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1949 (11) TMI 13

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..... C and D provide for payment of interest at 101/2 per cent per annum. One hundred shares of the Indian Iron and Steel Company Ltd., and two hundred shares of the Midland Rubber Company Ltd., were pledged with the Bank when the first loan was advanced. For the second loan the security given was two hundred shares of the Midland Rubber Company Ltd., and for the third two hundred shares of the Indian Iron and Steel Company, Ltd. On the day the first loan was advanced (11-9-1112 corresponding to 28.4.1937) and before the advance itself was made Defendant 2 gave a letter of guarantee to the Bank undertaking responsibility for all loans the Bank advanced to Defendant 1 on promissory notes and on the security of shares in limited Companies. The said letter of guarantee is Ex. A. No payment was made towards these transactions for very nearly 10 months and when the price of shares began to fall the Bank started pressing Defendant 1 for payment. As however no response was made they issued a notice, Ex, F (4-2-1938) demanding payment of all amounts due within 7 days and intimating Defendant 1 that otherwise they would sell the shares and proceed to realise the balance. To this Defendant 1 sent .....

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..... e raised by Defendant 1 was that the sale of the shares was unauthorised and without proper or reasonable notice to him and hence invalid. He contended that the shares were sold at very low prices and that had they been sold at proper prices besides satisfying the amounts due to the Bank there would also have been a large surplus. According to him it was a case of wrongful conversion and he put forward a counter claim for ₹ 6,737-8-0. It was further contended that the debt being secured under Act III (3) of 1116 the Bank cannot claim more than 6 per cent interest per annum. 4. The Court guardian of the minor Defendants even put the Bank to prove the genuineness of Ex. A and contended that even if that be genuine it cannot have any operation with respect to the loans advanced under Exs. C and D, but only to that under Ex. B. Another contention raised was that by the Bank's direct dealings with Defendant 1 the contract of suretyship stood cancelled even during the life-time of Defendant 2. Like Defendant 1 the minor Defendants also raised objection to the rate of interest claimed by the Bank. 5. The main defences of Defendant 1 failed in the Court below. He succeeded .....

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..... 8. In dealing with the first point, it may be mentioned that in the Court below it was even contended that the Bank cannot effect the sale of the securities pledged with them without the consent or permission of Defendant 1. In the appeal no such point was urged and if we may say so rightly. Section 176, Contract Act (Section 129, Tranvancore Contract Act) defines the rights a pawnor has with respect to his securities and the said section reads thus: If the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawner may bring a suit against the pawnor 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 duo, the pawnor shall pay over the surplus to the pawnor. Defendant 1 had executed promissory notes with respect to the loans and they had become overdue when Ex. F le .....

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..... was raised in the two cases mentioned and what is pointed out in them that the expression he may sell the thing pledged on giving reasonable notice of the sale in Section 176 only means an intimation of the intention to sell and not that a sale should be arranged beforehand and due notice of all details given to the pawnor finds abundant support in earlier as well as in later decided cases. The latest pronouncement of an Indian High Court on the subject is that occurring in Official Assignee v. Modho Lal Sindhu A.I.R. 1947 Bom. 217 : (48 Bom. L.R. 828). At p. 227 of the report after stating that the law with regard to a pawn enacted in the Indian Contract Act, 1872 is a codification of the English Common law, Stone C.J. said as follows: Speaking of the common law right to sell Story J. in his commentaries on the Law of Bailments, eighth edition gays at p. 262: Another right resulting, by the common law, from the contract of pledge, is the right to sell the pledge, where there has been a default in the pledgor in complying with his engagement, but a sale before default would be a conversion. Such a right does not divest the general property of the pawnor, but still leave in .....

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..... her at the time originally appointed, or after notice by the pledgee.' In Ex parte Official Receiver; In re Morritt (1886) 18 Q.B.D. 222 at p. 232 : (56 L.J.Q.B. 139), Cotton L.J. said: A contract of pledge carries with it the implication that the security may be made available to satisfy the obligation and enables the pledgee in possession (though he has not the general property in the thing pledged, but a special property only) to sell on default in payment and after notice to the pledgor, although the pledgor may redeem at any moment up to sale.' He afterwards said, Ex parte Official Receiver; In re Morritt, (1886) 18 Q.B.D. 222 at p. 233 : (56 L.J.Q.B. 139), with reference to the position of a mortgagee of personal chattels: 'Where there is no express power of sale given by the mortgage, he has, after default in payment, and after he has given the mortgagor a reasonable time to pay the money due, a power to sell and give a good title to the purchaser, though, of course, the mortgagor has, at any time before sale, a right on payment of the money due, including expenses, to prevent the sale and redeem the chattels .' According to those authorities, it would seem t .....

