# THE NEW MARINE COAL CO. (BENGAL) PRIVATE LTD v. UNION OF INDIA

- **Citation:** [1964] 2 S.C.R. 859
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Case number:** Civil Appeal No. 421 of 1961
- **Bench:** P. B. GAHlNDRAGADK-'.R, K. N. W-'.Nohoo, K. C. DAs GuPTA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-new-marine-coal-co-bengal-private-ltd-v-union-of-india-2845
- **Pages:** 20

## Headnote

Goods delivered under ill•gal contract-Party. receiving
the same and enjoying the ben•fit-Bound to pay compensationEstoppel by negligence-Should b• pleadeil-El•ments of Estoppel
by negligence-There must be a legal duty~N egligence mu"t be
the proximate course-Governmen{ of India Act, 1935,
(25 &
26, Geo. 5, ch. 42) s. I75 (3)-Indian Contract Act, 1872 (IX
of 1872),
s. 70-Indian Evidence Act, 1872 (1 of 1872),
s. 115.
The appellant filed a suit on the Original Side of the
Calcutta High Court against the respondent for the recovery of
a certain amount representing the price of coal supplied to
the respondent. The appellant's case was that if the contract
under which the coal was supplied was illegal by, reason of
it being in contravention of s. 175 (3) of the Government of
India Act, 1935, the respondent was liable to pay compensation under s. 70 of the Indian Contract Act, since the Coal
was not supplied gratuitously and the respondent had enjoyed
the benefit thereof.
The respondent's case was that the contract was illegal
and s. 70 of the Indian Contract Act was not attracted. It
was further alleged that the respondent had issued and sent
bills to cover the amount and intiination cards in accordance
with the usual practice and ordinary course of dealings. The
respondent, it was alleged paid the amount by a cheque to a
person authorised by the appellant and on presentation of
proper receipts. It was therefore alternatively pleaded that
the appellant's claim having been satisfied, he had no cause
of action.
It was established in the course of the trial that the
appellant had not in fact authorised any person to issue the
receipts but a certain !'erson not conμected with the appcllal\t
1963
Abril
5
1963
Ntw Marine Coal
Co. ( B tngal} P, Lui.
v.
L' nitm rJ b1dia
\
860 SUPREME COURT REPORTS [1964] VOL.
firm, 'without the consent· or knowledge of the appellant got
hold of the intimation cards and bills addressed to the appellant
forged the documenlS and fra11dulently received the cheque
from the respondent and appropriated the amount for himself.
The rr.sponder.t had not pleaded in its written statement that
it was due to the negligence of the appellant that the third
person was able to get hold of the
intimation card and
perpetrate the fraud.
Neither was it pro\'ed in the ease that
the appellant was in fact negligent.
The Trial Judge found that the respondent was bound to
pay compensation under s. 70 of the Indian Contract Act and
rejected the alleged payment of the bills and in the retult
decreed the amount prayed for hy the appellant. The respondent
thereupon appealed to a Division Bench.
Both the Judges
agreed that the appeal sl10ulcl be allowed.
Regarding the
invalidity of the agreement and th~ inapplicability of s. 70 of
the Contract Act both the J1dges agreed in favour of the
present respondent.
But while one of the Judges was not
prepared to consider the plea of negligence which was raised
by the present respondent for the first time in the appeal the
other judge held that there was negligence on the part of the
pre<;ont appellant.
The present appeal was filed on a certificate g1'rnted by the High Court.
'
In this Court, apart from the questions of'the invalidity
o( the contract under s. 175 (3) of the Government of fndia
Act and the applicability of s. 70 of the Contract Act, it was
argued on behalf of the appellant that a plea of negligence
should have b"en raised by th~ respondent in its pleadings and
that the appellate r.ourt
\Va!! :n error in allowing such a plea
to be raised for th" first time in appeal. It was contended
further that in support of the pica of negligence it must be
shown that the party against whom the plea is raised owed a
duty to the party who raises the pica and that the negligence
must not be merely or indirectly connected with the misleading
effect but must be the pr,oximate cause of the result.
Held that the contract is illegal and void.
If in pursuance of the void contract, the appellant ha•
per

## Text

_Characters 0–39,734 of 40,951. This is a partial read: ask again with offset=39734 for what follows._

-
2 S.C.R.
SUPREME COURT REPORTS
859
THE NEW MARINE COAL CO. (BENGAL)
PRIVATE LTD.
v.
