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Kesarimal Vs. Gundabathula Suryanarayanmurthy and anr. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1928Mad1022; 114Ind.Cas.820
AppellantKesarimal
RespondentGundabathula Suryanarayanmurthy and anr.
Cases ReferredPrag Narain v. Mul Chand
Excerpt:
.....(jewels) at my risk and credit the sale proceeds realized in our khatha. if i fail to do so you sell the jewels at my risk without giving me any notice and credit the amount in the katha. though ordinarily the pawnee is entitled to withhold the sale of the jewels for so long as he liked, yet when he had chosen to take the authority or permission of the pawnor to make the sale without notice after the lapse of the fixed period, he is, in my opinion, bound to have made the sale immediately after that date or within a reasonable time thereafter, and it is, in my opinion, much more incumbent to do so when he could not but be aware that owing to gradual fall in prices the security would be diminished and the jewels would fetch a lower price. if the contention of the defendant is upheld,..........pay you the principal and interest due to you and redeem the said jewels. if i fail to do so you sell the jewels at my risk without giving me any notice and credit the amount in the katha. i shall pay the balance that may be still due according to the credit and debit entries. i shall not raise any kind of dispute in respect of the said jewels.4. the promised payment was not made. the plaintiff, however, did not sell the jewels then, nor for a considerable time afterwards. on 12th january 1926 the plaintiff sent another notice to the defendant informing him that if the debt is not repaid within 24 hours after the receipt of the notice the pledged jewels will be sold in the bazaar on 21st january 1926, and a suit will be brought for the recovery of the amount found short. this was.....
Judgment:

Thiruvenkatachariar, J.

1. This case raises a question of some importance as regards the exercise by a pledgee of his right to sell the pledge for realizing the debt secured by the pledge. The material facts of the case are as follows:

2. The defendant borrowed from the plaintiff on 8th October 1922 Rs. 765 stipulating to pay interest therefor at a certain rate per mensem and the debt was secured by two gold ornaments weighing 36-1/8 tolas. In March 1924 the plaintiff sent a formal notice to the defendant informing him that unless the amount due to him was repaid on or before the 30th of that month he would sell the pledge. The defendant replied to that letter by Ex. B, dated 30th March 1924, and on the same day he also paid Rs. 100 to the plaintiff towards interest. In Ex. B the defendant wrote as follows:

I shall pay the balance of principal and interest by 30th April 1924 or pay the interest and write and give you a fresh paddu. If I fail to do so you may sell the articles (jewels) at my risk and credit the sale proceeds realized in our khatha. I shall pay the balance according to your credit and debit account. I shall not question you regarding the articles.

3. No further payment was made by the defendant as promised, nor was any fresh arrangement entered into between the parties. Then on 20th July 1924 the plaintiff sent another registered notice to the defendant informing him that the value of the jewels already pledged with him by the defendant is not sufficient security for the principal and interest due to him and that if the amount is not repaid within 24 hours he will sell the pledged jewels in the bazaar on 20th August 1924 without any further notice for realizing the amount due to him. This notice was replied to by the defendant on 19th August 1924 in which he asked for further time. He says in this letter:

I shall before 1st September 1924 pay you the principal and interest due to you and redeem the said jewels. If I fail to do so you sell the jewels at my risk without giving me any notice and credit the amount in the katha. I shall pay the balance that may be still due according to the credit and debit entries. I shall not raise any kind of dispute in respect of the said jewels.

4. The promised payment was not made. The plaintiff, however, did not sell the jewels then, nor for a considerable time afterwards. On 12th January 1926 the plaintiff sent another notice to the defendant informing him that if the debt is not repaid within 24 hours after the receipt of the notice the pledged jewels will be sold in the bazaar on 21st January 1926, and a suit will be brought for the recovery of the amount found short. This was replied to by the defendant on 16th January 1926. That letter has not been produced in this ease. The jewels were sold by the plaintiff on 21st January 1926 and realized a sum of Rs. 679-12-0. On 26th January 1926 the plaintiff wrote to the defendant enclosing an account of what was due to him on the pledge after crediting the amount realized in the sale and demanding payment of the amount still due, viz., Rs. 447-10-0. The defendant not having complied with that demand, the plaintiff brought the suit for the recovery of the said amount.

