Liability of Bank making payment of faith of bill of lading.

RAMACHANDRA IYER, J. :- These appeals raise a question as to the liability of a shipowner for non-disclosure in the bill of lading of a fact relating to the condition of the packages received by him for carriage by sea. The Ellarman and Bucknall Steamship Co. Ltd., whose local agents are Messrs. Best and Co., Ltd., are the appellants in the two appeals, which arise out of the decree in two actions, O. S. Nos. 1135 and 1144 of 1955 (commenced on the original side of this court but later transferred to the City Civil Court, Madras).

The suits were instituted by the first respondent in each of the appeals for recovery of Rs. 26061-4-9 and Rs. 23248 respectively from the-Mercantile Bank of India (the second respondent) and the appellant. They were tried with a similar suit, O- S. No. 1134 of 1955, and a common judgment was delivered. The first respondent in C. C. C A. No. 52 of 1957 entered into two contracts (respectively, dated 12-12-1950 and 19-01-1951, with the British Mercantile Co., New York, for the purchase of fresh Monsento Palystryene Injection Moulding powder (not reground) in granules packed in new fibre drums for Rs. 25000 and Rs. 12000.

The first respondent in C. C. C. A. 53 of 1957 entered into three similar contracts with the same seller; oh 12-12-1950, 23-01-1951 and 25-01-1951, for Rs. 13500, Rs. 13500 and Rs. 7300 respectively. In all the contracts the price was to be paid at New York by means of irrevocable letters of credit, to be opened in favour of the seller, payable in full on presentation of the shipping documents. In accordance with the terms stipulated, the buyers opened letters of credit with the Mercantile Bank of India Ltd., for the requisite amounts.

The Mercantile bank of India, which had no branch of its own at New York, arranged with the Bank of Montreal at that place to open on behalf of the buyer, the letters of credit. Within (the time stipulated in the contract the seller tendered to the appellant, for being carried by its steamer "S. S. City of Lucknow", certain consignments alleged to contain polystyrene powder; the goods consigned were packed in re-used drums.

The mates receipt, which was given on delivery of the goods by the shipper to the shipowner, described the packages as "re-used drums".

It may be noticed that the mates receipt is a mere acknowledgement of receipt of goods-by the shipowner; the contract of carriage will be contained only in the bill of lading signed by the person who agrees to carry them ; that is a document of title to the goods.

2. The seller, being evidently apprehensive that the description of the packages in the mates receipt, if entered in the bills of lading, would not facilitate his obtaining monies under the letters of credit, requested the appellant, the shipowner, to issue clean bills of lading by not mentioning therein that the goods were consigned in re-used drums (as in the males receipt), but merely mentioning them as drums. The appellant acceded to the request but it safeguarded itself by obtaining from the shipper letters of indemnity (Ex. A. 26 being typical of the rest), whereby the seller agreed to indemnify the former against any loss etc., but that it may sustain by reason of clean bills of lading being issued, and issued such bills, the relevant clauses therein stating :

"Received in apparent good order and condition from the British Mercantile Co., Ltd., to be transported by the good vessel City of Lucknow .... .Total packages said to weigh 9920 Ibs, said to be marked and numbered as below….. 21 drums weighed 9920 Ibs." (The above is contained in Ex. A-7, one of the bills nf lading issued by the1 appellant.)"

Armed with such bills of lading, which did not disclose that the packing was either defective or was made in reused drums, the shipper had no difficulty in negotiating them and drawing monies, $5227 and $2475 from the Montreal Bank under the various letters of credit. In due course, that bank forwarded the bills of lading to the Mercant