2 S.C.R. THE NEW MARINE COAL CO. (BENGAL) PRIVATE LTD. v. UNION OF INDIA (P. B. GAHlNDRAGADK-'.R, K. N. W-'.NOHOO and K. C. DAs GuPTA JJ.) Goods delivered under ill•gal contract-Party. receiving
the same and enjoying the ben•fit-Bound to pay compensation- Estoppel by negligence-Should b• pleadeil-El•ments of Estoppel by negligence-There must be a legal duty~N egligence mu"t be the proximate course-Governmen{ of India Act, 1935,
(25 & 26, Geo. 5, ch. 42) s. I75 (3)-Indian Contract Act, 1872 (IX of 1872), s. 70-Indian Evidence Act, 1872 (1 of 1872), s. 115. The appellant filed a suit on the Original Side of the
Calcutta High Court against the respondent for the recovery of a certain amount representing the price of coal supplied to the respondent. The appellant's case was that if the contract under which the coal was supplied was illegal by, reason of it being in contravention of s. 175 (3) of the Government of India Act, 1935, the respondent was liable to pay compen-
sation under s. 70 of the Indian Contract Act, since the Coal was not supplied gratuitously and the respondent had enjoyed the benefit thereof. The respondent's case was that the contract was illegal
and s. 70 of the Indian Contract Act was not attracted. It was further alleged that the respondent had issued and sent bills to cover the amount and intiination cards in accordance with the usual practice and ordinary course of dealings. The respondent, it was alleged paid the amount by a cheque to a person authorised by the appellant and on presentation of
proper receipts. It was therefore alternatively pleaded that the appellant's claim having been satisfied, he had no cause of action. It was established in the course of the trial that the
appellant had not in fact authorised any person to issue the receipts but a certain !'erson not conµected with the appcllal\t Abril Ntw Marine Coal Co. ( B tngal} P, Lui. v. L' nitm rJ b1dia
firm, 'without the consent· or knowledge of the appellant got hold of the intimation cards and bills addressed to the appellant forged the documenlS and fra11dulently received the cheque from the respondent and appropriated the amount for himself. The rr.sponder.t had not pleaded in its written statement that it was due to the negligence of the appellant that the third person was able to get hold of the
intimation card and perpetrate the fraud. Neither was it pro\'ed in the ease that the appellant was in fact negligent. The Trial Judge found that the respondent was bound to pay compensation under s. 70 of the Indian Contract Act and rejected the alleged payment of the bills and in the retult decreed the amount prayed for hy the appellant. The respondent thereupon appealed to a Division Bench.
Both the Judges agreed that the appeal sl10ulcl be allowed. Regarding the invalidity of the agreement and th~ inapplicability of s. 70 of the Contract Act both the J1dges agreed in favour of the
present respondent. But while one of the Judges was not prepared to consider the plea of negligence which was raised by the present respondent for the first time in the appeal the other judge held that there was negligence on the part of the pre<;ont appellant.
The present appeal was filed on a certi- ficate g1'rnted by the High Court. In this Court, apart from the questions of'the invalidity o( the contract under s. 175 (3) of the Government of fndia Act and the applicability of s. 70 of the Contract Act, it was argued on behalf of the appellant that a plea of negligence should have b"en raised by th~ respondent in its pleadings and that the appellate r.ourt
\Va!! :n error in allowing such a plea to be raised for th" first time in appeal. It was contended further that in support of the pica of negligence it must be shown that the party against whom the plea is raised owed a duty to the party who raises the pica and that the negligence must not be merely or indirectly connected with the misleading effect but must be the pr,oximate cause of the result.
Held that the contract is illegal and void. If in pursuance of the void contract, the appellant ha• performed his part ancl the respondent has received the benefit of the performance of the rontract by the appellant, s. 70 of the Contract Act would justify the claim made by the appellant against the rr'.spondent.
State of w_,t Bengal v. B. K. Morida/, [1962] Supp I S. C. R. 876, refen-cd to. 2 s.c.R. Since a plea of negligence was not raised by the respon· dent in the trial court the appellant is entitled to contend that it had no opportunity to meet this plea and dealing with it in appeal has, therefore, been unfair to it.
