Madhava Reddy, J.
1. This appeal by defendants 1 to 11 is directed against the judgment and decree in O.S. No. 53 of 1970 on the file of the Chief Judge, City Civil Court, Hyderabad. The plaintiffs, respondents 1 and 2 herein filed a suit for the recovery of a sum of Rupees 57,751-90 together with interest pendente lite until realization and costs against the estate of late Sri A.K. Babu Khan in the hands of defendants 1 to 11.
2. It is the case of the plaintiffs that late Sri A.K. Babu Khan pledged 2650 shares of the Hyderabad Construction Company Limited, Hyderabad through one Kapurachand Shrimal, Share and Stock Broker with Smt. Najeebunisa Begum to whom Sri Babu Khan had to pay Rs. 54,000. Sri A.K. Babu khan requested the plaintiffs 1 and 2 and one Sri Hargovind Bajjaj (who will be hereinafter referred to as the 'plaintiffs') who not being available to join the plaintiffs in filing the suit, has been impleaded as the 12th defendant, to redeem the said shares from Smt. Najeebunnisa Begum by paying Rs. 54,000 and to keep the said shares as pledge against the loan thus advanced to Sri A.K. Babu Khan. Accordingly, the plaintiffs paid Rs. 54,000 to Smt. Najeebunnisa Begum and redeemed the shares Sri A.K. Babu Khan, executed an agreement of pledge on 6th July, 1965 marked Ex. A-1 in the suit. Incorporating the terms agreed upon between the parties, Sri A.K. Babu Khan executed a document on 6-7-1965 the salient terms of the said agreement are :
(i) that the shares shall be lodged by the plaintiffs for transfer in their names :
(ii) that Sri A.K. Babu Khan would redeem the shares at any time within two years on payment of the said amount without interest together with the amount of transfer fee ;
(iii) that if the amount is not paid within two years, interest at 9% shall be charged for a period of one year;
(iv) that if the amount is not paid, the plaintiffs shall be entitled to dispose of the said shares at the risk and responsibility of Sri A.K. Babu Khan after intimating him.
Accordingly the plaintiffs redeemed the shares by paying Rs. 54,000 to Smt. Najeebunnisa Begum and got the shares transferred to their name. In spite of several demands, Sri A.K. Babu Khan and after his death, his legal heirs, defendants 1 to 11 herein failed to pay the amount due and redeem the pledged shares. When no reply was given to the lawyer's notice dated 14th August, 1969 the plaintiffs issued a further notice intimating the defendants that unless the shares are redeemed by payment of the amount due inclusive of interest, the shares would be sold at public auction on 10-4-1970 at the office of Sri B.C. Jain advocate and that the short fall, if any, would be recovered from them. A notice to that effect was published in the papers and hand-bills were also distributed intimating the share-brokers and intending purchasers about the proposed sale. But the defendants failed to pay the amount and redeem the shares. The shares were, therefore, sold at a public auction on 10-4-1970. After deducting the amount of Rs. 9,613-00 realised by the sale of the said 2650 shares, the principal amount and the interest due thereon at 9 per cent per annum from 6-7-1967 to 10-4-70 which comes to Rs. 67,751-00 is sought to be recovered from the estate of Sri A.K. Babu Khan in the hands of the defendants.
3. The defendants denied the plaint allegations for want of knowledge. They however, admit that Sri A.K. Babu Khan executed the agreement dated 6th July, 1965. But they contended that the interpretation sought to be placed by the plaintiffs on the agreement is not correct. According to them, the transaction was not one of pledge but one of out and out sale with an option of repurchase being vested in Sri A.K. Babu Khan. They also pleaded that on the date of the agreement Sri A.K. Babu Khan was not the owner of the said shares and could not have created a valid pledge. A plea that the suit was barred by limitation was also raised. In the result, they prayed for the dismissal of the suit.
4. The learned Chief Judge held that the suit transaction cannot by any stretch of imagination be described as a pledge but that the transaction under Ex. A-1 is one of sale. But at the same time he was of the view that this finding does not deprive the plaintiffs of their right to sue on the original debt on the principle of money had and received. He also held that the estate of late Sri A.K. Babu Khan was liable to discharge the amount of Rs. 54,000 borrowed by late Sri A.K. Babu Khan through P.W. 2 for the purpose of redeeming the shares from Smt. Najeebunnisa Begum he further held that the cause of action arose at the end of two years period given under Ex. As-1 to Sri A.K. Babu Khan for repayment of the amount and that the suit was not barred by limitation. As regards the plaintiffs' claim of interest while declaring that they were not entitled to interest till 10-4-1970, it allowed interest of Rupees 4,860-00, it allowed interest on Rupees 49,446-90 at 6 per cent.