UNION OF INDIA
(P. B. GAHlNDRAGADK-'.R, K. N. W-'.NOHOO and
K. C. DAs GuPTA JJ.)
Goods delivered under ill•gal contract-Party. receiving
the same and enjoying the ben•fit-Bound to pay compensationEstoppel by negligence-Should b• pleadeil-El•ments of Estoppel
by negligence-There must be a legal duty~N egligence mu"t be
the proximate course-Governmen{ of India Act, 1935,
(25 &
26, Geo. 5, ch. 42) s. I75 (3)-Indian Contract Act, 1872 (IX
of 1872),
s. 70-Indian Evidence Act, 1872 (1 of 1872),
s. 115.
The appellant filed a suit on the Original Side of the
Calcutta High Court against the respondent for the recovery of
a certain amount representing the price of coal supplied to
the respondent. The appellant's case was that if the contract
under which the coal was supplied was illegal by, reason of
it being in contravention of s. 175 (3) of the Government of
India Act, 1935, the respondent was liable to pay compensation under s. 70 of the Indian Contract Act, since the Coal
was not supplied gratuitously and the respondent had enjoyed
the benefit thereof.
The respondent's case was that the contract was illegal
and s. 70 of the Indian Contract Act was not attracted. It
was further alleged that the respondent had issued and sent
bills to cover the amount and intiination cards in accordance
with the usual practice and ordinary course of dealings. The
respondent, it was alleged paid the amount by a cheque to a
person authorised by the appellant and on presentation of
proper receipts. It was therefore alternatively pleaded that
the appellant's claim having been satisfied, he had no cause
of action.
It was established in the course of the trial that the
appellant had not in fact authorised any person to issue the
receipts but a certain !'erson not conμected with the appcllal\t
1963
Abril
5
1963
Ntw Marine Coal
Co. ( B tngal} P, Lui.
v.
L' nitm rJ b1dia
\
860 SUPREME COURT REPORTS [1964] VOL.
firm, 'without the consent· or knowledge of the appellant got
hold of the intimation cards and bills addressed to the appellant
forged the documenlS and fra11dulently received the cheque
from the respondent and appropriated the amount for himself.
The rr.sponder.t had not pleaded in its written statement that
it was due to the negligence of the appellant that the third
person was able to get hold of the
intimation card and
perpetrate the fraud.
Neither was it pro\'ed in the ease that
the appellant was in fact negligent.
The Trial Judge found that the respondent was bound to
pay compensation under s. 70 of the Indian Contract Act and
rejected the alleged payment of the bills and in the retult
decreed the amount prayed for hy the appellant. The respondent
thereupon appealed to a Division Bench.
Both the Judges
agreed that the appeal sl10ulcl be allowed.
Regarding the
invalidity of the agreement and th~ inapplicability of s. 70 of
the Contract Act both the J1dges agreed in favour of the
present respondent.
But while one of the Judges was not
prepared to consider the plea of negligence which was raised
by the present respondent for the first time in the appeal the
other judge held that there was negligence on the part of the
pre<;ont appellant.
The present appeal was filed on a certificate g1'rnted by the High Court.
'
In this Court, apart from the questions of'the invalidity
o( the contract under s. 175 (3) of the Government of fndia
Act and the applicability of s. 70 of the Contract Act, it was
argued on behalf of the appellant that a plea of negligence
should have b"en raised by th~ respondent in its pleadings and
that the appellate r.ourt
\Va!! :n error in allowing such a plea
to be raised for th" first time in appeal. It was contended
further that in support of the pica of negligence it must be
shown that the party against whom the plea is raised owed a
duty to the party who raises the pica and that the negligence
must not be merely or indirectly connected with the misleading
effect but must be the pr,oximate cause of the result.
Held that the contract is illegal and void.
If in pursuance of the void contract, the appellant ha•
performed his part ancl the respondent has received the benefit
of the performance of the rontract by the appellant, s. 70 of
the Contract Act would justify the claim made by the appellant
against the rr'.spondent.
State of w_,t Bengal v. B. K. Morida/, [1962] Supp
I S. C. R. 876, refen-cd to.
-
·•
2 s.c.R.
SUPREME COURT REPORTS
861
Since a plea of negligence was not raised by the respon·
dent 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.
