The British Machinery Supplies Co., by Power-of-Agent and Branch Manager, Revachand Teckwani vs Devaraj and Others

T. Venkatadri, J.—An interesting question of law arises in this revision petition, viz., whether the plaintiff, the owner of a sewing machine,

who sold it under a Hire-Purchase agreement to the first defendant, could recover it from the third defendant who was a pledgee from the first

defendant. The Courts below have dismissed the suit of the plaintiff, as far as the third defendant was concerned. The plaintiff has, therefore,

preferred this revision petition contending that a decree should be passed against the third defendant also.

Learned Counsel for the petitioner contended that, as per the terms of the agreement, the first defendant had no right to pledge the sewing

machine with the third defendant and therefore his client would be entitled to recover the machine from whomsoever it remained. Let us, therefore,

consider the rights the first defendant would be entitled to in the goods during the subsistence of the Hire-purchase Agreement. Lord Macnaghten

says in Tolhurst v. Associated Portland Cement Manufacturers (1900) Ltd. L.R. (1893) A.C. 414 .

It is well settled that as a general rule the benefit of a contract is assignable in equity and may be enforced by the assignee.

It is true that the first defendant had no title, at the time of pledging the article, but certainly he had an interest in it, as between him and the plaintiff.

There can be no doubt that such interest that the first defendant had would pass to the pledgee. The interest of the hirer became vested in the

pledgee. As observed by Channel, J., in Belsize Motor Supply Co. v. Cox L.R. (1914) 1 K.B. 244 .

A pledgee or purchaser takes such title as his pledgor or vendor has... In the view I take of the agreement... the hirers did not lose their right to

purchase the cab merely by making default in the payment of the instalments.... On default... the agreement gives the plaintiffs an option to take

possession of the cab and to terminate the agreement. That option has to be exercised, otherwise the agreement continues in force; until it is

exercised the right of the hirers subsists to pay all the purchase-money and acquire the property in the cab.... If this be the true view of the

agreement, then the defendant has acquired an interest in the cab, and, that being so, the proper judgment will be for the amount remaining

unpaid...

In this case, therefore, the petitioner could only have a right to get the unpaid instalments, but he has certainly no right to recover anything more

than that sum. Nor has he a right to recover the machine itself.

In all hire-purchase agreements, there is a dual nature, where a hirer can transfer the benefit of the hiring alone while retaining the option to

purchase; or he can assign the option alone, remaining in possession of the goods until the hire-purchase price has been paid; or he can assign his

entire rights under the agreement, in which case the assignee becomes entitled both to the use of the goods and to the option to purchase. Modern

hire-purchase agreements invariably contain stringent conditions prohibiting assignment and enabling the owner to resume possession and terminate

the hiring or the entire agreement in the event of breach. A prohibition against assignment must be so framed as to cover both the assignment of the

benefit of the hiring and the transfer of the option to purchase. Thus a condition in the agreement that the hirer shall not sell the goods does not

prohibit the hirer from assigning the benefit of hiring. The pledge by the hirer would not constitute a breach of the hire-purchase agreement, in the

absence of a provision in the agreement expressly prohibiting the hirer from pledging or parting with possession of the goods. Even the provisions

of the Contract Act save the pledgee at least to the extent of the pledgor''s own interest in the goods. In this case, the petitioner himself stated that

there was default in the payment of money. Once there was default in the payment of instalments of the hire-purchase agreement, the petitioner

could have terminated the agreement, but he has not terminated the agreement, i.e., he has not exercised the right of termination. At the time of the

pledge, the first defendant (hirer) had legal possession of the chattel and he had a right to the goods. In those circumstances, it is not possible for

me to say that the first defendant had no right or interest in the goods when he pledged it to the third defendant. Further, there is absolutely no

evidence to warrant the conclusion that the third defendant was aware that the first defendant was only a hirer and not the true owner of the sewing

machine. The petitioner cannot ask the third defendant to return the sewing machine. He can only file a suit for damages for the payment of unpaid

instalments by the first and second defendants for the balance of the unpaid instalments due and payable by the first defendant under the hire-

purchase agreement. The plaintiff is not, therefore, entitled to recover the sewing machine from the third defendant.

Learned Counsel for the third defendant pointed out that as far as the third defendant was concerned, the suit was not maintainable because it

was in the nature of specific performance of a contract. Without going into the merits of this contention, it is enough for my limited purpose to

declare that the first defendant had an interest in the chattel which he pledged with the third defendant and that the third defendant was a bona fide

pledgee. Once a decree is passed against the first defendant for the balance of the instalments, the petitioner cannot recover the sewing machine

from the third defendant. There is no reason to interfere with the orders of the Courts below.

The Civil Revision Petition is dismissed. There will be no order as to costs.