AI Structured Summary
Not yet generated for this judgment
Judgment
K.S. Hegde, J.—The fifth defendant in Special Civil Suit No. 16 of 1951 in the Court of the Joint Civil Judge, Senior Division at Belgaum is the appellant in this Court. The material facts of this case are as follows:
The plaintiff is the Swamiji of Uttaradhi Math. According to his case, he pledged a gold pot weighing over 400 tolas through his agent Madhwachar with the money-lending concern belonging to the family of defendants 1 to 4 for a sum of Rs. 30.000/-. The pledge in question was made on 10-1-1949. His further case is that out of the sum of Rs 50.000/-, he had already discharged a sum of Rs. 23,000/-. When he offered to pay the balance amount and asked for the redemption of jewel, defendants 1 to 4 tailed to give back the jewel in question and thereafter, he came to know that they had re-pledged that jewel with the fifth defendant for a sum of Rs. 33,750/-. He demanded possession of the jewel from the 5th defendant. The fifth defendant having refused to comply with the demand made he is constrained to file the present suit.
Defendants 1 to 4 belong to a Hindu joint family of which the first defendant is the Karta. They are money-lenders. The money-lending business was managed by defendants 3 and 4. The second defendant though a member of that family was a Government servant at the relevant time. Defendants 1 to 4 pleaded in the Court below that the third defendant pledged the jewel in question on 10-1-1949 with the Canara Industrial and Banking Syndicate Ltd., at its branch at Belgaum on behalf of the plaintiff and that the same was not pledged with them. Their further case was that the pledge with the Canara Industrial and Banking Syndicate was redeemed on 30-7-1949 and the same jewel was again pledged with the fifth defendant on the same day for Rs. 33,750/-. They admit mat out of the monies borrowed by the Plaintiff, he had discharged a sum of Rs. 10,000/- even prior to 30-7-1949. It is also admitted that on the date of the suit a sum of Rs. 20,000/- and odd on the aggregate had been paid in respect of the monies borrowed on 10-1-1949. The case for the fifth defendant is that the jewel in question did not belong to the plaintiff and that defendants 1 to 4 were the true owners of the same; they pledged that jewel on 30-74949 with them for Rs. 33,750/- and until the money borrowed as per the pledge is paid off he is entitled to retain possession thereof. It is also pleaded that the suit as brought is bad as the plaintiff did not comply with section 70 of the Bombay Co-operative Societies Act.
On the basis of these pleading, as many as ten issues were framed. The Court below rejected all the contentions of the defendants and decreed the suit as prayed for. In so far as the costs are concerned, it gave a decree in favour of the plaintiff only as against defendants 1 to 4. Aggrieved by this decision, the fifth defendant has come up in appeal and the plaintiff has filed a Memorandum of cross-objections wherein he has objected to the decision of the Court below as regards costs and also complained that the money directed to be returned is not full and complete.
The facts as found by the Court below are: that the jewel in question was pledged by the plaintiff with the family of defendants 1 to 4 for a sum of Rs. 30,000/-; it is the family of defendants I to 4 who re-pledged the jewel first with the Canara Industrial and Banking Syndicate Ltd., and later on with the 5th defendant; only a sum of Rs. 9,166/- is due under the pledge made on 10-1-1949 and the plaintiff is entitled to get possession of the jewel on payment of that amount. It also came to the conclusion that the notice given u/s 70 of the Bombay Cooperative Societies Act, Exhibit 122 is valid in law.
In this Court, Sri S.V. Mahajan, the learned counsel for the appellant canvassed the correctness of the findings of the Court below and contended that in reality the plaintiff did not pledge the jewel with the family of defendants 1 to 4 and tie same was pledged by the third defendant for and on behalf of the plaintiff with the Canara Industrial and Banking Syndicate Ltd., at its Branch at Belgaum. He drew our attention to the evidence on record to show that on earlier occasions the third defendant had acted as the agent of the plaintiff. We are not satisfied that the evidence that is brought to our notice is capable of the only conclusion that on those occasions the third defendant acted as the agent of (the plaintiff. It appears to us that the plaintiff was constantly pledging his jewels with the family of defendants 1 to 4 and the family of defendants 1 to 4 in their turn, were re-pledging the same. It is unnecessary to examine the earlier transactions, in detail as they have no important bearing on the transaction under review.
