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Sri Raja Kakarlapudi Venkata Sudarsana Sundara Narasayyamma Garu (died) and Ors. Versus Andhra Bank Ltd., Vijayawada and Ors.

1959 (10) TMI 37 - ANDHRA PRADESH HIGH COURT

Appeal No. 7 of 1953 - Dated:- 17-10-1959 - Manohar Pershad and M. Seshachalapathi, JJ. For the Appellant: M. Ramachandra Raju and P. Sitaramaraju, Advs. For the Respondent: P. Somasundaram, C.V. Narasimha Rao and A. Kuppuswamy, Advs. JUDGMENT M. Seshachalapathi, J. 1. This is an appeal against the judgment and decree of the learned 1st Additional Subordinate Judge, Vijayawada, in O.S. No. 86 of 1949. The suit was brought by one Sri Raja Kakarlapudi Venkata Sudarsana Sundara Narasayamma Garu, fo .....

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ase of the plaintiff is that to secure the due payment of certain advances made by the 1st defendant-Bank to her husband amounting to ₹ 45,000 he pledged 9,100 B-Class shares bearing Nos. 143762 to 152861 of the 3rd defendant Company, that her husband died on 20-4-1948 at Madras and that she was his widow and nearest heir, that in spite of her intimation that she was making arrangements to pay the amounts due to the 1st defendant Bank and redeem the pledge, the 1st defendant-Bank without n .....

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d leaving a will appointing her as an executrix, she was not entitled to 61e a suit without obtaining a probate or producing a succession Certificate; secondly, that her husband, the late R. K, N.G. Raju, hypothecated the shares in question on 22-9-19-17 along with blank transfers duly signed by him and that in that instrument power had specifically been given to the Bank to sell and dispose of the shares either by public auction or private treaty as the Bank might deem fit without reference to .....

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nd that the plaintiff had no cause of action against it. The 3rd defendant Company filed a written statement pleading that it had done nothing to prejudice the interests of the parties concerned, that it was not a necessary party to the suit, that the plaintiff was not entitled to any injunction in the manner prayed for, and that it is in no way concerned with the disputes alleged in the plaint. 3. On those pleadings, the learned Subordinate Judge framed the following issues: 1. What are the ter .....

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ction of the plaintiff that there was no notice under Section 176 of the Indian Contract Act was not tenable, as in the circumstances of this case it should be held that the pledger waived the right to receive the notice of sale, and that such a waiver was legal and valid. He also held that the sale by the 1st defendant in favour of the 2nd defendant was at the prevailing market rate and that there was no evidence of any dishonesty or fraud on the part of the 1st defendant. On those findings, th .....

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he heir of her husband. 6. As regards the form of the suit, the learned Subordinate Judge held that a suit for declaration with an ancillary relief for injunction was maintainable in the circumstances of this case. But in view of his findings on issues 1, 2, 3 and 4, the learned Judge dismissed the suit. 7. The plaintiff, filed the present appeal in the High Court of Madras, which eventually was transferred to this Court. During the pendency of the appeal, the appellant died and the present four .....

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ed by Section 176 of the Indian Contract Act; (iii) that on file facts of this case there was no waiver of such a notice by the plaintiff either expressly or by conduct amounting to such waiver; and (iv) that the waiver relied on by the learned Subordinate Judge is only referable to certain expressions in the contract of pledge (Ex. B-1) which, even on the assumption that they amount to waiver are inoperative in law as they would amount to terms which cannot be legally incorporated in the contra .....

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nvey a valid title to the purchaser; (ii) that even on the assumption that Ex. B-1 constitutes a pledge of the shares, the letters written by the Bank (Exs. B-5, 6 and 8) are sufficient notice; (iii) that assuming they do not constitute sufficient notice, the transaction of sale cannot be held to be invalid because in Ex. B-1 there is an express and unambiguous waiver of the right to receive such a notice. It is also argued that on the footing that the sale in favour of the 2nd defendant is inva .....

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in brief outline the main facts of this case. The husband of the plaintiff was one R.K. N.G. Raju. He held 9100 B-class shares in the Andhra Cement Company bearing share Nos. 143762 to 152861, stated to have been purchased by him at ₹ 12/- per share. He had an over-draft account with the 1st defendant, Andhra Bank Ltd., both in his personal capacity and as partner of Raja Industrial and Chemical Agencies. On those two accounts the 1st defendant-Bank made several advances to him, on various .....