5. In this appeal, the learned counsel for the defendants appellants strenuously contends that the defendants appellants must succeed upon the finding of the court below that the transaction was not one of pledge but one of sale. The question of money had and received cannot arise when the transaction is one of sale. According to him in any event as the transaction covered by Ex. A-1 is not one of pledge, this suit must fail. He also contends that inasmuch as it is filed beyond three years of Ex. A-1 agreement the suit was barred by limitation.
6. The agreement between the parties is reduced to writing on 6-7-1965. The nature of the transaction must depend upon the interpretation of the terms of the said agreement and only if the terms are not clear or are susceptible of more than one interpretation, the conduct of the parties and the surrounding circumstances may help to ascertain the real intention of the parties.
7. The suit transaction relates to 2650 shares of Hyderabad Construction Company Limited. As can be gathered from that document, on the date of the agreement, three shares belonging to Sri A.K. Babu Khan were pledged by Sri Kapurachand Srimal with Smt. Najeebunnisa Begum for Rs. 54,000. All but 100 shares were fully paid up and they were standing in the name of different persons. 1900 shares were in the name of State Bank of Hyderabad, 250 in the name of Mrs. Lala Bee Saheba, 300 in the name of H.M.Surati and 100 in the name of Indira Vadan H. Surati. The plaintiffs were to obtain release of all these shares by paying Rs. 54,000 to Najeebunnisa Begum Saheba. They were also to lodge these shares for transfer in their names immediately. Sir A.K. Babu Khan was given the right to pay the amount including the transfer fee and take delivery of all these shares within a period of two years from that date. A further period of one year thereafter was also given to Sri A.K. Babu Khan, to take back these shares from the plaintiffs by paying the entire amount with 9 per cent interest. If the amounts were not paid even within the above stipulated period, the plaintiffs were given the right to dispose of the shares in open market at the risk and responsibility of Sri A.K. Babu Khan. They were however, required to give him prior intimation. The plaintiffs were also given full voting rights in the company on the said shares. As and when a part payment was made by Sri A.K. Babu Khan, the shares were to be delivered to him in proportion to such payment. Sri A.K. Babu Khan and the plaintiffs signed the agreement. This document is attested by two sons of Sri A.K. Babu Khan one of whom is the fifth defendant. The execution of this agreement is not in dispute. It is also not disputed that thereafter the plaintiffs paid Rs. 54,000 to Najeebunnisa Begum which is evidenced by the receipt. Ex. A-1 dated 8th July, 1965 and the shares were delivered to them. These shares were accompanied by blank transfer forms signed by the registered owners. Exs. X-2 to X-5 are the transfer forms which have been produced by D.W. 1. The plaintiffs submitted these transfer form s and obtained transfer of these shares in their respective names. Exs. X-6 to X-9 are the original entries in the registers of the Company and Ex. X-9A are the true copies thereof. It may also be noticed that the first plaintiff was elected as Director of the Hyderabad Construction Company. He also field a complaint against Sri A.K. Babu Khan alleging that he had failed to send a notice of the meeting of the Board of Directors. These documents are not disputed. These documents are also proved by the evidence of D.W. 2 who is an employee of the Hyderabad Construction Company Sri A.K. Babu Khan never paid the amount and never took back these shares. A notice Ex. B-1 dated 12th July, 1968 was issued on behalf of the plaintiffs to Sri A.K. Babu Khan calling upon him to pay Rs. 54,000 with interest from 7-7-1967 to 6-7-1968 amount to Rs. 4,860-00 and Rs. 300-00 being the notice charges and redeem his shares within one week of receipt of the notice failing which he was threatened with a suit to recover the said amount. Sri A.K. Babu Khan did not reply to the notice. Sri Babu Khan died in October 1968. Another notice dated 14th August, 1969 was issued on behalf of the plaintiffs through their Advocate to the heirs of late Sri A.K. Babu Khan, defendants 1 to 11 herein calling upon them to pay the amount. Office copy of that notice is marked as Ex. A-2. Defendants 1 to 11 neither sent any reply nor paid the amount demanded. The plaintiffs thereupon got issued another notice. Ex. A-3 dated 1-4-1970 informing the defendants 1 to 11 that if the amount of Rs. 54,000 together with interest upto date amounting to Rs. 12,859 and the notice charges of Rs. 300 are not paid within one week, all the 2650 shares would be sold in public auction on 10-4-1970 at 4-30 p.m. at the office of their Advocate Sri B.C. Jain and that whatever amount is realized would be given credit to and a suit for the recovery of the balance of the amount and costs of auction would be filed. Exs. A-5 to A-9 are the postal acknowledgment of some of the defendants in this behalf and Ex. A-10 is one of the envelopes addressed to the tenth defendant which was returned. In reply to this notice, defendants 1 to 4 published a notice under the signature of their Advocate in the 'Siasat' a local Urdu Daily and also in the English Daily 'Deccan Chronicle' which are marked respectively as Exs. A-4 and B-5 to the effect that the shares were not pledged as stated but that they were sold to the plaintiffs and others. According to Ex. A-3 notice, auction was held on 10-4-1970. The auction proceedings are marked as Ex. A-11. The plaintiffs thereupon caused another notice issued through their Advocate Sri B.C Jain on 4-7-1970 intimating the defendants that only a sum of Rupees 9,613-10 were realised by the sale of the shares and calling upon them to pay the balance of the amount of Rs. 54,406-90 within seven days failing which a suit would be filed. The defendants not having paid the amount, the suit was eventually filed.
