Central National Bank Ltd. v. United Industrial Bank Ltd.

Facts

Bhuiya, owner of certain shares, agreed to sell them to Mukherjee and instructed the defendant bank (with whom the shares were deposited) to deliver the certificates against payment. Mukherjee examined the certificates, deceived the bank manager and bolted away with them without paying, then pledged them with the plaintiff bank for an advance of Rs. 29,000. Mukherjee disappeared, and the plaintiff bank claimed possession and damages, relying on Sec. 30(2).

Issues

• Whether Mukherjee obtained possession of the shares with the consent of the seller (or his agent, the bank manager) within Sec. 30(2) of the Sale of Goods Act.
• Whether the plaintiff bank, as a bona fide pledgee, acquired a good title under that exception.

Arguments

The plaintiff bank argued it received the shares in good faith and without notice of any defect, from a buyer in possession of the goods with the seller's consent, so the pledge was protected under Sec. 30(2). The defendant bank argued there was no consent at all because Mukherjee had effectively stolen the certificates, so no title could pass.

Held

The Court held that the consent under Sec. 30(2) need not be free consent but it must be a real consent; consent induced by fraud or misrepresentation suffices, but consent that does not exist at all does not. Here the bank manager had no intention to deliver: despite his protest Mukherjee bolted away with the papers on the pretext of getting a pay order. The act was as much theft as taking the certificates out of the manager's pocket, so Mukherjee obtained possession without consent. As between two innocent parties defrauded by a third, the plaintiff bank had to bear the loss; no good title passed.

Ratio decidendi

Sec. 30(2) protects a sub-purchaser/pledgee only where the buyer obtained possession with the seller's real consent; where possession is obtained by trick or theft amounting to no consent at all, no good title is conferred.

Significance

A leading Supreme Court authority delineating the limits of the 'sale by buyer in possession' exception to nemo dat, distinguishing fraud-vitiated (but real) consent from absence of consent; frequently cited alongside Folkes v King on the meaning of 'consent'.

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