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t defendant-bank a communication (Ex. B-2) stating that R.K. N.G. Raju diet! at Madras on 20-4-1948, leaving a will appointing his wife as the executrix, and that he was instructed to take steps to secure adequate legal representation to the estate of the deceased. In that connection the counsel requested the 1st defendant-Bank to furnish the particulars of the account of the late R.K. N.G. Raju with the 1st defendant-bank, and also the amount due to the Bank in respect of over-draft transaction .....

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ss shares in the Andlira Cement Company, a sum of ₹ 37,216-8-0 was due. The Bank requested that arrangements might be made for the payment of the debts and taking the delivery of the said shares. 11. On 17-12-1948, the Bank wrote a letter (Ex. B-5) to the plaintiff giving particulars of the advances made to her husband and the amounts due and requesting her as the legal heir of the late R.K. N.G. Raju to take immediate steps to repay the outstanding amounts due to the Bank. This letter was .....

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ing for the particulars asked for by him on the assumption that the widow of the deceased would have already authorised the Bank to disclose the information. Accordingly the 1st defendant-Bank wrote to the counsel a letter (Ex. B-8) dated 9-2-1949. There was no reply by the plaintiff to the 1st defendant-Bank's letter dated 5-1-1949. 13. The 1st defendant-Bank thereupon would seem to have made enquiries with Somayajulu and Co., Slock and Share Brokers, Madras as to the market price of the B- .....

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ir signatures. On the same day the 1st defendant-Bank wrote a letter (Ex. B-12) to the plaintiff informing her that since no arrangements had been made by her for the adjustment of the loans, the Bank decided to realise the amounts due by the sale of the securities pledged and accordingly sold them at ₹ 6-5-0 per share. On 30-3-1949, a telegram (Ex. B-13) was sent by the plaintiff to the 1st defendant-Bank to the effect that the sale of 9100 B-class shares was illegal and that the Bank was .....

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Before dealing with the main case of the appellants, we consider it convenient to deal at the outset with a contention advanced by Mr. Somasundaram, that Ex. B-1 is not an instrument of pledge, hut a mortgage. The relevant portion of the instrument (Ex. B-1) may he extracted: That failing payment on demand to you by us of the amount of such advances you shall be entitled, but not hound to sell or otherwise dispose of all or any of the said moveable properties, marketable securities and goods by .....

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e Transfer of Property Act clearly states that Chapter VIII of the Act dealing with transfer of actionable claims will not apply to stocks, shares or debentures, or to instruments which are for the time being by law or custom, negotiable. Or to any mercantile documents of title of goods. Section 2(7) of the Sale of Goods Act defines goods as meaning 'every kind of moveable property other than shares etc.' With respect, therefore, to this class of moveable property there can be a mortgage .....

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ttels; a pledge or pawn conveys only a special properly, leaving the general property in the pledger or pawnor; the pledgee or pawnee never has the absolute ownership of the goods, but has a special property in them coupled with a power of selling and transferring them to a purchaser on default of payment at the stipulated time, if any, or at a reasonable time after demand and non-payment if no time for payment is agreed upon. 19. The essential distinction, therefore, between a pledge and a mort .....

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nsaction is a mortgage of moveable property or a pledge can only be determined by reference to the intention of the parties, and other surrounding circumstances. (Vide Arjun Prasad v. Central Bank of India, (S) AIR1956Pat32 . It is argued by Mr. Somasundaram that the execution along with Ex. B-1 of blank transfers indicates that it is a mortgage. We are unable to agree that that circumstance alone, without more will mean that the transaction is one of mortgage. A pledge of shares can also be acc .....

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ing of blank transfers is a convenient mode of exercising the right of sale when the pledgee in law is entitled to do. In any view, it seems to us that this question as to the nature of the transaction cannot be considered at this stage, because the parties throughout treated the transaction as one of pledge. In Ex. B-8 the plaintiff's counsel referred to the transaction as a pledge. In some of the letters written by the Bank the expression 'pledge' is used. The plaint proceeds upon .....

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ties in the trial court was as to whether there was notice as required under Section 176 of the Indian Contract Act, or whether on the facts of this case there was a waiver by the pledger of the right to receive notice. There was no oral evidence adduced by either side as to the suit transaction. In those circumstances, we are of opinion that the transaction must be treated as one of pledge alone. 21. The term 'pledge' is defined in Section 172 of the Indian Contract Act as 'the bail .....

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or upon the debt or promise, and retain the goods pledged as a collateral security, or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale. If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor. 23. On a plain reading of the section it seems to us that before exercisi .....