8. In the context of the above sequence of events and the evidence on record we may first examine whether the suit transaction was one of sale of shares as pleaded by the defendants.
9. It is significant to note that the consideration for the transfer of the shares in favour of the plaintiffs was not fixed per share. On the date of the suit transaction, these shares were pledged with Najeebunnisa Begum for Rs. 54,000. The plaintiffs were requested to obtain release of these shares by paying a sum of Rs. 54,000 due to due to Najeebunnisa Begum from Sri A.K. Babu Khan. Unless Sri A.K. Babu Khan thought the value of the shares was more than Rs.54,000 he would not have obtained release of the shares by paying that amount. The amount paid to Najeebunnisa Begum was not the consideration for the sale of these shares in favour of the plaintiffs. It was in view of the terms of the agreement, the plaintiffs paid Rs. 54,000 to Najeebunnisa Begum and obtained transfer of shares in their names.
10. It was argued by Mr. Balagopal, the lac for the appellants that only because there was a sale of shares in favour of the plaintiffs-respondents, blank transfer forms were signed and delivered to them, they were given the right to vote and stand for election. In fact, their names were recorded in the books of the company as shareholders and on the strength of the shares one of them was also elected as a Director. One of the plaintiffs also filed a complaint against Sri A.K. Babu Khan in Criminal Court for not giving him notice of the meeting of the Board of Directors. Thus the plaintiffs exercised all the rights of a purchaser of the shares and therefore, the transaction was one of sale and not a pledge.
11. The fact that blank forms were executed in favour of the plaintiffs and that the plaintiffs were recorded as share holders in the books of the Company and they also exercised the rights of the shareholders and one of them was elected as a Director is not a consequence which follows only when there is a sale of shares; it may even result form a mortgage of shares. As observed by the learned Author, Mulla in his book on the Transfer of Property Act, 1882, 'Shares are moveable property in Indian Law and may be subject-matter of a mortgage or a pledge.............. A deposit of the certificate accompanied by duly executed blank transfer deed has been held to be a mortgage both in England and in India as the transaction clearly authorises the creditor to fill up the blanks and get his name registered.'
12. In Narasayyamma v. Andhra Bank, AIR 1969 Andh Pra 273 it was held that the mere obtaining of blank transfer of shares was not conclusive of whether the transaction is one of mortgage or pledge. The Court observed :
'.............. obtaining of blank transfers is a convenient mode of exercising the rights of sale which the pledgee in law is entitled to do.'
13. Thus the above factors do not conclusively establish that the transaction is only one of sale. It all depends upon the cumulative effect of all the recitals in the agreement and the intention of the parties. A reading of all the terms and conditions of the suit transaction evidenced by Ex. A-1 and the intention of the parties gathered from all the surrounding circumstances as also their conduct militates against the plea of sale of these shares by Sri A.K. Babu Khan in favour of the plaintiffs. Vide (1901) 2 Ch 314 at p. 316; (1902) 1 Ch 579; (1910) 1 Ch 632 and : AIR1956Pat32 .
