JUDGMENT
Lancelot Sanderson, C.J.
1. This is an appeal by the defendant from the judgment of my learned brother Mr. Justice Buckland, dated the 26th January 1922. The facts of the case may be taken from his judgment at pp. 268 and 269 of the paper-book, which are as follows:
The plaintiff firm carry on business at Chandusi in the United Provinces. The defendant carries on business as a ghee and sugar merchant in Calcutta, The goods were consigned to Joy Gopal Joy Kisssen, a firm formerly carrying on business in Calcutta.
In the latter part of April 1920 Joy Gopal Joy Kissen sent their gomostha Ram Charan to Chandausi where ghee was purchased. A consignment consisting of 457 tins of which the value is stated to be Rs. 18,815-9-9 was despatched by rail to Calcutta under Railway receipt No. 19818. The Railway receipt was handed over to Ram Charan who brought it to Calcutta to his employers where it was received in the usual course of two or three days later. It is alleged that on or about the 30th April Joy Gopal Joy Kissen were closing down their business and in insolvent circumstances, and on the 2nd May a telegram was sent from Etawah where, amongst other places, business was carried on by Joy Gopal Joy Kissen, saying that that firm had failed and instructing the firm of Harnandroy Fulchand in Calcutta to detain the ghee. On the next day Messrs. Pugh & Co., were instructed to write a leter to the Railway Company which they did on behalf of the plaintiff to stop delivery of the goods under the Railway receipt to the consignee, as the latter had become insolvent. A telegram was also sent by the plaintiff firm on the 3rd May from Chandausi to the Goods Superintendent at Howrah to stop delivery of the 457 tins. In the meantime, according to the defendants’ case, on the 2nd May the Railway receipt which was then in the hands of Joy Gopal Joy Kissen was endorsed by a gomostha of the firm of the name of Haranath in favour of the defendant who is alleged to have paid Rs. 14,000 for it. On the 5th May Doyilal the gomostha of the plaintiff firm arrived at Howrah for the purpose of dealing with the matter He says he could not find Joy Gopal Joy Kissen and he went to the Railway Office. The defendant’s manager went for the goods, which he did on the 3rd, 6th and 11th May, according to his evidence but the goods had not arrived. On the 7th May Joy Gopal Joy Kissen were adjudicated insolvents and three days later, on the 10th, a further letter stopping the goods was written by Messrs. Khaitan and Co. on behalf of the Plaintiff. That letter was superfluous, in view of what already had taken place, and on the next day the Defendant’s manager says, he came to know at Howrah that Joy Gopal Joy Kissen were in financial difficulties. The ghee arrived at Howrah on the 16th May and on the 19th May, this suit was filed. Three days later by an arrangement which I understand was made under an order of the Court, the ghee was delivered to the Defendant.
2. It is necessary to notice, as the learned Judge has pointed out, that the goods in question were delivered under an arrangement, which was sanctioned by the Court, to the Defendant with the result that the seller found himself in the position of the Plaintiff; and, in the suit the first prayer was for declaration that the 457 tins of ghee belonged to the Plaintiff firm and that the Plaintiff firm was entitled to take delivery of the same from the East Indian Railway. In the alternative, a claim was made for a decree for Rs. 18,815 which was alleged to be the value of the goods in question.
3. The finding of the learned Judge was as follows:
I do not think it is established that Rs. 14,000 were paid by the Defendant to Joy Gopal Joy Kissen for the Railway receipt; circumstances are extremely suspicious, and I am by no means satisfied as to the bona fides of the Defendant in the transaction.
4. In the coarse of the case a question arose as to the party upon whom the burden of proof with respect to the two matters, which are referred to in the learned Judge’s decision rested, and the learned Judge stated the question in the following manner at p. 279:
Is it the duty of a seller-Plaintiff who has a right by law to stop the goods in transit be show that it has not ceased by reason of the conditions of the section not having been complied with, or is it the duty of the assignee-Defendants to show that it has ceased?
