Find a Lawyer

First Appeal No. 35 of 1957, decided on 15th February 1961.

S. 50‑Notice not served in conformity with S. 50‑Subsequent sale of goods illegal.

Where the auction of goods in dispute was not effected in conformity with the provisions of S. 50, Karachi Port Trust Act, 1886 and the sale in question was not in accordance with powers conferred on the Trust:

Held, that the sale was illegal and inoperative against the owner of goods.

Managers of the Metropolitan Asylum District v. Frederick Hill and others (1881) 6 A C 193 and Secretary of State v. Sunderji Shivji & Co. A I R 1938 P C 12 ref.

Defaulting in statutory duty‑Liable for wrongful conversion‑Contract Act (IX of 1872), S. 161 ‑Karachi Port Trust Act (VI of 1886), S. 50.

S. 220‑Agent‑Bailee‑Goods 'wrongfully converted‑Bailee not entitled to charges for services rendered-‑Karachi Port Trust's charges for storage of goods wrongfully auctioned, as well as charges for such auction‑Trust not entitled to deduct such charges from sale proceeds of goods‑, [Mulliner v. Florence (1878) 3 Q B D 484; Clark v. Gilbert (1835) 2 Bing. (N C) 343; 132 E R 135 and Scindia Steam Navigation Co., Ltd. v. The Trustees of the Port of Karachi 122 1 C 388].

Ibrahim Rao for Appellant.

Tikamdas Wadhumal for Respondents.

Date of hearing: 26th January 1961.

--This is an appeal against the judg ment of Mr. Syed Hassan Kazmi, Fifth Sub‑Judge First Class, Karachi, in Suit No. 168 of 1956 dated the 11th of January 1957, awarding the appellant a decree for Rs. 759‑5‑0 and dismissing the rest of the claim.

Appellant Usman Malick, who is the sole 'proprietor of Messrs Sind Deccan Commercial Company, imported from Messrs Van de Wall Haarlem of Holland under O. G. L. No. VIII 100 cases of vegetable ghee valued at Rs. 5,025‑9‑0 which were landed at the port of Karachi by the steamer "S. S. Fort Enterprise." The above‑mentioned goods were taken into custody by the respondents as statutory bailees. The appellant filed the delivery order with the respondents on the 28th of April 1950 but clearance could not be allowed as by that time the O. G. L. had come to an end and the goods in question also required a proper licence from the C. C. I. & E. under Rule 40 of the bye‑laws framed under the Karachi Port Trust Act, the goods could not be cleared unless and until completed Customs bills of entry and the receipt of Port Trust wharfage were produced before the respondents. In order to comply with this rule the appellant on the 13th of April 1950 had already filed Bill of Entry (Exh. 32) to have the Customs duty assessed. The Customs Authorities, in view of the subsequent change in the import of commodities, on the 14th of April 1950 asked the appellant to produce the necessary permit from the C. C. I. & E. This permit (Exh. 27) was obtained on the 9th of August 1950 and produced before them on the 15th of August 1950. The Custom Authorities further required the appellant to produce a permit from the Civil Supplies Department which was obtained on the 18th of September 1950 (Exh. 26) and was produced before them on the 28th of September 1950. Thereafter the Customs Authorities selected three cases out of the goods in question for testing their contents and on the 2nd of November 1950 sent samples to the Department concerned for test. The endorsement on the Bill of Entry (Exh. 32) shows that by the 26th of December 1950 the matter regarding the payment of Customs duty had not been finalised by the Custom Authorities:

