judgement:
Appeal No. 131 of 1966.
Appeal by special leave from the Award dated, the September 10, 1965 of the Labour Court, Delhi, in I.D. No. 23 of 1965.
M. C. Setavad, B. P. Maheshwari and M. section Narasimhan, for the appellant.
, Madan Mohan, for the respondents.
The Judgment of the Court was delivered by Shah, J.
The appellant is engaged in carrying on the business of regulating forward trade in groundnut oil and mustard seed, and is recognised as an Exchange under the provisions of the Forward Contract Act, 1952.
On June 1, 1964 the Government of India issued an order prohibiting trading in diverse commodities including groundnut oil and mustard seed, and in consequence thereof no further business could, be carried on through.
the appellant Exchange.
On July 17, 1965 the appellant served notices of retrenchment upon 30 out of its 37 employees and paid them salary for the period of notice and retrenchment compensation under section 25F of the 14 of 1947.
The workmen then raised an industrial dispute.
Conciliation proceedings to solve the dispute having failed, the Delhi Administration referred to the Labour Court the dispute whether retrenchment of the workmen by the appellant was unjustified and illegal.
The workmen pleaded that retrenchment "on the ground of the ban imposed on forward trading in groundnut oil and mustard seed was mala fide" and that in retaining seven workmen the appellant did not follow, without any adequate ground, "the first come last go" rule, and on that account all the workmen were entitled to be reinstated with full wages from the date of determination of employment and with continuity of service.
The appellant denied that in retrenching the workmen the management had acted mala fide, or that retrenchment amounted to an unfair labour practice.
The appellant further submitted that retrenchment of the workmen was not liable to be challenged, because some junior members of the staff were retained, since the Company had recorded in the resolution its reasons for departing from the rule "first come, last go", and had "adhered to the principles contained in section 25F of the Industrial, Disputes Act as far as possible".
At the hearing of the reference before the Labour Court, Delhi, counsel for the workmen conceded that the appellant was justified in retrenching its employees and that the number of employees required to carry on the work after the imposition of a ban against the business of the appellant could not exceed the number retained by the appellant.
Counsel however contended that since the appellant failed in effecting retrenchment of the workmen 76 to observe the principle of "first come, last go", the order in its entirety was illegal.
The Labour Court accepted the contention of the workmen and held that departure from a principle which was part of the law relating to industrial employment rendered the retrenchment of all workmen unjustified and improper and on that account retrenchment of clerks and peons who were affected by the departure from the rule was "illegal and mala fide".
In the view of the Labour Court, workmen Nos. 1 to 14 and 16 to 23 in Ext.
W 1 the List of Seniority were so affected.
The Labour Court ordered that as the appellant required only four clerks in cluding the Accountant R. N. Seth, the Accountant and three senior clerks Shiv Das Sharma, Kishan Lal Grover and Surinder Singh be retained, and that the senior clerks named be reinstated with full "back wages", subject to adjustment of compensation money paid to them against their salary.
The Court also directed that clerks Nos. 4 to 14 be paid, in addition to the retrenchment compensation received by them "50 per cent of the wages as compensation for the period they remained in unemployment up till the date when the award became enforceable", but they may not be reinstated, and that peons Tara Shanker and Om Prakash be reinstated with full wages and peons Nos.
18 to 23 in Ext.
W 1 be paid in addition to the retrenchment compensation, "50 per cent of the wages they would have been entitled to.
" With special leave, the Company has appealed to this Court.
It is an accepted principle of industrial law that in ordering retrenchment ordinarily the management should commence with the latest recruit, and progressively retrench employees higher up in the list of seniority.
But the rule is not immutable, and for valid reasons may be departed from.
It was observed by this Court in Swadesamitran Ltd. vs Their Workmen(1) that if a case for retrenchment is made out, it would normally be for the employer to decide which of the employees should be retrenched; but there can.
be no doubt that the ordinary industrial rule of retrenchment is "first come, last go", and where other things are equal, this rule has to be followed by the employer in effecting retrenchment.
The question then is whether in departing from the rule, the management had acted mala fide, or that its action amounted to an unfair labour practice.
The Tribunal has to determine in each case whether the management has in ordering retrenchment acted fairly and properly and not with any ulterior motive: it cannot assume from mere departure from the rule that the management was actuated by improper motives or that the management had acted in a manner amounting to an unfair labour practice.
Nor has the Tribunal authority to sit in appeal over the decision of the management if for valid and justifiable reasons the management has departed from the rule that the senior employees may be retrenched before his junior in employment (1) 77 The management of the appellant has recorded a resolution which sets out the reasons for retention of the employees Ram Lal Sethi, Jagdish Pershad, Kidar Nath Thukral, Om Prakash Juneja, Jai Narain, Budhpal Singh and Laljimal.
About Ram Lal Sethi the Company has stated that he was looking "after the accounts" and income tax cases of the Company and he was the only Accountant in the service of the Company and the senior most employee in the Accounts Section.
The Labour Court has upheld his retention, and nothing more need be said about him.
Jagdish Pershad was, it was stated, looking "after the share work, collection of building rent and court work and the realisation of rents" and that he was "in charge of the share work for the last many years".
The Labour Court was of the view that a clerk employed in general office duties may be styled as a general assistant, and that the posts of clerks are interchangeable and since clerks are not trained to handle any Particular kind of work, the reasons given by the management for retaining this and other clerks cannot be accepted.
However there was not in the employment of the Company any other clerk who could competently handle "share work" and attend to "court work".
Clerical work ordinarily does not require specialisation and clerks may be transferred from one department to another without detriment to the business.
But if a clerk has been working in a branch of the business and he is shown to possess special aptitude for a particular duty, performance of which requires application and experience, the management may in the interests of the business while retrenching others retain him even if he is junior to others.
The rule of "first come, last go" is intended to secure an equitable treatment to the employees when, having regard to the exigencies of the business, it is necessary to retrench some employees.
But in the application of the rule the interests of the business cannot be overlooked.
The rule has to be applied where other things are equal.
The management of the business must act fairly to the employees, where however the management bona fide retains staff possessing special aptitude in the interests of the business, it cannot be assumed to have acted unfairly merely because the rule "first come, last go" is not observed.
If retention of a clerical employee is regarded as necessary by the management in the interests of the business, that opinion cannot be discarded merely on the ground that the clerk concerned is not the seniormost.
There is nothing on the record to show that there was, among the senior employees, a clerk possessing the aptitude which Jagdish Pershad possessed.
Kidar Nath Thakural was doing "typing work" and he was retained because he was the only typist with the Company.
Our attention has not been invited to any evidence that there were other typists who were senior to him and they had been retrenched.
A typist is undoubtedly a clerk in a business concern but that does not mean that every clerk, unless specially trained, can become a competent typist.
Om Prakash Juneja was 78 retained because he was looking after the records of the Company and was "fully conversant as to where different type of records" were "lying", and that this employee was doing the work satisfactorily.
A record keeper 's work in a business cannot be performed efficiently without special training or long experience.
It would be difficult to hold that in retrenching employees, if the management retains an efficient record keeper in preference to a senior clerk who has no training or experience in record keeping, the management acts mala fide or improperly, or perpetrates an unfair labour practice.
The Labour Court was of the view that retention of junior clerks in service could not be sustained on the ground that they had gained experience in a particular branch of clerical work.
To accept that ground of preference, observed the Labour Court, was to destroy the rule "first come, last go" itself, since clerks are not specially trained to handle only a particular kind of work, and their work is easily convertible and one can replace another without dislocation in the department.
For ordinary clerical work this is undoubtedly true, but even among the clerical staff if a degree of specialisation is necessary for discharging clerical duties efficiently retention of a junior clerk on the ground that the duty performed by him requires experience, and aptitude, will not expose the management to a charge of mala fide, or perpetration of an unfair labour practice.