5. And upon that point his decision is to be found at p. 280 as follows:
In my judgment the burden of proof is upon the Defendant whose duty it is to prove that he acted in good faith and gave valuable consideration and it is not for the Plaintiff to show that the Defendant was not acting in good faith or gave no consideration. The result is that the Plaintiff firm must succeed, for the Defendant has not established that the endorsement of the Railway receipt was made either in good faith or for consideration.
6. I propose to consider the question which relates to the burden of proof in the first instance. It was not disputed, at all events, in this Court, that the Plaintiff was in the position of a seller. He had parted with the possession of the goods. The seller had not been paid the price of the goods. Further in this Court it was not denied that the Plaintiff gave the requisite notice to the Railway Company to stop the goods, and that at the time of such notice the buyers Joy Gopal Joy Kissen were insolvent; and it is common ground that the goods were in transit. In short, all the conditions necessary to bring the case within Section 99 of the Contract Act were fulfilled, and prima facie the Plaintiff had a right to stop the goods in transit. The question in this case arises by reason of the fact that it was alleged that the buyers Joy Gopal Joy Kissen had assigned the Railway receipt (which it was alleged was a document of title to the goods) to the Defendant for good consideration and by reason of the provisions which are to be found in Section 102 of the Contract Act. A considerable portion of the argument of the learned Counsel for the Appellant was directed to show that the right of the seller to stop the goods in transit was merely an equitable right. In my judgment it is not necessary to consider this question at any length nor is it necessary, for the reasons to which I will hereafter refer, to consider in detail the English oases which were cited to us. It will be sufficient for me to refer to the case of Booth Steamship Co. v. Cargo Fleet Iron Co. (1916) 2 K.B. 570 : 85 L.J.K.B. 1577 : 115 L.T. 199 : 32 T.L.R. 535, for the purpose of showing the origin and the nature of the vendor’s right of stoppage in transit.
7. In the judgment of the learned Chief Justice at p. 67 9 this passage is to be found:
The right of stoppage in transitu was introduced in the English law in the seventeenth century, and the first reported case on the subject is in the year 1690 [Wiseman v. Vandeputt (1960) 2 Vern. 203 : 23 E.R. 732]. As the right arises only in the case of insolvency, it came to be recognised in our Court in the first instance through the medium of the bankruptcy jurisdiction of the Lord Chancellor which was of statutory creation. The right is not peculiar to the law of England; it was part of the law merchant existing in most of the commercial States of Europe before it was recognised as part of our Law. In 1743, Lord Hardwicke received evidence of the custom of merchants as to stoppage in transitu and then applied the rule. He based his decree both upon the custom proved before him and upon the justice of the case: Snee v. Prescot (1743) 1 Atk. 245 : 26 E.R. 157. In 1841; Lord Abinger in Gibson v. Carruthers (1841) 8 M. and W. 321 : 11 L.J. Ex. 138 : 58 R.R. 713 : 151 E.R. 1061, gave a full and interesting account of the history of the introduction of stoppage in transitu into our law and reviewed the authorities. He referred to the opinions expressed by Courts of Equity that the right was founded upon some principle of the common law and of the practice in Courts of law to call the right a principle of equity which the common law had adopted. He pointed out the difficulty, owing perhaps to its foreign parentage, of reducing this right to some analogy with the principles which govern the law of contract as it prevails in this country between vendor and purchaser.
8. It was then pointed out by the learned Chief Justice that in England some of the difficulties attached to this question had been removed by the codification of the law which is contained in the Sale of Goods Act, 1893.
9. Fortunately in this country the law relating to the matter in question has been embodied in the Contract Act; and in my judgment we have be decide this question having regard to the provisions of the Contract Act, which relate to the matter in question. The Contract Act provides codification of the law relating to contracts but contains a proviso in Section 1 that “nothing herein contained shall affect the provisions of any Statute, Act, or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract not inconsistent with the provisions of this Act.”
10. Now, Section 99 of the Contract Act to which I have already referred provides that “a seller who has parted with the possession of the goods and has not received the whole price may, if the buyer becomes insolvent, stop the goods while they are in transit to the buyer.” Section 104 provides the method of stopping the goods. The section runs as follows:
The seller may effect stoppage in transit either by taking actual possession of the goods, or by giving notice of his claim to the carrier or other depository in whose possession they are.