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bsequent to the contract of pledge, but is referable only to the recitals of Ex. B-1, and that those recitals are not clear and unambiguous that notice has been waived. In support of that contention reliance was placed upon the decision of Wallis J., in Venkatesa Perumal Chetty v. S. Parthasarthy Iyengar 18 I C 986 where it was held that a party to a contract who relies upon a clause as affording him protection from liability cannot succeed unless the clause he relies on is clearly and unambiguo .....

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Section 176. It is argued that wherever the legislature thought that a particular term could be the subject of a contract it had said so by incorporating words such as : 'subject to the contract' or 'in the absence of a contract to the contrary'. In Section 176 there are no such qualifications. Therefore, any contract to the terms of Section 176 would be a contract contrary inconsistent with the provisions of the Act within the meaning of Section 1 of the Contract Act. 26. There .....

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r that that provision should not be made nugatory, the proper interpretation to put on Section 176 is to hold notwithstanding any contract to the contrary notice has to be given. In, a Bench of the Bombay High Court consisting of Stone C.J. and Chagla J., took substantially the same view. The learned Chief Justice observed as follows: In my judgment, a notice must be given in all cases of pledge, even when the instrument of pledge itself contains an unconditional power of sale. This opinion is h .....

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This case was carried in appeal to the Federal Court. Their Lordships held by a majority that in view of the assent for sale of shares by the pledger and the acquiescence thereof by the Official Assignee the sale was good and the further questions argued before them as to whether the pledgor could enter into a contract contrary to the provisions of Section 176 or whether a want of notice is a mere irregularity not affecting the title of the bona fide purchaser for value did not arise for conside .....

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Section 176 is mandatory and supersedes any contract to the contrary. In that case as in the case of the contract of pledge authorised the pawnor. It was held in both the decisions that such a clause could not relieve the pawnee from the mandatory obligation to give notice. 30. When in an enactment, in some sections the expression 'subject to the contract' or 'in the absence of the contract to the contrary' are used end in. others not, it is a well settled principle of constructi .....

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thholding from the words of the section their full force and effect. In this view the mortgagor's right to redeem must be affirmed, and as both suits are not before the Board there will he no difficulty in passing one decree in both so framed as to give due effect to this right." To the same effect is the observation of Srinivasan Ayyangar J., in Seeti Kutti v. Kunhi Pathumma ILR Mad 1040 : AIR 1919 Mad 672: The Indian Legislature in Section 60 of the Transfer of Property Act, as has be .....

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pawnor cannot agree to waive notice as it would be inconsistent with the provisions of Section 176, should prevail. 33. Mr. Somasundaram very strenuously contended before us that the right to receive notice 35 conceived in the interests of the pawnor and when a statute gives a party certain advantage or right it is always open to him to waive it- In support of the contention he cited a large number of authorities. 34. In Wilson v. McIntosh 1894 AC 129, the facts were that the respondent. McIntos .....

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a case and obtained an order against the appellant to state her case both of which proceeded upon the fooling that the caveat was still in existence. It was held that the respondent having waived her right to claim that the caveat should be regarded as having lapsed and obtained .1 case stated by the applicant he cannot in equity plead the bar under Section 23 The decision rested on the assumption that an applicant may waive the objection of pleading lapse under Section 23 of the Real Property A .....

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the notice under that Section could be waived and that as a matter of fact, it was waived. 36. In Selwyn v. Garfit (1888) 38 Ch D 273 the question of waiver did nut really fall to be considered as the only man, the mortgagor, who could have waived notice had already parted with his equity of redemption as has been made clear in the judgment of Bowcn L. J. 37. In Griffiths v. Earl of Dudley (1882) 9 QBD 357 the question was us to whether a workman could agree not to claim compensation for persona .....

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cil held that there is no inconsistency between the proposition that the provisions of Section 80 are mandatory and must be enforced by the court, and that they may be waived by the authority for whose benefit they are provided. This decision is not directly in point, for, the question of contracting out of the mandatory terms of the section did not arise in that case. 39. In Raja Chetty v. Jagannathadas AIR1950Mad284 , a Bench of the Madras High Court held that notwithstanding the provisions of .....

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n of the individual in his private capacity, which may be dispensed with without infringing any public right or public policy. 41. Mr. Ramachandra Raju has contended that the terms of Section 176 are conceived in general public interest and referable to public policy. It is argued by him that in the stress of need a pledger might assent to terms so manifestly deleterious to his interest and it is to prevent such people being exploited and that some notice being given before the pledgee exercises .....

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vide would virtually disappear. People in the position of such persons as I have mentioned might easily be persuaded to give a consent without really knowing what exactly was involved in such consent, and an opportunity of expressing their reasons for their inability to pay, whatever they may he, and of stating their difficulties, which is now afforded to them by the necessity of an application to the court would be entirely removed. Moreover, difficult questions might also arise whether the con .....