Before invoking a pka of estoppel on the ground of negligence, some duty must be shown to exist between the parties and .negligence must be proved in relation to such duty •. The Arnold v. The Cheque Bank, (1876) 1 C.P.D. 578,
referred to. The negligence alleged must be proved to be the pro· ximate or the immediate cause of the loss. Bexen<lale v. Benmtt, (1878) 3 Q. B. D. 525, referred to. The broad proposition "that whenever one of two in·
nocent persons must suffer by the acts of a third, he who enables such third person to occasion the loss, must sustain it" laid down by Ashhurst, J., in Liekbarrow v. Mason, 2 T. R. 63, on which one of the Judges of the Division Bench has based his decision cannot be sustained as valid in law.
Commonwealth Trust Ltd. v. Akotey, [1926] A. C. 72, Mercantile Bank of India Ltd. v. Central Bank of India Ltd. (1937) L. R. 65 I. A. 75, R. E. Jones Ltd. v. Waring & Gi7low . Ltd., [1926] A. C. 670 and Farquharson Bros. & Go. v. King · & Go., [1902] A. C. 325, referred to.
The appellant cannot be charged with negligence which, in turn, can be held to be the proximate cause of the loss caus· ed to the respondent. The appellant is entitled to be com- pensated under s. 70 of the Contract Act.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 421 of 1961. Appeal from the judgment and decree dated December 24, 1959 of the Calcutta High Court in Appeal from Original Decree No. 181 of 1956.
M. 0. Setalvad, S. 0. Ghose, J.B. Daikichanji, 0. 0. Mathur and Ravinder Narain, for the ;ippellant. New Mdrine Coal Co. (B••z•l) P. Ltd. Uni•n of India Bishan Narain and P. D. Menon, for the
· "'"' M<Ti•• Coal rc~pondcnt. lo (B111:al) P. Lid Union of btdia 19U:l. April 5. The J udgmclll of the Court was delivered by G•juriro1adk" J, GAJE~DUAGADKA!\ J.-This appeal anses out
of a suit filed by the appellant, the l\ew :Marine Coal (Bengal) Private Ltd. against the respondent, the Union of India, on the original side of the Calcutta High Court to recover Rs. '20,34:~/8/·. The
appellant's case was that it had supplied coal to the Bengal Nagpur Railway Administration in the month of June, 1949, and the amount claimed by it represented the price of the said coal· and sales-
tax thereon. The appellant also made an alterna- tive case, because it was apprehended that the respondent may urge that the contract sued on was illegal and invalid since it did not comply with
s.175 (3) of the Government of hdia Act, I935. Under this alternative claim, the appellant alleged that the coal had been supplied by the appellant not intend- ing so to do gratuitously,
and the respondent had enjoyed the benefit thereof, and so, the respondent was bound to make compensation to the appellant in the form of the value of the said Coal under s. 70 of
the Indian Contract Act. The appellant's case was that since the said amount had . to be paid to it at its Esplanade Office in Calcutta, the original side of the Calcutta High Court had jurisdiction to
entertain the said suit. Since a part of the cause of action had accrued outside the limits of the original jurisdiction of the Calcutta High Court, the appellant obtained leave 10 sec under cl. 12 of the
Letters_ Patent. In its written statcm~nt, the respondent ad- mitted the delivery of the coal to the Bengal Nagpur Railway Administration and did not dispute the appellant's case that it had forwarded
to the 2 s.a.R.. SUPREME couR. T R.Ei>oR. ts s6i . respondent bills in regard to the amount alleged to be payable to the appellant for the said supply. The respondent, however, pleaded that the contract on
which the suit was based was illegal inasmuch as it had been entered into in contravention of the pro- visions of s. 175 (3) of the Government of India Act, 1935; and it was urged thats. 70 of the Indian
Contract Act had no application. Besides, the respondent 'alleged that following the usual practice and course of dealings between the parties, an in- timation card was issued and sent to the appellant
by the respondent requesting the appellant to ob- tain payment on presentation of a proper receipt· and authority against its bills in question. There- after, the respondent, on receipt of the said intima-
tion card and a proper receipt executed on behalf of the- appellant, paid the amount covered by the said bills by an 'account payee' cheque on the Reserve Bank of India drawn in favour of the
appellant which was delivered to the person purport- ing to have authority to receive payment on behalf of the appellant. The respondent thus alternatively pleaded· satisfaction of the claim, and so, urged that
the appellant had no cause of action for the suit. On these pleadings, seven substantive issues were framed by the learned trial Judge. Issues l & 2 which were framed in respect of the jurisdic-