5. The defendant's pleas were: (1) that the plaintiff should have sold the jewels in September 1924 and he did sell them then and his case that he sold the jewels only in January 1926 is not true. (2) That even if the sale was made by him in January 1926 the defendant is not bound by that sale, he is entitled to get credit for the value which the jewels would have fetched if they had been sold in September 1924, when the price of gold was much higher than what it was in January 1926.

6. The learned Subordinate Judge has found against the defendant's plea that the jewels were in fact sold in September 1924. But he upheld the defendant's other plea that the plaintiff should have sold the jewels in September 1924 and that the defendant should be credited with the amount which the pledged jewels would have fetched if they had been sold in September 1924. He finds that if they had been sold then they would have fetched Rs. 124-11-0 more than they did at the sale held in January 1926. On that footing he gave a decree for the plaintiff for Rs. 166-2-0 only. Against that decree this petition is preferred by the plaintiff. He contends that the Subordinate Judge is wrong in holding that he was bound to sell the pledge in September 1924. On the other hand he could sell them at any time he chose and the sale made in 1926 should have been held to be valid and binding on the defendant. That is the only question which has to be considered in this case. The learned Subordinate Judge in support of his conclusion that the plaintiff should have sold them in September 1924 says as follows:

Though ordinarily the pawnee is entitled to withhold the sale of the jewels for so long as he liked, yet when he had chosen to take the authority or permission of the pawnor to make the sale without notice after the lapse of the fixed period, he is, in my opinion, bound to have made the sale immediately after that date or within a reasonable time thereafter, and it is, in my opinion, much more incumbent to do so when he could not but be aware that owing to gradual fall in prices the security would be diminished and the jewels would fetch a lower price. The rulings in Prag Narain v. Mul Chand [1897] 19 All. 535, Abdul Hakim Muhammad Sadik v. Joho Jautzen A.I.R. 1924 Lah. 319, read along with Kunj Behari Lal v. Bargava Commercial Bank, Jubbalpore [1918] 40 All. 522, seem sufficiently to support my view. I therefore find that the sale relied on by the plaintiff is not binding on the defendants.

7. Prag Narain v. Mul Chand [1897] 19 All. 535 and Abdul Hakim Muhammad Sadik v. Joho Jautzen A.I.R. 1924 Lah. 319 relate to the power of sale conferred by Section 107, Contract Act, on a vendor of goods who has a lien thereon for the unpaid purchase money. The section says

that he may after giving notice to the buyer of his intention to do so re-sell them after the lapse of a reasonable time and the buyer must bear any loss, but is not entitled to any profit which may occur on such re-sale.

8. The case in Kunj Behari Lal v. Bhargava Commercial Bank, Jubbalpore [1918] 40 All. 522 relates to the power of sale conferred on a pawnee by Section 176, Contract Act. He is empowered to sell the pledged articles 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 the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount due the pawnee shall pay the surplus to the pawnor. In Kunj Behari Lal v. Bhargava Commercial Bank, Jubbalpore [1918] 40 All. 522 the only point which, according to the learned Judges, they had to decide was whether the notice given by the pawnee was not a reasonable notice of sale within the meaning of Section 176, Contract Act, as it did not give the actual date, time and place of the intended sale. They held that 'notice of sale' means only notice of an intention to sell and does not necessarily mean that a sale should be arranged beforehand and that due notice of all the details should be given to the pawnor. They then proceed to observe as follows:

It is quite clear that all that the law intends is that the pawnee should give the pawnor reasonable time within which to exercise his right of redemption and proceed to sell if the property be not redeemed. His right to sell is analogous to the seller's right of re-selling granted under Section 107, Contract Act, and we take it that the two rights must be exercised in more or Jess the same method.