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sts of the people who had gone to war and was referable to public policy. 43. In Bowmaker, Ltd. v. Tabor 1941 2 KB 1 Goddard L. J., has taken the same view with reference to some of the other provisions of the Courts (Emergency Powers) Act and had approved the principle of the decision of Farwell J., in the case earlier referred to. 44. It is not necessary for us to consider in this case the question further, in view of the direct decisions of the Indian High Courts, with which, we are in agreem .....

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But we are of opinion that the suit must fail for a different reason. In the plaint the plaintiff claims to be the widow and the heir of the late R.K.N.G. Raju and entitled to his estate including the shares in the suit. It is not in dispute that R.K.N.G, Raju died at Madras on 20-4-1948 leaving a will. The counsel of the plaintiff wrote to the 1st defendant-Bank a letter on 25th November, 1948 marked as Ex. B-2 in these terms: To The Agent, Andhra Bank Ltd., Bezwada. Sir, Reference : Sri R.K. N .....

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e highly obliged if you can furnish to me at the earliest opportunity the balance now standing to the credit of the abovenamed deceased together with accrued interest, if any. I further understand that he has pledged with you 9100-B, ordinary fully paid up shares which he held in the Andhra Cement Company Limited, Rezwada on 22nd September, 1947 to secure overdraft account. Kindly furnish me the particulars as to the rate of interest and the amount now outstanding to you in respect of the over-d .....

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213 of the Indian Succession Act inter alia provides as follows: Section 213(1): No right as executor or legatee can be established in any court of Justice, unless a court of competent jurisdiction in British India has granted probate of the will under which the right is claimed, or has granted letters of administration with the will or with a copy of an authenticated copy of the will annexed. 49. On behalf of the appellants it is contended that Section 213 of the Succession Act has no applicati .....

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ion that steps were being taken to get the estate duly represented may be suggestive of the will having been executed at Madras. On behalf of the defendant interrogatories were served on the plaintiff on 5-1-1950, under O. 12 R. 2, C.P.C. in these terms: The Andhra Bank Ltd., and others. Defendants. Notice to admit documents under O. XII, R. 3 C.P. C. To Sri Metlapati Koteswara Rao Pantulu Gam, B.A.B.L., Advocate for plaintiff, Vijayawada. Take notice that you are hereby required to reply to the .....

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counsel appearing for the plaintiff in these terms: O.S. No. 86 of 1949. Between: Sri Rajah Kakarlapudi Venkata Sudarsana Sundara Narasayamma Garu..... Plaintiff. And The Andhra Bank Ltd., and Others. Defendants. NOTICE TO PRODUCE DOCUMENTS To Sri Metlapalli Koteswara Rao Pantulu Garu, B,A., B.L., Vijayawada. Take notice that you are required to produce on 16th December 1950 the hearing date, the will-nama alleged to have been executed by late Sri R.K.N.G. Raju Garu and referred to in the letter .....

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we are of opinion that this vital information was withheld because, if given it would be detrimental to the interests of the appellant. We would be justified in drawing inferences' adverse to the plaintiff. We are, therefore, of the view that the will should have been executed at Madras in which case Section 213 of the Succession Act would he a bar for the institution of this suit. 53. The second argument is that the suit is filed by the plaintiff not for establishing any right as executor .....

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ll executed in his favour at Madras in respect of property situate in Madras when the will is not probated and no letters of administration with the will annexed have been granted. It was held that a defendant resisting a claim made by the plaintiff as heir-at-law cannot rely in defence on a will which required to be probated, but which has not been, and Section 187 of the Indian Succession Act XXXIX of 1925 is a bar to every one claiming under such a will, whether a plaintiff or defendant. But .....

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point which, I think is important namely, that the plaintiff being the heir under intestacy, which must be presumed until a will is proved, is entitled to succeed to the property, unless it can be shown that his title has been displaced. If the defendant merely proves that a will is in existence and does not prove the terms of that will, that is not necessarily inconsistent with the plaintiff's title. In the first place, the will may not be a valid will, and, in the second place, the plainti .....

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ither in him-self or in some third person. If what is stated above be the correct principle of pleading applicable to such cases, it follows that when the plaintiff in the present case shows a prima facie title in himself to the property in dispute - as the admitted heir-at-law of the last owner - the defendant has 'to show a better title' either in himself or in some third person xx xx The general law would seem to he that the defendant's plea of jus tertii cannot be entertained whe .....