tion of the Court were not pressed by the respondent, and so, no findings were recorded on them. On issue No. 3 the learned trial Judge found that the contract on which the appellant based his claim was
invalid and unenforceable. Issue No. 4 in regard to the alleged payment of the bills was found against the respondent. On issue· No. 5, the trial Court held that the respondent was bound to pay to the
appellant the amount claimed by way of compensa- . tion. Issue :'~o. 6 which was raised by the respon- dent under s. 80 of the Code of Civil Procedure was not pressed, and therefore, no finding was recorded
J963 N~w Marini Coal Co. (Bengal) P. Lid. v. Union of InditJ Gaj1ndratadkar J. 19fJ N1w MoritU Codi Co. (Bt•z•I) P. Ltd. Ulli .. oj lw SUPllEME COURT REPOlltS [1964] vot. on it, Issue No. 7 which was framed on the appe·
llant's allegation that its claim had been aqmitted by the respondent wa~ answered against rhc appc· llant. In the result, the main finding on issue I\o. 5 decided the fate of the suit and since the said find·
ing was in favour of the appellant, a decree was passed directing the respondent to pay to the appellant Rs. :!0,030/8/·· This amount, according to the decree, had to carry interest at the rate of
6 percent per annum. This decree was challenged by the respondent by an appeal before a Division Bench of the said High Court. The appeal was heard by P. B. Mukarji and Bose JJ.' Both the learned judges agreed that
the resporident's appeal should be allowed and the appellant's claim dismissed with costs, but their decision was based on different grounds. Bose J. held that the contract sued on was invalid and that
the claim made by the appellant for compensation under s. 70 of the Indian Contract Act was not sustainable. He also found that the appellant's con- tention that the said contract which was initially in-
valid had been duly ratified, had not been proved. It is on these grounds that Bose J. came to the con cl u. sion that the appellant's claim could not be granted. Incidentally, it may be added that Bose J., was not
prepared to consider the plea of negligence which was raised by the respondent for the first time in appeal. Mukarji, J., who delivered the principal Judg- ment ·of the Appeal Court agreed with Bose J. ·in
holding that the contract was invalid and s. 70 was inapplicable. He, however, took the view that the said contract had been duly ratified and so, he pro· cecdcd to examine the question as to whether the
appellant's claim was justified on the merits. On this part of the case, the learned Judge took the view that even if both the appellant and the respon- dent wero held to be innocent, since the respondent
had actually parted with the money, the appellant was not entitled to require the respondent to pay over the said money again, because he thought that as held by Ashhurst J. in Lickbarrow v. Mason (1)1
it was a well-recognised principle of law "that when· ever one of two innocent persons must suffer by the acts of a third, he who enables such third person to occasion the loss must sustain it." In the opinion
of the learned Judge, the intimation card had been duly sent by post by the respondent to the appellant and the fact that the said intimation card went into unauthorised hands of dishonest persons who used it
fraudulently for the purpose of obtaining a cheque for the amount in questfon from the respondent, showed that the appellant had by his negligence enable'cl the said fraudulent persons to secure the
cheque, and so, it was not open to the appellant to claim the amount from the respondent. . It is oil these grounds that Mukharji, J., allowed the appeal and dismissed the appellant's suit with costs. It is
against this judgment and degree that the appellant has come to this Court with a certificate granted by the said High Court. In the courts below, elaborate arguments were urgaj by the parties on the question as to whether
the contract, the subject-matter of the suit, was invalid and if yes, whether a claim for compen· sation made by the appellant could be sustained under s. 70 of the Indian Contract Act. Both these
questions are concluded by a recent decision of this Court in the SI.ate of West Bengal v. M/B. B. K. Mondal & Sons (2). As a result of this decision, there can be no deubt that the contract on which
the suit is based is void and unenforceable, and thia part of the decision is against the appellant. It is also clear under this decision that if in pursuance or the said void contract, the appellant has performed
his part and the respondent has received the benefit of-the performance of the contract by· the appellant, (1) 2 T.R. 6i; 70. (2) [1962) Supp. 1 S.C.R. 876. J96J N1w .Matiu Coal Ct. (B,.gal) P. Ltd.
v. Union of l'ftt!"11J Gaj•ndratodluiT I. New Marine ~al C• (B1ngal) P. Ltd, v. · U11iorz of India GajtrzdragadJ;tn J. section 70 would justify the claim made by the appellant against the respondent.