It was submitted than in J. K. Iran and Steel Company Ltd. vs Its workmen(1) this Court has hold that in the matter of retrenchment of clerical staff, departure from the rule "first come, last go" may not be recognised when it is sought to be justified on the ground that the workman retained has experience of a particular branch of the clerical work, and reliance was placed upon the following observations of Subba Rao, J. "But if the preferential treatment given to juniors ignores the well recognized principle in the industrial law that the "first come, last go" without any acceptable " or sound reasoning, a tribunal or an adjudicator will be well justified to hold that the action of the management is not bona fide.
In regard to the clerks, what is the ground of preference given by the management? It is said that junior clerks, who were retained, have experience in a particular branch of clerical work.
To accept this ground of preference without more is to destroy the principle itself.
It may be that the clerks entrusted with such works may continue to do the same work till a readjustment of the work is made.
There is no particular or scientific skill required in one class of work rather than in another.
Clerks are not specially trained to handle (1) 79 only a particular kind of work.
Their work is easily convertible and one can replace another without any dislocation in the department.
" But the judgment does not enunciate a different principle.
Ordinarily it is for the management to ascertain who on retrenchment should be retained in the interests of the business and the Industrial Tribunal will not interfere with the decision of the management, unless preferential treatment is actuated by mala fides.
Where those retrenched and those retained are doing substantially the same kind of work and no special skill or aptitude is required for doing the work which the retained clerk is doing, preference given to the retained clerk on the ground that he has some ex perience in the branch may justifiably raise an inference of mala fides.
Apparently in J.K. Iron and Steel Company 's case,(1) the work required to be done by the clerks retained needed no special aptitude, and the clerks retrenched could as well do the work which was done by the clerk retained.
It was in those circumstances that the Court held that mere experience in a particular branch requiring no special aptitude was not sufficient to justify departure from the rule "first come, last go".
In the present case the four clerks retained had, beside ex perience, special skill and aptitude in the particular branch of the business of the appellant they were attending to, and the management had retained them because of that skill or aptitude.
The Labour Court inferred mala fides merely because the management departed from the rule "first come, last go".
Whether the management in departing from the rule has acted mala fide, must depend upon the circumstances of the case : it cannot be inferred merely from departure from the rule.
We may turn to the cases of the three peons, Jai Narain, Budhpal Singh Laljimal.
Retention of Jai Narain has been upheld by the Labour Court and, nothing more need be said about him.
The other two peons are Budhpal Singh and Laljimal who were working as chowkidars.
They are said to be "the senior most chowkidars", and there is no evidence to show that there were in the employment of the Company other persons who could have worked as chowkidars.
Peons Budhpal Singh and Laljimal were retained because they were the "senior most chowkidars".
Retention of the "senior most chowkidars" would not be interfered with by the Tribunal in the absence of clear proof of mala fides.
It cannot be assumed without more that every peon can do the work of a chowkidar.
The management may ordinarily require the chowkidar to possess good physique and ability to maintain watch over the building and its assets.
There is no evidence that the two peons Tara Shanker and Om Prakash had ever worked as chowkidars or were suitable for work as chowkidars.
The order (1) 80 of reinstatement of Tara Shanker and Om Prakash will stand vacated.
The second part of the order directing that clerks from Nos. 4 to 14 and peons from Nos.
18 to 23 in the seniority list, shall be entitled in addition to the retrenchment compensation already paid to them 50 per cent of the wages as compensation for the period they remained unemployed is wholly indefensible.
These employees had been properly retrenched: that was conceded before the Labour Court.
It was also conceded that for carrying on the business of the appellant after imposition of the ban by the Central Government, not more than seven employees were required.
If the management was entitled to retrench 30 workmen and did so after paying wages for the period of notice and retrench ment compensation, we fail to appreciate the grounds on which an order for payment of 50 per cent of the wages in addition to retrenchment compensation may be made.
Retrenchment compensation is paid as solatium for termination of service resulting in unemployment and if that compensation be paid there can be no ground for awarding compensation in addition to statutory retrenchment compensation.
If the Industrial Tribunal comes to the conclusion that an order of retrenchment was not properly made and the Tribunal directs reinstatement, an order for payment of remuneration for the period during which the employee remained unemployed, or a part thereof may appropriately be made.
That is because the employee who had been retrenched for no fault of his had been improperly kept out of employment, and was prevented from earning his wages.
But where retrenchment has been properly made and that order has not been set aside, we are not aware of any principle which may justify an order directing payment of compensation to employees properly retrenched in addition to the retrenchment compensation statutorily payable.
The appeal is therefore allowed and the award made by the Labour Court is substituted by the following award: "That retrenchment of the workmen was not unjustified or illegal and the workmen are not entitled to any relief".
In the circumstances of the case, there will be no order as to costs.
Appeal allowed.

summary/full:
The respondents (workmen of the appellant) raised on indus trial dispute and pleaded before the Labour Court that the appellant 's action in retrenching some of its employees was mala fide, as the appellant did not follow the "first come.
last go" rule.
The appellant justified its action on the ground that the appellant had recorded valid reasons for departing from the rule.
The reasons were that, one of the employees retained was the only person capable of looking after the appellant 's share work and court work, another was the only typist with the appellant, a third was the record keeper who alone knew where the different types of records were kept, and the other two were peons who were retained as chowkidars because, there was no other person who could do that work.
The Labour Court accepted the respondents ' contention, ordered the reinstatement of those employees who were affected by the departure from the rule, and directed that those employees who were properly retrenched should be paid in addition to the retrenchment compensation under section 25F of the , which had been paid by the appellant 50 % of their wages as compensation till the date when the award, became enforceable.
In appeal to this Court.
HELD:(i) The Labour Court was in error in inferring mala )ides merely because the management departed from the rule of "first come, last go.
" Where other things are equal, the ordinary industrial rule has to be followed by the employer, but the rule is not immutable.
It is for the management to ascertain who, on retrenchment, should be retained in the interests of the business, and the industrial tribunal will not interfere with the decision of the management, unless preferential treatment is actuated by mala fides.
Preference given to the retained employees on the ground of mere experience may justify an inference of mala fides; but in the present case, the employees retained had, beside experience, special skill, or aptitude in the Particular branch of the business of the appellant they were attending to, and the management had retained them because of that skill, or aptitude.
[76 E F 79B E].
Swadesamitran Ltd. V. Their Workmen, ; and J.K. Iron and Steel Company Ltd. vs its Workmen. , referred to.
(ii) Where retrenchment has been properly made and that order has not been set aside, there is no justification for directing payment of compensation to employees Properly retrenched in addition to the retrenchment compensation statutorily payable.
[8O E].


judgement:
Appeal No. 257 of 1964.
Appeal by special leave from the judgment and order dated February 19, 1963 of the Government of India, Ministry of Mines and Fuel, New Delhi on an application for review under rule 54 of the Mineral Concession Rules 1960.
section N. Andley, Rameshwar Nath, P. L. Vohra and Mahinder Narain, for the appellant.
C. K. Daphtary, Attorney General, R. Ganapathy lyer and B. R. G. K. Achar, for respondent No. 1.
R. N. Sachthey, for respondent No. 2.
The Judgment of the Court was delivered by Hidayatullah, J.
The appellant Messrs. Nandram Hunatram of Calcutta, a firm consisting of four partners including one Kishan Lal Aggarwal, held a mining lease for coal in respect of Handidhua Colliery for a period of 30 years commencing on April 6, 1959.
Under Part VII of the lease, which contained the covenants of the lessee, the firm had undertaken to commence mining operations within one year from the date of the execution of the lease and then to continue the work of searching and winning minerals without voluntary intermission in a skillful and workman like manner.
The firm had appointed one M. L. Goel as the Manager and Kishan Lal Aggarwal as the occupier of the colliery.
It appears (and in fact it is not denied) that the partners fell out among themselves and as none of them was willing to spend money on the colliery, work deteriorated and came to a standstill in May 1962.
Goel reported to the State Government that the wages of the labourers had not been paid for weeks, that work had stopped at the colliery and that even the essential services were not being maintained owing to non payment of wages.
