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Judgment
Oldfield, J.—The decision of the Second Additional District Munsif of Rajamundry comes before us u/s 25 Provincial Small Cause Courts
Act, Act IX of ]887. He has held the defendant Railway Company liable on a risk note in respect of one out of a consignment of bales of gunny
bags, of which plaintiff was consignee. The risk note, Exhibit B is in form B and is a contract by the consignor in consideration of the lower charge
he has paid to hold the company ""harmless and free from all responsibility for any loss, destruction, or deterioration of, or damage to the
consignment from any cause whatever except for the loss of a complete consignment or of one or more complete packages forming part of a
consignment due either to the wilful neglect of a Railway Administration, or to theft by or to the wilful neglect of its servants, transport agent or
carriers employed by them before, during and after transit over the said Railway or other Railway lines working in connection therewith or by any
other transport agency or agencies employed by them respectively for the carriage of the whole or any part of the said consignment: provided the
term ""wilful neglect"" be not held to include fire, robbery from a running train or any other unforeseen event or accident.''''
Two questions have been argued. Firstly, was the injury, which one bale admittedly sustained, due to the wilful neglect of the company''s
servants? Secondly did that injury amount to loss within the meaning of the exception, which provides for the company''s liability?
The first of these questions can be answered shortly in the affirmative. The lower Court held that there had been wilful neglect by the company''s
servants in (1) unloading inward goods on the outward platform (2) placing a leaking acid package on the bale of gunnies. We cannot follow the
first portion of this finding and confine ourselves to the second. Something has been said regarding the burden of proof. But it is unnecessary to
discuss its incidence, because the company admitted in its written statement that the package of acid was dropped by its cooly and fell on the bale
and defendants'' 1st witness deposed to that effect. The acid according to the evidence had leaked on the shoulder of the cooly, having burnt
through his coat and he put it down on the bale, disregarding the certainty that it would leak on it also and injure it. We have no doubt that in doing
so he was wilfully negligent.
The more difficult question remains whether the injury to the bale is loss, for which the company is liable under the exception in the risk note; and
the difficulty arises from the fact that, whilst the exception provides only for the case of loss, the general portion of the note exempts from liability in
respect of all claims not only for loss, but also for destruction, deterioration or damage. It is therefore far plaintiff to establish that the bale is lost
and the lower Court has found that it is so. The contention for the company is that this finding is wrong and that, the bale being merely damaged, its
liability is not established.
This finding in favour of loss appears to rest on the result of an inspection, to which lower Court refers as showing that the bale was completely
useless, and also on its statement that the acid penetrated the bale completely and affected all the gunnies. This apparently is also based on the
statement of plaintiff''s 1st witness in examination in chief that the bale was burnt in the middle, that the acid affected it right through, that not one
bag was whole and all the bags seemed to have been damaged. But there is then the fact that as the same witness said in cross-examination, "" I
saw the burnt bale in Court. It was not yet opened. I cannot say whether whole bags were found in it."" It has not been suggested before us that the
bale was opened later for the Court''s inspection and we cannot understand how the lower Court could satisfy itself as its judgment implies or how
it could neglect the witness''s latter statement. Its finding on the question of fact must be rejected on the ground that it was reached without
reference to material evidence; and we must therefore remand the case. In doing so it is advisable that we should deal with the legal question which
arises and indicate the principle, on which the enquiry on remand should proceed.
To return to the terms of the risk note, it would appear at first sight as though a distinction is drawn between loss and destruction, deterioration
and damage and the exception is not intended to apply to cases, in which only the three last mentioned can be established. But, whatever the
implication from the separation of these terms., it is clear that the distinction proposed cannot be supported by then use in ordinary parlance. For,
whilst loss cannot include deterioration and will always include destruction, it will in some cases include damage, when the extent and nature thereof
are sufficient. Shortly we have to decide the point, if any, at which damage becomes loss.