11. Sections 106 and 107 deal with the rights of the seller after he has stopped the goods in transit. Section 106: “Stoppage in transit entitles the seller to hold the goods stopped until the price of the whole of the goods sold is paid.”
12. Section 107: “Where the buyer of goods fails to perform his part of the contract, either by nob taking the goods sold to him, or by not paying for them, the seller, having a lien on the goods, or having stopped them in transit, may after giving notice to the buyer of his intention to do so, re-sell them, after the lapse of a reasonable time, and the buyer must bear any loss, but is not entitled to any profit which may occur on such re-sale.” So that in my judgment, it appears that the giving of the notice by the seller be the carrier operates to defeat the purchaser’s right to possession and entitles the seller to hold the goods until the price is paid, or, in the event of the price not being paid in accordance with the contract, to re-sell the goods in accordance with the provisions of Section 107. Then arises the question, what is the position when the buyer resells the goods to another purchaser? Sections 101 and 102 are material to that question, Section 101 provides: “The seller’s right of stoppage does not, except in the case hereinafter mentioned, cease on the buyer’s reselling the goods while in transit, and receiving the price, but continues until the goods have been delivered to the second buyer, or to some person on his behalf.” It is to be noted that Section 101 constitutes the general rule that the seller’s right to stop does not cease on the buyer’s re-selling the goods while in transit but continues until the goods have been delivered to the second buyer or to some person on his behalf. The section, however, refers to certain exceptions: and Section 102 is an exception, in my judgment to the general rule which is laid down in Section 101. That section provides: “The right of stoppage ceases if the buyer having obtained a bill of lading or other document showing title to the goods assigns it, while the goods are in transit to a second buyer who is acting in good faith, and who gives valuable consideration for them.” In my judgment, there is no doubt that the proper construction to be placed upon these sections is that when the seller has stopped the goods in transit, it lies upon the second buyer to prove that when the document of title to the goods was assigned to him, he was acting in good faith and that he gave valuable consideration for the goods. The Defendant was in the position of the second buyer referred to in Section 102; and I agree with decision of the learned Jude that the burden of proof was upon him to show that he acted in good faith and that he gave valuable consideration.
13. The question, therefore, arises whether the defendant discharged the onus which lay upon him. The decision of the learned Judge in that respect is to be found at p. 277 of the paper book as follows:
I do not think it is established that Rs. 14,000 were paid by the defendant to Joy Gopal Joy Kissen for the Railway receipt; the circumstances are extremely suspicious and I am by no means satisfied as to the bona fides of the defendant in the transaction.
14. And, consequently, the learned Judge decided in favour of the Plaintiff.
15. The learned Judge, when dealing with the question whether the Defendant had discharged the burden of proof, which rested upon him, stated certain facts which are to be found in his judgment, and the passage begins at the bottom of p. 272 as follows: “What are the outstanding features of this story as related to me?” The learned Counsel for the Appellant did not dispute the learned Judge’s findings of fact in this respect, but he did dispute the deductions which the learned Judge made from the above-mentioned facts.
16. The result is that the facts to which I have referred stand uncontested, and the onus rests upon the Appellant to satisfy this Court that the deductions which the learned Judge made from those facts are wrong.
17. Now, the main grounds upon which the learned Counsel for the Appellant relied were the entries in the defendant’s books. He pointed out that the finding of the learned Judge was that the books on the face of them deserved the commendation which was asked for them; that is to say, (as I understand the judgment of the learned Judge) as far as could be ascertained from the entries themselves they appear to have been made at or about the time of the alleged transaction and in the ordinary course of business: in that respect they were entitled to the commendation that was claimed. The learned Judge then went on to point out that those entries were not conclusive. It appears that the defendant’s business was carried on at Burrabazar where apparently the defendant carried on his ghee business and the defendant’s son carried on another business of a financial nature and the books relating to both these businesses were kept in the Burrabazar Office, some of the monies being kept in a safe in a house at Bagbazar where apparently the defendant and his son lived. The learned Judge pointed out that assuming for the sake of argument that this was not a bona fide transaction, it would be necessary to make entries in the books of the Burrabazar Office and to enter a substantial sum which could be put forward as the consideration for the assignment of the Railway receipt: he drew attention to the fact that the money was supposed to have been taken from the safe in the house at Bagbazar, and that there was no book of account recording the extraction of the money from the Bagbazar safe except a copy book which was produced by the defendant’s son for the first time when he was in the witness box; and he made certain criticisms upon that book and the way in which the entries were made.
