ARATIBALA MOHANTY v. STATE BANK OF INDIA — 1990 DIGILAW 131 (ORI)

G. B. PATNAIK,. J. ( 1 ) A short but interesting question of law that arises for considertion in this writ application is whether the pawnee not being in a position to release the pledged articles for some supervening circumstances can charge interest on the amount in question for the period for which the said pawnee was not in a position to release the pledged articles. ( 2 ) THIS question arises in the following circumstances : The petitioner pledged gold ornaments with the opposite party - State Bank of India, Bhubaneswar, and took three different loans on three different dates by executing promissory notes. It was a stipulation in the promissory note that the loan would be repaid with interest in instalments within a specified period failing which the pawnee (the Bank) would be at liberty to dispose of the pledged articles by public auction. Between 3-12-1973 and 23-7-1974 by pledging 729. 700 grammes of gold, the petitioner had taken a loan of Rs. 17,200/ -. On 2-4-1976, the petitioner wrote to the Bank to release the gold ornaments pledged under Account No. 15/557 and requested that she may be intimated the outstanding amount of the principal and the interest so that she would be able to pay the money and release the ornaments. The said letter has been annexed as Annexure 1. Again on 21-12-1976, the petitioner wrote another letter stating therein that she was interested in releasing all the ornaments covered under the three gold loans and she should be intimated about the total amount she was required to pay towards principal and interest so that she could get the gold released. This letter has been annexed as Annexure 2. As no reply was received from the Bank, the petitioner gave a legal notice which has been annexed as Annexure E to the counter-affidavit of the opposite parties. The opposite party No. 3 intimated the petitioner by letter dated 7-6-1977 that the gold in question had been sized by the police in connection with a criminal case against the husband of the petitioner and the Bank was holding the property as Zimadar and, therefore, the Bank would not be able to release the gold. It was also stated therein that the petitioner should wait for further hearing from the Bank. This document has been annexued as Annexure 2. It was also stated therein that the petitioner should wait for further hearing from the Bank. This document has been annexued as Annexure 2. The gold in question had been seized pursuant to an order of attachment passed by the Sessions Judge, Puri, in Misc. Case No. 44 of 1974 initiated against the petitioner' husband under Sec. 3 of the Criminal Law Amendment Ordinance by order dated 13-5-1977. The petitioner appeared in the said proceeding and claimed that the property was her Stridhan property and, therefore, could not be attahced. The Sessions Judge vacated the order of attachment on 23-9-1981. But notwithstanding the vacation of the order of attachment, the Bank never wrote again to the petitioner though it had promised to do so under Annexure 3. On 30-8-1988 the petitioner tendered a cheque of Rs. 500/- for encashment which was dishonoured by the Bank on the ground that the funds had been attached by the District and Sessions Judge. This intimation has been annexed as Annexure 4 and obviously the Bank was under an misapprehension, as the order of attachment had been vacated since 23-9-1981. On 8-10-1988, the Bank gave a notice to the petitioner to pay Rs. 1,76,232. 88 representing the principal amount and the interest thereon in respect of three loans, failing which the Bank would sell the ornaments by public auction. This letter has been annexed as Annexure 5 to the writ application. The petitioner, however, approached the Bank stating that the petitioner would not be liable to pay any interest as the Bank itself had refused to release the gold on the ground of so-called attachment by the Sessions Judge. The Bank, however, gave another notice on 12-11-1988 under Annexure 6 requiring the petitioner to deposit Rs. 1,79,478. 28 paise. The petitioner thereafter has approached this Court. ( 3 ) THE only contention raised by Mr. The Bank, however, gave another notice on 12-11-1988 under Annexure 6 requiring the petitioner to deposit Rs. 1,79,478. 