S.A. No. 674 of 1996. Case: Syndicate Bank Vs Mohammed. Kerala High Court

Case Number:S.A. No. 674 of 1996
Party Name:Syndicate Bank Vs Mohammed
Counsel:For Appellant: K.V. Sohan, Adv. and For Respondents: D. Krishna Prasad, M. Harisharma, Joji Varghese and Satheesh Kumar, Advs.
Judges:P. Bhavadasan, J.
Issue:Contract Act, 1872 - Sections 148, 160, 172 to 176 and 177; Travancore Contract Act - Section 129; Specific Relief Act; T.P. Act - Section 69(3)
Citation:2010 (2) KLT 563
Judgement Date:April 06, 2010
Court:Kerala High Court


P. Bhavadasan, J.

1. The defendant in O.S. No. 219 of 1989, who suffered a decree at the hands of the first Appellate Court is the appellant. The parties and facts are hereinafter referred to as they were available before the Trial Court.

2. The plaintiff alleged that he had pledged gold ornaments of five sovereigns on 11.11.1981 with the defendant Bank and borrowed a sum of Rs. 2500/- on the security of those gold ornaments. The plaintiff paid Rs. 1918.70 on 8.4.1985 towards the loan amount. The Bank issued a notice dated 4.2.1986 to the plaintiff recalling the loan and informing him that if he failed to discharge the debt, the ornaments would be sold in auction on 27.2.1986. The plaintiff claimed to have paid Rs. 500/- in response to the notice and thereafter he expressed his willingness to discharge the balance amount. But the gold ornaments were not returned to him. A notice was issued by the plaintiff, which caused the defendant to send a reply containing false allegations. The defendant claimed to had sold the jewels. The plaintiff claims that it was unauthorised, illegal and contrary to law. Being an unauthorised sale, it is also stated that the Bank is not entitled to adjust the balance amount due from the sale proceeds. Claiming that he is entitled to return of the ornaments, he laid the suit, or in the alternative claiming Rs. 12,000/-.

3. The defendant resisted the suit. The pledge was admitted. The defendant disputed that 5 sovereigns of gold were pledged and contended that 30.700 grams which was equal to three and three fourth sovereigns were pledged by the plaintiff. The valuation of jewellery was estimated at Rs. 4500/- and a sum of Rs. 2500/- was given as loan to the plaintiff on execution of a pronote also. The plaintiff was bound to discharge the debt within three years. He did not do so. In case the debt was not paid, the Bank was entitled to cause sale of the ornaments after notice to the plaintiff in compliance with the statutory requirements. The defendant issued notice dated 4.2.1986 informing the plaintiff to wipe off the debt as in case of default the ornaments pledged would be sold. After receiving notice, the plaintiff paid a sum of Rs. 500/-. Thereafter he did not respond. Sale was published in Malayala Manorama daily dated 20.7.1986 and the ornaments were sold in public auction. There is no merit in the allegation that the sale was unauthorised and illegal. It was in accordance with law. The plaintiff was fully aware of the auction. They contended that the plaintiff is not entitled to any reliefs and the suit would be dismissed.

4. The Trial Court raised necessary issues. The plaintiff examined P.W. 1 and had Exts.A1 and A2 marked. The defendant had examined D.W.1 and Exts. B1 to B9 marked. On a consideration of the materials before it, the Trial Court came to the conclusion that the sale was in accordance with law and the plaintiff is not entitled to any reliefs. Accordingly the suit was dismissed.

5. The plaintiff carried the matter in appeal as A.S. No. 17 of 1991 before the Sub Court, Hosdurg. The Appellate Court felt that the notice sent by the Bank which stipulated that the sale will be held on 27.2.1986 in case the plaintiff failed to discharge the debt, was bound to conduct the sale on the same day. Having not done so, the Bank was bound to issue another notice before the sale was effected. Holding so, the lower Appellate Court reversed the finding of the Trial Court and decreed the suit as follows:

In the result, the appeal is allowed, the judgment and decree of the lower court are set aside; and the suit is decreed for a sum of Rs. 6,844/- (Rupees Six Thousand Eight Hundred and Forty Four only) with costs throughout. Time for payment is one month. The plaintiff/appellant is also entitled to get future interest from the date of plaint till realisation at the rate of 6% p.a..

