Judgement

GROVER, J.:- This is an appeal be certificate from a judgment and decree of the Patna High Court in a mortgage suit.

2. The facts may be stated: On August 1, 1953 the defendants, who are respondents herein, entered into an agreement (Exh. P-9) with the plaintiff Bank by which a cash credit account was opened, the limit being Rupees 3,50.000/- The defendants hypothecated in favour of the Bank the goods described in general terms in the Schedule attached to the agreement. The arrangement was that the defendants were to be at liberty to sell and dispose of the goods which had been hypothecated in the ordinary course of their business but they were bound to replace the goods disposed of by new goods of equal value, According to Clause 5 of the agreement the hypothecated goods were to be stored or kept at the risk of the defendants and at their expense in good condition. The interest was payable at a certain percentage over the Bank rate the minimum being 5% . The agreement was to operate as a continuing security for the balance from time to time due to Bank and also for the ultimate balance which would become due in the cash credit account. It may be mentioned that we have referred only to the terms of the agreement which are material for the purpose of the present case. The goods which were hypothecated were stored in the godowns which, as admitted in the evidence of one of the defendants himself, were situated within the premises of the mills belonging to the defendants. The key or the keys of the godowns, however, remained in the custody of the Bank Official i.e. the godown keeper. On July 27, 1954 there was an unexpected and unprecedent flood in the town or Raxaul where the premises of the mills were situated and which got innundated with flood waters. The defendants addressed a letter dated July 27, 1954 to the Bank Manager saying that due to unprecedented floods "a great damage has been done to the goods pledged with you and we are helpless which is already known to you and to your staff when you troubled to come in our factory at the time when the flood was in full swing. The goods which have been damaged by the flood require different sorts of handling to save from further deterioration. We are therefore going to pile loose weight goods to dry them and so there may be variation in counting of the goods which please note."

3. On September 29, 1954 the defendants addressed a letter (Exh. I-b) to the Bank the material portion of which is reproduced below:

"In the event of your handling over to us delivery of the under mentioned stocks pledged with you and damaged by the recent flood for processing and sale at best available market rate we, hereby undertake to hold the said stocks so delivered to us as trustees for and on behalf of your Bank holding them strictly under lien (?) to you and we hereby undertaken not to make any other disposition whatsoever of the said goods without your written instructions.

We have no right, title or interest nor any claim over the said goods held by us as trustees on your behalf and undertake at any time to hand over to you on demand the goods so long as the same continue to be in our custody.

We hereby agree to hand over to you all the sale proceeds of the goods as and when sold by us.

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We hereby guarantee and promise at the times hereafter to keep you indemnified against all losses, costs, damages and expenses of whatever nature you may sustain or which you may sustain or which you may have to incur by reason of any act of embezzlement, neglect, misfeasance, non-feasance in respect of clearance and sale of the goods at best available market rates and we shall always remain liable and responsible for all the acts of omission of our servants, employees representatives or any other person acting on our behalf."

A Schedule of stocks was given in the letter (Exh. I-b) the total book value of which was shown as Rupees 1,04,840/- On the same date the defendants