It, however, appears that although the matter regarding the payment of Customs duty had not been finalised by the Customs Authorities the respondents decided to sell by public auction 97 cases of vegetable ghee lying with them and published an auction notice in the issue of the Civil & Military Gazette, Karachi, dated 14th December 1950. They auctioned the 97 cases on the 5th of January 1951. The correspondence placed on the record shows that no information about the auction of the said goods was given to the appellant and the respondents, on several inquiries made by the appellant and their agent, gave him to understand that the goods were still lying in the Port Trust and were available for delivery. It was only on the 5th of March 1951 that the Deputy Traffic Manager by letter (Exh. 13) informed the appellant that 97 cases had been auctioned by the respondents an the 5th of January 1951 under section 50 given to him on the 12th of December 1950. It will be interesting to note that by a letter dated 21st March 1951 the respondents informed Messrs Mackinnon Mackenzie & Co. that the appellant had cleared 97 cases and the remaining 3 cases were lying uncleared in the auction Shed. This letter was forwarded by the aforesaid company under cover of a letter dated 2nd April 1951 (Exh. I1). On the 2nd of Ma) 1951 the respondents, however, gave notice to the appellant for the sale of the 3 cases lying with them, but the appellant declined to clear these goods on the ground that unle,s the matter regarding the 97 cases was settled by them the question of clearing these cases did not arise. On the 4th of September 1951 the respondents informed the appellant that all the 100 cages had been auctioned for a total amount of Rs. 7,077 out of which Rs. 6,317‑11‑;) had been appropriated towards Port Trust and Customs duty charges and the balance of Rs. 759‑5‑0 was available for payment to them. The appellant challenged the validity of the sale of the said goods and by a notice dated 10th January 1952 informed the respondents that they had wrongfully converted the goods and called upon them to pay a sum, of Rs. 7;077 as damages with future interest at 6%, per annum. Consequently, on the refusal of the respondents to comply with the notice, the appellant filed suit No. 373 of 1952 on the 27th February 1952 in the Chief Court of Sind in the said amount as damages for wrongful conversion of the goods in dispute. This suit was later on transferred to the District Court as Suit No. 168 of 1956.

In the written statement the respondents admitted the sale of 100 cases of vegetable ghee in dispute by public auction but resisted the suit mainly on the ground that the appellant not only failed to produce the necessary documents from the Customs authorities etc., but also failed to clear the goods within a reasonable time and justified the action as considerable time had elapsed and. large amount for storage and wharfage charges had fallen due. It was pleaded that in exercise of their powers under section 50, K. P. T. Act, at first 97 cases were auctioned on the 5th of January 1951 and the remaining 3 cases on the 19th of May 1951 for a total amount of Rs. 7,077. They also contended that the auction sale was in conformity with the aforesaid provision of law and the appellant was not entitled to any claim except the amount of Rs. 759‑5‑0 lying with them as balance after payment of Customs duty, demurrage and other charges. They also objected that the claim was barred by time under section 87 of the Karachi Port Trust Act and the suit was not maintainable under section 69 of the Partner ship Act.

The learned Subordinate Judge, on the evidence produced before him, came to the conclusion that in respect of both the auction of the goods in dispute the respondents failed to comply with section 50, K. P. T. Act inasmuch as neither ten days notice of the sale was published in the Official Gazette nor in two local newspapers with regard to the 97 cases no notice of the intended auction was even given to the appellant or his agent. He found that the auction sale by the respondents being in contravention of the mandatory provisions of the K. P. T. Act cannot be considered as purporting to have been done in pursuance of the Act and the appellant's claim is not hit by section 87 of the Act and the short period of limitation prescribed in it is not applicable to his claim. He held the claim within time under Articles 36, 48 and 49 of the Limitation Act having been brought within two years of the auction sale and conversion of the goods by the respondents. On merits, the learned Subordinate Judge found that the respondents wrongfully converted the appellant's goods and acted mala fide. But he allowed the deduction of Rs. 3,476‑14‑0 paid towards Customs duty, Sales‑tax and wharfage, Rs. 884‑10‑0 incurred for auction expenses and Rs. 1,955 as storage charges due from the appellants. In conclusion the appellant was granted a decree only in the sum of Rs. 759‑5‑0 lying with the respondents.

The appellant has only challenged the finding of the learned Subordinate Court in respect of the deduction of the amount for Customs Duty, wharfage charges, auction charges and storage charges. We are also not concerned in this appeal about the question whether the claim is within time as the respondents have not filed any counter objection and are not challenging the finding of the learned Subordinate Judge that the suit is well within time.