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..... refore be of much use to the Appellant in this case. Here Ex. F contains an unequivocal indication of the Bank's intention to sell the shares if occasion demanded it; the Appellant had notice of it and what he did was to attempt to gain more time so that the gale may be held when the share market was more favourable. The lower Court's decision that the legal requirements of a valid notice are satisfied in this case has therefore to be upheld. 10. In view of our decision on the first point the other two points also arise for consideration. In a sense the third point is inconsistent with and contradictory of the second. The two contentions ill go together, but a Defendant is not precluded from raising pleas in the alternative. The second point raised is that the sale held in violation of an agreement to postpone it indefinitely is not valid and binding on the Appellant. The third point argued was that the sales held were inordinately delayed after notice of the sale and that the Bank should bear the consequent loss the Appellant sustained thereby. We have to consider these two points on their respective merits. 11. No case of any agreement to postpone the sale was pl .....

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..... -8-39 and 28-9-39. The law does not impose a burden on a pawnee to bring the security to sale within a reasonable time of the notice of the sale. Decided cases covering this point will appear in the sequel. No waiver of the right of sale can therefore be inferred from mere delay. 13. The other ground on which this argument was sought to be rested was that Ex. IX, the lawyer's notice issued in October 1938, long after Ex. F was sent, made no reference to the Bank's right of sale but only to a suit in a Court of law to recover the amounts due. It is too far-fetched to contend that the implication of the notice is necessarily the abandonment of the right of sale. Section 176 gives a pawnee the right to bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security as also the right to sell the thing pledged, on giving the pawner reasonable notice of the sale. So long as the security is not released the pawnee has the liberty to choose either course the law allows. It is an accepted rule that a party must in law be deemed to be acting always in his beat interests to safeguard his rights and not in derogation of them. That the .....

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..... notice. In Mannargudy Champaka Rice Mills, Ltd. v. Ramaswami Pillai 1929 M.W.N. 167, referring to Section 176, Coutts-Trotter C.J. observed as follows: That (Section 176) has been in fact construed by the learned Judge to mean not merely that the notice of the proposed sale must be within a reasonable time but that the unfortunate pawnee is put to exercise his judgment at his peril as to when is the proper and reasonable time for him to sell. Why should he? He has got the goods. In this particular case, the his Respondent is wholly without merits because it was at his request that the mill held their hand and did not sell at a much earlier date as they otherwise would have done because he represented that he had the sub-purchasers of the rice who would take delivery and pay the mill as things went on what was due to them. The learned Chief Justice's comment regarding the conduct of the pawnor in asking the pawnee to postpone the sale and afterwards turning round to say that the sale was delayed applies with equal, force to the conduct of the Appellant in this case. The evidence shows that the shares were sold by recognised brokers through the medium of well-known ins .....

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..... antee passed by Defendant 2 to the Bank is, in our opinion, clear, as clear can be. Thereunder without reserve or restriction Defendant 2 entered into a contract of guarantee with the Bank to be jointly and severally liable for all loans the Bank advanced to Defendant 1 on the strength of promissory-notes executed by him and the pledge of shares in limited companies. There was no time limit or any limit for the amounts for which Defendant 2 stood guarantee. The contention does not even find mention in the memorandum of appeal and we cannot help looking upon the point as thoroughly untenable. 18. It was next urged that the sale of the shares effected without notice to the guarantor rendered it invalid as against him and that the guarantor's estate cannot now be made liable for the amounts decreed against that estate. This point again is not raised either in the Court below or in the memorandum of appeal to this Court. It is a question of fact whether the guarantor had notice of the sale and strictly speaking the Appellant is not even entitled to be heard on it. We would however venture to observe that while a reasonable notice of the sale is a statutory requirement so far as .....

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