TMI Blog1971 (4) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... h credit system with the Bank and took advances on the pledged goods. The Bank held the goods as security for the advances made and , be constituents either provided the Bank with godown or the Bank kept the pledged goods in godowns of its own and charged rents from the constituents. The defendant No. 2 entered into a cash credit system agreement with the plaintiff s Arrah Branch, the arrangement being that the sugar would be pledged under the cash credit system. On December 16, 1946 the advance made to defendant No. 2 stood at ₹ 3,20,486-2-0 and the Bank held 6239 bags of different varieties of sugar as security. These bags were kept in godowns provided by defendant No. 2. The key of the lock of each godown was in the custody of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Certificate Officer, Patna, under the Public Demands Recovery Act on account of arrears of sugar cess amounting to ₹ 2 lakhs due from the Bhita Sugar Factory with which defendant No. 2 had entered into an arrangement pursuant to which the entire quantity of sugar including 5000 maunds which had been seized had come into possession of defendant No. 2. The other defendant also resisted the suit on various grounds. A number of issues were framed on the pleadings of the parties. We may only mention issue No. 6(a) which will be material for determination of the points which we have been called upon to decide Was the sugar seized by the government in possession of the Bank as a pledgee at the time of the seizure and have the rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security for payment of the debts or advances made to defendant No. 2 in its cash credit account. There were arrears of certain cess due from defendant No. 2. As stated before, the Cane Commissioner took proceedings under the Public Demands Recovery Act and attached the price of the sugar which had been deposited by the appropriate authorities in the Government Treasury instead of being paid to the plaintiff. The Cane Commissioner indisputably did not have any right of priority over the other creditors of defendant No. 2 and, in particular, the secured creditors. Section 172 of the Contract Act defines a pledge to mean the bailment of goods as security for payment of debt or performance of a promise. The bailor is called the pawnor and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions the High Court came to the conclusion that a pawnee has merely the possession of the goods coupled with a power to sell them on default by the pawnor but the latter retains the ownership subject to a lien to the extent of the debt enforceable by exercise of the power of sale. In the present case the sugar had been seized and then sold. The sale proceeds would have been available to defendants 2 to 5 subject to the claim of the plaintiff against them but it ceased to have any lien on the pledged property or the sale proceeds against any third party including the State as soon as it was legally deprived of the possession of the pledged goods. According to the Statement in Halsbury s Laws of England Pawn has been described as a se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law relating to the rights of the Pawnee vis-a-vis other unsecured creditors of the pawnor. In our judgment the High Court is in error in considering that the rights of the Pawnee who had parted with money in favour of the pawnor on the security of the goods can be defeated by the goods being lawfully seized by the Government and the money being made available to other creditors of the pawnor without the claim of the Pawnee being fully satisfied. The Pawnee has special property and a lien which is not of ordinary nature on the goods and so long as his claim is not satisfied no other creditor of the pawnor has any right to take away the goods or its price. After the goods had been seized by the Government it was bound to pay the amount due t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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