The sole question for determination therefore in this appeal is whether the learned Subordinate Judge was justified in allowing the claim of the respondents to deduct Rs. 3,476‑14-0 for Customs duty, Sales tax, and wharfage charges, and Rs. 884‑10‑0 for auction' expenses and Rs. 1,955 for their storage charges. Before proceeding to deal with the question involved in this matter it will he useful to mention here that under the K.P.T. Act the position of the respondents is that of statutory bailees. Under section 47 of the K. P. T. Act the Karachi Port Trust is the agent of the owner of the goods and delivery of the goods by the steamship company under the statutory provision of this enactment is the delivery of the goods to the consignee. Thereafter the Karachi Port Trust is bound to retain the goods left with them either in the ware‑houses or in the sheds of the Board, or, with the consent of the Chief Officer of Customs, in a public ware house, at the risk and expense of the owner of the said goods unless the lien on them is discharged. Both under the Customs law and the Port Trust Act, the consignee of the goods is not entitled to remove the goods unless and until completed Customs Bills of Entry, invoices and Port Trust wharfage entire are produced before the Port Trust Authorities. The Port Trust Authorities however under section 50 of the K. P. T. Act, if the tolls, dues, rates and charges payable to the Board under the Act in respect of any goods which have been landed, are not paid, or if the lien for freight, primage or general average, where such notice as aforesaid has been given, is not discharged, its Bard may, and in the latter event, if required by or on behalf of the person claiming such lien for freight, primage or general average shall on the expiration of two months from the time when the 'goods were placed in their custody, sell by public auction the said goods, or so much thereof as may be necessary to satisfy the amounts due from the owner of the goods, but before doing so it is necessary under the provisions of section 50 that at least ten days' notice of the same shall be given by publication thereof in the Official Gazette and in two local newspapers, and if the address of the consignee of the goods or of his agents has been stated on the manifest of the cargo or is otherwise known to the Board, notice shall also be given to the consignee of the goods or to his agent by letter delivered at such address or sent by post. It further provides that the title of a bona fide purchaser of such goods shall not be invalidated by reason of the omission to send such notice, nor shall any such purchaser be bound to inquire whether such notice has been sent. The Board is however authorised under this provision to dispose of such goods as are of perishable nature within such period being not less than 74 hours after the landing of the goods, as they think fit, by public auction, in which event such notice shall be given to the consignee of the goods or his agent as the urgency of the case admits of. In order to appreciate the powers of the Board in this respect section 50 of the K. P. T. is reproduced below:

"If the tolls, dues, rates and charges payable to the Board under this Act in respect of any goods which have been landed or if rents due under section 46 are not paid, or if the lien for freight, primage or general average where such notice as aforesaid has been given, ' is not discharged, the Board may, and in the latter event, if required by or on behalf of the person claiming such lien for freight, primage or general average, shall at the expiration of two months from the time when the goods were placed in their custody, or seized and detained for rents due will by public auction sell the said goods, or so much thereof as may be necessary to satisfy the amounts herein after directed to be paid out of the produce of such sale.

Before making such sale at least ten days, notice of the same shall be given by publication thereof in the Official Gazette and in two local newspapers.

If the address of the consignee of the goods or of his agent has been stated on the manifest of the cargo, or in any of the documents which have come into the hands, of the Board, or is otherwise known, notice shall also be given to the consignee of the goods or to his agent by letter delivered at such address or sent by post; but the title of a bona fide purchaser of such goods shall not be invalidated by reason of the omission to send such notice, nor shall any such purchaser be bound to inquire whether such notice has been sent.

Provided that, if such goods are of so perishable a nature as, in the opinion of the officer appointed by the Board in that behalf, to render early or immediate sale necessary or advisable, the Board may within such period being not less than twenty‑four hours after the landing of the goods, as they think fit, sell by public auction the said goods or such portion of them as aforesaid, in which event such notice, if any, shall he given to the consignee of the goods or his agent as the urgency of the case admits of."