Before invoking a pka of estoppel on the ground of
negligence, some duty must be shown to exist between the
parties and .negligence must be proved in relation to such duty •.
The Arnold v. The Cheque Bank, (1876) 1 C.P.D. 578,
referred to.
The negligence alleged must be proved to be the pro·
ximate or the immediate cause of the loss.
Bexen<lale v. Benmtt, (1878) 3 Q. B. D. 525, referred to.
The broad proposition "that whenever one of two in·
nocent persons must suffer by the acts of a third, he who
enables such third person to occasion the loss, must sustain it"
laid down by Ashhurst, J., in Liekbarrow v. Mason, 2 T. R. 63,
on which one of the Judges of the Division Bench has based his
decision cannot be sustained as valid in law.
Commonwealth Trust Ltd. v. Akotey, [1926] A. C. 72,
Mercantile Bank of India Ltd. v. Central Bank of India Ltd.
(1937) L. R. 65 I. A. 75, R. E. Jones Ltd. v. Waring & Gi7low
. Ltd., [1926] A. C. 670 and Farquharson Bros. & Go. v. King
· & Go., [1902] A. C. 325, referred to.
The appellant cannot be charged with negligence which,
in turn, can be held to be the proximate cause of the loss caus·
ed to the respondent. The appellant is entitled to be compensated under s. 70 of the Contract Act.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 421 of 1961.
Appeal from the judgment and decree dated
December 24, 1959 of the Calcutta High Court in
Appeal from Original Decree No. 181 of 1956.
M. 0. Setalvad, S. 0. Ghose, J.B. Daikichanji,
0. 0.
Mathur and Ravinder
Narain,
for the
;ippellant.
·
1963
New Mdrine Coal
Co. (B••z•l) P. Ltd.
••
Uni•n of India
s62 SUPREME COURT REPORTS [1964] Vot.
1963
Bishan Narain and P. D.
Menon, for the
· "'"' M<Ti•• Coal
rc~pondcnt.
lo (B111:al) P. Lid
••
Union of btdia
19U:l.
April 5.
The J udgmclll of the Court
was delivered by
G•juriro1adk" J,
GAJE~DUAGADKA!\ J.-This appeal anses out
of a suit filed by the
appellant, the l\ew :Marine
Coal (Bengal) Private Ltd. against the respondent,
the Union of India, on the original side of the
Calcutta High Court to recover Rs. '20,34:~/8/·. The
appellant's 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 salestax 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 hdia Act, I935. 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 appellant's 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 10 sec under cl. 12 of the
Letters_ Patent.
In its written
statcm~nt, the respondent admitted the delivery of the coal to the Bengal Nagpur
Railway Administration and did not dispute the
appellant's case
that it had forwarded
to the
2 s.a.R..
SUPREME couR. T R.Ei>oR. ts s6i
. 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 thats. 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
of 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.
On these pleadings, seven substantive issues
were framed by the learned trial Judge. Issues
l & 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 compensa-
. tion.
Issue :'~o. 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
J963
N~w Marini Coal
Co. (Bengal) P. Lid.
v.
Union of InditJ
Gaj1ndratadkar J.
19fJ
N1w MoritU Codi
Co. (Bt•z•I) P. Ltd.
••
Ulli .. oj lw
•
864
SUPllEME COURT REPOlltS [1964] vot.
on it, Issue No. 7 which was framed on the appe·
llant's allegation that its claim had been aqmitted
by the respondent wa~ answered against rhc appc·
llant.
In the result, the main finding on issue I\o. 5
decided the fate of the suit and since the said find·
ing was in favour of the appellant, a decree was
passed directing the respondent to pay to the
appellant Rs. :!0,030/8/·· This amount, according
to the decree, had to carry interest at the rate of
6 percent per annum.
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. Mukarji
and Bose JJ.' Both the learned judges agreed that
the resporident's appeal should be allowed and the
appellant's 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 claim made by the appellant for compensation
under s. 70 of the Indian Contract Act was not
sustainable.
He also found that the appellant's 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 con cl u.
sion that the appellant's 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.
•
Mukarji, J., who delivered the principal Judgment ·of the Appeal Court agreed with Bose J. ·in
• .
holding that the contract was invalid and s. 70 was
inapplicable. He, however, took the view that the
said contract had been duly ratified and so, he pro·
cecdcd to examine the question as to whether the
appellant's claim was justified on the merits.