He wrote to the firm and Government early in the first week of May, bringing to their notice that the colliery was in danger of being flooded if the essential services stopped working.
On May 9, 1962 the essential services stopped working as their wages had not been paid for several weeks.
The colliery began to get flooded when the pumps stopped and it was apprehended that within the next few hours the pumps would be drowned and the colliery lost.
Government, however, stepped in and made a promise to the essential workmen that their wages would be paid and this saved the colliery.
On May 14, the Chief Inspector of Mines was informed by Kishan Lal Aggarwal that he was restrained by the other 106 Partners of the firm from making payment for running expenses of the colliery and that he was not in a position to perform his duties as an occupier.
He accordingly resigned his office.
Goel also resigned and on May 16, 1962 the Sub divisional Officer, Talchar informed Government that the situation had become very alarming and that some action was absolutely necessary.
Government thereupon gave a notice on May 19, 1962 asking the firm to remedy the defect within sixty days of the receipt of the notice failing which Government threatened to take over the colliery from the firm.
As the firm did nothing to remove the defects and did not request for extension of time, Government took over the colliery and terminated the lease.
The firm thereupon filed an application for revision before the Central Government under Rule 54 of the Mineral Concession Rules 1960.
The Central Government asked for the comments of the State Government on the application and invited the firm to make its own comments upon the reply of the State Government.
Taking the entire matter into consideration the Central Government by order, February 19, 1963, rejected the application for revision.
The present appeal is against the order of the Central Government by special leave of this Court.
It was admitted in the application for revision and it is not denied before us that the partners were quarrelling among themselves and the work at the colliery had therefore stopped.
It is admitted that the wages of the labourers were not paid for about five weeks before Government sent its notice on May 19, 1,962.
It is further admitted that the essential services had also stopped working and that but for the timely action of the Government, the colliery would have been flooded in a matter of hours and probably rendered unworkable till dewatered.
With this background in mind we have to consider the objections of the firm to the order of the Central Government in the first instance and of the State Government in the final analysis.
Clause (3) of Part VII of the lease is one of the covenants by the lessee and under it the lessee undertook to continue work, without voluntary intermission, in a skilful and workman like manner.
Under cls.
(i) to (x) of Rule 41 of the Mineral Concession Rules, 1949 and under Rule 27(5) of the Mineral Concession Rules, 1960 power is conferred on the State Government to require the lessee by notice to remove a breach within 60 days of the receipt of notice and in default to determine the lease and forfeit the whole or part of the security in deposit.
Under Rule 27(1)(f) the lessee is also required to conduct operations in a proper, skilful and workmanlike manner.
It is abvious that there was a breach by the lessee of the covenants and the Mineral Concession Rules when the firm stopped working the colliery.
Even if the firm did not order the stoppage of the work at the colliery it is clear from the complaints 107 of Goel and Kishan Lal Aggarwal that no payment was being made to the labourers and they stopped work.
On record there are many telegrams and letters sent by the Workers ' Association to Government complaining of the failure of the firm to pay their wages for weeks.
It is thus clear that action was absolutely necessary to save the colliery from being ruined.
It is contended, however, that the wages were paid in full on the 17th of July but that obviously cannot do away with voluntary intermission which had already taken place for a few weeks.
The firm in its representation to the Central Government said that it had plans to raise as much as 240,000 tons of coal per year but their performance shows that in April, 1962 they had raised less than 2,000 tons and nothing in May, June and July.
In these circumstances, there is no merit whatever in the submission of the firm that the action by the State Government was arbitrary and high handed.
It is plain that the firm did not fulfil its obligations under the lease and, whatever the reason, it was guilty of voluntary intermission in the working of the colliery and of endangering it by neglect.
This entitled the State Government to step in and determine the lease under the terms of the lease and the provisions of the Mineral Concession Rules.
It is, however, argued before us that the Central Government did not give a hearing to the firm and also did not give any reasons in its order dismissing the application for revision.
Reliance is placed upon two recent decisions of this Court which, following the earlier decision reported in Harinagar Sugar Mills Ltd. vs Shyam Sundar Jhunjhunwala(1) have laid down that Government should give reasons when it performs quasi judicial functions such as hearin appeals and revisions.
The two cases are Madhya Pradesh Industries Ltd. vs Union of India and Ors.(2) and Aluminium Corporation of India Ltd. vs Union of India and Ors(3) In Harinagar Sugar Mills(1) the order was reversed on the ground that reasons for the decision should have appeared.
In the Aluminium case there was dispute as to how much scrap was remelted and Government gave its decision on a report received behind the back of the aggrieved party again without stating why a part of the assessee 's case was rejected.
In the Madhya Pradesh Industries case it was pointed out that an order affirming an earlier decision need not fail because it does not repeat the same reasons over again.
The Mineral Concession Rules make it incumbent on the Central Government to obtain the comments of the State Government upon the application for revision and cast a duty on the Central Government to afford an opportunity to the applicant to make representations in respect of the comments of the State Government.
This procedure was correctly followed and the Central Government thus had a detailed discussion of the pros and cons of the case before it.
The facts in the case were quite clear and spoke (1) ; , (2) ; (3) C.A. No.635 of 1964 decided on September 23,1965.
108 for themselves.
The belated attempt to pay the back wages of the workmen did not undo the voluntary intermission for a significantly long period and did not wipe off the dereliction on the part of the firm by which the existence of the colliery was gravely endangered.
The documents on the record quite clearly establish that the colliery was being flooded as the essential services had stopped functioning and but for the timely intervention of the State Government the colliery would have been lost.
In these circumstances, it is quite clear that the action of the State Government was not only right but proper and this is hardly a case in which any action other than rejecting the application for revision was called for and a detailed order was really not required because after all the Central Government was merely approving of the action taken in the case by the State Government, which stood completely vindicated.
The order of the Central Government is clearly sustainable on the ma terial and it is not said that anything has been withheld from us.
The action of the State Government far from being arbitrary or capricious was perhaps the only one to take and all that the Central Government has done is to approve of it.
The appeal fails and is dismissed with costs.
Appeal dismissed.

dataset_name: IN-Abs

summary/full:
The appellant firm held mining lease of a colliery on the condition to continue the work, without voluntary intermission, in a skillful and workman like manner.
The partners fell out amongst, themselves, the work of the colliery stopped, wages of the labourers were not paid, the essential services stopped working, and the colliery began to get flooded.
The State Government stepped in and made a promise to the essential workmen that their wages would be paid and this saved the colliery.
The State Government gave a notice asking the firm to remedy the defect within sixty days failing which it would take over the colliery.
As the firm did nothing to remove the defects and did not request for extension of time, the State Government took over the colliery and terminated the lease.
The firm filed a revision before the Central Government.
The Central Govern ment asked for the comments of the State Government and invited the firm to make its own comment upon the reply of the State Government.
Taking the entire matter into consideration, the Central Government rejected the revision.
In appeal to this Court, the firm contended that the action by the State Government was arbitrary and highhanded and that the Central Government did not give a hearing to the firm and also did not give any reasons in its order dismissing the revision.
HELD:The action of the State Government far from being arbi trary or capricious was not only right but proper.
This$ was hardly a case in which any act ion other than rejecting the application for revision was called for and a detailed order was really not required because after all the Central Government was merely approving the action taken in the case by the State Government, which stood completely vindicated.
[108 B C] The Mineral Concession Rules make it incumbent on the Central Government to obtain the comments of the State Government upon the application for revision and cast a duty on the Central Government to afford an opportunity to the applicant to make representations in respect of the comments of the State Government.
This procedure was correctly followed and the Central Government thus had a detailed discussion of the pros and cons of the case before it.
[107 G].
Harinagar Sugar Mills Ltd. vs Shyam Sundar Jhunjhunwala, [ ; , Madhya Pradesh Industries Ltd. vs Union of India.
[1966] J.S.C.R. 466 and Aluminium Corporation of India Ltd. vs Union of India and Ors., C.A. No. 635/64, dated 22 1965] referred to.
