TMI Blog1992 (7) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... ch goods is not less than the minimum prescribed under section 5(5) of the Karnataka Sales Tax Act, 1957." 2.. It is contended on behalf of the petitioners that the State of Karnataka has enacted the Karnataka Pawn Brokers Act, 1961 (hereinafter referred to as "the Act") which provides for the regulation and control of the business of pawn brokers in the State of Karnataka; that in regard to unredeemed pledged articles the pawn broker has an option either to sue for the recovery of money in respect of which the goods were pledged or to sell the same as provided in section 176 of the Indian Contract Act, 1872. However, section 12 of the Act controls the sale of pledged articles. The relevant provision thereof reads as follows: "12. Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is required. 4.. Explaining the rights available under section 176 of the Contract Act the Supreme Court in Lallan Prasad v. Rahmat Ali AIR 1967 SC 1322 stated as follows: "That section 176 deals with the rights of a pawnee and provides that in case of default by the pawner the pawnee has (1) the right to sue upon the debt and to retain the goods as collateral security, and (2) to sell the goods after reasonable notice of the intended sale to the pawner. Once the pawnee by virtue of his right under section 176 sells the goods the right of the pawner to redeem them is of course extinguished. But as aforesaid the pawnee is bound to apply the sale proceeds towards satisfaction of the debt and pay the surplus, if any, to the pawner. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a right to appropriate the sale proceeds or any portion thereof for satisfaction of his dues from the pawner. 5. Therefore, the legal position that emerges on the basis of section 176 of the Contract Act, section 12 of the Act and the decisions referred to above is that the pawnee has the right to sell the goods pledged in case of default in the repayment of the debt by the pawner. But that right can be exercised only in the manner provided in section 12 of the Act and subject to the conditions prescribed in rule 20 of the Rules framed under the Act. Whatever may be the nature of the transaction it is clear that a sale takes effect, that is, the goods will pass to the purchaser on a sale taking place in terms of section 12 of the Act or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uish these two decisions on the basis that there were respective provisions in the relevant Acts empowering the sale of salvaged goods or unclaimed goods. But that should not make any distinction in the present cases. Inasmuch as in the course of business the pledgee is empowered to sell the goods of course subject to the provisions of the Act and the Rules framed thereunder, then, when the goods are sold at his instance he becomes a dealer for the purpose of the Karnataka Sales Tax Act. Consequently, he is liable to pay the taxes as provided under the Act. The arguments advanced on behalf of the petitioners that they are not owners of the goods nor do they act as agents of the pledger or that the sale effected is a statutory sale and not a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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