Now coming to the suit transaction, it is clearly and satisfactorily established that the plaintiff pledged the jewel in question with the family of defendants 1 to 4. The accounts maintained by defendants 1 to 4, Exhibit 173 show that the jewel was pledged with them, This is corroborated by Exhibit 134, a receipt granted by the third defendant to the plaintiff. This is further corroborated by the letter written by defendants 3 and 4 to the plaintiff on 25-8-1950 and marked as Exhibit 137 in the case. On this point, further corroboration is available from the entries found in Exhibit 135. We are in agreement with the Court below that the jewel in question was pledged by the plaintiff with the family of defendants 1 to 4.
7a. We are unable to accept the contention advanced on behalf of the appellant that the agent of the plaintiff was present at the time or the pledge with the Canara Industrial and Banking Syndicate Ltd. On this point, we have only the testimony of defendant 3 who is undoubtedly an interested witness. On his own showing he was guilty of breach of trust. It is difficult to found a case on an evidence of this type.
There is no dispute that the jewel was pledged by the third defendant with the 5th defendant. The plea that the third defendant pledged the jewel with the fifth defendant with the consent of the plaintiff stands on flimsy material. On this aspect also we have only the testimony of the third defendant. From the surrounding circumstances, it is clear that the plaintiff would not have consented to the pledge in question. Only a sum of Rs. 20,000/- and odd was due from the plaintiff on the suit pledge and the plaintiff would not have directly or indirectly consented to the pledge of his jewel for Rs. 33,750. We are unable to accept the contention of the fifth defendant that the pledge with him was made with the consent of the plaintiff.
Sri S.V. Mahajan next urged that his client was a bona fide pledgee without notice of the defect in title. He tried to take support from the well-known doctrine that if the true owner of a property puts another in ostensible possession of it and holds him out to the world as being fully capable of disposing of and conferring a title to it and such a person does dispose of it, the true owner has no claim as against a bona fide purchaser for value. This principle of law is inapplicable to the facts of the present case. As mentioned earlier, the third defendant''s possession of the jewel was only that of a pledgee. It cannot be said that the plaintiff put forward the third defendant as the ostensible owner of the property nor is the fifth defendant a transferee of the property in question. Further, we are not convinced that the transaction entered into by the fifth defendant was a bona fide one. The fifth defendant had large dealings with the family of defendants 1 to 4.
The Chairman of 5th defendant Bank was a close relation of defendants 1 to 4. The authorities of the fifth defendant Bank knew that the family of defendants 1 to 4, were doing money lending business. The pot pledged is not one of those which is usually found in a private house. In these circumstances it is difficult to believe that the authorities of the fifth defendant Bank would have believed that the third defendant was the full owner of the pot in question. Moreover, it is seen from the evidence that the transaction was not done in accordance with the rules of the Bank. Money was advanced to the third defendant even without the sanction of the Managing Committee but with the approval of the Chairman of the Bank who as mentioned earlier is a relation of defendants 1 to 4. Hence we do not think that there is any substance in the contention that the fifth defendant is a bona fide transferee and as such, his rights should be protected.
It is next urged by Sri Mahajan that the family of defendants 1 to 4 were mercantile agents and they having pledged the jewel in question with the fifth defendant, the latter is entitled to the protection afforded by section 178 of the Indian Contract Act. There appears to be no basis for this contention. In the first place, it was not pleaded that the third defendant was a mercantile agent. Mercantile agent is defined in section 2(9) of the Sale of Goods Act and according to that! definition "Mercantile agent, means a mercantile agent having in the customary course of business as such agent authority either to sell goods, Or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods;" There is not even a title of evidence in this case to establish the "customary course of business" as mentioned in the aforesaid provision. Therefore, the 5th defendant cannot claim any protection u/s 178 of the Indian Contract Act.