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intiff who has shown a prima facie title as the heir-at-law of the deceased. The real question in this case is whether the plaintiff who on statements made on her behalf is the executrix appointed under the will of her husband can maintain the present action as an heir as if on intestacy. 55. That the plaintiff was appointed as an executrix under the will of her husband is beyond all doubt. That being so, under Section 211 of the Succession Act, the entire property of the testator vests in the e .....

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perty of the deceased persons, but Section 211. The vesting of the property of the deceased persons in the executor as such does not arise from the probate. The executor derives his title from the will. Immediately upon the testator's death his property vests in the executor, for, the law knows no interval between the testator's death and the vesting of the property (vide Whitehead v. Taylor 1839 10 AEl 210 and Raja Rama v. Fakuruddin Sahib 38 M LJ 210 : AIR 1930 Mad 218. Therefore, even .....

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n the mofussil to which the Hindu Wills Act does not apply, the estate vests in the executor, who accepts office, from the date of the testator's death, This decision is later affirmed by the Privy Council in Venkata Subamma v. Ramayya It seems to us, therefore, that on the date of the testator's death the property of the late R.K.N.G, Raju vested in the plaintiff as an executrix. 57. In Parlhasarathy Aiyar v. Subbaraya Gramany AIR 1924 Mad 07 at p. 70, it was observed by Schwabe C. J., .....

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ase obviously has no application, because on the facts of that case it was found that the executor died without accepting the office or showing any indication that he took upon himself the duties of executor. Whether the executor has accepted the office or not will depend upon the facts of each case. In this case the plaintiff has not given evidence and no oral evidence was at all tendered by her. We can only, therefore, deduce the fact of her acceptance from the record available. In Ex. B-2, th .....

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tly in point: Where a man who was named as one to several executors, in answer to an inquiry who were the executors, wrote a letter saying that he and others were executors, this was held to afford sufficient evidence that he had acted as executor. The insertion of an advertisement calling on persons to send in their accounts, and to pay money due to the testator's estate, to A and B. 'his executors in trust', was held to make them compellable to take probate, and to subject them per .....

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' Solicitor replied that the executors of the will are his widow and daughter and Robert Smith, thus acknowledging himself to be an executor. Turner L.J. held that that letter was enough to indicate that there was an acceptance of the office of the executor. 60. In the second case (1832) 3 Hag Ecc 771 : 162 ER 1339 certain persons, Symes and Hennam published an advertisement in the paper that all persons who have any claim on the estate of late John Feaver were requested to send their respec .....

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ct as executor, and he may determine such election by acts which amount to an administration, One of the acts which amounts to administration so that the executor cannot afterwards refuse is something done by him with relation to the estate of the testator which shows an intention in him to enter upon the office of the executor. 62. In view of these authorities, we are of opinion that the plaintiff had accepted the office of the executrix, and it is not open now to the appellants' counsel to .....

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the pledgee of the pledged goods must either seek to redeem or sue for damages on the foot of conversion. This contention finds support in the decision of the Privy Council in Neckram Dobay v. Bank of Bengal ILR Cal 322 In that case the facts were that the plaintiff Dobay deposited with the Bank of Bengal certain Government promissory notes for the purpose of securing loans. A part of those securities were sold lawfully by the Bank, upon the borrower failing to comply with the terms of the agre .....

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gee-bank to itself was illegal and, therefore, the plaintiff was entitled to a declaration that what purported to have been the sale to the Bank itself, was no sale at all and that the plaintiff was entitled to redeem according to the terms of his pledge. The Privy Council, however, held that: It would be inequitable to allow the Bank, after this transaction, to treat the securities, which it had sold to itself, and then had in its hands, as still subject to the pledge. In their Lordships' o .....

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pledged goods without proper notice does not render the sale void but by analogy to Section 69(3) of Transfer of Property Act, the remedy of the pawnor for an improper sale of the mortgaged property is damages for conversion to the pawnor, and the correct measure of damages is the loss which the pawnor has actually sustained, taking into account the pawnee's interest in the goods at the time of the conversion. 67. In AIR1955Pat288 a Bench of the Patna High Court held that if the sale of the .....

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he pledge, and; (ii) that without a proper tender of the amount due on the pledge, the only right of the pledger in respect of an unlawful or unauthorised sale is in tort for damages actually sustained by him." We are in accord with the view of Chagla J., that in case of an unauthorised sale by a Pledgee the relief that the pledgor can seek is to file a suit for redemption by depositing the money, treating the sale as if it had never taken place, or where the suit for redemption is not file .....

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