9. It will be seen that no question was raised in this ease as to whether the pawnee who had complied with the requirements of Section 176 by giving reasonable notice of the sale was thereafter bound to sell the pledged jewels within a reasonable time after the expiry of the period mentioned in his notice. In the earlier case in Prag Narain v. Mul Chand [1897] 19 All. 535, which arose under Section 107 of the Act, it was held that if a vendor of goods who has a lien thereon elects to exercise his right of sale for recovering the damages due to him by reason of the defendant's breach of the contract, he must not only give reasonable notice to the vendee of the intended sale, but he is also bound to exercise his right of resale within a reasonable time after the date of the breach. When the purchaser of goods fails to perform his part of the contract either by not taking the goods sold to him or by not paying for them the seller has two courses open to him, viz., (1) he may either sue for the price due to him, in which case he must retain the article sold which will have to be delivered over to the vendee on his compliance with the decree for the payment of the price; or (2) he may claim damages for the breach of the contract on the part of the defendant, the amount thereof being the difference between the contract price and the market price of the goods sold on the date of the breach In the latter case the amount of damages to be decreed to the vendor will depend upon the price which the thing sold will fetch if it is re-sold within a reasonable time from the date of the breach. If the vendor, therefore, elects to exercise his power of sale under Section 107, the resale must be made within a reasonable time from the date of the breach.

10. Section 107 also makes it clear that the vendee who has committed the breach has no claim to the property so that if it fetches more in the re-sale than the price due to the vendor, he has no right to claim the excess, but if it fetches less the difference will be the damages which he has to pay to the vendor. But the position of a pawnee is quite different. He holds the pledge as security for the debt due to him from the pawnor and though he has got the right to sell, he is not bound to sell at any particular time. So long as the security is ample, it may not be to his interest to sell it, but if the security is insufficient and the debtor has no other means of paying it will be to his interest to realize the debt by the sale of the things pledged as speedily as possible. He has also to consider the question whether the market for the goods is a rising or a falling one. Further at whatever time he may sell the things pledged, they are sold as the property of the pawnor and the latter is entitled to the surplus proceeds of the sale after the debt is fully discharged and the pawnor has also until a sale is actually made the right to redeem the pledge: see Section 177, Contract Act. All these provisions show that the power of sale is one which is conferred on the pawnee to be exercised for his benefit according to his discretion in order to realize the debt due to him for which the pledge is a standing security. In order to exercise the power of sale all that the pawnee need do is to give reasonable notice of the intended sale. If he does so he requires no further authorization or permission of the pawnor to effect the actual sale.

11. It seems to me that though the case of a pawnee may be analogous to the ease of an unpaid vendor of goods having a lien thereof for the damages due to him, as regards the requirement of giving; reasonable notice of sale, the analogy goes no further as the rights of an unpaid vendor and of a secured creditor are essentially different. Section 176 does not say that the pawnee who gives notice of sale should sell within a reasonable time-thereafter and I do not think that in the case of a pawnee such a further duty should be implied. If the contention of the defendant is upheld, and the pawnee being bound to sell within a reasonable period after the expiry of the time given in his notice should be debited with the price which the thing pledged would have fetched if sold then, it will follow that the pawnor also would have no right thereafter to redeem the pledge-a view which is clearly opposed to his rights as-declared in Section 177.

12. There may be cases in which the pawnor and pawnee come to a binding agreement to the effect that the sale must be made at a particular time, but I am unable to hold that any such binding agreement has been made out in this case. The correspondence between the parties only makes out that the debtor-wanted further time for payment and had no objection to the pledged articles-being sold without further notice to him. if he did not repay the debt within the. time asked for it. In this case the defendant had also a further notice dated the 12th January 1926 and he could have redeemed the pledge then. I and, therefore, of opinion that the learned Subordinate Judge was wrong in holding that the plaintiff was bound to sell the pledged jewels within a reasonable time from the 1st September 1924 and that the defendant should, therefore, be credited with the price the jewels would have fetched if the sale was then held. I am of opinion that the account between the parties should be taken on the footing of the sale which was held in January 1926.

13. A further point was raised by the learned vakil for the respondent, viz., that the rate of interest should be calculated according to the alternative provision in the agreement A by which the rate of interest is reduced to Rs. 0-14-6 from Re. 1-9-0 per mensem if the interest is regularly paid once in three months. This plea was not put forward either in the defendant's written statement, nor was it raised in the lower Court. Moreover, apart from the payment of Rs. 100 made on 30th April 1926, no other payment for interest is pleaded. I cannot, therefore, allow the defendant to raise this new point at this stage of the case. In the result there will be a decree for the plaintiff for Rs. 454-6-3 with costs below. The respondent will also pay the costs of this petition.


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