One ground of decision has been suggested, which can be dismissed shortly--that there is no loss, whatever happens to the contents, if the
character of the package as such is unaffected by damage sustained by its outward envelope alone. This is based on Bombay Baroda and Central
Indian Railway Company v. Ambalal Sewaklal Indian Railway Gases 48 followed in East Indian Railway Company v. Nilkanta Roy ILR (1918)
Ca1. 576 and in this Court in C.S. No. 309 of 1914 by Kumaraswami Sastri, J. though only on the ground that, sitting alone, he was not prepared
to dissent from the decisions of two Benches in the cases referred to. Those decisions do not commend themselves to us. For they are based on
no earlier authority and, with all due respect, it is unreasonable to suppose that the parties, entering into such contracts as Exh. B. have regard to
the worthless outer covering, not its contents; the bag, for instance, not the grain without it; or in the present case the rough gunny covering and iron
hoops, not the bags inside, in which the bale really consisted.
Another principle suggested is that damage can be identified with loss, only if the goods concerned have been deprived of the merchantable;
character, in which they were accepted for transmission; and, if the contract before us were one of insurance, this would be sound. Asfor and Co.
v. Blundell (1896) I.Q.B. 123 and Cologan v. London Assurance Company (1816) 5 M. & S 447. But there is no question here of insurance in
connection with railway contracts, since railways in India are not common carriers. The lrravady Flottila Company v. Bugwandas ILR (1891) Cal.
620; and the suggestion must therefore be defended on its merits. The objection to it, which must in my opinion prevail, is that even in the absence
of a special contract a Railway is u/s 72(1) Railways Act (IX of 1890) liable only as a bailee under Sections 151, 152 and 161, Indian Contract
Act. It follows that a Railway will ordinarily be liable in damages only according to the actual condition of the goods; for their full value, if they are
rendered totally valueless; for such portions of it, if they have merely sustained deterioration, as would afford reasonable compensation, without
reference to their loss or retention of their merchantable character. It is next material that in the present case the contract embodied in the risk note
Exhibit B was made in consideration of the railway''s acceptance of a reduced charge; and it therefore cannot be regarded as intended to increase
its responsibility. It is then impossible to accept respondent''s contention, which by treating ''loss'' in the exception in Exhibit B as equivalent to the
''loss,'' destruction, deterioration or damage in the general portion and to the ""loss destruction or deterioration"" in Section 72(1) of the Railways
Act would leave the Railway under the liability it would have been under, if Exhibit B had never been given. This entails acceptance of the only
alternative construction of Exhihit B, that proposed by the Railway and already referred to as consistent with ordinary parlance. It is said that an
unreasonable contract results from it. But the form, has, as the Act requires, been approved by Government, and it has not been shown how the
acceptance of a smaller responsibility in consideration of a lower charge than that which is normally payable and which respondent''s consignor
could have paid, if he desired a full indemnity, is oppressive. For these reasons I hold that respondent can recover only if his bale of gunnybags is
entirely deprived of value.
The Lower Court must therefore submit a finding on the issue:
Was respondent''s bale of gunny bags when delivered, to him of no value?
The bale is, it is alleged with the respondent. The Lower Court will give him an opportunity to produce it in Court and, if it is so produced, will
inspect it and the bags composing it, noting their condition in its finding. In any case, fresh evidence may be adduced by both parties regarding its
condition and that of its contents. Findings due in two months. Seven days for objections.
Seshagiri Aiyar, J.