Protection was next sought u/s 178A of the Contract Act which provision reads thus:
When the pawnor has obtained possession, of the goods pledged by him under a contract voidable, u/s 19 or section 19A but the contract has not been rescinded at the time or the pledge, the pawnee acquires a good title to the goods provided he acts in good faith and without notice of the pawnor''s defect of title.
In order to come within the scope of this section a person seeking relief thereunder must establish that the pawnor had a legal title on the date of the pledge though that title is defeasible either u/s 19 or 19A of the Contract Act. The essence of that provision is that the pawnor must have had a title to the goods pledged on the date of the pledge. A pledgee has no title to the property pledged with him. His rights are those that are found in sections 173 to 176 of the Contract Act. He can only retain possession of the goods pledged till the amount borrowed is discharged. u/s 176, if the pawnor makes a default in the payment of the money, the pawnee has a right to sell the goods in question after due notice to the pawnor. Hence we do not think that section 178A of the Contract Act is applicable to the facts of the present case.
It is next urged that u/s 179 of the Contract Act, where a person pledges goods in which he has only a limited interest (the pawnee being one), the pledge is valid to the extent of that interest. From this it is urged that on the date of the pledge with the 5th defendant i.e. 30-7-1949, the pledgee was entitled to receive a sum of Rs. 20,000/- and odd from the plaintiff and therefore, to that extent, the third defendant could have pledged the jewel in question with the fifth defendant and hence the fifth defendant has got interest in that jewel to the extent of the money due from the plaintiff to the third defendant on 30-7-1949. It is further urged that any payment by the plaintiff to the third defendant on or after 30-7-194 is not binding on the fifth defendant. Before dealing with this branch of the case, it is necessary to mention that the Court below has come to the conclusion, and we are in agreement with that conclusion, that the plaintiff when he made payments to the third defendant on, or after 30-7-1949 was not aware of the pledge in favour of the fifth defendant. Having said that we shall now proceed to consider the question of law formulated for determination.
It cannot be said that the first Pledgee is a transferee of the goods pledged. We have earlier mentioned that the pledgee can only retain possession of the goods pledged till the money borrowed is repaid. The moment the money borrowed is repaid, the pawnor is entitled to the return of the goods pledged. It is immaterial in whose hands the goods pledged are on the date when the money borrowed is fully discharged. Throughout the period of the pledge, the pawnor continues to be the owner of the goods pledged and the juridical possession also continues to be with him. The pawnee merely retains the physical possession of the goods, or in other words, he is merely in custody of the goods. Hence the moment the money borrowed is repaid, the true owner is entitled to the return of the physical possession of the goods.
This question came up for consideration before the Supreme Court in Jaswantrai Manilal Akhaney Vs. The State of Bombay, In that case under a contract entered into by the Pledgor bank with the pledgee bank securities owned by the pledgor of the face value of - Rs. 75,000/-were kept by the pledgee Bank charged with the payment of such amount up to the limit of Rs. 66,150/- as may from time to time have been advanced or be advanced to the pledgor bank under the overdraft arrangement. But that charge was not an absolute one without reference to the state of accounts between the two banks; in other words, there was to be a charge only when there was an adverse balance against the pledgor Bank. At all material times, the pledgor Bank had not drawn any sum from the pledgee Bank in pursuance of the agreement. The pledgee bank sold the securities in contravention of the terms of the contract entered into between the pledgor and the pledgee. In that connection, the scope of section 179 of the Indian Contract Act came up for consideration, Sinha, J. (as he then was), speaking for the Court observed:
That the right of the pledgee bank to deal with the securities under the agreement would arise only on the happening of certain events, namely, that the pledgor Bank either had tailed to maintain the proper margin or had made a default in repayment of the outstanding amount on demand by the pledgee Bank. So long as those contingencies did not arise, the pledgee Bank had no right to deal with the securities by way of pledge, sub-pledge or assignment; He further observed:
That if the pledgor Bank has as a matter of fact operated upon the overdraft account and had drawn any sum within the limit stipulated in the contract, the pledgee Bank would have an interest within the meaning of section 179 Contract Act, pro tanto in those securities and might then have been entitled to pledge or sub-pledge the securities with a third party. But so long as there was no overdraft by the pledgor, the pledgee had no such interest as it could in its turn pledge or sub-pledge to a third party.
