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Visalakshi Ammal and ors. Vs. the Coimbatore Janopakara Nidhi Limited, a Money Lending Corporation Represented by Its Secretary and anr. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported in(1942)1MLJ44
AppellantVisalakshi Ammal and ors.
RespondentThe Coimbatore Janopakara Nidhi Limited, a Money Lending Corporation Represented by Its Secretary an
Cases Referred(See Seuger v. Hukma Kessa I.L.R.
Excerpt:
.....force on the 1st of july of that year, jewels entrusted for safe custody can be the subject of a valid pledge by the depositee. 2. the appellants contend that the pawnor is not entitled to create a valid pledge in respect of the jewels which were merely entrusted for safe custody. provided that the pawnee acts in good faith and has not at the time of the pledge notice that the pawnor has not authority to pledge. 178-a :where the pawnor has ob- provided that the pawnee acts intained possession of the goods pledg- good faith, and under circumstancesed by him under a contract voidable which are hot such as to raise a reasonableunder section 19 or section 19-a, but the presumption, that the pawnorcontract has not been rescinded at the is acting improperly :time of the pledge, the pawnee..........force on the 1st of july of that year, jewels entrusted for safe custody can be the subject of a valid pledge by the depositee. the lower appellate court found that the respondent bank took the pledge bona fide and without any notice of the defect in the title of the pawnor and that the pledge is valid. the second appeal is filed by the owners of the jewels.2. the appellants contend that the pawnor is not entitled to create a valid pledge in respect of the jewels which were merely entrusted for safe custody. it is urged by the respondent that having regard to the amendment of the various sections, the prior decisions of this and the other high courts that a pledge made under such circumstances is not valid do not apply to cases arising after the amendment. the relevant sections old and.....
Judgment:

Somayya, J.

1. The question in this second appeal is whether after the Indian Contract (Amendment) Act of 1930 which came into force on the 1st of July of that year, jewels entrusted for safe custody can be the subject of a valid pledge by the depositee. The lower appellate Court found that the respondent bank took the pledge bona fide and without any notice of the defect in the title of the pawnor and that the pledge is valid. The second appeal is filed by the owners of the jewels.

2. The appellants contend that the pawnor is not entitled to create a valid pledge in respect of the jewels which were merely entrusted for safe custody. It is urged by the respondent that having regard to the amendment of the various sections, the prior decisions of this and the other High Courts that a pledge made under such circumstances is not valid do not apply to cases arising after the amendment. The relevant sections old and new are:

NEW. OLD178 :-- 178 :--Where a mercantile agent is, with. A person who is in possession of anythe consent of the owner, in possession goods, or of any bill of lading, dockof goods or the documents of title to warrant, warehouse keeper's certifi-goods, any pledge made by him, when cate, or warrant or order for delivery,acting in the ordinary course of busi- or any other document of title to goodsness of a mercantile agent, shall be may make a valid pledge of suchas valid as if lie were expressly author- goods or document : ised by the owner of the goods tomake the same; provided that the pawnee acts in good faith and has not at the time of the pledge notice that the pawnor has not authority to pledge.178-A : Where the pawnor has ob- Provided that the pawnee acts intained possession of the goods pledg- good faith, and under circumstancesed by him under a contract voidable which are hot such as to raise a reasonableunder Section 19 or Section 19-A, but the presumption, that the pawnorcontract has not been rescinded at the is acting improperly : time of the pledge, the pawnee ac- Provided also that such goods orquires a good title to the goods, pro- documents have not been obtainedvided he. acts in good faith and from the lawful owner, or from anywithout notice of the pawnor's defect person in lawful custody of them byof title? means of an offence or fraud.

3. It is found by both the lower Courts that the jewels were entrusted for safe custody to the pawnor and the lower appellate Court finds that the pawnee, i.e., the bank took the pledge in good faith. On these facts, is the pledge valid? Sections 178 and 178-A after amendment correspond to Section 178 before amendment. Section 178 as it .stood before the amendment in so far as it relates to our case said this:

A person who is in possession of any goods may make a valid pledge of such goods provided that the pawnee acts in good faith and under circumstances which are not such as to raise a reasonable presumption that the pawnor is acting improperly; provided also that such goods have not been obtained from their lawful owner, or from any, person. in lawful custody of them by means of an offence or fraud.