This part of the decision is in favour of •.he appellant. It is therefore unnecessary to deal with this aspect of the matter at length. Assuming then that the appellanr is entitled to
claim the amount from the respondent, two questions still remain to be considered. The first question is whether the intimation card on the production of which the respondent always proceeded to issue a
cheque against 1he bills received by it from the appellant, was received by the appellant or not, and if this question is answered in the affirmative, the other question which will call for our decision is
whether by virtue of the fact that after the intimation_ card had been duly posted by the respondent to the appellant it fell into dishonest hands and was fraudulently used by some persons, that would create
an impediment in the way of the· appellant's claim on the ground that the appellant was negligent and his negligence creates estoppel. Before addressing ourselves to these questions, it would be necessary to
set out the material facts as to the despatch of the intimation card and the fraudulent use ·which was made of it by persons in whose hands the said card appears to have fallen. It appears that according
to the ordinary course of business, on receiving the bills from the appellant, the respondent used to send an intimation card to 1hc appellant and the said card had to be sent back by the appellant with a
person having the au1hority of the appellant to .receive the payment and when it was so produced before the respondent, a cheque used to be issued. In the present case, it is common ground that a bill
. was sent by the appellant to the respondent making a total claim of Rs. ~0,34a/8/- on August 18; 1949. Thereafter, on October JO, 1949, the respondent sent the intimation card to the appellant
addressed at its place of business 135, Canning Street, . Calcutta. This card intimated to the appcl:ant _, .2 S.C.R. that its claim for the amount specified in its bill· would be paid on presentation of a proper receipt
and authority between 11 A. M, to 3 l'. M. on ordi- nary days and between ll A. M. to 1 P. M. on Saturdays. Along with the card, a form of the receipt was sent and the appellant was asked to
~ign it. This intimation card was duly posted. Later, one Mr. B. L. Aggarwal produced the intimation card before the respondent. In doing so he projuced an endrosement which purported
to show that the appellant had authorised him to receive the payment on its behalf. When the intimation card with the appropriate authority was shown to the respondent, Mr. Aggarwal was
asked to pass a receipt and when the receipt was passed in the usual form, an 'account payee' cheque for the amount in question was given to him. Mr. Aggarwal took the cheque and left the respondent's
office. Meanwhile, it appears that some persons had entered into a conspiracy to make fraudulent use of the intimation card which had gone into their custody. In order to carry out this conspiracy, they
purported to form a limited company bearing the same name as that of the appellant. A resolution purported to have been passed by the Directors of this fictitious company on October 17,
authorised the opening of an account in favour of the Company in the United Commercial Bank Ltd., Calcutta. This resolution purported to be signed by the Chairman of the Board of Directors Mr.
Abinash Chander Chatterji. Armed with . this resolution an application was made to open an account in the United Commercial Bank Ltd., and. while doing so, the Articles of Association purport-
ing to be the Articles of the said fictitious Company were produced and the account was opened with a cheque of Rs. 500/- on October 27, 1949. · On October 26, 19i9, the cheque received from. the
New Matine Coal Co. (Bmg,l) P. Ltd. v. Union oj India Gajendragadka.r J. N1w M.nru Coal Co. (R,.1all P. Lli. Union of lruli4 Gaj,,.dragUAar J. 1- respondent was credited in the said account, and as
was to be expected, withdrawals from this account, began in quick succession, with the result that by November I, 194\1, ouly Rs. 68/- were left in this account. That, in brief, is the story of the
fraud which has been committed in respect of the cheque issued by the respondent to the appellant for the bill dated August 18, 1949. In the courts below, the appellant denied that
it had received the intimation card from the respon- dent, and it was alleged on its behalf that in deliver- ing the cheque to the person who presented the said card with the authority purporting to have been
issued by the appellant, it cannot be said that the respondent had given the cheque to any person authorised by the appellant, and so, the appellant was justified in saying that it had not received the
payment for its bill. In support of its case, the appellant examined its Director, Mr. Parikh and its officer, Mr. Bhat. The respondent led no oral evidence; it, however, relied on the fact that the
intimation card bore the postal mark which showed that it had been posted and it was urged that the said postal mark raised a presumption that the card which had been duly posted in the Post Office must
have, in ordinary course, reached the addressee- The trial Court noticed the fact that the intimation card did not bear a corresponding delivery mark as it should have, and it took the view that the onus