105 The firm did not fulfil its obligations under the lease and, whatever the reason, it was guilty of voluntary intermission in the working of the colliery and of endangering it by neglect.
This entitled the State Government to step in and determine the lease under the terms of the lease and the provisions of the Mineral Concession Rules.
[107 C D].


judgement:
iminal Appeal No. 37 of 1964.
Appeal from the judgment and order dated November 26, 1963 of the Allahabad High Court in Government Appeal No. 782 of 1962.
section P. Sinha, G. L. Sanghi, Ganpat Rai, E. C. Agarwala, section section Khanduja for P. C. Agarwala, for the appellant.
Atiquor Rehman and O. P. Rana, for the respondent.
Antiquor Rehman and O.P. Rana,for the respondent.
69 The Judgment of the Court was delivered by Shah, J.
The appellant was charged before a Magistrate, 1st Class, at Varanasi with being, on November 25, 1960, in possession of counterfeit labels which could be used to pass off his "tobacco tins" as the goods of M /s Nandoo Ram Khedan Lal bearing 'Titli" (butterfly) trade mark, and with being in possession for ale of "tobacco tins" bearing counterfeit trade marks of the genuine "Titli" brand trade mark of M/s Nandoo Ram Khedan Lal.
The Trial Magistrate convicted the appellant and sentenced him to suffer simple imprisonment for three months for offences under section 78 read with section 77 and under section 79 of the 43 of 1958, and directed the two sentences to run consecutively.
In appeal to the Court of Session, Varanasi, the order passed by the Trial Magistrate was set aside and the appellant was acquitted principally on the ground that the prosecution was barred because it was not instituted within the period prescribed by section 92 of the Act.
The High Court of Judicature at Allahabad however set aside the order of acquittal and restored the conviction, but reduced the sentence on each of the charges to a fine of Rs. 1,000/ .
With certificate granted by the High Court under article 134 of the Constitution, this appeal has been preferred.
M/s Nandoo Ram Khedan Lal who will hereinafter be called "the complainants" carry on in the town of Varanasi, business in "chewing tobacco".
They were marketing their product for the last many years under a trade mark styled "Titli" (butterfly).
The label on the containers of "chewing tobacco" shows figures of three butterflies on yellow green background and the legend "Titli" in Devnagari and English characters.
The appellant who carried on business also in "chewing tobacco" commenced market his goods in the name of "Titli" (partridge).
The label on the containers had figures of four butterflies on leaf green background, and the legend "Titli" in Devnagari and English characters.
The colour schemes of the butterflies in the complainants ' label and of the butterflies in the appellants label were substantially similar.
The complainants gave information to the police in November 1960 that the appellant had infringed their trade mark by marketing his goods under a trade mark calculated to deceive the purchasers into believing that they were purchasing the product of the complainants.
The police submitted a charge sheet against the appellant for offences under section 78 read with section 77 and, section 79 of the .
The Trial Magistrate observed that there was ' close resemblance between the label used by the complainants and the label used by the.
appellant, and that a vast mejority of users of such tobacco being illiterate were likely to be "carried" 'away by ' a pictorial ' device of "Titli" 70 (butterfly)" since they were incapable of reading and understanding the "descriptions on the label in Devanagri and in English".
With this view the Sessions Judge and the High Court agreed.
Before us, no substantial argument has been advanced which would justify us in taking a different view on this question.
It was however contended for the appellant that the case against him must still fail because the prosecution was barred by section 92 of the , and also because there was such acquiescence on the part of the complainants as would justify an inference that they had assented to the appellant using the trade mark under which his product was marketed.
To appreciate these two contentions, it is necessary to refer to certain facts.
Some time before 1955 the appellant had started marketing his goods under the trade mark "Titli": there is however no evidence about the general get up of the label on the containers of "chewing tobacco" marketed by him at that time.
On January 6, 1955 the complainants wrote a letter to the appellant claiming that they were the sole proprietors of "Titli" brand, that "Titli" was their registered trade mark, and the appellant had "with criminal intention started making illegal and unlawful use of that trade mark" and had copied their trade mark and was using it on similar but inferior "chewing tobacco" and was passing off his goods in the market as the product of the complainants; and on those allegations the complainants called upon the appellant to desist from selling or disposing of any of the goods with labels resembling to the complainants ' trade mark and thereby deceiving the public into purchasing the appellant 's product when the public desires to purchase the complainants ' product and making several other incidental requisitions.
In reply, the appellant denied that the complainants were the sole proprietors of "Titli" trade mark and that in any event the appellant had not used the trade mark "Titli" on any goods manufactured by him.
The appellant also claimed that he had been marketing his goods in the name of "Titli" for many years and that the complainants were seeking to pass off their product as that of the appellant.
After this correspondence no steps were taken by the complainants against the appellant till November 1960.
The appellant was on information lodged by the complainants prosecuted for offences under section 78 read with section 77 and section 79 of the .
The appellant submitted that whereas the complainants had on their own admission learnt about infringement of their trade mark in 1955, criminal proceedings started in November 1960 were barred under section 92 of the .
It may be noticed however that the offences charged against the appellant 71 were alleged to have been committed on November 25, 1960, an& the charge sheet was lodged in the Court of the Magistrate, 1st Class, on March 22, 1961.
Section 92 of the , insofar as it is material, provides: "No prosecution for an offence under this Act. . . . . shall be commenced after the expiration of three years next after the commission of the offence charged, or two years after the discovery thereof by the prosecutor, whichever expiration first happens." In substance the appellant in relaying upon the bar of section 92 seeks to substitute for the words "after the discovery" the words " after the first discovery", and for the words "after the commission of the offence charged" the words "after the commission of the first infringement of trade mark".
The Legislature has deliberately not used those expressions, and there is no warrant for substituting them in the section and thereby substantially modifying the section.
Counsel for the appellant however submitted that in inter preting section 15 of the Merchandise Marks Act 4 of 1889, which is similar to section 92 of Act 43 of 1958, the Madras High Court had in Ruppell vs Ponnusami Jevan and Another(1) held that a prosecution under section 15 of the Merchandise Marks Act 4 of 1889 commenced after the expiration of the period prescribed by the Legislature from the date when the infringement was first discovered, is barred and that this Court had in Dau Dayal vs State of Uttar Pradesh(1) affirmed that view.
In Ruppell 's case(1) the accused was charged with committing an offence punishable under section 15 of the , on a complaint that the accused had infringed the complainant 's trade mark.
It appeared at the trial that the complainant had discovered in 1893 that goods were sold by the accused marked with a trade mark which was similar to his trade mark, and the complainant had called upon the accused to discontinue user of the counterfeit trade mark and to render an account of sales made by him.
In 1898 the complainant prosecuted the accused for infringing his trade mark.
The High Court of Madras held that as the complainant did not show that he believed the use of the alleged counterfeit trade mark had been discontinued after the first discovery and protest in 1893, prosecution of the accused in 1898 under section 15 of the , was barred.
This view was followed by the Bombay High Court in Abdulsatar Khan Kamruddin Khan vs Ratanlal Kishenlal,(3): The Court observed in that case that under section 15 of the , if the offence of infringement of a trade or property mark is a continuing one, and if no discontinuance is proved, time runs from the first (1) I.L.R. (3) I.L.R. (2 ) ; 72 instance of infringement or from the first discovery of the infringement.
Abdulsatar Khan 's case(1) was however overruled by a full bench of the Bombay High Court in Emperor vs Chhotalal Amarchand.(2) In that case the Court dissenting from the judgment of the Madras High Court in Ruppell 's case(1) and overruling the decision in Abdulsatar Khan 's case(1) held that under section 15 of the , starting point of limitation in all cases is the date of the offence charged.
In Dau Dayal 's case,(1) Venkatarama Aiyar, J., incorporated substantially the whole of the judgment in Ruppell 's case: (3) but in Dau Dayal 's case(1) the matter in dispute was entirely different.
In that case the accused was prosecuted for offences punishable under sections 420, 482, 483 & 486 I.P. Code on the allegation that he was in possession of Bidis which bore counterfeit trade marks.
