Case: State Bank of India Vs J.K. Dal Mills and Ors.. Mumbai DRAT DRAT (Mumbai Debt Recovery Appellate Tribunals)

Party NameState Bank of India Vs J.K. Dal Mills and Ors.
JudgesS.S. Parkar, J. (Chairperson)
IssueContract Law
Citation2008 (III) BC 110
Judgement DateOctober 30, 2007
CourtMumbai DRAT DRAT (Mumbai Debt Recovery Appellate Tribunals)

Judgment:

S.S. Parkar, J. (Chairperson)

1. The short question which requires consideration in this appeal is whether the option of sale of the pledged property given under Section 176 of the Indian Contract Act is discretionary or obligatory.

2. This appeal has been filed impugning that part of the judgment and order dated 16th June, 2003 passed by the Presiding Officer, D.R.T., Aurangabad in Original Application No. 30 of 2002 by which the claim of the appellant Bank was disallowed to the extent of Rs. 42,39,665.94 which includes interest on the notional sale proceeds of the shares from 21st July, 2000.

3. Briefly stated the facts are as follows:

The appellant Bank had filed suit for recovery of Rs. 71,09,136.21 being the amount due on a cash credit account opened by the respondents with interest thereon at the rate of 17 per cent per annum with quarterly rests and for sale of the mortgaged immovable properties and hypothecated movable properties and for other reliefs. While partly decreeing the suit filed by the appellant Bank the D.R.T. disallowed part of the claim of the appellant Bank on the ground that had the appellant Bank sold the shares pledged with it on expiry of 15 days after serving the notice dated 6th July, 2000 on the respondents the respondents would not have suffered losses. Reliance is placed on Section 176 of the Indian Contract Act. The appellant Bank had served the notice dated 6th July, 2000 on the respondents calling upon them to submit stock statement immediately giving factual position and arrange for creation of second mortgage as agreed by them in respect of immovable pre was earlier mortgaged to M.S.F.C. and to liquidate the account in full at an early date. In the said notice it was stated that if the respondents did not respond to the said requisition within 15 days the Bank would be compelled to sell the shares held by it as security in the open market at the prevailing rate on the day of the sale at the risk of the respondents and to initiate legal action for recovery of the balance amount against them.

4. The defence of the respondents was that if the shares, which were pledged by the respondents, were sold by the appellant Bank as stated in the aforesaid notice the appellant Bank would have been in a position to recover more amount by way of sale proceeds of the 11000 shares of Hindustan Lever Limited which were pledged with it as the prices of the said shares had gone down subsequently. The D.R.T. was of the view that the appellant Bank was obliged to sell the shares as stated in its notice dated 6th July, 2000 and since the said shares were not sold the respondents were entitled for set-off to the extent of difference in the prices of the shares. It was found that on the expiry of 15 days after service of the notice on the respondents i.e. on 21st July, 2000 price of the shares of the said company was about Rs. 281/- per share. It is not in dispute that the said shares were not sold by the Bank and they are still lying with the appellant Bank as a security for the repayment of the dues of...

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