28 paise. The petitioner thereafter has approached this Court. ( 3 ) THE only contention raised by Mr. Ratho for the petitioner is that the petitioner having approached the Bank to take release of the pledged articles on 2-4-1976 but the Bank refusing to release these articles on the ground that the articles have been seized by the police, would not be entitled to charge interest on the loan amount for that period and even after the vacation of attachment by the Sessions Judge, the Bank not having intimated the petitioner even though it had earlier promised to do so under Annexure 3 till 1988, the Bank cannot charge interest for the period. ( 4 ) THE Bank has filed a counter-affidavit and has taken the stand that the gold ornaments were seized by the police pursuant to an order of attachment by the Sessions Judge in a criminal case and in view of the said seizure and order of attachment, the Bank expressed its inability to release the ornaments under Annexure-3 and thereafter the Bank never knew of the order vacating the attachment by the Sessions Judge and, therefore, the question of informing the pledge does not arise. It is further stated that the order of attachment having been vacated at the behest of the petitioner, the petitioner should have approached the Bank immediately after the same and that not having been done, she is not entitled to claim that no interest could be charged by the Bank on the principal amount for the period in question. ( 5 ) THE correctness of the rival submissions depends upon the true legal position with regard to the rights and liabilities of a pawnee vis-a-vis the pawnor. The law with regard to pledge has been codified in Ss. 172 to 176 of the Indian Contract Act. Under Sec. 172 of the Contract Act, the bailment of goods as security for payment of debt or performance of a promise is called "pledge". The bailor is called the "pawnor" and the bailee is called the "pawnee". "pledge' is a contract whereunder deposit of goods is made a security for a debt and the right to the property vests in the pawnee so far as is necessary to secure the debt. The bailor is called the "pawnor" and the bailee is called the "pawnee". "pledge' is a contract whereunder deposit of goods is made a security for a debt and the right to the property vests in the pawnee so far as is necessary to secure the debt. In the ordinary sense of the term it amounts to advancement of money on keeping possession of goods or chattels of the persons who takes the money. Under the pledge though no title to the goods passes to the pawnee, but right to retain possession remains with the pawnee till the payment is made by the pawnor. Section 173 of the Indian Contract Act entitles the pawnee to retain the goods pledged as security for payment of debt and Section 176 deals with his rights and provides that in case of default by the pawnor he has the right to sue upon the debt and to retain the goods as collateral security and to sell the goods after reasonable notice of the intended sale is given to the pawnor. Once the pawnee sells the goods, the right of the pawnor to redeem is extinguished, but the pawnee is bound to apply the sale proceeds towards satisfaction of the debt and pay the balance, if any, to the pawnor. But so long as the sale has not taken place, the pawnor is entitled to redeem the goods on payment of debt. If the pawnee is not in a position to deliver the goods then he cannot have both the payment of debt and also the goods. Broadly, this is the legal position with regard to pledge. ( 6 ) MR. Ratho, the learned counsel for the petitioner, strenuously argues that the pawnee under law being bound to deliver, the goods when the pawnor exercises his right to redeem, his inability to return the goods disentitles him to charge interest for the period for which the pawnee was not in a position to give back the possession of the goods. In other words, the pawnee' right to receive interest ceases when the pawnee becomes a Zimadar on account of any supervening circumstances. In support of his aforesaid contention, the learned counsel places reliance on two decisions of the Supreme Court in Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322 and The Bank of Bihar v. The State of Bihar, AIR 1971 SC 1210 . In support of his aforesaid contention, the learned counsel places reliance on two decisions of the Supreme Court in Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322 and The Bank of Bihar v. The State of Bihar, AIR 1971 SC 1210 . In Lallan Prasad' case AIR 1967 SC 1322 after analysing the provisions of Sections 172 to 176 of the Indian Contract Act, their Lordships observed:-"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 pawnor 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, therefor, 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 pawnor 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 of the debt and also the goods. . . . . . . "there is no dispute with the aforesaid proposition of law enunciated by their Lordships of the Supreme Court. But we are not in a position to appreciate as to how this decision supports the petitioner' contention that the moment the pawnee is not in a position to deliver back the possession of the goods pledged, the relationship of pawnor and pawnee ceases and the pawnor would not be liable to pay interest