18. In addition to those criticisms there seems to me a further criticism which I think was not noticed by the learned Judge. It seems to me that on the page on which this entry of Rs. 14,000 is found, the first item on the credit side, viz., Rs. 97,000 must have been entered after the next four items.
19. It was suggested by the learned Counsel for the plaintiff that that had been done in order to make it appear that there was sufficient money on the credit side to permit the withdrawal of the Rs. 14,000 on 19th of Baisakh.
20. The learned Counsel for the Appellant, in my judgment, made a pertinent observation with regard to that, namely, that the witness who produced the book had not been cross-examined upon that point; and that consequently much strees ought not to be laid upon it. I agree with that observation. At the same time it is to he remembered that that book was not disclosed by the defendant in his affidavit of documents and the plaintiff’s learned Counsel had no opportunity of seeing it until it was produced by the witness when he was in the witness box; and it is not surprising that in the short time which was available for examining the book, the learned Counsel did not observe the matter to which attention has now been drawn. At the same time it must be remembered that the witness had no opportunity of explaining that entry, and, consequently I do not attach an undue importance to that matter.
21. The main facts, (I do not intend be deal with them in detail) which emerge in this case with regard to the assignment of the Railway Receipt, are these: The representative of the defendant whose name was Butto Lal Banerjee entered into this arrangement, apparently, according to his own account, after a short discussion. He apparently was prepared to pay the considerable sum of Rs. 14,000 in respect’ of the ghee. I desire to draw attention to a passage in his evidence which seems to me to be material (at p. 80) which is as follows:
Q.–Do you know that goods are sometimes sent at owner’s risk and sometimes at Railway risk?
A.–Yes.
Q.–You know if it is at the owner’s risk and the goods are lost, you get nothing from the Railway?
A.–Yes.
Q.–That you have known for years? A.–Yes.
Q.–Did you enquire from Harnarain and Rajmull whether these goods were coming at Railway risk or at owner’s risk?
A.–I did not consider it necessary to enquire about all these.
Q.–Did you enquire?
A.–No.
Q.–If they were coming at owner’s risk, supposing they were lost or destroyed or stolen, what would you have done?
A.–On the strength of this receipt we would have called upon the Railway Company to explain.
Q.–You have told us that you know for years that if it was at owner’s risk you cannot get anything from the Railway? A.–Yes.
Q.–May I take it that you had no discussion with Harnarain and Rajmull as to what would happen if the goods did not arrive or if only a portion arrived?
A.–No. There was no talk with Harnarain on the subject.
Q.–Or with Rajmull?
A. No.
22. He is supposed to be a business man–he was buying a particular kind of ghee with which apparently his firm never dealt before. He had for some considerable time had no dealings with Joy Gopal Joy Kissen. He had no sample of the ghee. He did not take the trouble to enquire whether it was carried at owner’s risk or at the Railway risk, nor did he even enquire about the invoice price. The invoice price at Chandausi was Rs. 90-8 annas and he bought it at Rs. 80 per maund. He then, having made so little enquiry about the ghee or the conditions relating to its transit, is supposed to have gone up to the Bagbazar house, obtained Rs. 14,000 and paid it over to Harnath who was the representative of Joy Gopal Joy Kissen. This Harnath or Harnarain has not been called; but a man named Rajmull has been called. Raj mull was not connected with Joy Gopal Joy Kissen at the time, although he had been, as I understand, employed by this firm at some previous period; and, I personally do not understand why the services of Rajmull were called upon on this occasion, because, apparently, according to his own account, he did nothing except to introduce Harnath to the representative of the defendant firm. The evidence shows that the defendant firm’s place of business was at a short distance from the place of business of Joy Gopal Joy Kissen. I am not at all inclined to disagree with the learned Judge’s finding when he said that “Rajmull’s evidence with regard to what took place and there being need for him to attend, is not to be accepted too readily.”