was on the respondent to show that the ~aid card had in fact bern delivered to the appellant. It then considered the oral evidence adduced by the appe- llant and having regard to the fact that no evidence
had been led by the respondent, it came to the con- clusion that the respondent had failed in showing that"the intimation card had been duly delivered to the appellant. Substantially, it is on the basis of
this finding that the decree was passed by the trial Court in favour of the appellant. 2 S.C.R. In appeal, Mukarji, J. took the view, and we think, rightly, that the posting of the card having
been duly proved, a presumption arose that it must have been delivered to the addressee in ordinary course. He also considered the oral evidence given by Mr. Parikh and Mr. Bhat and was not
satisfied that it was trustworthy. In particular, the learned Judge was ·inclined to take the view that Mr. Parikh's statement that his office did not employ any despatch clerk and did not keep any
Chiti note-book like the Inward and Outward Register was unbelievable. In the result, he made a finding that the appellant was negligent in receiv- ing, arranging, recording and dealing with letters
addressed to it. The position of the evidence in respect of this point is no doubt unsatisfactory. It appears that Mr. Parik4 who is the Director of the appellant Company since 1948 is also the Director of K, Wara
Ltd. which manages eight collieries like that of the appellant. K. Wara Ltd., has its office at 135, Canning Street. The appellant Company also has one office at the said place. A Post Box in which
letters addressed to the appellant and K. Wara Ltd. could be dropped has been kept on the ground floor of the building in which the said offices are situated. The said Post Box is locked and naturally
the key is given to one or the other of the Peons to open the said Box and take out the letters and deliver them to Mr. Parikh. Mr. Parikh's evidence shows that his denial that he had received any ·
intimation card could not be accepted at its face value for two reasons; the first was that even if the inti- mation card had been received by the Peon and had not been deliverd by him to Mr. Parikh, Mr. Parikh
would n;;,t know that the card had been received and though his statement that he did not get the card may be literally true,. it would not be true in the 1ense that the card had not been delivered to the
N1w Marine Caal Co. \B<ngal) P. Ltd. Union of India Gojena1agadkar J. ,,63 Jlt•' V nrint C"•l Co. (ll1n1.J1 r. l.td. v. Un·o11 of /11,,a (,1j1nlrcgadi:ar J. 870, SUPRE'.'vlE COURT REPORTS [1!!64] VOL.
appellant Company. Besides, Mr. Parikh 's statement that he did not employ any despatch clerk and kept no inward or outward register is prima f"c.ie unbeli- evable, and so, Mukarji J. was inclined to hold that
the intimation card may have been received by the appellant Company. Having made this finding, Mukarji J. proceeded to examine the true legal position in regard to the appellant's claim, and a., we
have already observed, he held that since the appellant was guilty of negligence which facilitated the commission of the offence by some strangen, it was precluded from making a claim against the
respondent. As we have a I ready iccn, !lose, J., has put his decision' on the narrow ·grou11d that the contract was invalid and s. 70 did not help the appellant. That ground, however, cannot
now sustain the final condusion of Bose, .J., in view of the recent decision of this Court in the case of .II JS. B. J(. °Jlfonda.l ch Solis (1). Therefore, io dealing with the present appeal, we will assume that the
finding recorded by l\fokarji J., is correct and that the intimation card sent by the respondent to the appellant can be deemed to have been delivered to the appellant. The· question which arises for our
decision then is: if the intimation card was thereafter taken by somebody else and fraudulently med, does that create an cstoppel against the appellant in regard to the claim made by it in the present case ?
In <lealing with this point, it is necessary to bear in mind that though the evidence given by · Mr. Parikh may be unsatisfactory and may justify the conclusion that despite his denial, the intimation
card may have been delivered to Mr. Parikh, it ia not the respondent's case that Mr. Parikh deliberately allowed either one of his employees or somebody else to make fraudulent use of the said intimation
card. In other words, we must deal with the point . of law raised by the appellant on the basis that Mr. Parikh had no connection whatever with the (II (1962j Supp. I S.C.R. 876. 2 S.C.R.
fraud committed on the respondent and that whoever obtained the intimation card from Mr. Parikh's office and , used it for a fraudulent purpose acted on his own without the knowledge or consent of
Mr. Parikh. The short question which falls to be considered is if the arrangement for keeping the intimation card in safe custody was not as good and effective as it should have been
and somebody managed to pilfer the said card, does it justify the reipondent's case that the appellant was negligent and by virtue ofits negligence, it is estopped from making the present claim ?