for that period. But we are not in a position to appreciate as to how this decision supports the petitioner' contention that the moment the pawnee is not in a position to deliver back the possession of the goods pledged, the relationship of pawnor and pawnee ceases and the pawnor would not be liable to pay interest for that period. In The Bank of Bihar' case AIR 1971 SC 1210 what their Lordships were considering was the right of a pawnee vis-a-vis the rights of other creditors of the pawnor. It was held by their Lordships that the rights of the pawnee who had parted with money in favour of the pawnor on the security of the goods could not be defeated by the goods being seized by the Government and money being made available to other creditors of the pawnor without the claim of the pawnee being fully satisfied. It was observed in that connection by their Lordships :-". . . . . . The pawnee has special property and a lien which is not of ordinary nature on the goods and so long as his claim is not satisfied on other creditor of the pawnor has any right to take away the goods or its price. After the goods had been seized by the Government it was bound to pay the amount due to the plaintiff (the pawnee) and the balance could have been made available to satisfy the claim of other creditors of the pawnor. But by a mere act of lawful seizure the Government could not deprive the plaintiff of the amount which was secured by the pledge of the goods to it. . . . . . . "we also fail to appreciate as to how this decision is of any assistance in advancing the contention of the petitioner. None of these decisions lays down that the moment the pawnee becomes incapable of delivering possession of the goods pledged, the relationship of pawnor and pawnee ceases and the pawnee will not be entitled to claim interest which he was entitled to under the agreement of pledge. ( 7 ) ADMITTEDLY, the petitioner had taken the loan on the pledge agreement. ( 7 ) ADMITTEDLY, the petitioner had taken the loan on the pledge agreement. On account of order of attachment from the Court and seizure of the property, the Bank which the obligation to deliver back the possession of the goods when the pawnor exercises her right of redemption, has not discharged that obligation pursuant to Annexures 1 and 2 and has expressed its inability to do so under Annexure 3. The petitioner herself got the order of attachment vacated by moving the Sessions Judge on 23-9-1981 but thereafter never intimated the Bank about the same, nor wanted to exercise her right to redeem the pledged articles by satisfying the debt. The petitioner, on the other hand, wanted to rely upon the Bank' letter that she would be intimated about the release of the goods later. The Bank has taken the stand that it was unaware of the order of vacation of attachment by the Sessions Judge and since the petitioner herself got the order of attachment vacated, we think, it was the petitioner' duty to intimate the Bank about the vacation order and exercise her right of redemption. Not having done that the petitioner cannot claim any equity in her favour and the Bank would be fully justified in claiming interest for the period subsequent to the date of vacation of the order of attachment on 23-9-1981 till the amount of debt is actually paid and the goods are redeemed. But so far as the period from 2-4-1976 till 23-9-1981 is concerned, the question that arises for our consideration is whether for that period also the Bank would be justified in claiming interest even though the pawnor wanted to satisfy the debt and take delivery of the goods pledged and the Bank as the pawnee was not in a position to deliver back the goods on account of the seizure made the Bank as the pawnee having refused to perform its obligation of redelivering the goods on debts being satisfied cannot claim any interest for the said period and the observations of their Lordships in Lallan Prasad' case AIR 1967 SC 1322 (supra) to the effect that if the pawnee is not in a position to re-deliver the goods he cannot have both the payment of debt and also the goods, would apply. We would, therefore, hold that the Bank as pawnee will not be entitled to charge any interest on the principal amount for the period 2-4-1976, the date on which the petitioner wanted release of the gold pledged by satisfying the debt and the Bank expressed its inability till 22-9-1981 when the Sessions Judge vacated the ad interim order of attachment, whereafter the Bank was in a position to deliver back the possession of the goods on petitioner satisfying the debts in question pursuant to the pledge agreement. ( 8 ) THE writ application is accordingly allowed to the extent indicated above. There will, however, be no order as to costs. ( 9 ) J. M. MAHAPATRA, J. : -. I agree. Petition partly allowed.