# NATIONAL BANK OF LAHORE LTD v. SOHANLAL SEHGAL AND OTHERS

- **Citation:** [1965] 3 S.C.R. 293
- **Court:** Supreme Court of India
- **Decided:** 1965-03-05
- **Bench:** K. SuBBA RA:o, J. c. SHAH, R. s. BACHAWAT
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/national-bank-of-lahore-ltd-v-sohanlal-sehgal-and-others-3486
- **Pages:** 7

## Headnote

Limitation Act, 1908, First Schedule, Articles 36 and 115-Scope of
The respondents hired Jockers in the safe deposit vaults from the
appellant bank at J ullundur through its manager under different
agreements on various dates during 1950. In April 1951, the lockers
were tampered with and the valuables of the respondents kept in
them were removed by the Manager. In due course the Manager was
prosecuted and convicted for theft. The respondents filed three suits
against t)le bank for the recovery of different sums being the value of
the contents of ihe lockers which had been removed. The bank denied
its liability on various grounds and also contended that the suits were
barred by l\mitation.
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The trial court held that the Bank was liable to bear the loss
incurred by the respondents and that the suits were not barred by
!imitation. On appeal, the High Court accepted the findings of the
trial court on both the questions and dismissed the appeals.
In the appeal before the Supreme Court, only the question of
limitation was raised. It was contended on behalf of the appellants
on the facts found that the suit was barred by !imitation as the theft
of the valuables by the Manager was a tort committed by him dehors
the contracts entered into by the appellant with the respondents and,
therefore, Article 36 of the Limitation Act which required that a suit
must be instituted within two years applied, and not Art. 115, which
provided for a period of limitation of three years; that the suits were1
not based on a breach of contract committed ty the bank but only the
theft committed bi its agent dehors the terms of the contract.
HELD: The suit claims, being ex contractu, were clearly govern·
ed by Article 115 of the First Schedule to the Limitation Act and not
by Article 36. [298 FJ
There were clear allegations in the plaint that the appellant committed breach of contract in not complying with some of the conditions thereof and that the appellant understood those allegations in
that light and traversed them. [298 E]
Even ii the respondents' claim was solely based on the fraud committed by the manager during the course of his employment, such a
claim could Il'J! fall under Art. 36. To attract.Art. 36, the misfeasance
must be :ndcpendent of contract. The fraud of the manager committed in the course of his employment must be deemed to be a fraud
of the principal, i.e. the Bank must be deemed to have permitted its
manager to commit theft in violation of the terms of the contracts.
While under the contracts the bank was under an obligation to provide good lockers and not to permit access to the safe except to
persons mentioned in the contracts, in v'oJation of these terms the
bank gave defective lockers and gave access to the manager, thus
facilitating the theft. In either case the wrong committed was not
independent of the contract but directly arose out of the breach of
contract. [298 G, HJ
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SUPR.E:M:E COURfr REPORTS
[1965] 3 s.c.11.
C1v1L APPELLATE JURISDICTION: Civil Appeals Nos. 929, 930
A
and 931 of 1963.
Appeals by special leave from the judgment and decree dated
October 11, 1961 of the Punjab High Court in Regular First
Appeals Nos. 136, 137 and 138 of 1959.
Hans Raj Sawhney and B. C. Misra, for the appellant (in all
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the appeals).
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B. R. L. Iyengar, S. K. Mehta and K. L. Mehta, for the respondents (In C.A. No. 229 of 1963).
V. D. Mahajan, for the respondent. (In' C.A. No. 930 of 1963).
Kanwar Rajendra Singh and Vidya Sagar Nayyar, for the respondent (In C.A. No. 931 of 1963).

## Text

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NATIONAL BANK OF LAHORE LTD
v.
SOHANLAL SEHGAL AND OTHERS
March 5, 1965
293
[K. SuBBA RA:o, J. c. SHAH AND R. s. BACHAWAT, JJ.]
Limitation Act, 1908, First Schedule, Articles 36 and 115-Scope of
The respondents hired Jockers in the safe deposit vaults from the
appellant bank at J ullundur through its manager under different
agreements on various dates during 1950. In April 1951, the lockers
were tampered with and the valuables of the respondents kept in
them were removed by the Manager. In due course the Manager was
prosecuted and convicted for theft. The respondents filed three suits
against t)le bank for the recovery of different sums being the value of
the contents of ihe lockers which had been removed. The bank denied
its liability on various grounds and also contended that the suits were
barred by l\mitation.
·
.
The trial court held that the Bank was liable to bear the loss
incurred by the respondents and that the suits were not barred by
!imitation. On appeal, the High Court accepted the findings of the
trial court on both the questions and dismissed the appeals.