14. The transfer of these shares both under provisions of the Company Law as well as under the express terms of agreement gave the plaintiffs full voting rights in the company. Sri A.K. Babu Khan was, however, given the option to take back his shares at any time within two years of the agreement by paying only Rs. 54,000 and not the full market price at the relevant time. The plaintiff could not refuse to re-deliver these shares to Sri A.K. Babu Khan if he chose to take them back within two years. Even at the end of two years but within one year thereafter Sri A.K. Babu Khan had the right to a return of all the shares on payment of Rs. 54,000 and interest at 9 per cent thereon. The plaintiffs were bound to return the shares even then. The question of Sri A.K. Babu Khan's paying Rupees 54,000 with interest at 9 per cent could never have provided for the same if the transaction was one of sale. This shows that the transfer of these shares in favour of the plaintiffs was not absolute. It was subject to certain conditions. This transfer was subject to Sri A.K. Babu Khan repaying the amount at any time within three years and asking for return of these shares. In fact, one of the terms of the agreement stipulates that whenever part payment is made by Sri A.K. Babu Khan, the shares will be returned to him in proportion to the amount paid by him. If the shares were sold outright to the plaintiffs and the plaintiffs had purchased the same such a condition would not have found a place in the agreement. This condition totally belies the claim of the defendants that the transaction was one of out and out sale and that the plaintiffs had purchased these shares for Rs. 54,000. It is further stipulated that if the amount is not paid even within three years of the agreement, the plaintiff shall have the right to dispose of the shares in open market at the risk and responsibility of the first party. The words 'at the risk and responsibility of the first party' clinchingly establish that Sri A.K. Babu Khan was primarily under an obligation to repay the amount at least within a period of three years and take back the shares. The shares were held by the plaintiffs only as security for the payments. If it was an out and out sale as pleaded by the defendants, the question of the shares being sold in open market at the risk and responsibility of Sri A.K. Babu Khan cannot arise. This could arise only if Sri A.K. Babu Khan still had an interest in the shares and that could subsist only if the transaction was not one o sale and right. The plaintiffs denied that there was any sale of shares in their favour and that is what P.W. 1 who is the first plaintiff and P.W. 2 Kapurchand Shrimal through whom the shares were initially pledged with Najeebunnisa Begum and later taken delivery of by the plaintiffs by paying Rs. 54,000 deposed. There is no evidence to the contrary. Sri A.K. Babu Khan had died. The only other witness who deposed anything in this behalf is the 5th defendant examined as D.W. 2. He is also the attesting witness of Ex. A-1. He deposed that he signed the document, Ex. A-1 when asked to do so by his father. He was neither told about the contents of the document nor did he himself read them. He frankly admits that his father did not tell him about these transactions. He deposed that after the plaintiffs left, his father told him that the plaintiffs have purchased the shares of the Company. He further deposes that his father never told him that these shares were pledged with the plaintiffs. In the written statement he did not state this fact. When the 5th defendant had signed Ex. A-1 it is highly improbable that his father would have once again told him that the shares were sold to the plaintiffs. Further if it was a case of sale, there is no reason why Sri A.K. Babu Khan should not have given a reply to that effect in response to the notice. Ex. B-4 After the death of Sri A.K. Babu Khan, even the defendants did not send any reply to the plaintiff's notice Ex. A-2. Only in response to the second notice they took up the plea that the shares were sold by Sri A.K. Babu Khan to the plaintiffs. In the face of the recitals of the document, Ex. A-1, the evidence on record and the conduct of Sri A.K. Babu Khan and the defendants themselves, the plea of the defendants that there was a sale of these shares in favour of the plaintiffs cannot be upheld. The finding of the court below in this behalf cannot be sustained.
15. If the transaction is not one of sale, what then is it? Is it pledge or a mortgage? The defendants-appellants contend that the plaintiffs can succeed only if the transaction is proved to be one of pledge and according to them it is not a pledge.
16. Whether a transaction is one of 'pledge' or a 'mortgage' is not often free from difficulty. As observed by the learned Author Mulla in the Transfer of Property Act, the Transfer of Property Act refers to mortgages of immovable property and the Indian Contract Act refers to pledges of moveable property but neither Act deals with mortgages of moveable property. Section 172 of the Indian Contract Act defines 'pledge' as follows :
'The bailment of goods as security for payment of a debt or performance of a promise is called 'pledge'. The bailer is in this case, allied 'Pawner'. The bailee is called the 'Pawnee'.
17. The three essential features of a 'pledge' are : (1) there must be a bailment of goods i.e. delivery of goods, (2) the bailment must be by way of security and (3) the security must be for payment of a debt or a performance of a promise. As observed in Sanjiva Row's commentaries on Indian Contract Act 'a 'pledge' is delivery of goods by the pledgor to the pledgee by way of security upon a contract that they shall when the debt is paid or the promise is performed be returned or otherwise disposed of according to the directions of the pledgor.............. A pledgee does not have the right of ownership, though he has the right of possession, but not the right of enjoyment; a pledgee has the right of disposition which is limited to disposition of pledgee's rights only and of a sale only after notice and subject to certain limitation.' While the owner has the right of possession as well as the right of enjoyment and right of disposition, the pledgee has only the right of possession but not the right of enjoyment. The pledger's right of disposition is governed by the terms of the pledge and is limited to the recovery of the amount due to him under that pledge.
