Bank of Baroda v. Punjab National Bank

Facts

• A borrower pledged goods with Bank of Baroda by endorsing and delivering railway receipts
• Punjab National Bank also claimed rights over the same goods
• The question was whether delivery of railway receipts constituted valid pledge of the underlying goods

Issue

1. Whether delivery of documents of title to goods (railway receipts) to a bank creates a valid pledge of the goods represented by those documents.

Held

• Lord Wright held that when railway receipts (documents of title to goods) are endorsed and delivered to a bank as security for an advance, a valid pledge of the goods represented by those receipts is created. The bank acquires the same rights as if physical goods were delivered. Constructive delivery through documents of title is equivalent to actual delivery for purposes of S.172.

Ratio Decidendi

Delivery of documents of title to goods constitutes constructive delivery of the goods themselves. A valid pledge is created when such documents are endorsed and delivered to the bank as security. The bank acquires pledgee rights (retention + sale under S.176) over the goods.