Jammu and Kashmir Bank Ltd. vs Tek Chand

K.V. Gopalakrishnan Nair, J.—This is a second appeal against the judgment of the Additional District Judge at Jammu who confirmed the

decision of the Subordinate Judge at Jammu.

The Respondent instituted a suit against the Appellant Bank in the court of the Subordinate Judge at Jammu for a sum of Rs. 300/ - on the basis

of a savings Bank deposit with the Bank. The Savings Bank Pass Book which the Respondent obtained from the Bank was pledged by him to the

Rural Development Officer Srinagar as security for the performance of an undertaking. The fact of this pledge was duly endorsed on the Pass

Book to the knowledge of the Bank.

The Respondent having fulfilled his undertaking, the Savings Bank Pass Book was delivered back by the Rural Development Officer, Jammu to the

Respondent and a letter was sent to the Appellant Bank by the officer informing that the Respondent, has been released from his obligations as

pledger and that the amount due under the Pass Book may be paid to him by the Bank. The Respondent thereupon made demand on the Bank for

payment of the money due to him under the Savings Bank ac. count. Oral demand having failed, he sent a registered demand notice to the Bank

which also was not heeded by the Bank. A suit, was therefore, instituted by the Respondent against the Bank.

The only plea set up by the Bank in the written statement was that the pledge was to the Rural Development Officer at Srinagar and that the

Rural Development Officer at Jammu could not therefore, release the Defendant from his obligations under the contract of pledge. The trial court

found the plea of the Bank to be untenable and decreed the suit. An appeal by the Bank to the Additional District Judge having proved

unsuccessful, the Bank has moved this Court in second appeal.

The transaction in question in this appeal is clearly one of pledge. Section 172 of the Contract Act defines pledge as the bailment of goods as

security for the payment of a debt or the performance of an obligation. A bailment is defined in Section 148 of the Act as the delivery of goods by

one person to another for some purpose upon a contract that they shall, when the purpose; is accomplished, be re turned or otherwise disposed of

according to the directions of the person delivering them. In Halsbury's Laws of England, second Ed. Vol. 25, page 4, paragraph 7 it is stated:

The subject-matter of the contract of pawn usually consists of goods and chattels capable of actual or constructive delivery, but other forms of

personal property, including negotiable instruments, may be the subject of the contract where they can be identified.

It has been held by more than one High Court in India that a pledge of share certificates can validly be made. (Please see Kannambra Nayar

Veettil Valia Ammukutti Neithiar's son Kunhunni Elaya Nayar Avergal (deceased) Vs. P.N. Krishna Pattar and Others, ; Arjun Prasad and Others

Vs. Central Bank of India Ltd., ; and Jamshedji v. Maganlal Bankelal and Co. AIR 1925 Bom 314. Even if a share certificate is not accompanied

by blank transfer signed by the pledger, there can be a valid pledge of the share certificate.

In the instant case the transaction cannot be considered as a mortgage or as a lien. A pledge is something between a simple lien and a mortgage.

In the case of a lien there is no transfer of any interest; the person exercising a lien has only a right to retain the subject-matter of the lien until he is

paid. In the case of a mortgage the property passes to the mortgagee; he has an absolute interest in the property subject to a right of redemption

by the mortgagor. But in the case of a pledge, though the deposit of goods is made security for payment of a debt or performance or a promise,

the pledgee has only a special property in the pledge, while the general property therein remains in the pledger and wholly reverts to him on the

discharge of the debt or the performance of the promise.

In the present case, the transaction cannot be called a lien; nor does it come within the description of a mortgage. It can only be a pledge. And

the parties have adopted for the transaction the nomenclature of pledge which in the circumstances can well be taken as truly describing their

intention. If documents like insurance policies, bonds, promissory notes and scrip can form the subject-matter of pledge. I see no reason on

principle for holding that a Saving Bank Book cannot validly be pledged. A Saving Bank Book falls within the definition of goods,

A pledgee of a Savings Bank Book can also effectively enforce the pledge by laying a proper action on it in a court of law, although there may be

some difficulty in his effectively exercising a right of sale u/s 176 of the Contract Act as in the case of other tangible goods, like, for in stance, a

gold ornament. It has been laid down in Kannambra Nayar Veettil Valia Ammukutti Neithiar's son Kunhunni Elaya Nayar Avergal (deceased) Vs.

P.N. Krishna Pattar and Others, , that even in the case of share certificates unaccompanied by blank transfers there can be a valid pledge.