On the evidence produced by the parties it is quite clear that the learned Subordinate Judge's finding that the respondents failed to comply with the above‑mentioned provisions is fully borne out from the record. The evidence of D. W. Irshadul Haq, Traffic Supervisor of the respondents, leaves no doubt in our mind that the respondents failed to give any notice either to the appellant or to his agent Messrs Mackinnon Mackenzie. Except the bare statement of this witness that notice of auction in respect of 97 cases was given to the steamer's agent, there is nothing on the record to show that in fact any notice was given to them. This witness also admitted that the notice of auction of 97 cases was only advertised in the Civil & Military Gazette and the notice of auction was not published in the Official Gazette. It is quite true that the respondents gave notice of auction in respect of the remaining three cases to the appellant but in respect of these cases also the respondents did not comply with the provisions of section 50 of the K. P. T. Act inasmuch as they did not publish the auction notice in the Official Gazette and in two local newspapers. Therefore on this evidence the finding of the learned Subordinate Judge that in respect of both the auctions of the goods in question the respondents failed to comply with the provisions of law which require at least ten days, notice of the same to be given by publication thereof in the Official Gazette and two local newspapers and with regard to the 97 cases out of them the respondents did not gave any notice of the intended auction to the appellant or his agent as required by the said provision, is absolutely correct and no exception can be taken of it.

It was however urged by Mr. Tikamdas, the learned counsel for the respondents, that the requirement of giving notice to the consignee or his agent or publishing the auction notice in the Official Gazette and two local newspapers is only of a directory nature and its non‑compliance will not convert the sale in question into a tortious act or wrongful conversion of the property. The learned counsel was unable to refer us to any authority in support of his contention. On the other hand in Managers of the Metropolitan Asylum District v. Frederick Hill and others ((1881) 6 A C 193), Lord Watson in respect of such requirements observed as under:

"Where the terms of a statute are not imperative but permissible, the fair inference is that the Legislature intended that the discretion, as to the use of the general powers thereby conferred, should be exercised in strict conformity with private rights."

Similarly in Secretary of Stare v. Sunderji Shivji & Co. (A I R 1938 P C 12) it was contended before the Privy Council that the defects in the notice of an intention to sell at a public auction in not specifying the time and place of the proposed public auction was not of such a nature which should invalidate the sale. Their Lordships repelled this contention and observed as under:‑

"As already stated; the question of the sufficiency of the notice was referred to in the course of the argument, and while their Lordships in view of the conclusion already mentioned do not consider it necessary to, give any decision on that part of the case, they are of opinion that it is difficult to see how a notice of an intention to sell at a public auction can be sufficient or effective, unless it specifies the time and place of the proposed public auction, the nature of the goods intended to be sold and all other particulars necessary to enable the members of the public to appreciate what it is which it is intended to put up for sale at the public auction."

Their Lordships in the earlier part of that judgment held that as the Railway Company did not sell the coal in the manner prescribed by sections 55 and 56 of the Railways Act, they cannot rely on the protection given by the Act. We therefore find no force in the contention of Mr. Tikamdas and are in complete agreement with the view of the learned Subordinate Judge that the auction of the goods in dispute was not effected in con formity with the provisions of section 50 of the K. P. T. Ac and the sale in question was not in accordance with the powers conferred on the respondents and was absolutely illegal and inoperative against the interests of the appellant. On this findings the other finding of the learned Subordinate Judge that the res pondents were guilty of wrongfully converting the property of the appellant is also absolutely correct. The learned counsel for the respondents has not been able to satisfy us to take any different view on this aspect of the question. The learned Subordinate Judge has also considered the appellant's case that the action of the respondents in disposing of the goods in question was mala fide, and although it is true that the facts disclosed in this case do not speak very highly of the management of the respondents and give an impression that at the material time there was no co‑ordination between its various branches in so far as they failed to inform the appellant or his agent about the disposal of the goods by public auction and even offered' the goods after 5th January for clearance but on the view we have taken it is not necessary, to give any finding on this question.