In dealing with this question, it is necessary to remember that the plea of negligence on which estoppel was pleaded by the respondent against the appellant had not been alleged in the written
statement. It is remarkable that the pleadings of both the parties completely ignored the fact known to both of them before the present suit was filed that a cheque had been issued by the respondent and
had been fraudulently used by some strangers. The appellant in its plaint does not refer to the issue of the cheque and its.fradulent use and makes a claim as though the respondent had not honoured the bill
submitted to it by the appellant; whereas the respon- dent in its written statement ignores the fact that the cheque had not been received by the appellant but had been fraudulently obtained and encashed by
some other persons. That being the nature of the pleadings filed by the parties in the Trial Court, neither party· pleaded any negligence against the other. It is true that both the par.ties
argued the point of negligence against each other in the appellate Court. The appellant urged that the respondent 11hould not have delivered the cheque to the person who presented the bill and the
intimation card because a stamped receipt had not been produced by the said person as it should have peen; the appellant's case was that it wa·s usual that New ,'vJarin1 Coal Co. (Bengal) P. Ltd.
Unio1t 'lf India Gaj1ndragadkar J, /96S Nim Man·n, Coal C.. (lleagol) P. lli, v. C/niim of frulit1 GojnulragadMr J • a stamped receipt had to be produced alongwith the intimation card by a person duly authorised by
the appellant before the cheque was deliveud to hirri and since without a stamped receipt the cheque had been delivered, the respondent was guilty of negligence. This point has been rejected by Mukarji
J., but that is another matter. On the other hand, the respondent pleaded that the appellant was negligent imumuch as the intimation card which had been sent to it and which must be presumed to have been delivered to it I.ell
into the hands of strangers owing to the negligent manner in which it was handled after it was delivered in the Letter Box of the appellant in 135, Canning Street, Calcutta. As we have already noticed,
Bose, J., refused to entertain the plea of negligence urged by both the parties, whereas Mukarji J ., considered it and made a finding in favour of the respondent and against the appellant.
Mr. Setalvad contends that a plea of negligence should have been raised by the respondent in its pleadim1;s and the appellate Court was, therefore, in error in allowing such a pica to be raised for the first
time .in appeal. In our opinion, there is some force in this contention. Negligence in popular language aud in common sense means failure to exercise that care and diligence which the circumstances require.
Naturally what amounts to negligence would al- ways depend upon the circumstances and facts in any particular case. The nature of the contract, the circumstances in which the performance of the
contract by one party or the other was expected, the degree of diligence, care and attention which, in ordinary course, was expected to be shown by the parties to the contract, the circumstances under which
and the reason for which failure to show due dili- gence occurred are all facts which would be relevant before a judicial finding -0an be made on the plea 2 S.C,R. of negligence. Since a plea of negligence was not
raised by the respondent in the trial Court, the appettant is entitled to contend that it had no oppor- tunity to meet this plea and dealing with 1t in appeal has, therefore, been unfair to it.
Apart from this aspect of the matter, there is another serious objection which has been taken by Mr. Setalvad against the view which prevailed with Mukarji, J. He argues that when a plea of estoppel
on the ,ground of negligence is raised, ·negligence to which reference is made in support of such a plea is not the negligence as is understood in popular language or in common sense ; it has a technical
denotation. In support of a plea of estoppel on the gi:ound of negligence, it must be shown that the party against whom the plea is raised owed a duty to 'the party who raises the plea. Just as estoppel
can be pleaded on the ground of misrepresentation or act or omission, so can estoppel be pleaded on the- ground of negligence ; but before such a plea can suc- ceed, negligence must be established in this technical
sense. As Halsbury has observed : "before anyone can 'be estopped by a representation inferred from negligent conduct, there must be a duty to use due care towards the party misled, or towards the general
public of which he is one (')." There is another requirement which has to be proved before a plea of cstoppel on the ground of negligence can be upheld and that requirement is that "the negligence
on which it is based should not ~e indirectly or remotely connected with the misleading effect assigned to it, but must be the proximate or real cause of that result (')." Negligence, according to Halsbury,
which can sustain a plea of estoppel must be in the transaction itself and it should be so connected with the result to which it led that it is impossible . to treat the two separately. This aspect of the matter has
. not been duly examined by Mukarji J. when he made his finding against the appellant. (I) Halsbury's Laws ofEng1and Vol. 15, page 248, para 451. \2) Hal1burv'1 Law1 of E1111and Vol, 1' pap 245 para 453,
Nem Marini Co•l Ca. (B1ngol) P. Lrd. Urtien oj India. Aiw Manne C.•I Co. (dm1al) P ui. v, Union of lnd1t1 874 SUPREME C6URT REPORTS [1!}64] VOL. Mukarji, J. thought that the principle laid
down by Ashhurst, J. in the case oj Lackbarrow ('), was a broad and general principle which applid to the facts in the present case. It may .be conceded that as it was expressed by Ashhurst, J., in the case
of Lickbarrow, the proposition no doubt has been stated in a broad and general manner. Indeed, the 1ame proposition has been affirmed in the same broad and general way by the Privy Council in Common·
wealth Trust Ltd. v. A.kotey ('). In that case, the respondent who was a grower of cocoa in the Gold Coast Colony, consigned by railway 1050 bags of cocoa to L., to whom he had previously sold cocoa.