The mere circumstance that pledgee in such a case will not be able to exercise his right of sale u/s 176 without the intervention of court and pass a

perfect title to the purchaser at the sale was not considered sufficient for holding the pledge not valid. It was pointed out that as the pledgee did not

obtain blank transfers from the pledger he will have to lay an action in the civil court and enforce the security. Indeed, Section 176 expressly

provides for such a course. The pledge of a Saving Bank Book must be held at least to stand on the same footing as pledge of a scrip

unaccompanied by blank transfer.

A pledge is lost upon re-delivery of the pawn to the pawner unless the re-delivery be for a specified purpose. But even if the re-delivery were

for a specified purpose a bona fide purchaser of the property from the pawner in possession would be protected; but the pawner would in such a

case be liable in conversion. In Vol. 25 of the Second Edition of Halsbury's Laws of England at page 8 the law is stated as follows:

The contract of pawn is extinguished by the satisfaction of the debt or engagement and the re-delivery of the property pledged to the pawner, since

there is an implied undertaking on the part of the pawnee to redeliver the same to the pawner on payment by the latter of the sum advanced with

interest. The essence of this extinction of the contract lies in the pawnee being divested wholly of his special property and possession in the

property pledged.

In the case in hand, the Savings Bank Book was redelivered to the Respondent-pawner. The Bank with whom the amount was deposited was

duly informed of this re-delivery of the Pass Book to the pawner. What is more, the Rural Development Officer Jammu wrote to the Bank that the

amount in the Savings Bank deposit may be paid to the pawner as he has been released from the obligation under the pledge and the Savings Bank

Book has been re - delivered to him. The Officer also added that he is officially competent to re-deliver the Pass Book to the pledger and

extinguish the contract of pledge.

In pursuance of this, the Respondent demanded payment of the Bank, but the Bank declined to pay. The only justification trotted out by the Bank

is that the pledge was to the Rural Development Officer, Srinagar, and that the Respondent must prove that the Rural Development Officer,

Jammu, was competent to release him from the obligation of the contract of the pledge. This stand of the Bank is, to my mind unreasonable. The

re-delivery of the Pass Book to the Respondent afforded sufficient justification for the Bank to pay the money to the Respondent. Any doubt in the

matter the Bank might have had must have been dispelled by the letter of the Rural Development Officer Jammu. In the circumstances the Bank

could well have presumed that the Rural Development Officer Jammu was competent to deliver the Saving Bank Book to the Respondent and

release him from his obligation under the contract.

There is a presumption that an official act is regularly performed. (Please see Section 114(e) of the Evidence Act). The Rural Development

Officer, Jammu wrote the letter to the Bank as a public servant discharging duties as such. The natural presumption, therefore was that the

statements made by him in his letter were correct. It was for the person who challenges the truth of these statements to prove them to be false. This

being a case of an official act done by the Rural Development Officer, Jammu it must be presumed that the act was legally performed.

In Balgobind Kumar v. Rai Behari Lal AIR 1923 Pat 96 (2) it was pointed out that official acts are to be presumed to be legally performed. To the

same effect are the decisions in The President, Union Board Vs. A.M. Balakrishna Reddiar, ; A.K. Bijli Sahib Bahadur Vs. M.K. Mohamed Asan

Maracair and Others, and Sham Sunder Lal Vs. Emperor, . Although these decisions were rendered under different provisions of law and on

different facts, the presumption mentioned above has been clearly applied in all of them.

The trial court has stated that at the time when the pledge was made there was only one Rural Development Officer for the whole State whose

headquarters were at Srinagar and that subsequently the jurisdiction of this officer was bifurcated and two officers, one with headquarters at

Srinagar in charge of Kashmir Province and the other with headquarters at Jammu in charge of Jammu province were created. The obligation for

the performance of which the pledge in this case was made admittedly related to the Jammu Province, and therefore fell within the jurisdiction of

the Rural Development Officer at Jammu.

The Appellant Bank has not been able to suggest, that the position is in any way different from what has just been set out. Its only plea was that the

Respondent ought to prove conclusively that the Rural Development Officer at Jammu was competent to re - deliver the Savings Bank Book to

him and release him from obligation under the contract. I think this is only trying to saddle the wrong horse. It was for the Bank to show that the

Officer as Jammu was not competent to do what he did. As already indicated there is nothing on the side of the Bank even faintly to show this. The

Bank, was therefore, wholly wrong in having declined to pay the amount to the Respondent.

I see no ground for reversing the decision of the courts below. In the result the appeal is dismissed with costs.