The case of a servant being in custody of the goods of the master, Biddomoye Dabee v. Siitaram I.L.R.(1878) Cal. 497 the case of a wife being in custody of the goods of the husband, Stager v. Hukma Kessa I.L.R.(1900) 24 Bom. 458 the case of a person getting possession under an agreement of hire Naganada y. Bappu (1903) 14 M.L.J. 69 : I.L.R. Mad. 424 and Ramasami Gupta v. Kamalammal (1921) 42, M.L.J. 32 : I.L.R. Mad. 173 and the case of a person to whom goods were entrusted for safe custody Shankar Murlidhar v. Mohanlal Jaduram I.L.R.(1887) 11 Bom. 704 came up for consideration before the amendment and the decisions held, that in such cases the persons who pawned them had no possession in law treating the expression 'possession' as that which an owner has in his goods. They held that mere physical custody is not 'juridical' possession which is contemplated by Section 178 (See Seuger v. Hukma Kessa I.L.R.(1900) 24 Bom. 458 . Now the position has been made clear by the new Sections 178 and 178-A. New Section 178 is confined to cases of mercantile agents. Section 178-A says that if the pawnor obtains possession of the goods under a contract which is voidable under Section 19 or 19-A of the Contract Act, then, a pledge by him would be valid if the pledgee had no notice of the want of or defect of title provided also that the contract had not been rescinded at the time, of the pledge. Thus, Section 178-A applies to cases where the pawnor obtained possession of the goods under a contract which is bad under Sections 19 and 19-A of the Contract Act. Here it is not a case where the pawnor obtained possession of the goods under a contract which is voidable for coercion, misrepresentation, fraud or undue influence which are the four categories provided for by Sections 19 and 19-A. In the cases not covered by Section 178-A, the old rule that a person cannot give his alienee a title higher than what hie himself has continues to apply. The ordinary rule is that a person cannot give to another person a title higher than what he himself has. That rule is subject to certain exceptions which are embodied in Sections 178 and 178-A. Section 178 does not apply because it is confined to cases of mercantile agents. Section 178-A does not apply because possession of the goods was not obtained under a contract which is voidable under Sections 19 and 19-A for coercion, undue influence, fraud or misrepresentation.

4. It was urged that by the recent amendment, the Legislature extended to bona fide pledgees protection even in cases where possession of the goods was obtained under a voidable contract and that this assumes that where the goods were obtained under a valid contract, the pledge must be a fortiori valid. The argument is put thus : where, the pawnor gets the goods by practising fraud, misrepresentation or undue influence, the pledge is valid, provided the further conditions laid down by the section are fulfill-ed. Why then is the pledge invalid where he got possession under a contract and which is not open to any of the above infirmative circumstances? Entrusting a person with goods for safe custody is a -species of bailment. Bailment is a contract under Section 148 of the Contract Act. If the contract of bailment is vitiated by fraud or misrepresentation or undue influence, even then the goods can be the subject of a valid pledge. If so, it is urged that it must be so in a case where the contract of bailment under which the goods were obtained by the pawnor is not open to any of the infirmative circumstances just mentioned. This argument assumes that if the contract of bailment is vitiated under Section 19 or 19-A, the pawnor can create a valid, pledge. The pawnor does not get possession he gets only bare custody. A person in custody of goods under a contract of bailment of this kind would still continue to be under the same disability as before. Further, the wording of Section 178-A appears to indicate that by reason of the contract which is bad for fraud, undue influence, etc., the pawnor should obtain title to the goods and possession thereof in the strict sense, i.e., juridical possession such that an owner has. Section 178-A says that where the pawnor has obtained possession of the goods under a voidable contract, a pawnee gets a good title provided the pledgee acts in goad faith and without notice of the pawnor's defect of title. This means that but for the fraud; coercion, misrepresentation or undue influence, the pawnor would have got aperfectly valid title. Where it is only a case of safe custody, the pawnor had no title at oil voidable or valid nor 'juridical possession' as opposed to bare custody. If this contract of bailment is valid, he gets only a right to be in custody and if it is voidable for reasons mentioned in Sections 19 and 19-A of the Contract Act, even then, it cannot come under Section 178-A, because it is not a case of the pawnor's getting a defective title or 'possession' as explained above. As Messrs. Pollock and Mulla have pointed out in the latest edition (sixth edition) on pages 550 and 551, the result is the same both before and after the amendment in the case of a gratuitous bailee or of a person who is entrusted with the goods for a specific purpose.

5. I hold that the lower appellate Court is wrong in the view that it has taken that the pledge is valid. The decree of the lower appellate Court is therefore reversed and that of the District Munsif restored with costs here and in the lower appellate Court. The order of the District Munsif as to costs of that Court will stand. The jewels will be returned to defendants 2 to 5.

6. Leave refused.


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