On
this part of the case, the learned Judge took the
view that even if both the appellant and the respondent wero held to be innocent, since the respondent
,
2 S.C.R. SUPREME COURT REPORTS
869
had actually parted with the money, the appellant
was not entitled to require the respondent to pay
over the said money again, because he thought that
as held by Ashhurst J. in Lickbarrow v. Mason (1)1
it was a well-recognised principle of law "that when·
ever one of two innocent persons must suffer by the
acts of a third, he who enables such third person to
occasion the loss must sustain it." In the opinion
of the learned Judge, the intimation card had been
duly sent by post by the respondent to the appellant
and the fact that the said intimation card went into
unauthorised hands of dishonest persons who used it
fraudulently for the purpose of obtaining a cheque
for the amount in questfon from the respondent,
showed that the appellant had by his negligence
enable'cl the said fraudulent persons to secure the
cheque, and so, it was not open to the appellant to
claim the amount from the respondent. . It is oil
these grounds that Mukharji, J., allowed the appeal
and dismissed the appellant's suit with costs. It is
against this judgment and degree that the appellant
has come to this Court with a certificate granted by
the said High Court.
In the courts below, elaborate arguments were
urgaj by the parties on the question as to whether
the contract, the subject-matter of the suit, was
invalid and if yes, whether a claim for compen·
sation 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 SI.ate of West Bengal v. M/B. B. K.
Mondal & Sons (2).
As a result of this decision,
there can be no deubt that the contract on which
the suit is based is void and unenforceable, and thia
-"'
part of the decision is against the appellant. It is
also clear under this decision that if in pursuance or
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,
(1) 2 T.R. 6i; 70.
(2) [1962) Supp. 1 S.C.R. 876.
J96J
N1w .Matiu Coal
Ct. (B,.gal) P. Ltd.
v.
Union of l'ftt!"11J
Gaj•ndratodluiT I.
New Marine ~al
C• (B1ngal) P. Ltd,
v.
· U11iorz of India
GajtrzdragadJ;tn J.
'
866 SUPREME COURT REPORTS[l964]VOL.
section 70 would justify the claim made by the
appellant against the respondent.
This part of the
decision is in favour of •.he appellant. It is therefore
unnecessary to deal with this aspect of the matter at
length.
-
Assuming then that the appellanr is entitled to
claim the amount from the respondent, two questions
still remain to be considered.
The first question is
whether the intimation card on the production of
which the respondent always proceeded to issue a
cheque against 1he bills received by it from the
appellant, was received by the appellant or not, and
if this question is answered in the affirmative, the
other question which will call for our decision is
whether by virtue of the fact that after the intimation_
card had been duly posted by the respondent to the
appellant it fell into dishonest
hands and was
fraudulently used by some persons, that would create
an impediment in the way of the· appellant's claim
on the ground that the appellant was negligent and
his negligence creates estoppel.
Before addressing
ourselves to these questions, it would be necessary to
set out the material facts as to the despatch of the
intimation card and the fraudulent use ·which was
made of it by persons in whose hands the said card
appears to have fallen.
It appears that according
to the ordinary course of business, on receiving the
bills from the appellant, the respondent used to send
an intimation card to 1hc appellant and the said
card had to be sent back by the appellant with a
person having the au1hority of the appellant to
.receive the payment and when it was so produced
before the respondent, a cheque used to be issued.
In the present case, it is common ground that a bill
. was sent by the appellant to the respondent making
a total claim of Rs.
~0,34a/8/-
on August 18;
1949.
Thereafter,
on
October JO,
1949, the
respondent sent the intimation card to the appellant
addressed at its place of business 135, Canning Street,
. Calcutta.
This card
intimated to the appcl:ant

•
_,
.2 S.C.R.
SUPREME COURT REPORTS
867
that its claim for the amount specified in its bill·
would be paid on presentation of a proper receipt
and authority between 11 A. M, to 3 l'. M. on ordinary days and between ll A. M. to 1 P. M. on
Saturdays.
Along with the card, a form of the
receipt was sent and the appellant was asked to
~ign it. This intimation card was duly posted.
Later, one Mr. B. L.
Aggarwal
produced the
intimation card before the respondent. In doing
so he projuced an endrosement which purported
to show
that
the
appellant
had
authorised
him to receive the payment on its behalf. When
the intimation card with the appropriate authority
was shown to the respondent, Mr. Aggarwal was
asked to pass a receipt and when the receipt was
passed in the usual form, an 'account payee' cheque
for the amount in question was given to him. Mr.
