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Judgment
C.K. Mallikarjuna, M.-This appeal is filed under section 105 of the Karnataka Co-operative Societies Act against the Judgment and Award dated 16-9-1976 passed by the Hon. Arbitrator in dispute No. 3939/75-76 on the file of the Assistant Registrar of Co-operative Societies, Mangalore.
The facts of the case in brief are the following: The appellant had borrowed from the respondent Bank the produce loan of Rs. 1000 by pledging paddy under PL. No. 21 on 6-2-1971 and also a loan of Rs. 700 by pledging jewels under JL. No. 1254 on 29-6-1970, a loan of Rs. 200 by pledging jewels under JL. No. 32 on 4-8-1970, a loan of Rs. 245 by pledging jewels under JL. No. 52 on 20-8-1970 and a loan of Rs. 150 by pledging jewels under JL. No. 125 on 13-10-1970 and had executed the bonds for these loans in favour of the respondent Bank. The produce loan was repayable within six months from the date of the loan and the loan amounts taken on pledging the jewels were repayable within one year from the date of each loan. On 12-7-1972 the appellant received a notice from the Senior Auditor of the Co-operative Societies, calling upon the appellant to repay the amounts due under the above said loans, but when the appellant offered to repay the loan amount the then Secretary of the respondent Bank informed the appellant that the paddy and jewels which had been pledged were missing and therefore, the same cannot be released even if the appellant repays the loan amount. The appellant even filed a written application with the respondent Bank on 25-10-1972 requesting the respondent Bank to release the pledged paddy and the jewels after accepting the dues from him. But the respondent Bank sent a reply dated 20-7-1972 pleading its inability to release the pledged goods. Thereafter the respondent sent a notice on 8-2-1973 to the appellant calling upon him to pay the dues under the above loans. The appellant approached the respondent Bank and requested for receiving the money due under the loans and release the pledged goods but the Respondent again pleaded inability to release the pledged goods. Therefore, the appellant issued a lawyer''s notice dated 11-3-1973 to the respondent Bank and even for this notice the reply dated 15-3-1973 was to the same effect. Then the appellant filed a dispute on 12-3-1976 before the Assistant Registrar of Cooperative Societies, South Kanara District Mangalore in dispute No. 3939/75-76 against the respondent Bank for recovery of pledged paddy or its value as on the date of the dispute i.e., Rs. 2248 and the pledged jewels or their value as on the date of dispute i.e., Rs. 8000, in all for a sum of Rs. 10,548 pleading at the same time that the loans in question had become time barred and therefore, the respondent Bank is not entitled to recover any amount in respect of those loans. The respondent Bank resisted the claim of the appellant by filing its written statement wherein it was pleaded that the loans in question had not become time barred, that under the terms of the loan bonds and also by virtue of the by-laws of the respondent Bank the appellant was entitled to claim only the value of the goods pledged, as fixed at the time of pledging and not at the rate prevailing at the time of the dispute, if the goods are not available for release and therefore, the appellant was still liable to pay to the respondent Bank a sum of Rs. 812-42. with future interest at 121/2 per cent after adjusting the value of the pledged goods and a judgment and award may be passed in favour of the respondent Bank against the appellant, for Rs. 812-42 with future interest. The said dispute was referred by the Assistant Registrar to the Hon. Arbitrator who conducted the proceedings and ultimately passed the impugned award for Rs. 257-23 only, in favour of the appellant against the respondent Bank after allowing the set off to the extent of Rs. 2986 with future interest at 121/2 per cent from the date of the award till the date of payment. Aggrieved by this award the appellant has approached this Tribunal with this appeal on the grounds set out in the appeal memorandum in detail.
Heard the arguments.
It is not disputed in this case that the pledged paddy and jewels were not available for release when the appellant offered to repay the amount due under the loans and asked for release of the pledged goods. It is submitted that these pledged goods were not available on account of misappropriation by the staff of the respondent Bank against whom proceedings are said to have been taken. The learned counsel appearing for the appellant contended that by-law No. 57(5)D of the respondent Bank which is marked as Exh. D-6 in this case and which is relied upon by the respondent Bank is opposed to public policy and also to the provisions of the Indian Contract Act and therefore, the same is unenforceable and as such it is not open to the respondent Bank to ask the appellant to accept the value of the pledged goods as on the date of the pledge only and not as on the date on which the appellant offered to get them released by repaying the loan amount. This by-law No. 57(5)D is as under:
* * *
The learned counsel for the appellant pointed out that the terms of the bonds executed by the appellant at the time of taking the loans and copies of which are marked as Exh. D-1 to D-5 in this case are opposed to the provisions of section 23 of the Indian Contract Act. As per the terms of these bonds it is seen that the appellant had undertaken to abide by the by-laws of the respondent Bank and the learned counsel for the appellant submitted that by-law No. 57(5)D being opposed to the public policy and the provisions of the Indian Contract Act the said terms in the loan bonds are also ineffective. In this connection the learned counsel for the appellant relied upon the provisions of sections 23 and 161 of the Indian Contract Act. Section 23 of the Contract Act provides thus:
"The consideration or object of an agreement is lawful, unless:
it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law, or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void."