A complaint was filed against the accused on March 26, 1954, and after investigation by the police, a charge sheet was filed in the Court of the Magistrate on September 30, 1954.
The accused contended that the offence was discovered on April 26, 1954, and since process was issued by the Magistrate on July 22, 1955, i.e. more than one year after discovery of the offence he could not, because of section 15 of the Merchandise Marks Act, 1889, be prosecuted.
This Court rejected the plea raised by the accused.
An excerpt from the judgment in Ruppell 's case(1) was incorporated only to indicate the general tenor of section 15, and not with a view to express approval of all that was observed therein.
We are however in this case not called upon to consider whe ther Ruppell 's case(1) was correctly decided.
That case was decided on the interpretation of section 15 of the Merchandise Marks Act, 1889.
Suffice it to say that the Legislature has in enacting the 43 of 1958 made a substantial departure from the language used in section 15 of Act 4 of 1889.
For the sake of convenience the material parts of the two sections may be set out in juxtaposition: Section 15 of Act 4 of 1889 No such prosecution. . shall be commenced after the expiration of three years next after the commission of the offence, or one year after the first discovery thereof by the prosecutor, whichever expiration first happens.
(1) I.L.R. I.L.R. Section 92 of Act 43 of 1958 No prosecution for an offence under this Act. . shall be commenced after the expiration of three years next after the commission of the offence charged, or two years after the discovery thereof by the prosecutor, whichever expiration first happens.
(2) I.L.R. (4) A.T.R. 73 The Legislature in enacting section 92 of Act 43 of 1958 has clearly made departure from section 15 of Act 4 of 1889 in important respects.
Whereas under section 15 prosecution had to be commenced within three years next after the commission of the offence or within one year after the first discovery thereof by the prosecutor, under section 92 the prosecution must be commenced before the expiration of three years next after the commission of the offence charged, or two years after the discovery by the prosecutor of the offence charged, whichever expiration first happens.
Under section 92 it is plain the period commences to run from the date of the commission of the offence charged or from the date of discovery by the prosecutor of the offence charged.
The argument which could be raised under section 15 and was approved in Ruppell 's case(1) that the Legislature intended to provide that the period shall commence from the first discovery thereof by the prosecutor is plainly not open to the offender infringing the provisions of the under section 92.
The period has to be computed for the purpose of the first part of the section from the date of the commission of the offence charged, and under the second part from the date of discovery of the offence charged, and not from the first discovery of infringement of trade mark by the prosecutor.
The plea that the complainants had assented to the use of the trade mark by the appellant, and on that account the latter could not be said to have falsified a trade mark or to have falsely applied the trade mark, is without substance.
Section 77, it is true, provides that a person shall be deemed to falsify a trade mark who either (a) without the assent of the proprietor of the trade mark makes that trade mark or a deceptively similar mark; or (b) falsifies any genuine trade mark, whether by alteration, addition, effacement or otherwise.
If there is assent of the proprietor to the use by the accused of a trade mark which is deceptively similar, there would be no falsification or false application of the trade mark: but protest against infringement of the complainants ' trade mark cannot be regarded as assent to the use or application of the false trade mark.
The High Court has on a review of the evidence held that there was no acquiescence by the complainants from which assent may be inferred, and we see no reason to differ from that finding.
The appeal therefore fails and is dismissed.
Appeal dismissed.

summary/full:
In 1955 the complainants protested to the appellant that he was infringing their trade mark but no further action was taken by them at that time.
In November 1960, the appellant was found in possession of labels and tobacco tins carrying marks deceptively similar to the complainants ' trade mark.
After investigation the police lodged in March 1961 a charge sheet against the appellant in respect of alleged offences under section 78 read ' with section 77 and P. 79 of the .
The trial Magistrate convicted the appellant who was however acquitted by the Sessions Judge principally on the ground that the prosecution was barred as it was not instituted within the period prescribed by section 92 of the Act.
In appeal against the order of acquittal the High Court convicted him but granted him a certificate under Art, 134 of the Constitution.
HELD:The period under section 92 of the commences to run from the date of the commission of the offences charged or from the date of discovery by the prosecutor of the offence charged.
The period does not have to be reckoned from the first discovery of infringement of trade mark by the prosecutor.
In this respect section 92 of the Act of 1958 is materially different from section 15 of the Merchandise Marks Act 4 of 1889.
[73A D] Ruppell vs Ponnusami Tavan and Anr., I.L.R. and Dau Dayal vs State of Uttar Pradesh, ; , distinguished.
Abdulsatar Khan Kamruddin Khan vs Ratanlal Kishenalal, I.L.R. and Emperior vs Chhotalal Amarchand, I.L.R. , referred to.
There was nothing to substantiate the appellant 's plea based on section 77 of the Act that the complainants had acquiesced in his use of the deceptive trade mark.


judgement:
Appeal No. 274 of 1964.
Appeal from the judgment and decree dated November 3, 1960 of the Madras High Court in C.C.C. Appeal No. 61 of 1957.
A. K. Sen, V. Bhagat and D. N. Gupta, for the appellant.
section T. Desai, Kesawlal and R. Ganapathy Iyer, for the respondent.
The Judgment of the Court was delivered by Subba Rao, J.
The appellant, Ellerman Bucknall Steamship Company Ltd., hereinafter called the shipowners, are a limited liability company incorporated under the law in the United Kingdom carrying on business as common carriers by sea.
They own a ship named "CITY OF LUCKNOW".
Messrs. Best & Co., Ltd., having their office at Madras, are the local agents of the shipowners.
Sha Misrimal Bherajee, the respondent herein, hereinafter called the buyer, entered into two contracts with the British Mercantile Company Limited, New York, herein after called the seller, for the purchase of Fresh Monsanto Polystyrene Injection Moulding Power (not reground) in granueles manufactured by Monsanto Chemical of New York.
In respect of the first contract, the purchaser placed two indents dated December 26, 1950, and December 27, 1950, for the said stuff of value of Rs. 13,500/ and Rs. 6,750/ respectively.
The buyer entered into a second contract with the seller for the purchase of 24 drums of the same material of the value of Rs. 16,000/ under an indent dated January 23, 1951.
In respect of the first contract and indents the 94 buyer opened and confirmed an irrevocable Letter of Credit No. 4748 dated December 28, 1950, for U.S. $4535 plus war risk with the Eastern Bank Limited.
In regard to the second contract he opened another irrevocable Letter of Credit No. 5012 dated January 31, 1951 for U.S. $3,330.
As the said Bank had no branch of its own at New York, it arranged with the Marine Midland Trust Company of New York for payment of the bills that might be presented by the seller in New York.
Pursuant to the said contracts, the seller delivered to the shipowners certain consignments in reused fibre drums.
The bills of lading issued by the shipowners described the drums simply as drums.
After taking a letter of indemnity to cover against any loss, the shipowners issued clean bills of lading.
The seller negotiated the bills of lading with the Marine Midland Trust Company, New York and obtained payment of U.S. $6,998.75 under the letters of credit.
Thereafter, the bills of lading were forwarded to the Eastern Bank Limited, Madras, and the buyer paid to the said Bank a sum of Rs. 33,012 5 9 against the said letters of credit.
When the shipment arrived it was discovered that the goods sought to be delivered did not answer the description given in the documents.
Indeed ', the drums contained only coal dust and factory shavings.
The buyer took appropriate proceedings against the seller in the American, courts and realized a sum of Rs. 13,604 9 0.
Thereafter, he instituted the present suit in the City Civil Court, Madras, for the re covery of a sum of Rs. 23,760 15 6 against the Bank as well as the shipowners.
To that suit the Bank was made the 1st defendant and the shipowners, the 2nd defendant.
Broadly stated, the basis of the claim against the Bank was that, though under the letters of credit the Bank had the authority to pay only against clean bills of lading, it paid against unclean bills of lading.