The said judgment and decree are assailed in this appeal.

6. The following substantial questions of law are raised in this Second Appeal for consideration:

i) A pawnor who gives notice of sale of pledged articles stipulating a date and the pawnee pays a portion of the debt without redeeming the pledge whether the pawnee entitled to a subsequent notice of intended sale in case the pawner sells the pledged articles on a subsequent date?

ii) Is not the notice of intended sale dated 4.2.86 given to the plaintiff by the defendant valid notice under Section 176 of the Indian Contract Act?

iii) Is not a publication of intended sale in local daily sufficient reasonable notice contemplated under Section 176 of Indian Contract Act?

7. The facts are almost admitted. There is no dispute regarding the fact that gold ornaments were pledged with the Bank and the plaintiff had availed a loan of Rs. 2500/-. He had also executed a pronote. It is also not in dispute that a notice dated 4.2.1986 was issued by the Bank calling upon the pledger to discharge the debt and in case he failed to do so, the ornaments would be sold by the pledgee on 27.2.1986. It seems that the plaintiff paid a sum Rs. 500/- and did not pay the balance amount due to the Bank. The Bank after publication in the Malayala Manorama daily sold the gold ornaments. The case of the plaintiff is that later when he went to the Bank and expressed his readiness to discharge the loan, and sought return of the ornaments, the Bank was not able to do so.

8. The main issue is regarding the notice issued by the Bank. While the Trial Court held that the notice issued and which is admitted to have been received by the plaintiff is sufficient in law, the Appellate Court thought otherwise. According to the Appellate Court, in the notice issued by the Bank they had indicated that if the loan is not discharged, the sale would be conducted on 27.2.1986. Admittedly no sale was conducted on 27.2.1986. It is also on record that a sum of Rs. 500/- was paid by the plaintiff. The Appellate Court held that before conducting sale a fresh notice had to be issued to the plaintiff as the case on hand constitutes an exceptional circumstance as envisaged in law. The question is whether the view of the Appellate Court is correct.

9. It may be useful to refer to the relevant statutory provisions. Sections 176 and 177 of the Indian Contract Act reads as follows:

176. Pawnee's right where pawnor makes default - If the pawnor makes default in payment of the debt, or performance; at the stipulated time or the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale.

If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor.

177. Defaulting pawnor's right to redeem - If a time is stipulated for the payment of the debt, or performance of the promise, for which the pledge is made, and the pawnor makes default in payment of the debt or performance of the promise at the stipulated time, he may redeem the goods pledged at any subsequent time before the actual sale of them, but he must, in that case, pay, in addition, any expenses which have arisen from his default.

In case of possession of goods pledged with the pawnee, Section 176 recognizes three rights in case of default by the pawnor. They are (i) he may bring upon a suit, (ii) he may retain it as a collateral security and (iii) he may sell it by giving the pawnor a reasonable notice of the sale. The right of the pawnor to have a reasonable notice is well recognized in law. If the pawnor commits default in payment of the debt within the stipulated period in respect of which the goods were pledged, the pawnee can either file a suit or to resort to sale of pledged goods by giving reasonable notice. Indian Contract Act does not prescribe any particular form of notice or any particulars the notice should contain. What is stated is only that the pawnor should be given a reasonable notice of the sale.

10. It was contended on behalf of the appellant that it is not necessary that the pledgee in his notice should specify the time, date and place of sale. All that is required by the section is that the pledger should be informed that if he does not wipe off the debt, the pledgee would be entitled to sell the articles. Even assuming a date is specified in the notice for the sale of the property and even if the sale is not conducted on that day, it does not mean that if sale is conducted later a fresh notice has to be issued. All that Section 176 requires is that the plegee should exercise his option informing the pledger about the same.

11. Learned Counsel appearing for the respondent on the other hand pointed out that having specified the date and having received Rs. 500/- from the pledger, if the pledgee wanted to conduct the sale on a later date, they were bound to issue fresh notice. The pledger has a right to redeem the property and he could do so before the actual sale is effected. So it is absolutely necessary that the pledger is informed about the entire details regarding the sale. It was therefore contended that not only the pledgee should inform about his option, but he should also inform the time, date and place of sale.

12. It is well settled that the contract of pawn or pledge contains five classes of bailment. Pawn has been described as a security where by contract a...

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