Then section 161 runs thus:
"If, by the default of the bailee, the goods are not returned, delivered or tendered at the proper time, he is responsible to the bailor for any loss, destruction or deterioration of the goods from that time."
The learned counsel for the respondent tried to urge that in view of by-law No. 57(5)D of the respondent Bank the appellant cannot claim the value of the pledged goods as on the date of getting them released, but he will be entitled to the value as on the date of the pledge and as entered in the registers of the respondent Bank at that time. It may be noticed that this bylaw in question is clearly opposed to section 161 of the Contract Act because if the value of the pledged goods was considerably higher at the time of offering to get them released than the value at the time of the pledge, then naturally the person who had pledged the goods will incur loss if he is asked to accept the value as at the time of pledge because after getting them released he would have certainly got higher value in the market at the time and to the extent of loss that might occur on account of the inability of the respondent Bank to release the goods, the respondent Bank becomes responsible under section 161 of the Contract Act. Therefore, the bylaw in question is certainly repugnant to the provisions of section 161 of the Contract Act and therefore, the said bylaw is really unenforceable. It may also be noticed that this bylaw is also unreasonable because it provides that in case of depreciation of the value of the pledged goods the respondent Bank can call for additional security, whereas in case of any rise in the value it makes the debtor to accept only the lower value which existed at the time of the pledge and as entered in the registers of the respondent Bank. It is needless to say here that this bylaw also gives room for mischief of misappropriation by the staff of the respondent Bank because when a person pledges jewels on a particular date and borrows loan and subsequently after considerable time if he goes there and offers to repay the loan amount and get the pledged jewels released, then the staff in charge of the pledged jewels can easily tell the debtor that the said jewels are missing and he has to accept the value of the jewels as at the time of the pledge even though the market value of the pledged jewels was considerably higher at the time of offering to get them released. In Mewa Ram v Municipal Board Muttara, AIR 1939 All 466, which is a Full Bench Case we find the following observations.
"There are certain essentials for the validity of a bylaw. It must be:
Intra vires of the authority who makes it. 2. Not repugnant to the law of the country. 3. Certain in its terms and positive. 4. Reasonable (see Halsbury''s laws of England Edn 2, para 26 p. 604.)"
As already pointed out by us above this bylaw No. 57(5)D of the respondent Bank is clearly repugnant to the provisions of section 161 of the Contract Act and the same is also unreasonable. Therefore, the learned counsel for the appellant is perfectly justified in contending that the said bylaw is unenforceable. This being so, the undertaking taken from the appellant in the loan bonds that he would abide by the bylaws, of the respondent in so far as they relate to this bylaw No. 57(5)D would be unlawful in view of the provisions of section 23 of the Contract Act and therefore, the said undertaking has got to be ignored. Section 163 of the Contract Act provides thus:
"In the absence of any contract to the contrary, the bailee is bound to deliver to the bailor, or according to his directions, any increase or profit which may have accrued from the goods bailed."
Since the undertaking taken in the loan bonds from the appellant has to be ignored as pointed out above, it amounts to the absence of any contract to the contrary referred to in section 163 of the Contract Act and therefore, the respondent Bank is bound to deliver to the appellant the increase or profit which might have accrued from the pledged goods. Therefore, the contentions of the learned counsel for the appellant that the respondent Bank had to give the value of the pledged goods as on the date on which the appellant offered to repay the loan amount and get the pledged goods released, has got to be accepted in this case.