The contention of Mr. Tikamdas that respondents as statutory bailees cannot be sued for conversion is not well -founded. It appears to us that in those cases where the res pondents fail to exercise their power in strict conformity with section 50, K. P. T. Act it is not open to them to claim protection under other provisions of the enactment and their responsibility as bailees shall have to be determined in terms of section 161, Contract Act, which is to the following effect

"If, by the default of the bailee, the goods are not returned, delivered or tendered at the proper time, he is responsible‑to the B bailor for any loss, destruction or deterioration of the goods from that time etc., etc."

Under this provision of law a bailee who either refused to give delivery of the goods under his custody or fails to return the goods to the bailor, he is responsible to the bailor for any loss, destruction or deterioration of the goods from that time. This principle is derived from the English Common Law based on the principles recognised under the old Roman Law. In view of this provision, there is not the slightest doubt that in consequence of the auction sale the goods in dispute have been totally lost to the appellant and the sale being defective the respondents are in default and were rightly held to have wrongfully converted the goods. Consequently they are clearly responsible to compensate the appellant for the damages caused to him.

Mr. Ibrahim Rao, the learned counsel for the appellant, has urged before us that the finding of the learned Subordinate Judge that the respondents were entitled to deduct Customs duty etc., auction charges and storage charges is against well recognised principles. He contended that there is no evidence on the record to prove that the respondents had paid any amount towards Customs duty, sales‑tax and wharfage charges. This contention is not well‑founded. The evidence of D: W. 1 Mr. Irshadul Haq is quite clear on the question of the payment of Rs. 3,419‑11‑0 towards Customs duty and sales tax etc. He stated that

"The auction of 97 cases fetched Rs. 7,000 as the auction money. Out of it we paid Rs. 12‑6‑0 for wharfage, Rs. .1,749‑15‑0 for storage charges, Rs. 875 as auction expenses at 12 and Rs. 3,419‑11‑0 for Customs duty and sales tax.

The total of these items was Rs. 6,058."

There is no cross-examination of this witness on this part of the statement. The plaintiff/appellant P. W. 1 also has not denied the payment of Customs duty, sales tax or wharfage charges in his statement. In view of this we are fully satisfied that the respondents paid a sum of Rs. 3,419‑11‑0 towards Customs duty; sales‑tax and wharfage charges and as they were bound in law to pay this amount to the Authorities concerned under the provisions of the K. P. T. Act, the appellant cannot make any grievance about it and his contention in this respect must fail.

The question, however, remains whether the respondents were entitled to deduct Rs. 875 as auction charges and Rs. 1,749‑15‑0 for storage charges Mr. Tikamdas conceded that in the circumstances of the present case and in view of the finding against the respondents that they were guilty of wrongful conversion of the goods in dispute the respondents are not entitled to deduct Rs. 875 towards auction expenses. The only dispute therefore remains about the deductions made by the respondents towards storage charges. Mr. Tikamdas argued that under the provisions of the K. P. T. Act the respondents had a lien in respect of storage charges and therefore on the sale of the goods in dispute they are entitled to deduct this amount also from the sale proceeds, but the question is whether, a bailee who hay wrongfully converted the property of another person is entitle to claim any charges for service rendered by him for the good kept with him. It is a well established rule of law that an agent is not entitled to claim any amount due to him for services rendered if he has been guilty of any misconduct or a; any wrongful act in the discharge of his duties. This principle is embodied in section 220 of the. Contract Act. Under the K. P. T. Act, as already observed, the respondents' position 4 that of an agent and it was their duty to take care of the goods of the appellant in the same way as they would have taken of their own goods. The manner in which the goods in question were disposed of by them is definitely against the procedure and conditions on which they could dispose them of and there is not the slightest doubt in our mind that they have acted in haste and hurry and did not take proper care of the goods of the appellant. Therefore it is quite clear to us that on the principles recognised under section 220 of the Contract Act the respondents are not entitled to claim any charges for the services rendered by them. It is true that under section 170 of the Contract Act where the: bailee has, in accordance with purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them. But it is also a well established rule of law that a bailee's lien is lost if he surrenders possession of the goods and he has no right of sale unless such power is conferred on him under any statute or by the contract in Mulliner v. Florence ((1878) 3 Q B D 484) Bramwell, L. J., observed at page 489 as under:‑

