Jammu & Kashmir High Court
State Bank Of India vs Standard Engineering And Trading ... on 5 September, 2002
Equivalent citations: AIR2003J&K64, AIR 2003 JAMMU AND KASHMIR 64
ORDER T.S. Doabia, J.
1. The State Bank of India, who figured as a plaintiff was unsuccessful in the suit filed before the trial Court. Suit stands dismissed. Now, an appeal has been preferred.
2. Issue No. 1, which was to the effect as to whether the suit is maintainable or not, was decided in favour of the plaintiff-Bank, issue No. 2, which was regarding the authority of the Branch Manager to file the suit, was also decided in favour of the appellant-Bank. Issue No. 3 with regard to the execution of the documents before obtaining financial assistance by the defendant/respondent was also decided in favour of the appellant-Bank. Same was the position visa-vis issue No. 4, which was regarding the admissibility of the documents. Issue No. 5, which was to the effect as to whether the mortgage deed could be executed or not, and was admissible in evidence, was also decided in favour of the appellant-Bank. What has gone against the defendant-Bank, is issue No. 6. For facility of reference, this issue is being reproduced below :--
"6. Whether the plaintiff is entitled to the suit amount along with loss and interest @ 13.5% per annum from 12-5-81 till payment of the whole amount? OPP"
3. With a view to appreciate the controversy which led to a decision being against the appellant-Bank, the following facts be noticed.
4. Within one year of the grant of the loan to the borrower, the appellant-Bank chose to lock the factory premises. During this period, a theft took place. The goods of the value of Rs. 47,052 were subject-matter of theft. The argument put across before the trial Court was that as the Bank had put the factory premises under its lock and key, therefore, to this extent the respondent-defendants could not be made liable. The total amount, which was being claimed by the defendant was to the extent of Rs. 59,783.21. The value of the articles regarding which possession was taken, by putting the premises under lock and key by the appellant-Bank, was taken note of by the trial Court. The balance amount payable by the defendant was calculated at Rs. 12.431.21. The appellant-Bank had received Rs. 12,000/- from the Insurance Company. The balance which remained and as claimed by the Bank, came to Rs. 431-32. Even, this amount was not decreed because when the suit was filed, the interest component was determined by the appellant-Bank, without taking note of Rs. 12,000/- which was paid by the defendant/respondent. It was, accordingly, held by the trial Court that the appellant-Bank is not entitled to any decree. It is this aspect of the matter, which is subject-matter of challenge in this appeal.
5. I am of the opinion, that once possession of the property was taken over by the appellant-Bank, and any loss was caused to the property in the meanwhile, then the respondent-Defendant cannot be burdened with such a loss. See Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322 wherein it was observed :
"The second question would then be whether the appellant was entitled to recover the balance of the said loan in view of his denial of the pledge and his failure to offer to redeliver the goods. Under the Common Law a pawn or a pledge is a bailment of personal property as a security for some debt or engagement. A Pawner is one who being liable to an engagement gives to the person to whom he is liable a thing to be held as security for payment of his debt or the fulfilment of his liability. The two ingredients of a pawn or a pledge are :
(1) that it is essential to the contract of pawn that the property pledged should be actually or constructively delivered to the pawnee, and (2) a pawnee has only a special property in the pledge but the general property therein remains in the pawner and wholly reverts to him on discharge of the debt. A pawn, therefore, is a security, where, by contract a deposit of goods is made as security for a debt. The right to property vests in the pledge only so far as is necessary to secure the debt. In this sense a pawn or pledge is an intermediate between a simple lien and a mortgage which wholly passes the property in the thing conveyed. (See Halliday v. Holygate, (1868) 3 Ex 299). A contract to pawn a chattel even though money is advanced on the faith of it is not sufficient in itself to pass special property in the chattel to pawnee. Delivery of the chattel pawned is a necessary element in the making of a pawn. But delivery and advance need not be simultaneous and a pledge may be perfected by delivery after the advance is made. Satisfaction of the debt or engagement extinguishes the pawn and the pawnee on such satisfaction is bound to redeliver the property. The pawner has an absolute right to redeem the property pledged upon tender of the amount advanced but that right would be lost if the pawnee has in the meantime lawfully sold the property pledged. A contract of pawn thus carries with it an implication that the security is available to satisfy the debt and under this implication the pawnee has the power of sale on default in payment where time is fixed for payment and where there is no such stipulated time on demand for payment and no notice of his intention to sell after default. The pawner however has a right to redeem the property pledged until the sale. If the pawnee sells he must appropriate the proceeds of the sale towards the pawner's debt, for, the sale proceeds are the pawner's monies to be applied and the pawnee must pay to the pawner any surplus after satisfying the debt. The pawnee's right of sale is derived from an implied authority from the pawner and such a sale is for the benefit of both the parties. He has a right of action for his debt notwithstanding possession by him of the goods pledged. But if the pawner tenders payment of the debt the pawnee has to return the property pledged. If by his default the pawnee is unable to return the security against payment of the debt, the pawner has a good defence to the action. This being the position under the common law, it was observed in Trustees of the Property of Eills and Co. v. Dixon Johnson, 1925 AC 489, that if a creditor holding security sues for the debt he is under an obligation on payment of the debt to hand over the security, and that if having improperly made away with the security he is unable to return it to the debtor he cannot have judgment for the debt."
6. It was further observed "There is no difference between the common law of England arid the law with regard to pledge as codified in Sections 172 to 176 of the Contract Act. Under Section 172 a pledge is a bailment of the goods as security for payment of a debt or performance of a promise.
Section 173 entitles a pawnee to retain the goods pledged as security for payment of a debt and under Section 175 he is entitled to receive from the pawner any extraordinary expenses he incurs for the preservation of the goods pledged with him. 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. So long, however, the sale does not take place the pawner is entitled to redeem the goods on payment of the debt. It follows, therefore, that where a pawnee files a suit for recovery of debt, though he is entitled to retain the goods he is bound to return them on payment of the debt. The right to sue on the debt assumes that he is in a position to redeliver the goods on payment of the debt and therefore, if he has put himself in a position where he is not able to redeliver the goods he cannot obtain a decree. If it were otherwise the result would be that he would recover the debt and also retain the goods pledged and the pawner in such a case would be placed in a position where he incurs a greater liability than he bargained for under the contract of pledge. The pawnee, therefore, can sue on the debt retaining the pledged goods as collateral security. If the debt is paid he has to return the goods with or without the assistance of the Court and appropriate the sale proceeds towards the debt. But if he sues on the debt denying the pledge, and it is found that he was given possession of the goods pledged and had retained the same, the pawner has the right to redeem the goods so pledged by payment of the debt. If the pawnee is not in a position to redeliver the goods he cannot have both the payment if the debt and also the goods. Where the value of the pledged property is less than the debt and in a suit for recovery of debt by the pledgee, the pledgee denies the pledge or is otherwise not in a position to return the pledged goods he has to give credit for the value of the goods and would be entitled then to recover only the balance. That being the position the appellant would not be entitled to decree against the said promissory note and also retain the said goods found to have been delivered to him and, therefore, in his custody."
7. In some similar circumstances in Central Bank of India v. Grains and Gunny Agency, AIR 1989 MP 28, it was said that a Bank is not entitled to claim the amount which gets damaged while in custody of the Bank. Same view was expressed in Dhanlaxmi Bank Ltd. v. K.K. Jose, AIR 1991 Ker 388.
8. The view expressed by the learned trial Court is as such upheld. I do not find any merit in this appeal, and the same is dismissed. The record be returned to the trial Court forthwith.