From this it follows that the pledgee has no title to the property pledged but he has merely an interest in it and the said interest is co-extensive with monies advanced.
The true scope of section 179 came up also for consideration before a Bench of Allahabad High Court in the Firm Thakur Das Marakhan Lal Vs. Mathura Prasad and Others, There also the sub-pledgee advanced the contention that he was a transferee of the rights of the pledgee. This contention was repelled by the learned Judges. They held:
The appellant''s contention that he was a transferee of the rights of Manni Ram or that he was a transferee in good faith has been negatived by all the Courts consistently and they have further held that he was really a sub-pledgee. In view of this finding it is difficult to accept the appellant''s contention that his position is not that of a sub-pledgee and that he is really a transferee of the pawnee rights of Manni Ram in good faith. We must proceed on the footing that he is really a sub-pledgee.
So far as a sub-pledgee is concerned, the law admits of no doubt. Section 179 of the Indian Contract Act makes it clear that if a person with a limited interest in goods pledges them, the pledge is valid to the extent of that interest only.
The principle enacted in this section is a well-established principle of common law which has been stated by Judge Story in his book on ''Bailments'', Ss. 324-327, in these words:
The pawnee may by the common law deliver over the pawn to a stranger for safe custody without consideration; or he may sell or assign all his interest in the pawn; or he may convey the same interest conditionally, by way of pawn, to another person, without in either case destroying or invalidating his security. But if the pawnee should undertake to pledge the property (not being negotiable securities) for a debt beyond his own, or to make a transfer thereof as if he were the actual owner, it is clear that in such case he would be guilty of a breach of trust, and his creditor would acquire no title beyond that held by the pa(sic)nee.
Whatever doubt may be indulged in, in the case of a mere factor, it has been decided in the case of a strict pledge, that if the pledgee transfers the same to his own creditor the latter may hold the pledge until the debt of the original owner is discharged''.'''' (the underlining (here into'') is ours). This appears to be the true position in law. The moment the original debt is discharged, the sub-pledgee loses all rights in the property pledged. His title is a precarious title. It is dependent on the title of his pledgor. The moment his pledger''s; title is lost by the payment of the debt borrowed under the pledge, his title automatically lapses. In this case, it is unnecessary for us to consider as to what would have been the case if the original pawnor had paid the monies borrowed to his pawnee-after having notice of the sub-pledge as we have earlier found that plaintiff had no notice of the pledge by the third defendant in favour of the fifth defendant.
We do not think that the case of Poona Bank Ltd. Vs. Kachhi Dasa Oswal Jain Temple, cited by Sri S.V. Mahajan either bears on the point under consideration or is of any assistance to his client. In that case, their Lordships held that possession required under Sec. 178 of the Indian Contract Act, 1872, before it was amended by Act IV of 1930, was juridical possession or the possession of a factor or an agent entrusted as such and ordinarily having as such agent power to sell or pledge the property. In their view, according to the first Proviso to S. 178 the pawnee must act under circumstances which are not such as to raise a reasonable presumption that the pawnee is acting improperly. He must act with due care and attention in taking the pledge, WE are clear in our opinion that even u/s 178 as it stood prior to its amendment in 1930 the pawnee could not have had anything more than the limited interest he possessed, because his possession was not a juridical possession. It is unnecessary for us now to consider what exactly are the true limits of section 178 as it stood prior to 1930.
From a review of the facts of this case and the law bearing on the same we have unhesitatingly come to the conclusion that the fifth defendant cannot have any right more than the right possessed by the family of defendant 1 to 4 According to the finding of the Court below�and with that finding the appellant has no quarrel�the amount that was due from the plaintiff to the family of defendants 1 to 4 was only Rs. 9,166/-.