Aggarwal took the cheque and left the respondent's
office.
Meanwhile, it appears that some persons had
entered into a conspiracy to make fraudulent use of
the intimation card which had gone into their
custody. In order to carry out this conspiracy, they
purported to form a limited company bearing the
same name as that of the appellant. A resolution
purported to have been passed by the Directors of
this fictitious
company
on
October 17,
1949
authorised the opening of an account in favour of
the Company in the United Commercial Bank Ltd.,
Calcutta. This resolution purported to be signed
by the Chairman of the Board of Directors Mr.
Abinash Chander Chatterji.
Armed
with . this
resolution
an application was made to open an
account in the United Commercial Bank Ltd., and.
while doing so, the Articles of Association purporting to be the Articles of the said fictitious Company
were produced and the account was opened with
a cheque of Rs. 500/-
on October 27, 1949. · On
October 26, 19i9, the cheque received from. the
1963
New Matine Coal
Co. (Bmg,l) P. Ltd.
v.
Union oj India
Gajendragadka.r J.
963
N1w M.nru Coal
Co. (R,.1all P. Lli.
••
Union of lruli4
Gaj,,.dragUAar J.
868 SUPREME COURT REPORTS [1964] VOL.
1respondent was credited in the said account, and as
was to be expected, withdrawals from this account,
began in quick succession, with the result that by
November I, 194\1, ouly Rs. 68/-
were left in
this account.
That, in brief, is the story of the
fraud which has been committed in respect of the
cheque issued by the respondent to the appellant
for the bill dated August 18, 1949.
In the courts below, the appellant denied that
it had received the intimation card from the respondent, and it was alleged on its behalf that in delivering the cheque to the person who presented the said
card with the authority purporting to have been
issued by the appellant, it cannot be said that the
respondent had given the cheque to any person
authorised by the appellant, and so, the appellant
was justified in saying that it had not received the
payment for its bill.
In support of its case, the
appellant examined its Director, Mr. Parikh and
its officer, Mr. Bhat. The respondent led no oral
evidence; it, however, relied on the fact that the
intimation card bore the postal mark which showed
that it had been posted and it was urged that the
said postal mark raised a presumption that the card
which had been duly posted in the Post Office must
have, in ordinary course, reached the addresseeThe trial Court noticed the fact that the intimation
card did not bear a corresponding delivery mark as
it should have, and it took the view that the onus
was on the respondent to show that the ~aid card
had in fact bern delivered to the appellant. It then
considered the oral evidence adduced by the appellant and having regard to the fact that no evidence
had been led by the respondent, it came to the conclusion that the respondent had failed in showing
that"the intimation card had been duly delivered to
the appellant. Substantially, it is on the basis of
this finding that the decree was passed by the trial
Court in favour of the appellant.
-
2 S.C.R.
SUPREME COURT REPORTS
869
In appeal, Mukarji, J. took the view, and we
think, rightly, that the posting of the card having
been duly proved, a presumption arose that it must
have been delivered to the addressee in ordinary
course.
He also considered the oral
evidence
given by Mr. Parikh and Mr. Bhat and was not
satisfied that it was trustworthy. In particular, the
learned Judge was ·inclined to take the view that
Mr. Parikh's statement
that his office did not
employ any despatch clerk and did not keep any
Chiti note-book like the Inward and Outward
Register was unbelievable. In the result, he made
a finding that the appellant was negligent in receiving, arranging, recording and dealing with letters
addressed to it.
The position of the evidence in respect of this
point is no doubt unsatisfactory. It appears that
Mr. Parik4 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. Parikh's evidence
shows 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 the intimation card had been received by the Peon and had
not been deliverd by him to Mr. Parikh, Mr. Parikh
would n;;,t 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
1ense that the card had not been delivered to the
1963
N1w Marine Caal
Co. \B<ngal) P. Ltd.
••
Union of India
Gojena1agadkar J.
,,63
Jlt•' V nrint C"•l
Co. (ll1n1.J1 r. l.td.
v.
Un·o11 of /11,,a
(,1j1nlrcgadi:ar J.