In the appeal before the Supreme Court, only the question of
limitation was raised. It was contended on behalf of the appellants
on the facts found that the suit was barred by !imitation as the theft
of the valuables by the Manager was a tort committed by him dehors
the contracts entered into by the appellant with the respondents and,
therefore, Article 36 of the Limitation Act which required that a suit
must be instituted within two years applied, and not Art. 115, which
provided for a period of limitation of three years; that the suits were1
not based on a breach of contract committed ty the bank but only the
theft committed bi its agent dehors the terms of the contract.
HELD: The suit claims, being ex contractu, were clearly govern·
ed by Article 115 of the First Schedule to the Limitation Act and not
by Article 36. [298 FJ
There were clear allegations in the plaint that the appellant committed breach of contract in not complying with some of the conditions thereof and that the appellant understood those allegations in
that light and traversed them. [298 E]
Even ii the respondents' claim was solely based on the fraud committed by the manager during the course of his employment, such a
claim could Il'J! fall under Art. 36. To attract.Art. 36, the misfeasance
must be :ndcpendent of contract. The fraud of the manager committed in the course of his employment must be deemed to be a fraud
of the principal, i.e. the Bank must be deemed to have permitted its
manager to commit theft in violation of the terms of the contracts.
While under the contracts the bank was under an obligation to provide good lockers and not to permit access to the safe except to
persons mentioned in the contracts, in v'oJation of these terms the
bank gave defective lockers and gave access to the manager, thus
facilitating the theft. In either case the wrong committed was not
independent of the contract but directly arose out of the breach of
contract. [298 G, HJ
•
2~)4
SUPR.E:M:E COURfr REPORTS
[1965] 3 s.c.11.
C1v1L APPELLATE JURISDICTION: Civil Appeals Nos. 929, 930
A
and 931 of 1963.
Appeals by special leave from the judgment and decree dated
October 11, 1961 of the Punjab High Court in Regular First
Appeals Nos. 136, 137 and 138 of 1959.
Hans Raj Sawhney and B. C. Misra, for the appellant (in all
B
the appeals).
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B. R. L. Iyengar, S. K. Mehta and K. L. Mehta, for the respondents (In C.A. No. 229 of 1963).
V. D. Mahajan, for the respondent. (In' C.A. No. 930 of 1963).
Kanwar Rajendra Singh and Vidya Sagar Nayyar, for the respondent (In C.A. No. 931 of 1963).
The Judgment of the Court was delivered by
Sobba Rao, J. These appeals by special leave raise a question
of limitation.
. The National Bank of Lahore Limited, hereinafter called the
Bank, is a banking concern registered under the Indian Ccmpanies
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Act and having its registered office in Delhi and branches at
different places in India. Though its main business is banking, it
carries on the incidental business of hiring out lockers out of cabi- ·
nets in safe deposit vaults to constituents for safe custody of their
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jewels and other valuables. It has one such safe deposit vault at its
branch in Jullundur. The respondents herein hired lockers on rental
basis from the Bank at J ullundur through its Manager under
different agreements on different dates during the year 1950. In
April 1951 the said lockers were tampered with and the valuables
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of the respondents kept therein were removed by the Manager of
the Jullundur branch of the Bank. In due course the said Manager
was prosecuted before the Additional District Magistraite, Jullundur, and was convicted under ss. 380 and 409 of the Indian Penal
Code. The respondents filed 3 suits in the Court of the Subordinate Judge, Jullundur, against the Bank for the recovery of
different sums on account of the Joss of the valuable contents of
the lockers hired by them. The Bank denied its liability on various
grounds and also contended that the suits were barred by limit~-
tion.
The learned Subordinate Judge held that the Bank was liable
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to bear the loss incurred by the plaintiffs and that the suits were
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not barred by limitation. On appeal, the High Court of Punjab
accepted the findings of the learned Subordinate Judge on both the
questions and dismissed the appeals. The present appeals arise out
of the said judgment of the High Court.
The only question raised in these appeals is one of limitation .
.Before considering the question of ,limitation it is necessary to
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NATIONAL BANK OF LAHORE V. SOHANLAL (Subba Rao, J.)
295
notice briefly the findings of fact arrived at by the High Court. TI,le
High Court summarized its findings thus:
(I) The whole object of a safe deposit vault in which customers of a Bank can rent lockers for placing their valuables is to ensure their safe custody. The appellant-Bank
had issued instructions and laid down a detailed procedure for ensuring that safety but in actual practice the
Manager alone had been made the custodian with fulL
control over the keys of the strong room and a great
deal of laxity had been observed in haVing no check
whatsoever. on him.
(2) The lockers had been rented out to the plaintiffs by the
Manager Baldev Chaud, who was entrusted with the:
duty of doing so. It was he who had intentionally rented
out such lockers to the plaintiffs which had been tampered with by him. This constituted a fraud on his part
there being an implied representation to the ,plaintiffs
that the lockers were in a good and sound condition.