The question raised in this case is one of considerable importance: therefore I have taken the liberty of writing a separate judgment although I
do not differ from the conclusions arrived at by my learned brother. The facts are fully set out in the judgment just now delivered. I will first say a
few words upon some subsidiary points raised by Mr. Ramadoss before dealing with the main question. It was contended by the learned Vakil for
the respondent that a Railway Company is not competent to limit its liability to less than the minimum care which the Indian Contract Act imposes
on bailees. It is now well settled that under the Indian Law, a Railway Company has not the liabilities of an insurer but only those of a bailee. See
India General Steam Navigation Company v. Bhagwan Chandra Pal ILR (1913) Cal. 716. The observations of Sankaran Nair, J. in K.V.S. Sheik
Mahamad Ravuther Vs. The B.I.S.N. Co. and Others, were relied on for the proposition that a common carrier cannot exempt himself from
liability for negligence if such an exemption would be inconsistent with the provisions of the Indian Contract Act. The first observation with
reference to this dictum is that the learned Judge was dealing with the case of a carrier by sea. The principles applying to carriers by land are not
the same which govern the liability of a carrier by sea. In the next place two other learned Judges differed from him on this very question. In a later
case Kariadan Kumber Vs. The British India Steam Navigation Company Limited, by Agents Aspinwall and Co., Justice Sadasiva Aiyar and
Justice Tyabji did not act upon this dictum of Sankaran Nair, J. I must therefore hold that the contract is enforceable. Reliance was placed on
certain English decisions which hold that an exemption from contract by a carrier from liability must be reasonable and just. There is great
difference between the English law and the Indian law on this subject. If I understand the position aright, a Railway Company in England would be
authorised by Parliament to make its own rules and regulations. It would be created by an Act of Parliament and would have full power to regulate
its internal management. Under these circumstances Courts may be at liberty to decide whether the regulations framed by the Company are just
and reasonable and whether they are inter vires the Act of Parliament. In this country the position is very different. u/s 72 of Act IX of 1890 a
Railway Company may enter into an agreement to limit its responsibility provided it is in a form approved by the Governor-General in Council. It is
not denied that the rule with which we are concerned has been sanctioned by the Governor-General in Council. Therefore prima facie the rule must
be regarded as being within the powers of the Railway Company. It is on the respondent to show that the rule in question which the legislative
authority has sanctioned is inconsistent with any portion of the Railways Act, and the learned vakil for the respondent had not satisfied me on this
point. I must therefore hold that the rule is inter vires. Reference may also be made to Toonya Ram v. East Indian Railway Company ILR (1902)
Cal. 257 Tippanna v. The Southern Maratha Railway Company ILR (1892) Bom. 417 and East Indian Bail'' way Company v. Bunyad Ali ILR
(1895) All. 42.
Another point relied on on behalf of the respondent is that the word ''loss'' in the exemption clause of the Risk Note (Form B) includes
Destruction, deterioration and damage."" The note is not a very carefully drafted one, and it may be possible for the Government of India to
scrutinise its language on some future occasion. But as it stands at present I am compelled to hold that the word ""loss"" has a meaning distinct from
the other three words mentioned by me. All the four words are placed seriatim in the earlier portion. But when it comes to imposing liability,
notwithstanding the contract to the contrary, the draftsman has used the word ""loss"" alone and has left out the words ""destruction, deterioration and
damage."" I take it that this was done on purpose. Reasonable meaning can be attached to the note as it stands by imputing to the draftsman the
intention to hold the company liable only for the loss of a complete consignment of one or more complete packages and by exempting the company
from liability where there has been ""destruction, deterioration and damage "" to such a complete consignment of one or more complete packages. I
am not concerned in seeing whether this is good policy, or whether the consigning public will not be injured by it. But construing the language of the
note as it stands I can give it only the meaning which I have indicated and not the meaning which the learned vakil for the respondent has
suggested.