We see from the plaint that the appellant has claimed the value of the pledged goods prevailing on the date of filing the dispute which is 12-3-1976. But it may be noticed that the appellant offered to repay the loan amount on 27-10-1972 itself and the respondent Bank pleaded inability to release the pledged goods on the ground that the same were missing on 27-10-1972. This being the position, the appellant became entitled to claim the value of the pledged goods from the respondent Bank on 27-10-1972 itself and it is not known as to why the appellant slept over the matter up to 12-3-1976. The appellant has not explained as to why he did not file the dispute immediately after 27-10-1972. As there was no obstacle for him to file the dispute immediately after 27-10-1972 and as nothing compelled him to wait till 12-3-1976, it necessarily follows that the appellant is entitled to claim the value of the pledged goods obtaining on 27-10-1972 and not on 12-3-1976. Perhaps realising this entitlement the appellant specifically mentioned in ground No. 3 in the appeal memorandum that
"the appellant was entitled under law to the market value of the said articles as on the date of the respondent refusal i.e., 27-10-1972 if not the date of filing the suit."
We therefore, hold that the appellant was entitled to claim the value of the pledged goods from the respondent Bank on the basis of the market value as on 27-10-1972.
The learned counsel appearing for the appellant claims that since the respondent refused to release the pledged goods on 27-10-1972 interest should have been allowed to the appellant from 27-10-1972 itself. We see from the plaint that the appellant himself has not claimed any interest whatsoever from any date and this being so, a relief which had not been asked for could not have been granted. Therefore, the claim made for interest at this stage on behalf of the appellant from 27-10-1972 cannot be allowed and rightly the Arbitrator has granted only the future interest from the date of the Award. We see no reason to interfere with the same.
The learned counsel appearing for the appellant next submitted that the appellant should have been allowed the costs by the Arbitrator. We have already noticed how the respondent Bank has unreasonably driven the appellant to the necessity of filing the dispute. In such circumstances it was in the fitness of things to allow the costs to the appellant as he had succeeded in the dispute, though in part. We are therefore, inclined to accept the claim made on behalf of the appellant for costs in the dispute proceedings before the Arbitrator.
The appellant has pleaded before the Arbitrator that the claim of the respondent Bank for repayment of the debts had become time barred and therefore, the same could not be adjusted out of the amounts claimed by him in the dispute and it is also made a ground in this appeal. But the Arbitrator has rightly pointed out that the claim of the respondent Bank for the repayment of the debts had not at all become time barred and the learned counsel for the appellant perhaps rightly did not try to controvert the findings of the Arbitrator in this behalf.
The learned counsel for the appellant urged that it is only the appellant who had filed the dispute against the respondent Bank and the respondent Bank had only filed a written statement in the dispute proceedings but no counter claim had been preferred and therefore, the Arbitrator should not have allowed the adjustment of the loan amount out of the amount awarded to the appellant. We see no substance in this contention because under section 32 of the Karnataka Co-operative Societies Act any debt or outstanding demand owing to a co-operative society by any member or past member or deceased member is made a first charge upon any agricultural produce or any finished products manufactured from raw material belonging to such member and also under section 173 of the Contract Act the respondent Bank had a lien over the pledged goods for the debt due by the appellant. Therefore the Arbitrator was justified in allowing the set off claimed by the respondent Bank in the dispute proceedings and the contention of the learned counsel for the appellant in this behalf has got to be rejected. It may also be noticed that the Arbitrator has rightly allowed interest on the debt amount in favour of the respondent Bank only upto 27-10-1972 and has rejected the claim of the respondent Bank for subsequent interest, This also, in our opinion, is quite reasonable.
We have seen how in this case the appellant had claimed the value of the pledged goods on the basis of the market rate prevailing on the date of the filing of the dispute i.e., 12-3-1976 while the respondent Bank had pleaded that the appellant was entitled to claim the value of the pledged goods on the basis of the valuation made at the time of the pledge only. But in this appeal we have not accepted either of these two claims and we have held that the appellant is entitled to claim the value of the pledged goods on the basis of the market rate prevailing only on 27-10-1972. It is seen that there was no specific issue framed by the Arbitrator as to what was the market rate relating to the pledged goods on 27-10-72. Therefore, the parties could not focus their attention on the same and adduce evidence in that behalf. Therefore, it has become necessary for us to remit back this case to the Assistant Registrar only for this limited purpose. We therefore, pass the following order.
The appeal is allowed in part and the case is remanded to the Assistant Registrar of Co-operative Societies Mangalore with a direction that he or his nominee shall give sufficient opportunity to both the parties to adduce evidence regarding the valuation of the pledged goods obtaining on 27-10-1972 and on the basis of the said valuation necessary award be passed in favour of the appellant after allowing the set off in the light of the observations made by us above. The appellant shall get costs of this appeal from the respondent Bank. The Advocate''s fee is fixed at Rs. 50 only.