The cause of action against the shipowners was that they made a misrepresentation that the bills of lading were clean whereas in fact they were not so, with the result, acting on that misrepresentation, the agent of the Bank paid against the said bills of lading which it would not have done had it known the real facts.
The learned City Civil Judge held that the bills of lading were clean ones but in respect of one of the letters of credit the Bank should not have accepted the shipping documents which related only to a part of the goods contracted for.
On that finding the learned Judge held that the Bank was liable to refund the amount paid only under one of the letters of credit.
As against the shipowners he came to the conclusion that even if the bills were not clean, the Bank would nevertheless have paid the amount, as the terms of the letters of credit were comprehensive enough to authorize such payments.
In the result, he dismissed the suit against the shipowners but decreed it in part against the Bank.
The Bank and the shipowners preferred appeals to the High Court against the said decree insofar as it went against each of them.
95 The appeals were heard by a Division Bench of the Madras High Court.
The learned Judges of the High Court came to the conclusion that the shipowners with the knowledge that the bills of lading would be negotiated gave, at the request of the seller, clean bills of lading while as a matter of fact only unclean bills of lading should have been given.
They further held that the purchaser was damnified, as on the basis of the misrepresentation found in the bills of lading the Bank paid the amount against the shipping documents which it would not have done if it had known that the bills of lading were unclean.
In the result, they gave a decree for the entire suit claim against the shipowners.
They allowed C.C.C.A. No. 61 of 1957 against the shipowners but dismissed it against the Bank.
C.C.C.A. No. 54 of 1957, the appeal filed by the Bank, was allowed.
The shipowners have preferred the present appeal against the decree given by the High Court against them.
The argument of Mr. A. K. Sen, learned counsel for the appellant, may broadly be placed under the following three heads: (1) While the respondent based his cause of action on a breach of contract, the High Court gave the relief founded on deceit; (2) under common law or contract the appellant had no duty or obligation to make a statement in the bills of lading that the drums were old ones and, therefore, the non mention of that fact could not have misled the Bank into paying against the shipping documents under the letters of credit; and (3) the bills of lading were clean ones, for the oldness or newness of drums had no real impact on the contents thereof, for both, were equally suitable containers of the articles to be supplied.
Mr. section T. Desai.
learned counsel for the respondent, while made a faint attempt to sustain the decree of the High Court on the basis of breach of contract, seriously sought to support it on the doctrine of deceit.
He argued that there was a fraudulent misrepresentation by the appellant in collusion with the seller to the effect that the bills of lading were clean while in fact they were not and that, acting on that misrepresentation, the Bank, through its agent at New York, paid the amount to the seller under the letters of credit against the shipping documents, which it would not have done if such a misrepresentation had not been made.
He countered the contentions of the learned counsel for the appellant that the High Court gave a decree on a cause of action different from that on which the plaint was based.
The first contention turns upon the pleadings as well as on the conduct of the parties during the trial and the appeal.
A perusal of the plaint discloses that the 2nd defendant was sought to be made liable both in contract and in tort.
Paragraph 9 of the plaint reads thus: "if the first defendants state that they acted on the terms of the bills of lading and are therefore protected, the plaintiffs 96 also charge that in any event the second defendants are liable, for issuing the bills of lading without disclosing the true state of facts and for inserting statements in the bills of lading which are now admitted to be untrue.
The plaintiffs also charge that the defendants are precluded from denying the correctness of the statement in the bills of lading as regards the apparent good order and condition as mentioned in the bills, of lading.
The plaintiffs charge that the second defendants and the shippers acted collusively with a view to enable if possible the shippers to obtain moneys against goods which were not the goods agreed to be sold and which were not consigned according to the contract.
The very fact that the second defendants have obtained an indemnity for issuing the bills of lading without disclosing the real state of facts would show their consciousness that they were not right in issuing the bills of lading in the terms they did and whatever their rights as against the shippers may be on the indemnity, the plaintiffs are not concerned with the same, but the second defendants are liable to the plaintiffs to make good the loss resulting by reason of a representation acted on by which the plaintiffs have been damnified".
This passage in the plaint contains all the necessary allegations to sustain a claim in tort.
It is clear, therefore, that the claim of the buyer against the shipowners was also based upon the misrepre.
sentation made by the latter in the bills of lading.
In the written statement the appellant denied the allegations in para 9 of the plaint and stated that there was no secret arrangement between them and the seller in regard to the goods or the containers.
The shipowners also denied that they inserted any untrue statement in the bills of lading acting in collusion with the seller to enable the latter to obtain money against the bills of lading.
Issue 6 framed by the learned City Civil Judge reads: "Did the second defendant act bona fide throughout in issuing the bills of lading and in taking an indemnity from the shippers?".
The judgment of the learned City Civil Judge discloses that the question of misrepresentation by collusion was argued and the learned Judge held that the Bank was not misled, as under the letters of credit it had to pay the amount against the bills of lading, whether clean or unclean.
Before the High Court also the question of misrepresentation by the shipowners was expressly raised and was accepted by it.
We cannot, therefore, agree with the contention of the learned counsel for the appellant that the High Court had made out a new case which was not raised in the plaint: indeed, the claim on the basis of misrepresentation was made in the plaint, denied by the appellant in the written statement and argued in both the courts below.
There are, therefore, no merits in the first contention.
97 On the question of the appellant 's liability to the buyer in contract, we are satisfied that there is no basis for it.
Indeed, learned counsel for the respondent did not seriously press the point, though he did not give it up altogether.
A bill of lading serves three purposes, viz., (i) it is receipt for the goods shipped containing the terms on which they have been received; (ii) it is evidence of the contract for carriage of goods , and (iii) it is a document of title for the goods specified therein.
The contract of the shipowners in the bill of lading is that they will de.liver the goods at their destination "in the like good order and condition" in which they were when shipped.
In terms of the contract the shipowners delivered the goods to the buyer in the drums.
The consignee incurred damages not because of any defect in the drums but because the seller sent goods different from those he had agreed to sell to him.
Therefore, the shipowners were not liable for any damages to the purchaser on the basis of breach of any of the terms of the contract.
No further elaboration on this point is called for, as finally this point was not seriously pressed by the learned counsel for the respondent.
Now we shall consider the main point raised in the appeal, namely, the liability of the appellant in tort.
Before we advert to the question of law it would be convenient to notice the relevant facts.
Exhibit A 1 dated December 26, 1950, the indent placed by the buyer with the seller in respect of Fresh Monsanto Polystyrene Injection Moulding Powder of value of Rs. 13,500/ .
The packing was to be in new fibre drums each containing 250 lbs.
Exhibit A 2 is another indent dated December 27, 1950, placed by the buyer with the seller.
The quantity required thereunder was of the value of Rs. 6,750/ and the packing was to be in new fibre drums each containing 250 lbs.
Exhibit A 5 is the third indent dated January 23, 1951, for the same goods worth Rs. 16,500/ with similar terms.
The buyer opened two letters of credit, Exs.
B 1 and B 2, with the Eastern Bank Limited, Madras, for U.S. $ 7,625.
Exhibits B 28 and B 29 are the letters written by the Eastern Bank Limited, Madras, to the Marine Midland Trust Company, New York, to open letters of credit for payment of the bills that might be presented by the seller.
Exhibit B 1 reads: "We hereby authorise and request you and/or your Agents and/or Representatives at New York to open a confirmed and irrevocable bank credit in favour of Messrs. British Mercantile Company Limited etc., and to make payment or payments thereunder on our behalf. . against documents purport ing to be invoices, shipping specifications, Bills of Lading and Policies and/or Certificates of Insurance covering Marine and War Risks. .
We agree that this credit is subject to U.S.A. regulations and practice." 98 Exhibit B 2 is also a similar letter of credit.
Clause 3 of exhibit 28 reads: " Clean on Board" Bills of Lading in complete sets of at least two signed copies to be made out to the order of the Eastern Bank Limited.
or to order blank endorsed and marked by the shipping company 'Freight paid '.
" Exhibit B 29 also contains similar recitals.