18. In Kunhum Elaya Nayar v. Krishna Pattar, (1942) 2 Mad LJ 120= (AIR 1943 Mad 74) where there was mere deposit of shares certificates without any deed of transfer, the transaction was held to be one of pledge. But a deposit of certificates accompanied by a duly executed blank transfer deed constitutes a mortgage. In case of a pledge a special interest and not special property is transferred to the pledgee who is impliedly authorised to sell the goods pledged in case of default in accordance with the provisions of the Contract Act. In case of mortgage however, a general but limited property is transferred to the creditor but the possession may or may not be transferred to the mortgagee. Where money is advanced by way of loan upon the security of goods the transaction may take the form of a mortgage or a pledge.
'The distinction between a pledge and mortgage is that while under a pledge there is only a bailment, under mortgage there is one sort of transfer of right of property by way of security.............'
In a judgment of a single Judge of the High Court in Md. Sultan v. Firm Rapratap Kannya Lal, : AIR1964AP201 is was held :
'A pledge is the delivery of goods by the pledgor to the pledgee by way of security upon a contract that they shall when the debt is paid or the promise is performed, be returned or otherwise disposed of according to the directions of the pledgor. A pledge would therefore, create an estate which vests in the pledgee, which is distinguishable from ownership since an owner owns (a) the right of possession, (b) the right of enjoyment and (c) the right of disposition. But a pledgee does not have the right of ownership though he has the right of a pledgee which include only the right of possession but not the right of enjoyment. A pledgee has the right of disposition which is limited to the disposition of pledgee rights only and of a sale only after notice and subject to certain limitations as is clear from the various provisions of the Indian Contract Act.'
19. It is therefore to be recognised that although the hypothecation and mortgage of moveable are not specifically mentioned in the Contract Act, but that Act not being exhaustive law on the subject and as the above said transactions have long been recognised as valid in India these transactions will have to be given effect to. In the absence of specific rules applicable to any matter, the principle recognised in the various Civil Courts Act is that the Courts should decide according to justice, equity and good conscience which is considered to be equivalent to the English Law wherever such law is applicable to Indian conditions. It is only under this principle that the hypothecation or mortgage of moveable property, although to specifically provided in the Contract Act are valid and a decree can be passed in enforcement of such transactions.
20. The Privy Council in In Re- The Odessa, 1916 AC 145 emphasises that the notion of enjoyment is excluded from the concept of pledge and if something more than mere possession of shares is given to the creditor it ceases to be pledge. The distinction between a pledge and a mortgage has been referred to in Md. Sultan v. Firm Ramapratap Kanniyalal, : AIR1964AP201 at p. 204 in the same words as pointed out by Sanjiva Row in his Commentaries on the Indian Contract Act, in Radhakirhsnan v. Madras Peoples' Bank, AIR 1943 Mad 73 Leach, C.J. pointed out the distinction between mortgage and pledge thus :
'The difference between a mortgage and a pledge of goods is that in a mortgage the ownership of the goods passes, whereas in a pledge the pledgee gets possession, but no right to the goods beyond what is necessary to secure the debt.'
21. A Bench of this Court in Narasayamma v. Andhra Bank (supra) pointed out the essential distinction between a pledge and a mortgage in the following words:
'Unlike a pledge, a mortgage acquires a general property in the thing mortgaged subject to the right of redemption of the mortgagor. In other words the legal estate of the goods mortgaged passes on to the mortgagee. But a pledgee had only the special property in the goods pledged, namely, the right of retainer of the goods as security, and in case of default he must either bring a suit against the pawner or sell the gods after giving a reasonable notice. Whether a particular transaction 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.'
22. In that decision, the Division Bench pointed out that as shares are treated as moveable property in India, the mere fact that along with the instrument of security some shares were delivered along with the blank share transfer forms duly signed without more, does not mean that the transaction is one of mortgage. A pledge of shares can also be accompanied by blank transfers. Obtaining of blank transfers is a convenient mode of exercising the right of sale when the pledgee in law is entitled to do.
23. In view of the above position of law the contention of the learned counsel for the appellants that since the blank transfer forms are obtained, it is necessarily a pledge cannot be upheld. Such forms may be obtained both in case the pledge as well as mortgage. But the main point of distinction between a pledge and a mortgage is that the right of enjoyment of the property is not given to a pledgee, that right vests in a mortgagee. In the instant case, it is seen that the shares wee not only accompanied by blank transfer forms but under the agreement Ex. A-1, the transferee was specifically given the right to obtain the transfer of shares in his favour and also exercise the rights of a shareholder. In fact, it was stipulated that the shares shall be lodged for transfer by the plaintiffs in their names immediately.