(3) Although the Bank authorities were not aware of what
Baldev Chand was doing, but the fraud, which he perpetrated, was facilitated and was the result of the gross
laxity and negligence on !ht< part of the Bank authorities.
(4) The lockers were indisputably being let out by the
Manager to secure rent for the Bank.
Having found the said facts, the High Court held that the fraud was
committed by the Manager acting within the scope of his authority
and, therefore, the Bank was liable for the loss incurred by tlje respondents. Then it proceeded to consider the question of limitation from
three aspects, namely, (i) the loss was caused to the respondents.
as the Manager of the Bank committed fraud in the course of hi~
employment: (ii) there was a breach of the implied condition of the
contract. namely, that only such lockers would be rented out which
were safe and sound and which were capable of being operated in
the manner set out in the contract; and (iii) there was a relationship
of bailor and bailee between the respondents and the Bank, and
therefore the Bank would be liable on the basis of the contract of
bailment. It held that from whatever aspect the question was approached Art. 36 of the First Schedule to the Limitation Act would
he out of place and the respondents' claims would be governed by
either Art. 95 or some other article of the Limitation Act.
Learned counsel for the appellant accepted the findings of fact,
but contended that on the facts found the suits were barred by
limitation. Elaborating the argument the learned counsel pointed
out that the theft of the valuables by the Manager was a tort committed by him dehors the contracts entered into by the appellant
with the respondents and, therefore, Art. 36 of the First Schedule
2!-JH
RlTPRE]tfE COLRT REPORTS
[1965) 3 s.c.R.
tqf!he Limit~tion Act was immediately attracted to the respondent>'
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claims.
The scope of Art. 36 of the First Schedule to the Limitation
Act is fairly well settled. The said article says that the period of
limitation "for compensation for any malfeasance, misfeasance or
nonfeasance independent of contract and not herein specifically
rrovided for" is two vears from the time when the malfeasance,
misfeasance or nonfeasance takes place. If this article applied, the
suits having been filed more than 2 years after the loss of the articles
deposited with the Bank, they would be clearly out of time. Article
36 applied to acts or omissions commonly known as torts by English
l:iwyers. They are wrongs independent of contract. Article 36 applies to actions "ex de/icto" whereas Art. 115 applies to actions
"ex contractu''. "These torts are often considered as of three kinds,
viz., non-feasance or the omissicn of some act which a man is by
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law bound to do, misfeasance, being the improper performance of
some lawful act, or malfeasance, being the commission of some act
which is in itself unlawful". But to attract Art. 36 these wrongs shall
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be independent of contract. The meaning of the words "independent
of contract" has been felicitously brought out by Greer, L.J., in
Jarvis v. Moy, Davies, Smith, Vandervei/ and Co.(') thus:
"The distinction in the modern view, for this purpose, between contract and tort may be put thus. Where the breach
of duty alleged arises out of a liability independently of the
personal obligation undertaken by contract it is tort and it
may be tort even though there may happen to be a contract
between the parties, if the duty in fact arises independently
of that contract. Breach of contract occurs where that which
is complained of is a breach of duty arising out of the obligations undertaken by the contract."
If the suit claims are for compensation for breach of the terms of
the contracts, this article has no application and the appropriate
article is Art. 115, which pwvides a period of 3 years for compenst1tion. for the breach of any contract, express or implied, from the
<late when the contract is broken. If the suit claims are based on· a
wrong committed by the Bank or its agent dehors the contract.
Art. 36 will be attracted .
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Let us now apply this legal position to the claims in question.
One of the contracts that was entered into between the plaintiffs and
the Bank is dated February 5, J 951. It is not disputed that the other
two contracts, with which we arc concerned, also are of the same
p:Htern. Under· that contract the Bank, the appellant herein, and
Sohanlal Sehgal, one of the respondents herein, agreeC: "to hire.
subject to the conditions endorsed, the company's safe No. 1651 I
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(I) [1036] l K. H. 3{)(l, 40.J.
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NATIONAL BANK OF LAHORE t'. SORANLAL (Subba Rao, J.)
297
2203 Class lower for one year from this day at a rent of Rs. 40".
The relevant conditions read as follows:
l 4. It is agreed that the connection of the renter of the safe
and the Bank (and it has no connection) is that of a
lessor and Jessee for the within mentioned safe and not
that of a banker and customer.
15. The liability of the company in respect of property
deposited in the said safe is limited to ordinary care in
the performance by employees and officers of company
of their duties and shall consist only of (a) keeping the
safe in vault where located when this rental contract is
entered into or in one of equal specifications, the door
to which safe shall be locked at all time except when
an officer or an employee is present, (b) allowing no
person access to said safe, except hirer or authorised
deputy, or attorney in fact having special power to act
identificatio'n by signature being sufficient or Iiis/her
legal representative in the case of death, insolvency or
other disability of Hirer, except as herein expressly
stipulated. An unauthorised opening shall be presumed
or inferred from proof of partial or total loss of contents.