"The defendant, who had only a lien on the horses, was not justified in selling them, and he has therefore been guilty of a conversion, and that enables the plaintiff to maintain this action for the proceeds of the sale. The very notion of a lien is, that if, the person who is entitled to the lien, for his own benefit parts with the chattel over which he claims to exercise it, he is guilty of a tortious act."

He further observed at page 490:‑

"the general rule is that where a person converts property to his own use by selling it and receives the price, he is liable for the value of the article, and he cannot set‑off."

In Clark v. Gilbert ((1835) 2 Bing: (N C) 343; 132 E R 135), Tindal, C. J. in this connection observed at page 140 as under:‑

"Now that lease, at the time of such sale, was in the posses sion of the defendant as a pledge or security for the payment of his demand against the bankrupt: being either in his possession as solicitor, under a claim upon it for his lien which the law gives him; or having been expressly deposited with him as a security for his demand according to the evidence of Stevens. In either case, the right and power of the defendant over the lease was precisely the same; he had the right to retain the lease in his possession until his demand was paid, and so far, by means of the possession of the lease, to enforce payment of his demand; but he had that right only: he had no right to sell the lease, and to pay himself his demand out of the proceeds So long as the lease remained in his possession, neither the bankrupt nor his assignee could retake it, without either payment of the demand, or a tender and refusal, which is equivalent to payment. But if instead of keeping the thing pledged, he sells it, or enables any other person to sell iL, by concurring in the sale he is guilty of a direct conversion, and makes himself liable for the value of the lease in an action of trover. Such a case is the same in principle as that put by Littleton, section 71. If I lend to one my sheep to tathe his land, or my oxen to plough the land, and he killeth my cattle, I may well have an action of trespass against him, notwithstanding the lending'. On which Lord Coke adds this commentary viz:‑ the reason is, that when the bailee having but a bare use of them, taketh upon him as an owner to kill them, he loseth the benefit of the use of them. Or in these cases he may bring an action of trespass on the case for the conversion at his election,."

In both these cases the bailee was not allowed to offset the debt for which the lien was claimed. This question was also incidentally considered by Rupchand, A. J. C. in Scinda Steam Navigation Co., Ltd. v. The Trustees of the Port of Karachi (122 I C 388). The learned Judge observed:

"Ordinarily a bailee is not bound to sell the goods bailed to him if no delivery is demanded within a reasonable time; on the contrary he has no right to sell the goods bailed, unless such right is conferred upon him' by the agreement of parties or by any special Statute, and a sale of the goods bailed to him in exercise of his right of lien over the goods causes the loss of the lien."

In view of the above discussion it is quite clear to us that since the respondents wrongfully converted the goods in dispute their lien under the provisions of the K. P. T. Act on the wrongful sale of the goods was destroyed and they are not entitled to claim any storage charges from the appellant. Thus, from whatever view the question may be considered, we have no hesitation in corning to the conclusion that the claim of the respondents for storage charges is not in the least maintainable. Accordingly we will hold that the respondents were not entitled to deduct the amount of Rs. 875 towards auction charges and Rs. 1,749‑15‑0 towards storage charges. On the conclusions we have arrived at, the appellant is entitled to a decree of Rs. 3,600 against the respondents with interest at 6% per annum from the date of the suit till its realization. The respondents will also bear proportionate costs throughout.

For the reasons given above the appeal is allowed to the extent of Rs. 3,600.

A.H. Order according.

Find a Lawyer Near You

Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.