870, SUPRE'.'vlE COURT REPORTS [1!!64] VOL.
appellant Company. Besides, Mr. Parikh 's statement
that he did not employ any despatch clerk and kept
no inward or outward register is prima f"c.ie unbelievable, and so, Mukarji J. was inclined to hold that
the intimation card may have been received by the
appellant Company.
Having made this finding,
Mukarji J. proceeded to examine the true legal
position in regard to the appellant's claim, and a., we
have already observed,
he held that since the
appellant was guilty of negligence which facilitated
the commission of the offence by some strangen, it
was precluded from making a claim against the
respondent.
As we have a I ready iccn, !lose, J., has
put his decision' on the narrow ·grou11d that
the
contract was invalid and s. 70 did not help the
appellant. That ground,
however, cannot
now
sustain the final condusion of Bose, .J., in view of the
recent decision of this Court in the case of .II JS. B. J(.
°Jlfonda.l ch Solis (1).
Therefore, io dealing with the
present appeal, we will assume that the
finding
recorded by l\fokarji 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.
The· question which arises for our
decision then is: if the intimation card was thereafter
taken by somebody else and fraudulently med, does
that create an cstoppel against the appellant in
regard to the claim made by it in the present case ?
In <lealing with this point, it is necessary to
bear in mind that though the evidence given by ·
Mr. Parikh may be unsatisfactory and may justify
the conclusion that despite his denial, the intimation
card may have been delivered to Mr. Parikh, it ia
not the respondent's case that Mr. Parikh deliberately
allowed either one of his employees or somebody
else to make fraudulent use of the said intimation
card. In other words, we must deal with the point .
of law raised by the appellant on the basis that
Mr. Parikh had no connection whatever with the
(II (1962j Supp. I S.C.R. 876.
,'
...
2 S.C.R.
SUPREME COURT REPORTS
871
fraud committed on the respondent and that whoever
obtained the intimation card from Mr. Parikh's
office and , used it for a fraudulent purpose acted on
his own without the knowledge or consent of
Mr. Parikh. The short question which falls to be
considered is if the arrangement for keeping the
intimation card in safe custody was not as good and
effective as it should have been
and somebody
managed to pilfer the said card, does it justify the
reipondent's case that the appellant was negligent and
by virtue ofits negligence, it is estopped from making
the present claim ?
In dealing with this question, it is necessary to
remember that the plea of negligence on which
estoppel was pleaded by the respondent against the
appellant had not been alleged in the written
statement. It is remarkable that the pleadings of
both the parties completely ignored the fact known
to both of them before the present suit was filed
that a cheque had been issued by the respondent and
had been fraudulently used by some strangers. The
appellant in its plaint does not refer to the issue of
the cheque and its.fradulent use and makes a claim as
though the respondent had not honoured the bill
submitted to it by the appellant; whereas the respondent in its written statement ignores the fact that the
cheque had not been received by the appellant but
had been fraudulently obtained and encashed by
some other
persons.
That being the nature of
the pleadings filed by the
parties in the Trial
Court,
neither
party· pleaded
any
negligence
against the other.
It is true that both the par.ties
argued the point of negligence against each other
in the appellate Court. The appellant urged that
the respondent 11hould not have delivered the cheque
to the person who presented the bill and the
intimation card because a stamped receipt had not
been produced by the said person as it should have
peen; the appellant's case was that it wa·s usual that
1963
New ,'vJarin1 Coal
Co. (Bengal) P. Ltd.
Y•
Unio1t 'lf India
Gaj1ndragadkar J,
/96S
Nim Man·n, Coal
C.. (lleagol) P. lli,
v.
C/niim of frulit1
GojnulragadMr J •
872 SUPREME COURT REPORTS [l964)VOL.
a stamped receipt had to be produced alongwith
the intimation card by a person duly authorised by
the appellant before the cheque was deliveud to
hirri and since without a stamped receipt the cheque
had been delivered, the respondent was guilty of
negligence.
This point has been rejected by Mukarji
J., but that is another matter.
On the other hand, the respondent pleaded
that the appellant was negligent imumuch as the
intimation card which had been sent to it and which
must be presumed to have been delivered to it I.ell
into the hands of strangers owing to the negligent
manner in which it was handled after it was delivered
in the Letter Box of the appellant in 135, Canning
Street, Calcutta.
As
we have already noticed,
Bose, J., refused to entertain the plea of negligence
urged by both the parties,
whereas Mukarji J .,
considered it and made a finding in favour of the
respondent and against the appellant.