It will be seen that though the words "clean on board" bills of lading are not found in exhibit B 1 and B 2, but in the directions given to the Marine Midland Trust Company, New York, the said words are clearly found.
The following relevant recitals are found in a sample of the bills of lading: "Received in apparent good order and condition from British Mercantile Company, Limited, City of Lucknow, to be transported by the good Vessel City of Lucknow to sail from the Port of New York for the East Indies. . . . .
Total 21 packages, said to weigh 9,920 lbs.
said to be marked and numbered as below (weight, gauge, measurement, contents, conditions, quality and value unknown, statements of same herein being made solely on shipper 's declaration and this bill of lading not to be deemed any evidence thereof) to be delivered as provided hereunder (liability as carrier to end without notice) in like good order and condition at Madras or so near thereto as the vessel may safely get unto order of the Mercantile Bank of India, Limited, or to his or their Assigns. . . . . . " The bill of lading gives the number of packages as 21 drums and under the column "description of goods" it states "Polystyrene, Powder".
The Mate 's receipt given to the seller on the arrival of the goods at the wharf for being carried by S.S. City of Lucknow describes them is being packed in refused drums.
The seller gave an indemnity bond to the shipowners and the material part of it reads: "We shall be obliged by your granting us Clean Bills of Lading for the under mentioned goods, Mate 's receipt being claused Reused Drums and in consideration of your so doing we undertake to pay on demand all freight and/or General and particular Average and/or charges there may be thereon, to indemnify you and each of you against all claims and/or demands which may be made against you or any of you in respect of the undermentioned goods and to hold you harmless from any and all consequences that may arise by your granting such clean B/L and acting thereon including losses, damages, costs or any other expenses which you or any of you may sustain or incur by reason of the premises or in any way relating thereto.
" 99 After obtaining the said indemnity bond, the shipowners issued the bill of lading wherein instead of "reused drums" only "drums" was mentioned.
It will be seen from the said documents that according to the indents the seller had to pack the goods in new fibre drums.
that the Bank opened letters of credit for payment against bills of lading, that the Marine Midland Trust Company of New York, the agent of the Eastern Bank Limited, Madras, opened letters of credit whereunder payments could be made only against clean bills of lading, that in the Mate 's receipt given to the seller on the arrival of the goods at the wharf for being carried by S.S. City of Lucknow the drums were described as reused drums and that thereafter, after giving indemnity against any loss to the shipowners, in the bill of lading the drums were not described as reused drums but only as drums.
The learned City Civil Judge on the said documents gave the following findings: .lm0
Thus, if the Bills of Lading were unclean certainly the banks would not have paid the money to the shippers.
In fact it was for the very purpose of enabling the shippers to obtain monies from the banks that they wanted clean Bills of Lading and were prepared to give letters of indemnity to the shipping company.
With such description in the Bills of Lading it is extremely doubtful whether even the under writers would have insured the goods as required under the letters of credit.
If the shippers had not produced either clean Bills of Lading or Certificates of Insurance as required under the letters of credit then certainly the shippers could not have realised the money from the bank.
Thus the second defendants have certainly helped the shippers in this matter by suppressing the real condition of the goods from the Bills of Lading.
" The High Court, agreeing with that finding, held "the shipowner with the knowledge that the bills of lading would be negotiated, gave at the request of the seller clean bills of lading, while as a matter of fact only unclean bills of lading should have been given".
The question is whether on the said facts and the findings given by the courts below the purchaser could maintain an action for deceit against the shipowners.
"Deceit is a false statement of a fact made by a person knowingly or recklessly with the intent that it shall be acted upon by another who does act upon it and thereby suffers damage"; see "A Text book of the Law of Tort" by Winfield; 5th Edn., at 6. 379.
In order to make the shipowners liable for deceit, the first ingredient to be satisfied is that they knowingly issued a clean bill of lading, when it should not have been given, with intent that on that basis payment would be made to the holder of the bill under the letters of credit.
In order to come to a correct conclusion whether the ingredients of the definition of "deceit" have been satisfied in the present case, it is necessary to know the exact scope of the following three terms: "letters of credit", "bill of lading", and "clean bill 100 of lading".
The said three expressions are evolved in the law merchant to facilitate international trade.
The origin and importance of letters of credit in the international commerce has been stated by Denning, L. J., in Pa via & Co., A.P.A. vs, Thurmann Neilsen(1) as follows: "The sale of goods across the world is now usually arranged by means of confirmed credits.
The buyer requests his banker to open a credit in favour of the seller and in pursuance of that request the banker, or his foreign agent, issues a confirmed credit in favour of the seller.
This credit is a promise by the banker to pay money to the seller in return for the shipping documents.
Then the seller, when he presents the docu ments, gets paid the contract price.
The conditions of the credit must be strictly fulfilled, otherwise the seller would not be entitled to draw on it." But when issuing banker has no branch in the relevant country where the beneficiary operates, the services of an intermediary banker may be requisitioned.
The intermediary banker may be asked to advise the beneficiary of the credit or may be asked to add his confirmatory undertaking to it.
In the latter event the beneficiary has the promise of both the bankers.
As letters of credit are issued or opened on conditions on which the request is made, the banker can only negotiate the shipping documents if the conditions are strictly complied with.
If, for instance, the mandate of the buyer is that the banker shall pay on a clean bill of lading, the banker can only honour a clean bill and not an unclean one.
When a purchaser specifically directs the banker to pay against a clean bill of lading, the condition for payment is an obvious one.
But, when a credit calls for bills of lading without any qualification, in normal circumstances it means clean bills of lading: see British Imex Industries Ltd. vs Midland Bank Ltd.(2).
A clean bill of lading is defined in Halsbury 's Laws of Eng land, 3rd Edn., Vol. 2, at p. 218, as "one which does not contain any reservation as to the apparent good order and condition of the goods or the packing".
Carver in his book "British Shipping Laws", Vol. 2, Part 1, in para.
82, explains the expression "good order and condition" thus: "The general statement in the bill of lading that the goods have been shipped "in good order and condition" amounts (if it is unqualified) to an admission by the shipowner that, so far as he and his agents had the opportunity of judging, the goods were so shipped.
If there is no clause or notation in the bill of lading modifying or qualifying the statement that the goods were "shipped in good order and condition" the bill is known as a clean bill of lading.
" Decisions have held that the "condition" refers to external and apparent condition, and quality, to some thing which is usually not (1) , at 88.
(2) , a 551. 101 apparent at all events to an unskilled person: see Compania Naviera Vasconzada vs Churchill & Sim(1).
The words like "quality and measure unknown" found in Compania Naviera Vasconzada vs Churchil & Sim(1) "weght, contents and value unknown" in The Peter der Grosse(1); "weight, quality, condition and measure unknown" in The Tromp(3) were held to be not qualifying words.
In The Restitution Steamship Co., Ltd., vs Sir John Pirie and Co.(1) it was held "if you insert in the margin of a bill of lading weights, quantities, or anything that is not contained in the bill of lading itself, that is not a clean bill of lading".
If such words found a place in the body of a bill of lading, they would not have the effect of making the bill an unclean one, we do not see how their mention in the margin would make a difference.
But we need not express our final opinion thereon, as in the present case the words are found in the body of the bill itself.
But it is said that the omission of the adjective "new" qualifying the word "drums" or indeed the addition of the adjective "old" to qualifying the same would not necessarily make the bill any the less a clean bill, if old drums were suitable vehicles for conveying the articles supplied therein.
The newness or the oldness of the container, the argument proceeded, was not decisive of its suitability, for in the main it depended upon its condition and contents.
This argument as a proposition of law appears to be sound.
In The Tromp(3) potatoes, to the knowledge of the defendants ' master who signed the bill of lading, were shipped in wet bags and in a damaged condition.
The court held that as in the bill of lading the potatoes were described as shipped in good order and condition, which rep resented the external condition of the bags, the defendants were estopped from denying that the bags were dry when shipped.