23. The learned Judge seems to have thought that it was quite possible that as Harnath was not available as a witness it was necessary to have somebody who could speak to the transaction from the point of view of Joy Gopa Joy Kissen. I do nob intend to deal with this part of the case in any greater detail.
24. Our attention was drawn to the evidence by the learned Counsel on both sides with great care, and I repeat that in this case the question involved was of fact and it was for the appellant to satisfy the Court that the learned Judge’s findings of fact and the deductions which he drew from those facts were wrong. In my judgment the Appellant has failed to discharge that onus, and I am by no means satisfied that the learned Judge was wrong when he came to the conclusion that he was not satisfied that the Rs. 14,000 had been paid. Even if the learned Judge was wrong upon that point, it, by no means, follows that the Defendant should succeed, because the circumstances of this case are such as to lead me to believe that the learned Judge was right in his further decision, namely, that he was not satisfied as to the bona fides of the transaction.
25. The result is that, in my judgment, this appeal should be dismissed with costs. The in junction restraining the plaintiff from withdrawing the sale price of the ghee which is in deposit in Court is dissolved.
Richardson, J.
26. I agree. The view of the evidence taken by the learned Judge who tried the case raises the question whether in this conflict between the plaintiff as seller claiming the right of stoppage in transit and the Defendant as second buyer claiming as assignee of the Railway receipt being the document showing title to the goods, the burden of proof rests on the seller to prove the negative, or on the second buyer to prove the affirmative, of the proposition that the second buyer acted in good faith and gave valuable consideration for the goods. The learned Judge, while he characterises the circumstances in which the document of title was assigned as suspicious, regarded the evidence as in this sense inconclusive, that he could not pronounce against the second buyer if the burden of proof lay on the seller nor against the latter if the burden of proof lay on the former. The learned Judge’s decision was in favour of the seller because in point of law he held that the burden was on his adversary. It is not, I think, unfair to say that Sir Benode Mitter, appearing for the Appellant, the defendant, though he also argued the appeal on the facts, addressed himself in the main to the question of law so arising.
27. It is not now disputed that the first buyer became insolvent so that as against him the plaintiff as seller was entitled under Section 99 of the Contract Act to stop the goods while they were in transit. Nor is it disputed that the goods when the plaintiff stopped them were in transit. We are not concerned, therefore, with Section 100 of the Act which describes what is meant by transit. The relevant provisions will be found in the two following sections which ran as follows:
28. Section 101: “The seller’s right of stoppage does not, except in the oases hereinafter mentioned, cease on the buyer’s re-selling the goods while in transit, and receiving the price, but continues until the goods have been delivered to the second buyer, or to some person on his behalf:
29. Section 102: “The right of stoppage ceases if the buyer, having obtained a bill of lading or other document showing title to the goods, assigns it, while the goods are in transit, to a second buyer who is acting in good faith and who gives valuable consideration for them.”
30. So far as the question of the burden of proof depends on the language of these provisions, the rights of the assignee of the document of title, though they are formulated in a separate section, Section 102, would appear to be introduced by Section 101 as an exception to the seller’s general right of stoppage where the goods have been sold by the first buyer. According to the general rule, therefore, the language would appear to throw on the second buyer the burden of proving his own good faith in acquiring the document of title.
31. I will assume, however, that as regards the burden of proof the Act gives out no certain sound and that the question is to be decided on general principles or in the light of consideration such as those advanced by Sir Benode Mitter.
32. Sir Benode contended in effect that the right of stoppage in transit was an equitable right, that the legal right to the goods was in the assignee of the document of title and that it was for the seller to establish want of good faith on the part of such assignee.
33. It appears to me, however, that it is now too late to argue that the right of stoppage is a merely equitable right. Observations on the history of the right will be found in the judgments of Lord Reading, C.J., and Scrutton, J., (as he then was) in a case to which my Lord has already referred. Booth Steamship Co. v. Carga Fleet Iron Co. (1916) 2 K.B. 570 : 85 L.J.K.B. 1577 : 115 L.T. 199 : 32 T.L.R. 535. Even before the right was recognised in England by the Sale of Goods Act, the better view seems to have been that it was a common law right derived from the law merchant and both in England and in India it is now not only a legal but a statutory right.