There is no substance in the contention of the appellant that the notice given u/s 70 of the Bombay Co-operative Societies Act is invalid in any manner. Sri S.V. Mahajan advanced a three-fold argument in support of his contention that the notice in question is invalid in law. In the first place, he urged that the description of the plaintiff given in Exhibit 122 does not tally with the description given in the plaint. He next urged that the cause of action mentioned in Exhibit 122 is different from the cause of action mentioned in the plaint. He lastly urged that the relief claimed in the plaint has no reference to the relief claimed in the notice. None of these contentions appears to us to be correct. In Exhibit 122 it was mentioned that the plaintiff Swamier is represented by his agent Madhwachar. In the plaint it is mentioned that the plaintiff is represented by his then agent Sri Cuttal. In either case, the plaintiff mentioned is the Swami of the Uttaradi Math. Section 70 has nothing to do with the agent representing the plaintiff.
Sri Mahajan is also not right when he says that the cause of action mentioned in Exhibit 122 is different from the cause of action mentioned in the plaint. He is mistaking the date on which the cause of action arose with the cause of action as such. Section 70 concerns itself with the case of action and not the date on which the cause of action arose. In Exhibit 122 it was clearly mentioned that the 5th defendant''s possession of the jewel is an unlawful possession and therefore, the plaintiff is entitled to sue for possession. In the plaint that plea was elaborated, but the cause of action mentioned in Exhibit 122 is ad idem with the cause of action mentioned in the plaint. The only grievance of Sri Mahajan is, that in the plaint it is mentioned that the cause of action arose on 1-8-1949, whereas that date was not mentioned in Exhibit 122. The mentioning of the date on which the cause of action arose was wholly unnecessary for the purpose of a notice u/s 70.
Lastly, it was urged by Sri Mahajan, that in the notice the only relief mentioned is the relief of possession of the jewel pledged, but in the plaint, the plaintiff has asked for taking accounts of the monies due from him to the family of defendants 1 to 4 and also for the possession of the jewel. So far as the fifth defendant is concerned, the only relevant relief is the relief relating to possession. The relief of accounting is directed only against defendants 1 to 4 and with that relief the fifth defendant is not interested. It was not necessary for the plaintiff to recite in his notice the reliefs Other than those with which the fifth defendant was interested. While it is true that a notice either u/s 80 of the CPC or one u/s 70 of the Bombay Co-operative Societies Act should strictly and not merely substantially comply with the requirements of law in these matters as in other matters, a commonsense view and not a pedantic view should be taken. Hence we repel the contention of the appellant that the notice Exhibit 122 is invalid in law.
In the result, the appeal fails and the same is dismissed with costs.
Now coming to the memorandum of cross-objections two grounds are taken therein. It is urged by Sri T. Krishna Rao, the learned counsel for the plaintiff-respondent that during the pendency of the suit, his client made an application for possession of the jewel pledged and the same was granted to him on condition that he should place in fixed deposit with the fifth defendant a sum of Rs. 35,000/- which amount would carry interest at the rate of 2 1/2 per cent per annum, the condition being that if the plaintiff succeeded in the suit, the amount in question with interest should be returned to his client less the money due from his client to defendants 1 to 4; if, on the other hand, he failed in the suit, the entire sum due to the fifth defendant should be deducted from that sum. Now that the plaintiff has succeeded, he urges that his client is entitled to the entire sum of Rs. 35,000/- with the stipulated interest less Rs. 9,166/-. In the memorandum of cross-objections, the plaintiff has only claimed a sum of Rs. 25,584-0-0, the balance amount and interest on the same at 2 1/2 per cent per annum from the date on which the amount was deposited, viz., 10-4-1951 till the date of payment. The Court below evidently overlooked the provision relating to the payment of interest. We think this claim has to be upheld. But so far as the question of costs in the Court below is concerned, it was essentially in the discretion of the Court below. It is not possible to say that the learned Judge had improperly exercised the same. Hence we do not propose to interfere with that order.
In the result, we partly allow the memorandum of cross-objections and direct that in the place of the second paragraph of the decretal portion of the lower Court''s Judgment, the following shall be substituted:
The fifth defendant shall deduct the aforesaid sum of Rs. 9,166/- from the amounts deposited with it and Pay to the plaintiff the balance of Rs. 25,584/- with interest on the same at 2 1/2 per cent per annum from 10-4-1951 till payment.
In other respects the decree and judgment of the lower Court is affirmed.
There will he no order as to costs in the memorandum of cross-objections.
Mir Iqbal Husain, J.
I agree.