24. Accordingly transfer of shares was effected in favour of the plaintiffs and they exercised the right o voting, one of them was also elected as director. Thus the transferee enjoyed certain rights with respect to the shares which were given in their possession. Something more than mere delivery of shares with blank forms to enjoyment of the shares was bestowed on the plaintiffs which is consistent with an agreement of pledge; and consistent with mortgage.
25. The learned counsel for the appellant next contends that if it were a mortgage the plaintiffs could not have exercised the right of private sale and that establishes that it is not a mortgage. In case of mortgage, he could have only enforced the right of a mortgage by suing for the sale of the shares or for the appointment of a Receiver, the plaintiffs could not have sold them privately. In this behalf reliance is placed upon a judgment of the Madras High Court in Venkatachalam v. Venkatrami, AIR 1940 Mad 929. That was a case of mortgage of land and the crop. The court held that so far as the land is concerned it is mortgage of immovable property and governed by the provisions of the Transfer of Property Act but as regards the crop, it was held to be a mortgage of a moveable property and the mortgagee could only enforce the right of mortgage by suing for sale of the property. A mortgage of a moveable property is not entitled to claim possession, his right is only to enforce the mortgage by suing for sale of the property or the appointment of a receiver to secure possession of it in order that his security may be realized. Basing upon this decision the learned counsel for the appellant contends that since there is provision in the suit agreement for private sale that constitute only a pledge and not mortgage and therefore the plaintiff could not have sold the share privately, their only remedy was to approach the court. Be that as it may, if this contention of the appellants is accepted that establishes the suit mortgage to be a pledge. However, in our view, the fact that the parties have agreed that the subject-matter of the security may be sold in case of default without intervention of the Court does not necessarily imply that the transaction is one of pledge. Even in the case of mortgage of moveables the parties could so stipulate and shares have always been deemed to be moveable in India. Even in the case of a mortgage of moveables if under the terms of the contract entered into between the parties a right of private sale is given, that could be exercised. As stated by the learned Author, Mulla in his book on Transfer of Property Act, it is not as if the right of private sale could be vested only under a pledge and that a constitutes the distinguishing feature between a mortgage and a pledge.
26. In Inre Ahmed, AIR 1932 Bom 613 Kania, J., held that even a mortgagee of moveable has a right to sell without the intervention of the court. He further held that
'the rights of mortgagee of a moveable property are not in any way inferior to the rights of a pledgee because the mortgagee has the general estate in the property which is mortgaged to him. Besides he has the right to sell the property without the intervention of the court if the mortgagor after a proper notice is given to him to repay the money, fails to do so.
27. In Devarges v. Sandeman Clark & Co., (1902) 1 Ch 579 Lord Justices declared that the mortgagee of shares (the mortgage not being by deed) has in the absence of an express power of sale an implied power to sell the shares on default by the mortgagee in payment of the amount due at the time appointed for payment, or if no time be fixed then on the expiration of a reasonable notice by the mortgagee requiring payment on a day certain.'
28. In Ex parte Official Recovery in Remorritt, 18 Queen Bench Division 222 it was declared that when if a bill of sale contains an express power for the grantee to seize the goods, the grantee when he has seized the goods has power to sell them after the expiration of five days fixed by Bills of Sale Act, 1882. We have, therefore, no hesitation in holding that the power of sale conferred by the express terms of the agreement between the parties does not make it a pledge inasmuch as the right of enjoyment of the shares is also created under the agreement in favour of the plaintiff.
29. In Jagannath v. Fatechand AIR 1949 Nag 363 following the decision in Nanhuji v. Chinna, (1911) 10 Ind Cas 869 (Nag), the Bench held that as there is no statute governing the mortgage of moveables parties are exclusively bound by the terms of the agreement and the right of the mortgagee is to foreclose is regulated by the contract. Having regard to the terms of the agreement the court held that the transaction therein to be one of mortgage and not pledge. In Radhakrishna v. Madras Peoples' Bank Ltd.,(supra) Lach C.J. observed that a mortgage can also be a pledge. A Bench of the Andhra Pradesh High Court in Narasayamma v. Andhra Bank (supra) held the transaction to be one of pledge notwithstanding the shares being accompanied by blank transfer forms.
