C. Shah, J. - (1.) THE Bilaspur Central Cooperative Bank Ltd. hereinafter called 'the Bank' -maintains a Branch at Pendra Road in the Bdaspur District. As there is at Pendra Road no arrangement for a strong room for keeping in safe custody the cash of this Branch, the Bank requested the Inspector General of Police of the area for permission to lodge the cash box at the end of each day in the police station house Malkhana. The Inspector General of Police granted the permission and accordingly after business hours the cash box property locked and sealed used to be deposited in the police and station house Malkhana. This arrangement continued till April 11, 1950. In the evening of April 11, 1950, according to the usual practice the cash box property locked and sealed was deposited in the police station house Malkhana. It was found on the next day that the rear door of the Malkhana was open and the cash box missing. The cash box was found two days thereafter in an open field at some distance from the police station with its hasp broken and the contents missing. The police investigated a case of theft which was registered, but without any tangible results.
(2.) ON June 18, 1951 the Bank filed a suit against the State of Madhya Pradesh in the Court of the Additional District Judge, Bilaspur for a decree for Rs. 46,946/7 and interest thereon at the rate of seven per cent per annum from April 12, 1950 to June 13, 1951, alleging that it is registered under the rules and bye -laws of the Co -operative Societies Act and is functioning under that Act under the control of the Registrar, Co -operative Societies, M.P. that the State of Madhya Pradesh runs the Bank as a commercial or mercantile department of the State, in that it regulates and controls the Bank by restricting the constituents of the Bank and prescribing the place or places where its balances have to be kept, and the State also recovers a percentage for its control and on that account the Bank is a Department of the Government, that the cash in the sealed box was "public money" which the State had undertaken to accept for safe custody and by the arrangement between the Bank and the Inspector General of Police the State of Madhya Pradesh was liable to return to the Bank the amount of Rs. 46,94617 contained in the cash box and acceptance by the Inspector General of Police of the arrangement subject to the term that the police would take no responsibility for the actual contents of the box could not mean or be interpreted to mean that the Bank agreed to exonerate the State from liability for the loss of the cash box in consequence of the negligence of the servants of the State. The suit was resisted by the State of Madhya Pradesh. The State contended, inter alia, that it was not constituted a bailee of the cash box as alleged by the Bank, that in any event the arrangement made at the request of the Bank through the Registrar of the Co -operative Societies who sought the permission of the Inspector General of Police to deposit the cash box of the Bank in question on the terms that the box would be properly locked and sealed and that the police would not be responsible for the contents of the chests, the suit was not maintainable. It was also contended that the officers of the State took all reasonable care in regard to the cash box that an ordinary person would, in similar circumstances, take of his own similar property, the State could not in law be held liable for the loss of the contents of the cash box.
(3.) THE learned trial Judge dismissed the suit holding that even though the subordinate police officers of the State had failed to take such care of the box as is required by law, the State was not responsible for the consequences arising from the negligence of its subordinates. In appeal to the High Court, the decree passed by the trial Court was reversed. The High Court observed that by the reservation made by the Inspector General of Police in granting permission that the police officers were not to be responsible for the contents of the box the State did not absolve itself from the ordinary liability of a bailee under the general law, that the State was under a duty to select honest and competent servants and their duty in the course of their employment included the duty to look after the property bailed to the State and as the State of Madhya Pradesh was the bailee and the property was stolen, the State must be held liable, if the negligence of the servants was established and the State was shown to have employed dishonest servants or had not supervised their actions. The High Court further observed: The degree of care needed is laid down in Section 151 of the Indian Contract Act. We are satisfied that there was gross negligence in carrying out the bailment. The Inspector General of Police was acting within his powers to grant the permission: vide Police Regulations 697 and 698. The Co -operative Bank is a Government -supervised Bank, and enjoys a character which is more akin to a Government Department than to a purely private bank. The request of the Bank was joined by a request by the Registrar, Co -operative Societies Central Provinces and Berar. We hold that the Inspector General of Police acted under the above Regulations. We, therefore, hold also that the Government was bound by the action of the Inspector General of Police.;