Mr. Setalvad contends that a plea of negligence
should have been raised by the respondent in its
pleadim1;s and the appellate Court was, therefore, in
error in allowing such a pica to be raised for the first
time .in appeal.
In our opinion, there is some force
in this contention.
Negligence in popular language
aud 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 -0an be made on the plea
'
2 S.C,R.
'SUPREME COURT REPORTS
873
of negligence. Since a plea of negligence was not
raised by the respondent in the trial Court, the
appettant is entitled to contend that it had no opportunity to meet this plea and dealing with 1t in
appeal has, therefore, been unfair to it.
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
Mukarji, 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
gi:ound 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 theground of negligence ; but before such a plea can succeed, negligence must be established in this technical
sense.
As Halsbury has observed : "before anyone
can 'be estopped by a representation inferred from
negligent conduct, there must be a duty to use due
care towards the party misled, or towards the general
public of which he is one (')." There is another
requirement which has to be proved before a plea
of cstoppel on the ground of negligence can be
upheld and that requirement is that "the negligence
on which it is based should not ~e 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 Mukarji J. when he made
his finding against the appellant.
(I) Halsbury's Laws ofEng1and Vol. 15, page 248, para 451.
\2) Hal1burv'1 Law1 of E1111and Vol, 1' pap 245 para 453,
1963
Nem Marini Co•l
Ca. (B1ngol) P. Lrd.
••
Urtien oj India.
1963
Aiw Manne C.•I
Co. (dm1al) P ui.
v,
Union of lnd1t1
874 SUPREME C6URT REPORTS [1!}64] VOL.
Mukarji, J. thought that the principle laid
down by Ashhurst, J. in the case oj Lackbarrow ('),
was a broad and general principle which applid to
the facts in the present case. It may .be conceded
that as it was expressed by Ashhurst, J., in the case
of Lickbarrow, the proposition no doubt has been
stated in a broad and general manner. Indeed, the
1ame proposition has been affirmed in the same broad
and general way by the Privy Council in Common·
wealth Trust Ltd. v. A.kotey ('). In that case, the
respondent who was a grower of cocoa in the Gold
Coast Colony, consigned by railway 1050 bags of
cocoa to L., to whom he had previously sold cocoa.
Before a difference as to the price had been settled,
L. sold the cocoa to the appellants and handed the
consignment notci to their agent, who reconsigned
the cocoa to the appellants. The appellants bought
in good faid1 and for the full price. The respondent
then sued the appellants for damages for conversion.
It was held by the Privy Council that by his conduct
the respondent was precluded from setting up his
title against the appellant.!, and so his claim wa.~
rejected. In support of the view taken by the Privy
Council, reliance· was placed on
the well-known
statement of Ashhurst, J., in the case of J.Ackl!arrmv) '),
and so, it may be conceded that the broad principle enunciated by Ashhurst,J., received approval
from the Privy Council.
s'ubsequently, however, this question has been
elaborately examined
by the Privy Council in
Mercantile Bank of India Ltd. v. Central Ba11k oj
India Ltd., (1), and the validity of the broad and
general proposition to which we have just referred
has been seriously doubted by . the Privy Council.
Lord Wright who delivered the judgment of the
Board, referred to the decision in the ca8e of Lickbarrow ('),and observed "that it may well be that there
were facts in that case not fully elucidated in th•
report which woulq justify the decision; Dut on the
(I) 2 T.R. 63, 70.
(2J l1926) A.O. 72.
(S) (t937) L.R, '5 I.A. 75, 86,
•
2 S.C.R.
SUPREME COURT REPORTS 875
face of it their Lordships do not think that the case
is one which it would be safe
to follow."
Then
reference was made to the opinion of Lord Sumner
in the case of R.E. Jones Ltd. v.
Waring &: Gilloul
Ltd., (') where the principle enunciated by Ashhunt
.J. was not accepted, because it was held that the
principle of estoppel must ultimately depend upon
a duty.
Lord Lindley similarly in
Farquhar~on
Bro~. &: Co. v. King &: Co. ('), pointed out that the
dictum of Ashhurst J. was too wide.