30. In the instant case, the shares were given into possession of the plaintiff they were authorised to lodge them with the company and obtain their transfer in their favour and also exercise the rights of a shareholder. Thus rights more than what vest in a pledgee were crated in favour of the plaintiff. They were given the right to enjoy these shares so long as he amount is not paid by the defendants. For payment of the amount a period of three years was given and in default the plaintiffs were given the right to sell the shares at the risk and responsibility of the defendants. Though this right is a right akin to that of a pledgee that itself does not exclude the transaction from being one of mortgage. As the essential distinction between the pledge and a mortgage is that in the former there is no right to enjoyment while in the latter such a right is given the suit transaction must be held to be a mortgage. This transaction may also amount to a pledge but as it is something more than that and the rights of the parties are governed by the terms of Ex. A-1 it is held to be a mortgage. In bringing the shares to sale, the plaintiffs have only exercised their right under Ex. A-1 and not because they were pledgee. In our view the suit transaction constitutes a mortgage.
31. It was next contended by the lac for the appellants Mr. Bala Gopal that if the transaction is one of a mortgage the plaintiffs cannot be granted the relief prayed for, for they have sought the relief in the suit on the footing that the suit transaction is one of pledge. He points out that neither in the notice issued prior to the suit nor anywhere in the plaint has the suit transaction been described as a mortgage, it is only referred to as a pledge and relief was sought on that basis. If the plaintiff had put forward a case of mortgage, the defendants would have taken several pleas in defence. They would, therefore, be prejudiced if any relief is granted to the plaintiffs on the footing that the suit transaction is a mortgage.
32. If we examine the plaint and the prior notice, it cannot be said that the plaintiffs described the suit transaction as a mere pledge and that they have never implied that it is one of mortgage. At the most it could be said that they had not taken a clear stand on this aspect.
33. In the plaint the suit agreement is no doubt referred to as an agreement of pledge, but at the same time the salient terms of the agreement are enumerated. One of the terms of the agreement is that Sri A.K. Babu Khan shall redeem the shares at any time within two years. The question of redemption can arise only in the case of a mortgage. Though in the first notice, Ex. A-2 dated 14-8-1969 issued on behalf of the plaintiffs, the shares were said to be pledged with the plaintiffs and defendant No. 12 it was also stated therein that Sri A.K. Babu Khan should redeem the shares at any time within two years on payment of Rs. 54,000 and as he had not redeemed the shares even after the third year, they are entitled to claim interest at 9 per cent and that the estate of Sri A.K. Babu Khan was liable to meet the claim in the final notice, Ex. A-3 dated 1-4-70 issued before the institution of the suit this transaction was neither referred to as a pledge nor as a mortgage. Only a demand for the amount due together with interest and the charges of the notice was made and it was stated that the hare shall be sold by public auction. In view of the above, what all could be stated at the most is that the plaintiffs were not clear in their mind as to whether the suit transaction amounted to a pledge or a mortgage. But it cannot be categorically held that the description of the suit agreement in the plaint wholly excludes the notion of mortgage. The crucial terms of the document have been stated in the notices as well as in the plaint. The document itself is filed along with the plaint. In these circumstances, it is for the Court to construe whether the agreement constitutes a pledge or mortgage. The mere fact that the plaintiffs have termed it as a pledge although it is a mortgage cannot be a ground for refusing the relief which they are entitled to on the terms of the agreement which are not in dispute. Whatever relief the plaintiffs are entitled to on the facts found by the Court must be awarded.
34. It is, however, argued that if the plaintiffs are awarded relief on the footing that the suit transaction is a mortgage the defendants would be prejudiced, but what other defences were open to them. It is not stated. Merely because the plaintiffs specifically did not plead this as a mortgage, they cannot be denied the relief they are entitled to under that agreement. No doubt as contended by the learned counsel for the defendants appellants and as laid down in Kanda v. Waghu, AIR 1950 PC 68 that the determination in a case should be founded upon a amendment to be found in the pleadings and as observed in Trojan & Co., v. Nagappa Chettiar, : 4SCR789 it is well settled that the decision of a case cannot be based on grounds outside the pleadings of the parties and that it is the case pleaded that has to be found in that case where the plaintiffs had based his claim for a certain sum of money on the ground that the defendant had sold certain shares belonging to him without his instructions but he was not able to prove that the sale was not authorised by him the Supreme Court reversing the decision of the High Court held that the plaintiff could not be given a decree for the sum claimed on the ground of failure of consideration as he had no set up any such alternative claim in the plaint or even at the later stage when he sought to amend the plaint. But in this case, it cannot be said that the claim of the plaintiff for the recovery of the money due does not arise from the pleading and the terms of the agreement. Whether that agreement constitutes a pledge or a mortgage it is for the Court to determine. As laid down by Privy Council even in Kanda v. Waghu, AIR 1950 PC 68 (supra)all that is necessary is that 'the determination of cause should be founded upon the case to be found in the pleadings or involved in or consistent with the case thereby made.' As discussed above a case of mortgage is clearly made not by the pleadings in this case. There is no statute governing mortgage or moveables and very many features of a mortgage and a pledge are similar. If in these circumstances, when the party while describing the suit agreement to be a pledge filed the agreement executed between the parties the relief which follows from such agreement cannot be denied. In Kedar Lal v. Hari Lal, : 1SCR179 Fazal Ali J., speaking for the Court said :
'I would be slow to throw out a claim on a mere technicality of pleading when the substance of the thing is there and no prejudice is caused to the other side, however, clumsily or inartisticlly the plaint may be worded. In any event, it is always open to a Court to give a plaintiff such general or other relief as it deems just to the same extent as if it had been asked for provided that occasions no prejudice to the other side beyond what can be compensated for in costs.'