34. No doubt Dickbarrow v. Mason (1793) 5 T.R, 367 : 726 Sim. L.C. 12th Ed. 1 R.R. 425 : 101 E.R. 206 and Gurney v. Beherend (1854) 3 E.L. and B.L. 622 : 23 L.J.Q.B. 265 : 18 Jur. 856 : 2 W.R. 425 : 23 L.T. (O.S.) 85 : 97 R.R. 687 : 118 E.R. 1275 affirm the title of the bona fide transferee for value of a bill of lading endorsed by the consignee. But it has still to be remembered that the right of the assignee of the document of title is apart from any mere question of language an exception to the more general rule which appears in India in Section 101 of the Contract Act. The general rule is that “the seller’s right of stoppage does not cease on the buyer’s reselling the goods while in transit and receiving the price, but continues until the goods have been delivered to the second buyer or to some person on his behalf.”
35. If Section 102 confers upon the second buyer who comes within the section, a title which may also be described as a statutory title, still in my opinion the title is one which he must prove as against the seller who has shown that prima facie he had the right to stop the goods in transit.
36. I agree in this case with my Lord and the learned Judge that the burden lies upon the defendant, and that he has not discharged it.
37. His principal witnesses are his manager Batto Lal Banerjee and his son Nando. In both oases Mr. Sircar’s cross-examination at the trial was very damaging. The goods were being carried on the railway at owner’s risk. No enquiry was made on this point. Batto Lal’s evidence and that of the witness Padamraj Lameha as to the price of Chandausi thee in Calcutta at the beginning of May 1920 is very vague. The evidence for the plaintiff is that Chandausi ghee was then selling at a price not far short of Rs. 100 a maund. The contract price was Rs. 90-8-0 a maund and the defendant bought at Rs. 80 a maund. The transaction was an unusually large one for the defendant to embark upon. He had never bought Chandausi ghee before. He had no transactions with the original buyer, the firm of Joy Gopal Joy Kissen, at any rate for five or six years previously.
38. It is true that the account books kept at the defendant’s shop in Burrabazar purport to show that a sum of Rs. 14, 000 was paid to Joy Gopal Joy Kissen’s gomostha Haranath Modi and that these account books appear to have been kept in the regular course of business. But the story is that the money was brought from the home-safe in the family house in Baghbazar, and the evidence that the money was taken out of that safe is at least unsatisfactory. On this point it is unnecessary for me to say more than my Lord has already said.
39. Moreover, the firm of Joy Gopal Joy Kissen was a firm in a very large way of business. The gadi in Burrabazar was a very short distance from the defendant’s shop. The Railway receipt was negotiated on the 2nd May. It is admitted that Joy Gopal Joy Kissen’s gadi was actually closed on the 4th May. The firm or its proprietor was adjudicated insolvent on the 7th May. It is to my mind improbable that no inkling of the firm’s position had reached the defendant. I agree with the learned Judge’s observation made in another connection that “if it was true that Joy Gopal Joy Kissen wore carrying on business untill the 4th May it ought to have been easy in the case of a firm of the standing of Joy Gopal Joy Kissen who are said to have done a very large business and to have been well-known in Calcutta, to call some independent evidence to prove the fact.” The learned Judge adds that there is no evidence to that effect.
40. I am not satisfied that the alleged payment of Rs. 14,000 was in fact made; but even if it be assumed that this sum was paid by the defendant to Harnath Modi on account of Joy Gopal Joy Kissen, I am unable to say that it is established that the money was paid in good faith. We were referred to Section 3, Clause (20) of the General Clauses Act (Act X of 1897) which says that “a thing shall be deemed to be done in good faith where it is in fact done honestly, whether it is done negligently or not.” The definition does not apply to the Contract Act which was enacted in 1872 but in the present case the facts point to more than mere negligence; they point rather to deliberate abstention from enquiries, which if made would have put the defendant on his guard or to wilful blindness in entering upon a speculative transaction which it was expected would be profitable.
41. I agree that the appeal should be dismissed.