16. The company shall not be liable for any delay caused
by the failure of the vault doors or locks to operate.
17. The company shall not be liable for any loss etc.
The only purpose of the contract was to ensure the safety of the
:1rticlcs deposited in the safe deposit vault. It was implicit in the
contract that the Jockers supplied must necessarily be in a good
condition to achieve that purpose and, therefore, that they ·should
be in a reasonably perfect condition. It was an implied term of such
a contract. Condition 15 imposed another obligation on the Bank
to achieve the same purpose, namely, that the Bank should not
allow access to any person to the safe except the hirer or his authorised agent or attorney. If the articles deposited were lost because
cne or other of these two conditions was broken by the Bank, the
renter would eertainly be entitled to recover damages for the said
breach. Such a claim would be ex contractu and not ex delicto and
for such a claim Art. II 5 of the First Schedule to the Limitation
Act applied and not Art. 36 thereof.
Learned counsel for the appellant contended that the suits were
not based upon the breach of a contract committed by the Banki
but only the theft committed by its agent dehors the terms of the
contract. This leads us to the consideration of the scope of the
plaints presented by the respondents. It would be enough if we take
one of the plaints as an example, for others also run on the same
lines. Let us take the plaint in Civil Suit No. 141 of 1954, i.e., the
'uit filed by Sohanlal Sehgal and others against the Bank for the
recovery of a sum of Rs. 26,500. We have carefully gone through
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SUPREri.IE
COURT
REPORTS
[1965] 3 s.c.R.
the plaint, particularly paragraphs 8, 9 and 10 thereof. It will be
seen from the 'plaint that though it was not artistically drafted the
relief was claimed mainly on two grounds, namely, (i) th.1t it was
an implied term of the contract that the locker rented was in a good
condition, and (ii) the valuables were lost because the Manager, on
account of the negligence of the Bank in not taking all the necessary
precautions, committed theft of the articles in the course of his employment. In the written-statement the defendant denied its liability
both under the terms of the contract and also on the basis that it
was not liable for the agent's fraud. The High Court found that at
the time when the lockers were rented out they were in a defective
condition and that the Bank, in actual practice, made the Manager
the sole custodian with full control over the keys of the strong,
room and permitted a great deal of laxity in not having any check
whatsoever on him. In this state of the pleadings and the findings
it is not possible to accept the contention of the learned counsel·
for the appellant that the plaintiffs did not base their claims on the
branch of the conditions of the contracts. This argument is in the
teeth of the allegations made in the plaint, evidence adduced and
the arguments advanced in the Courts below and the findings arrived at by them. While ..ye concede that the plaint could have been
better drafted and couched in a clearer language, we cannot accede
to the contention that the plaints were solely based upon the fraud
of the Manager in the course of his employment. We, therefore,
hold that there were clear allegations in the plaints that the defendant committed breach of the contracts in not complying with some
ot the conditions thereof and that the defendant ·understood those
allegations in that light and traversed them. The suit claims, being
<'x contractu, were clearly governed by Art. 115 of the First Schedule to the Limitation Act and not by Art. 36 thereof.
If Art. 115 applied, it is not disputed that the suits were within
time.
Even if the claim was .solely based on the fraud committed by
the Manager during the course of his employment. we do not see
how such a claim fell under Art. 36 of the First Schedule to the
Limitation Act. To attract Art. 36, the misfeasance shall be independent of contract. The fraud of the Manager committed in the course
of his employment is deemed to be a fraud of the principal, that is
to say the Bank must be deemed to have permitted its manager to
commit theft in violation of the terms of the contracts. While under
the contracts the Bank was under an obligation to give to the
respondents good lockers. ensuring safety and protection against
· theft, it gave defective ories facilitating theft; while under the
contracts it should not permit access to the safe to persons other
than those mentioned in the contracts, in violation of the terms
thereof it gave access to its Manager and enabled him to ccmmit
theft. In either case the wrong committed was not independent of
the contract. but it dir~ctly aros~ out of the breach of the contract.
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:SAT!ONAL BAXK OF LAHORE v. SOHA:SLAL (.S11bbo Rao, J.)
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ln such circumstances Art. 36 is out of place. The competition between Arts. 115 and 120 to take its place need not be considered.
for neither of those Articles hits the claim, as the suits are within
3 years, which is the shorter of the two periods of limitation prescribed under the said two Articles.
In this view it is not necessary to express our view on the
question whether the contracts in question were of bailment.
In the result, the appeals fail and are dismissed with costs one
hearing fee.
Appeals dismissed.