Before a difference as to the price had been settled, L. sold the cocoa to the appellants and handed the consignment notci to their agent, who reconsigned the cocoa to the appellants. The appellants bought
in good faid1 and for the full price. The respondent then sued the appellants for damages for conversion. It was held by the Privy Council that by his conduct the respondent was precluded from setting up his
title against the appellant.!, and so his claim wa.~ rejected. In support of the view taken by the Privy Council, reliance· was placed on the well-known statement of Ashhurst, J., in the case of J.Ackl!arrmv) '), and so, it may be conceded that the broad prin-
ciple enunciated by Ashhurst,J., received approval from the Privy Council. s'ubsequently, however, this question has been elaborately examined by the Privy Council in Mercantile Bank of India Ltd. v. Central Ba11k oj
India Ltd., (1), and the validity of the broad and general proposition to which we have just referred has been seriously doubted by . the Privy Council. Lord Wright who delivered the judgment of the
Board, referred to the decision in the ca8e of Lickbar- row ('),and observed "that it may well be that there were facts in that case not fully elucidated in th• report which woulq justify the decision; Dut on the
(I) 2 T.R. 63, 70. (2J l1926) A.O. 72. (S) (t937) L.R, '5 I.A. 75, 86, 2 S.C.R. face of it their Lordships do not think that the case is one which it would be safe to follow." Then
reference was made to the opinion of Lord Sumner in the case of R.E. Jones Ltd. v. Waring &: Gilloul Ltd., (') where the principle enunciated by Ashhunt .J. was not accepted, because it was held that the
principle of estoppel must ultimately depend upon a duty. Lord Lindley similarly in Farquhar~on Bro~. &: Co. v. King &: Co. ('), pointed out that the dictum of Ashhurst J. was too wide.
A similar comment has been made as to the said ob1ervation by other Judges to which Lord Wright has referred in the course of his judgment. It would thus be seen that . in the case of The Mercantile Bank of
Ind·ia Ltd. (') the Privy Council has seriously doubted the correctness of the broad observations made by AshhurstJ, in the case of Liclcbarrow ('),and has not followed the decision in the
ca~t of Common- wealth Trust Ltd. ('). Therefore, it must be held that the decision of Mukarji J, which proceeded on the basis of the broad and unqualified proposition enunciated by Ashhurst, J., in the case of Lick barrow
cannot be sustained as valid in law. There are two other decisions to which refer- ence may usefully be made in considering this point. In Arnold v. 'l'he Cheque Bank, ('), Lord Coleridge,
C.J., in dealing with the question of negligence, obser\!Cd that "no authority whatever – had been cited before the.m for the contention that negligence in the custody of the draft will diSentitle the owner
of it to recover it· or its proceeds from a person who has wrongfully obtained possession of it. In the case before them, there was nothing in the draft or the endorsement with which the plaintiff
had anything to do, calculated in any way to mislead the defendants. It was regularly endorsed and was then enclosed in a letter to the plaintiffs correspon- dent1, to be sent through the post. There could be
no negligence in relying on the honesty of their (I) [1926] A.C. 670, (SJ (1937) L.R. 651.A. 75, 86. ($) [1926] A.O. 72. (2) [1902] A:C. 325. (41 2 T.R. 63, 70. (6) \1876) C P.D, 578, 588,
I96S New M•rlne Co•l Co, (Btnt•l) P. Lti. v. Unfon •f lnJic Gajenir1igadkat _ J . N1w Marinr Cttal Co ( Bt1tal) P. Ltd. UnU. of tni;a servants in the discharge of their ordinary duty,
that of conveying letters to the post; nor can there be any duty to the general public to exercise the same care in transmission of the draft as if any or every servant employed were a notorious thief."