A similar
comment has been made as to the said ob1ervation
by other Judges to which Lord Wright has referred
in the course of his judgment. It would thus be
seen that . in the case of The Mercantile Bank of
Ind·ia Ltd. (') the Privy Council has seriously doubted
the correctness of the broad observations made by
AshhurstJ, in the case of Liclcbarrow ('),and has
not followed the decision in the
ca~t of Commonwealth Trust Ltd. ('). Therefore, it must be held that
the decision of Mukarji J, which proceeded on the
basis of the broad and
unqualified proposition
enunciated by Ashhurst, J., in the case of Lick barrow
cannot be sustained as valid in law.
There are two other decisions to which reference may usefully be made in considering this point.
In Arnold v. 'l'he Cheque Bank, ('), Lord Coleridge,
C.J., in dealing with the question
of negligence,
obser\!Cd that "no authority whatever - had been
cited before the.m for the contention that negligence
in the custody of the draft will diSentitle the owner
of it to recover it· or its proceeds from a person who
has wrongfully obtained possession of it. In the
case before them, there was nothing in the draft or
the endorsement with which the plaintiff
had
anything to do, calculated in any way to mislead
the defendants. It was regularly endorsed and was
then enclosed in a letter to the plaintiffs correspondent1, to be sent through the post. There could be
no negligence in relying on the honesty of their
(I) [1926] A.C. 670,
(SJ (1937) L.R. 651.A. 75, 86.
($) [1926] A.O. 72.
(2) [1902] A:C. 325.
(41 2 T.R. 63, 70.
(6) \1876) C P.D, 578, 588,
I96S
New M•rlne Co•l
Co, (Btnt•l) P. Lti.
v.
Unfon •f lnJic
Gajenir1igadkat _ J .
1963
N1w Marinr Cttal
Co ( Bt1tal) P. Ltd.
••
UnU. of tni;a
876
SUPREME COURT REPORTS [1964) VOL.
servants in the discharge of their ordinary duty,
that of conveying letters to the post; nor can there
be any duty to the general public to exercise the
same care in transmission of the draft as if any or
every servant employed were a notorious thief."
These observations illustrate how before invoking a
plea of estoppel on the ground of negligence, 1mme
duty must be shown to exist between the parties and
negligence must be proved in relation to such duty.
Similarly,
in
Baxendale
v. Bennett,
(')
Bramwell, L.J., had occasion to consider the same
point. In that case, the defendant gave H. his
blank acceptance on a stamped paper and authorised
H. to fill in his name as drawer.
H. returned the
blank acceptance to the defendant in the same st.ate
in which he received it. The defendant put it into
a drawer of his writing table at his chambers, which
was unlocked, and it was lost or stolen. C. afterwards
filled in his own name without the defendant's
authority, and an action was brought on it by
the plaintiff as endorsee for
value. The court of
Appeal held that the defendant was not liable on the
bill. Dealing with the question
of negligence
attributed to the defendant, Bramwell L.J. observed
that "the defendant may have been negligent, that
is to say, if he had the paper from a third person,
as a bailee bound to keep it with ordinary care', he
would not have kept it in a drawer unlocked." But,
said the learned Judge, this negligence is not the
proximate or effective cause . of the fraud. A crime
was necessary for its completion, and so, it was held
that the defendant was not liable on the bill.
This
decision shows that negligence must be based on a
duty ,owed by one party to the other and must,
besides, be shown to have been the proximate or the
immediate cause of the loss.
It is in the light of this legal position that the
question about estoppel. raised by the respondent
(I)) (1878) SQ.. B. D. 525, 530.
2 S.C.R.
SUPREME COURT REPORTS
877
against the appellant in the AppeUate 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 woiild 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 deal·
ing 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
bold 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. Parikh's table by someone, either
by one of the employees of Mr. Parikh or some
stranger. In the latter case, though, technically,
the card had been delivered in the latter 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 . keepiQg it in safe custody
after it was received as he should have ? In our
opinion, it would be difficult to answer this question
in favour 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 in.
variably given to the Peon to collect the letters after
they are delivered by postal Peons.
This course
1953
Jl1w Marini_ Colli
C•. (B••t•I) P. Lli.
••
Uoio• of lnJia
Goj ... ragalhir J
1963
N1w Marini Coal
Co. (B,.ial) P. Ltd.
v.
Union of India
CajtnltagadA11r J.
878
SUPREME COURT REPORTS [1964! VOL.
of business proceeds on the assumption which muat
inevitably be made by all businessmen that the
servants entrusted with the task of collecting the
letters would act honestly.