But it would be noticed that the packing in that case was defective and that was the main cause for the rotting of the potatoes and, therefore, the bill of lading was not a clean one.
In Silver vs Ocean Steamship Co., Ltd.(1), damage was caused to frozen eggs as the can wherein they were packed were gashed, perforated or punctured and the eggs were insufficiently packed.
So the court held that having given a clean bill of lading the shipowner was estopped from proving that the cans were not in apparent good order and condition.
In Brown Jenkinson & Co., Ltd. vs Percy Dalton (London) Ltd.(1) orange juice was shipped in barrels.
Some of the barrels were old and frail and some were leaking.
Yet the shipowners gave a clean bill of lading.
They were estopped from denying that the barrels were in apparent good order and condition.
These decisions establish that good order and condition of packages depends upon the suitability of the packages for the (1)L.R. (2) L.R.[1876]lp.414.
(3)L.R. [1921] p. 337.
(4) (5)L.R.[1930]1 K.B.416.
(6) 102 particular goods or articles packed therein and other relevant circumstances of each case.
What is the real scope and legal effect of the statement in the bill of lading that the goods were shipped in good order and condition? We have already noticed that a bill of lading with such a statement, which does not contain any further reservation or qualification, is known as a clean bill of lading.
The said words are affirmation of a fact.
It is an admission creating an estoppel as between the shipowners and an endorsee, who on the faith of that admission has become endorsee for value of the bill of lading.
The shipowners are estopped from denying that the goods and the packages were not in good order and condition.
The estoppel applies only where the bad condition is discernible on a reasonable examination of the containers, having regard to their contents.
Any qualification of the said affirmation must only refer to the external and apparent condition of the containers: see The Skarp(1), Silver vs Ocean Steamship Co., Ltd.(") Companies Naviera Nazconzada vs Churchill & Sim(1), and The Tromp(4).
It is not necessary to consider the said decisions in detail as the principle is well settled.
Now let us look at the relevant facts of the present case.
It was one of the terms of the contract between the seller and the buyer that the goods should be packed in new fibre drums.
The standard of good order and condition of the packages was agreed upon by the parties to the contract.
The shipowners knew that condition as the Mate 's receipt disclosed the same.
If the drums had been mentioned as old in the bill of lading, the said bill would not have been a clean bill.
Though the apparent condition of the drums was old, the shipowners made an assertion that they were not old drums, i.e., they gave a clean bill.
This representation was obviously intended, in collusion with the seller, to enable him to operate upon the credit with the Bank.
This collusion is also apparent from the indemnity bond they took from the seller to guard themselves against the consequences of the said representation.
All the elements of deceit are present.
The decision in Brown Jenkinson & Co., Ltd. vs Percy Dalton (London) Ltd.(1) is apposite.
There, the defendants had a quantity of orange juice which they wish to ship to Hamburg.
The plaintiffs, as agents of the owners of the vessel on which the orange juice was to be shipped, informed the defendants that the barrels containing the orange juice were old and frail and that some of them were leaking and that a claused bill of lading should be granted.
The defendants required a clean bill of lading, and the shipowners, at the defendants ' request and on a promise that the defendants would give to them an indemnity, signed bills of lading (1)L.R.[1935]134.
(2) (3) (4) (5) 103 stating that the barrels were "shipped in apparent good order and condition".
The defendants, pursuant to their promise, entered into an indemnity whereby they undertook unconditionally to indemnify the master and the owners of the vessel against all losses which might arise from the issue of clean bills of lading in respect of the goods.
The barrels when delivered at Hamburg, were leaking and the shipowners had to make good the loss.
The plaintiffs sued the defendants under the indemnity, the benefit of which had been assigned to them.
The defendants refused to pay, alleging that the contract of indemnity was illegal, because it had as its object the making by the shipowners of a fraudulent misrepresentation.
The court held that the shipowners by making in the bill of lading a representation of fact that they knew to be false with intent that it should be acted upon were committing the tort of deceit, and that the defendants ' promise to indemnify the shipowners against loss resulting from the making of that representation was accordingly unenforceable.
The only difference on facts between that case and the present one is that in that case the barrels were not only old and frail but also some of them were leaking.
But there, as here, the shipowners made a representation of fact which they knew to be false with intent that it should be acted upon.
If so, it follows that the High Court was right in holding that the appellant was liable in damages for the loss incurred by the respondent.
Learned counsel for the appellant sought to raise three fur ther points, namely, (i) the shipowners were not bound by the representation made by the ship 's mate; (ii) the bill of lading was governed by the American law and not by common law; and (iii) the plaintiff buyer, having obtained a decree against the seller in the American court, could not maintain the present suit for damages.
The first point was not raised till now and, therefore, we can.
not permit the learned counsel to raise it for the first time before us.
The second point, namely, what is the American law? is a question of fact.
We have not got sufficient material on the record to know what the American law on the subject is.
We cannot, therefore, permit the appellant to raise this point either.
The third point is also one not pressed in the courts below and, therefore, does not call for our decision.
In the result, the appeal fails and is dismissed with costs.
Appeal dismissed.

summary/full:
The respondent entered into two contracts with the B Company (sellers) of New York to purchase certain chemicals and in pursuance of the contracts placed three indents for the material in December 1950 and January 1951.
The indents specified that the materials were to be packed in new fibre drums.
The respondent thereafter opened and confirmed irrevocable letters of credit to be negotiated by his bankers ' agents in New York.
These agents were authorised to make payment to the sellers against "clean on board" bills of lading.
When the sellers shipped the, goods by one of the appellant 's vessels, the Mate 's receipt given to the sellers on the arrival of the goods at the wharf described them as being packed in refused drums.
The sellers then approached the appellant with a request to grant them a clean bill of lading as against the reference in the Mate 's receipt to refused drums.
Upon the sellers furnishing the appellant with an indemnity bond against any claims etc., the appellant issued them a clean bill of lading which described the drums simply as drums.
The sellers then negotiated the bills of lading against the letters of credit and obtained payment of the contract price.
When the shipment arrived in India it was discovered that the drums contained only coal dust and not the chemicals ordered.
The respondent took appropriate proceedings against the sellers in the American Courts and recovered part of his loss.
He then instituted the present suit against the bank and the appellant.
The Trial Court dismissed the claim against the appellant but decreed the suit in part against the bank.
However, the High Court, on appeal, held that the appellant, with the knowledge that the bills of lading would be negotiated, gave at the request of the seller, clean bills of lading though only unclean bills of lading should have been given.
It therefore held the shipowners responsible for the loss caused to the respondents and allowed a separate appeal filed by the bank.
On appeal to this Court it was contended on behalf of the appellants that while respondent had based his cause of action on a breach of contract, the High Court had given relief founded on deceit.
that under common law or contract the appellant had no duty or obligation to make a statement in the bills of lading that the drums were old ones; and that the bills of lading were clean ones, for the oldness or newness of drums had no real impact on the contents thereof, as both were equally suitable containers for the materials to be supplied.
93 HELD:(i) There was no merit in the contention that the High Court gave relief founded on deceit whereas the respondents cause of action was based on a breach of contract.
It was clear from the pleadings that a claim on the basis of misrepresentation was made in the plaint, denied by the appellant in the written statement and argued in the Courts below.
[96 G H] (ii)The High Court was right in holding that the appellant was liable in damages for the loss incurred by the respondent.
It was one of the terms of the contract between the seller and the buyer that the goods should be placed in new fibre drums.
The standard of good order and condition of the packages was agreed upon by the parties to the contract.
The shipowners knew that condition as disclosed by the Mate 's receipt.
If the drums had been mentioned as old in the bill of lading, that bill would not have been a clean bill.
Though the apparent condition of the drums was old, the shipowners made an assertion that they were not old drums, i.e., they gave a clean bill.
This representation was obviously intended, in collusion with the sellers, to enable them to operate upon the credit with the Bank.
This collusion was also apparent from the indemnity bond they took from the sellers to guard themselves against the consequences of the said representation.
All the elements of deceit were therefore present.
[102 D F] Case law reviewed.