These observations illustrate how before invoking a plea of estoppel on the ground of negligence, 1mme duty must be shown to exist between the parties and negligence must be proved in relation to such duty.
Similarly, in Baxendale v. Bennett, Bramwell, L.J., had occasion to consider the same point. In that case, the defendant gave H. his blank acceptance on a stamped paper and authorised
H. to fill in his name as drawer. H. returned the blank acceptance to the defendant in the same st.ate in which he received it. The defendant put it into a drawer of his writing table at his chambers, which
was unlocked, and it was lost or stolen. C. afterwards filled in his own name without the defendant's authority, and an action was brought on it by the plaintiff as endorsee for value. The court of
Appeal held that the defendant was not liable on the bill. Dealing with the question of negligence attributed to the defendant, Bramwell L.J. observed that "the defendant may have been negligent, that
is to say, if he had the paper from a third person, as a bailee bound to keep it with ordinary care', he would not have kept it in a drawer unlocked." But, said the learned Judge, this negligence is not the
proximate or effective cause . of the fraud. A crime was necessary for its completion, and so, it was held that the defendant was not liable on the bill. This decision shows that negligence must be based on a
duty ,owed by one party to the other and must, besides, be shown to have been the proximate or the immediate cause of the loss. It is in the light of this legal position that the question about estoppel. raised by the respondent
(I)) (1878) SQ.. B. D. 525, 530. 2 S.C.R. against the appellant in the AppeUate Court may be considered. ·Can it be said that when the appellant received the intimation card, it owed a duty to
the respondent to keep' the said card in a locked drawer maintaining the key all the time with its Director? It would not be easy to answer this question in the affirmative; but assuming that the'
appellant had a kind of duty towards the respondent having regard to the fact that the intimation card was an important document ·the presentation of which with an endorsement as to authorisation duly
made woiild induce the respondent to issue a cheque to the person presenting it, can the Court say that in trusting its employees to bring letters from the letter box to the Director, the appellant had been
negligent ? As we have already observed, in deal· ing with the present dispute on the basis that the intimation card had been dropped in the letter box of the appellant, it is possible to
bold either that . the said card was collected by the Peon and given over to Mr. Parikh, or it was not. In the former case, after Mr. Parikh got the said card, it ·had been removed from Mr. Parikh's table by someone, either
by one of the employees of Mr. Parikh or some stranger. In the latter case, though, technically, the card had been delivered in the latter box of the appellant, it had not reached Mr. Parikh. In the
absence of any collusion between. Mr. Parikh and the person who made fraudulent use of the intimation· card, can the respondent be heard to say that Mr. Parikh did not show that degree of diligence in
receiving the card or in . keepiQg it in safe custody after it was received as he should have ? In our opinion, it would be difficult to answer this question in favour of the respondent. In ordinary course of
business, every office that receives large corres- pondence keeps a letter box outside the premises of the office. The box is locked and the key is in. variably given to the Peon to collect the letters after
they are delivered by postal Peons. This course Jl1w Marini_ Colli C•. (B••t•I) P. Lli. Uoio• of lnJia Goj … ragalhir J N1w Marini Coal Co. (B,.ial) P. Ltd. v. Union of India CajtnltagadA11r J.
of business proceeds on the assumption which muat inevitably be made by all businessmen that the servants entrusted with the task of collecting the letters would act honestly. Similarly, in ordinary
course of business, it would be assumed by a business- man that after letters are placed on the table or in a file which is kept at some other place, they would not be pilferred by any of his employees.
L'nder these circumstances, if the intimation card in ques· tion was taken away by some fraudulent person, it would be difficult to hold that the appellant ca11 be charged with negligence which, in turn, can be
held to be the proximate cause of the loss caused to the respondent. In our opinion, therefore, M ukarji J., was in error in holding that 1 he res· pondent could successfully plead estoppel
by negligence against the appellant. As we have al- ready observed, the que~tion as to whether the claim made by the appellant against the respondent under s. 70 is concluded by the decision of this Court in
the case of M/s. B. K. Jfondal & Sons ('), in fa1·our of the appellant, and so, it mmt be held that the Division Bench of the High Court erred in dismissing the appellant's claim.
The result is, the appeal is allo\\ed, the decree pas>• d by the appellate Court is set a.•ide and that of the trial Court restored wirh costs throughout. Appeal allowed. ; i:(19G2] Su: p. I S.C.R. 876.