at 135, Canning Street. The appellant Company also has one office at the said place. A Post Box in which letters addressed to the appellant and K. Wara Ltd., could be dropped has been kept on the ground floor of the building in which the said offices are situated. The said Post Box is locked and naturally the key is given to one or the other of the Peons to open the said Box and take out the letters and deliver them to Mr. Parikh. Mr. Parikhs evidence show that his denial that he had received any intimation card could not be accepted at its face value for two reasons; the first was that even if thehad been received by the Peon and had not been delivered by him to Mr. Parikh, Mr. Parikh would not know that the card had been received and though his statement that he did not get the card may be literally true, it would not be true in the sense that the card had not been delivered to the appellant Company. Besides, Mr. Parikhs statement the he did not employ any despatch clerk and kept no inward to outward register is prima facie unbelievable and so, Mukharji J., was inclined to hold that the intimation card may have been received by the appellant Company. Having made this finding, Mukharji J., proceeded to examine the true legal positions in regard to the appellants claim, and as we have already observed, he held that since the appellant was guilty of negligence which facilitated the commission of the offence by some strangers, it was precluded from making a claim against the respondent. As we have already seen, Bose J., has put his decision on the narrow ground that the contract was invalid and S. 70 did not help the appellant. That ground, however, cannot now sustain the final conclusion of Bose J., in view of the recent decision of this Court in the case of M/s. B. K. Mondal and Sons, AIR 1962 779. Therefore, in dealing with the present appeal, we will assume that the finding recorded by Mukharji j., is correct and that the intimation card sent by the respondent to the appellant can be deemed to have been delivered to the appellant.It is in the light of this legal position that the question about estoppel raised by the respondent against the appellant in the Appellate Court may be considered. Can it be said that when the appellant received the intimation card, it owed a duty to the respondent to keep the said card in a locked drawer maintaining the key all the time with its Director? It would not be easy to answer this question in the affirmative; but assuming that the appellant had a kind of duty towards the respondent having regard to the fact that the intimation card was an important document the presentation of which with an endorsement as to authorisation duly made would induce the respondent to issue a cheque to the person presenting it, can the Court say that in trusting its employees to bring letters from the letter box to the Director, the appellant had been negligent? As we have already observed, in dealing with the present dispute on the basis that the intimation card had been dropped in the letter box of the appellant, it is possible to hold either that the said card was collected by the Peon and given over to Mr. Parikh, or it was not. In the former case after Mr. parikh got the said card, it had been removed from Mr. Parikhs table by someone, either by one of the eimployees of Mr. Parikh or some stranger. In the latter case, though, technically, the card had been delivered in the letter box of the appellant, it had not reached Mr. Parikh. In the absence of any collusion between Mr. Parikh and the person who made fraudulent use of the intimation card, can the respondent be heard to say that Mr. Parikh did not show that degree of diligence in receiving the card or in keeping it in safe custody after it was received as he should have? In our opinion, it would be difficult to answer this question infavour of the respondent. In ordinary course of business, every office that receives large correspondence keeps a letter box outside the premises of the office. The box is locked and the key is invariably given to the peon to collect the letters after they are delivered by postal Peons. This course of business proceeds on the assumption which must inevitably be made by all businessmen that the servants entrusted with the task of collecting the letters would act honestly, Similarly, in ordinary course of business, it would be assumed by a businessmen that after letters are placed on the table or in a file which is kept atplace, they would not be pilferred by any of his employees. Under these circumstances, if the intimation card in question was taken away by some fraudulent person, it would be difficult to hold that the appellant can be charged with negligence which, in turn, can be held to be the proximate cause of the loss caused to the respondent. In our opinion, therefore, Mukharji J., was in error in holding that the respondent could successfully plead estoppel by negligence against the appellant. As we have already observed, the question as to whether the claim made by the appellant against the respondent under S. 70 is concluded by the decision of this Court in the case of M/s. B. K. Mondal and Sons, AIR 1962 SC 779   in favour of the appellant,and so, it must be held that the Division Bench of the High Court erred in dismissing the appellants claim.