One or two minor points raised by Mr. Chamier may now be dealt with. The Learned Counsel contended that there was no wilful negligence
on the part of the Railway Company and quoted Heaven v. Pander 11 Q.B. 503 for this contention. The District Munsif has found on the facts that
there was wilful negligence; and on the evidence which has been fully commented on before us it seems to me that the Railway Company acted
carelessly in the matter. The servant who was employed to carry an acid substance, unable to bear the injury which it inflicted on his shoulders
threw the acid over the gunny bags. His act was wilful in the sense that he must have known that the corrosive substance would cause injury to the
article over which it was thrown. In Lewis v. The great Western Railway Company 3 Q.B.D. 195 Lord Justice Bramwell said: ''wilful mis-
conduct'' means mis-conduct to which the will is a party, something opposed to accident or negligence; the mis-conduct, not the conduct must be
wilful."" Lower down the learned Lord Justice said: "" I am much inclined to think that that would be wilful mis-conduct because he acted under the
supposition that it might be mischievous, and with an indifference to his duty to ascertain whether it was mischievous or not. I think that would be
wiful misconduct."" Applying this definition I am satisfied that there was wilful default on the part of the servant.
Mr. Chamier next suggested that the act of the servant should not be charged against the Company. It is a well known rule of law that persons
who undertake to do certain things and who employ servants to do those things must be held responsible for the act of those servants done in the
discharge of the duty entrusted to them It may be different no doubt if the servant acted in violation of his duties. The very recent case of Joseph
Rand Limited v. Craig (1991) 1 Ch. 1 establishes this proposition very clearly. Swinfen Eady M.R. pointed out that if the act was done
deliberately by the servant to benefit himself that should not be attributed to the master. But if it is a case of carelessness or negligence in the course
of employment the master would be held liable. The latter is what actually happened in the present case. Therefore the Company is liable for the
conduct of the servant.
Now comes the main question as to whether the package can be said to have been lost. The judgment of Kumaraswamy Sastri J in C.S. No.
309 of 1914 was quoted before us and also East Indian Railway Company v. Nilakanta Roy ILR (1913) Cal. 576. The learned Judge felt bound
by the Calcutta decision and by a judgment of the Bombay High Court to hold that if the outer cover which encloses a parcel was delivered the
article cannot be said to have been lost by the Railway Company. The Bombay and the Calcutta cases do not discuss the matter and it seems to
me that they have put too narrow a construction upon the expression ""loss"". I am inclined to the view that the term ""loss"" should be construed as
including cases where the article consigned is lost to the consignor as such article. If the goods entrusted to the care of the Company cease to have
any resemblance to the goods of the description which they undertook to carry, it seems to me that the company should be held to have lost the
goods In Asfor and Co. v. Blundell (1896) 1 Q.B. 123 Lord Esher gave this meaning of the term ""loss"": ""The nature of a thing is not necessarily
altered because the thing itself has been damaged; wheat or rice may be damaged, but may still remain the things dealt with as wheat or rice in
business. But if the nature of the thing is altered and it becomes for business purposes something else so that it is not dealt with by business people
as the thing which it originally was the question for determination is whether the thing insured, the original article of commerce, has become a total
loss. If it is so changed in its nature by the perils of the sea as to become an unmerchantable thing, which no buyer would buy and no honest seller
would sell, then there is a total loss."" Although the learned Master of the Rolls was dealing with the case of an article carried by sea, I do not see
why the definition of the term ''loss'' should not be utilised in cases of other carriers. In Hearn v. The London and South Western Railway
Company (1879) 10 Exch. 793 Baron Parke expressed himself to the same effect. In my opinion therefore if it is proved that the article has lost its
identity as such it would amount to loss. On the question of the burden of proof the case in Hirji Khetsey and Company v. The Bombay Baroda
and Central India Railway Company ILR (1914) Bom. 191 lays down that it is the Railway Company that has to show that there was no loss. But
I am not satisfied that in this Case the District Munsif has considered the evidence very fully, on this question of loss. I agree that he should be
called to return a fresh finding on the question suggested by my learned colleague.
In compliance with the order contained in the above judgments, the Principal District Munsif of Rajahmundry submitted the following finding.
I cannot say the bags will be of no value at all. Some of them will be useful even now without patching up; some can be used after patching up, and
some are totally useless. I submit the finding in those terms and with those provisoes only.
The court delivered the following:
We accept the finding and allow the petition, dismissing the suit with costs throughout.