That dicta squarely applied to the facts of this case for we are unable to see what prejudice the defendants would suffer. We therefore, hold that in the present case the plaintiffs are entitled to the relief on the footing that the suit agreement constitutes a mortgage.
35. The only other question that remains to be considered is whether the suit is barred by limitation. That contention is based on the ground that the right to sue for the recovery of the amount accrued to the plaintiffs on the date when the loan was advanced and the suit agreement was executed i.e. on 6-7-1965. According to the defendants the suit ought to have been filed within three years of the suit agreement i.e. before 6-7-1968 and the suit filed on 18-6-1970 is barred by limitation. It is Article 19 that is applicable. But a reading of the agreement would clearly show that the plaintiff had no right to demand payment of the amount at any time after the execution of the agreement Sri A.K. Babu Khan was given the right to pay at any time within two years without being label to pay interest. He was given a further period of one year to pay the amount with interest The plaintiff was not therefore obliged to file a suit within the period of three years. He had the option to wait till the expiry of the three years and demand the payment of the principal with interest thereafter Art. 19 of the present Limitation Act which corresponds to Art. 57 of the old Act reads as follows :
'For money payable Three When the loan for money lent years is made.'
36. This provision is a general article applicable for suits for recovery of money lent. That would be applicable when the right to recover the amount is based on mere lending of the amount and the suit is based on the factum of lending and not governed by any agreement giving option to the debtor to pay after a certain period stipulated, under the agreement, obviously the creditor cannot enforce his claim within that period. Any suit filed within that period could be successfully resisted by the debtor under the terms of the agreement as premature. Having regard to the terms of the suit agreement, the plaintiffs could not enforce their claim for the recovery of the amount lent at any time within three years. The present suit in our view, is one for which no period of limitation is provided elsewhere in the new Act, and therefore, Article 113 would apply. That provides a period of three years and the period would begin to run form the date when the right to sue accrues. In the instant case, the suit is filed within three years after the period for repayment allowed to Sri A.K. Babu Khan. The first notice demanding the amount was issued on 1-4-70 in response to which alone the defendants respondents denied their liability to pay by publishing a notification in the Urdu daily 'Siya Sat' on 9-4-1970. The plaintiffs sold the shares by public auction on 10-4-1970 and after issuing a further notice, Ex. A-12 on 4-6-1970 have instituted the present suit. The right to sue in our view, accrued to the plaintiffs on the expiry of three years from the date of the suit agreement when in spite of demand for defendants did not pay the amount due under the agreement. The suit is therefore, held to be within limitation in Yellappa v. Desayappa (1906) ILR 30 Bom 218 on which reliance is placed by the learned counsel for the defendants-appellants, the suit was held to be barred by limitation. But that was a suit for the recovery of money secured by a pledge it was construed to be a suit for money lent and the period of limitation was held to be three years from the time the loan was made. So also in the case in Saiyid Ali Khan v Debi Prasad (1902) ILR 24 All 251. Following the earlier decision in Madan Mohan Lal v. Kanhai Lal, (1895) ILR 17 All 284, the court held that the suit of a pawnee to recover the balance of his debt after accounting for the proceeds of the sale of articles pledged is governed by Article 57 of the Second Schedule to the Indian Limitation Act, 1877 viz., three years from the date of the loan and the suit brought beyond that period was barred by limitation. But these cases were cases of pledges of moveables and not cases of mortgages.
37. Further it does not appear that in any of those cases the debtor or pledgor was given the option to pay the amount at any time within three years of the pledge. These two decisions in our view do not apply to the facts of the present case, firstly because the suit transaction is one of mortgage and secondly because under the express terms of the agreement the money lent could be paid by the debtor any time within three years from the date of the agreement. The suit is therefore held to be within time.
38. In view of the foregoing discussion this appeal fails and is accordingly dismissed with costs.
39. Appeal dismissed.