1966 (12) TMI 65 - SC - Indian Laws

Whether the first respondent pledged certain quantity of aeroscraps purchased by him from military authorities at Bamrauli Depot, Allahabad and delivered possession thereof to the appellant under an agreement of pledge entered into between them? Whether the appellant was entitled to any relief when his case was that the first respondent never delivered to him the said goods and the said agreement never ripened into a pledge? Held that - Appeal dismissed. High Court was right in its findings that the said goods were delivered to the appellant, that he was a pledgee thereof and that the said agreement did not rest at the stage of a mere agreement to pledge. 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 a decree against the said promissory note and also retain the said goods found to have been delivered to him and therefore in his custody.

Issues Involved:
1. Whether the first respondent pledged certain quantity of aeroscraps and delivered possession thereof to the appellant under an agreement of pledge.
2. Whether the appellant was entitled to any relief when his case was that the first respondent never delivered the said goods and the agreement never ripened into a pledge.

Detailed Analysis:

Issue 1: Pledge and Delivery of Aeroscraps
The primary question was whether the first respondent delivered the aeroscraps to the appellant as per the agreement of pledge. The undisputed facts were that the appellant advanced Rs. 20,000/- to the first respondent, who agreed to pledge the aeroscraps. The dispute centered on the custody of the goods after they were stored near the aerodrome.

- Appellant's Argument: The appellant claimed that the first respondent failed to deliver the goods, thus the agreement did not ripen into a pledge. He argued that he was entitled to recover the amount advanced based on the promissory note and receipt.

- Respondent's Argument: The first respondent admitted the loan but asserted that he delivered 147 tons of aeroscraps to the appellant. He contended that the appellant could not obtain a decree unless he was willing to redeliver the pledged goods.

- Trial Court Findings: The Trial Court rejected the respondent's case, holding that there was no completed contract of pledge as the goods were not delivered to the appellant. The court found that the second respondent had agreed to become a surety for the loan, and thus the appellant was entitled to recover the money.

- High Court Findings: The High Court reversed the Trial Court's judgment, concluding that the goods were delivered to the appellant and the agreement ripened into a pledge. It found that the appellant was not entitled to relief due to his stance that the goods were never pledged and not in his possession.

- Supreme Court Analysis: The Supreme Court reviewed the evidence and upheld the High Court's findings. It noted several facts indicating that the goods were in the appellant's possession:
- The appellant did not protest or demand delivery of the goods despite advancing a large amount.
- The second respondent's surety letter presupposed that the goods were under the appellant's control.
- The appellant employed watchmen for the protection of the goods, suggesting they were in his custody.
- Evidence showed that the first respondent removed part of the goods after paying the appellant, indicating the appellant's control over the goods.
- Notices and a telegram sent by the appellant to the first respondent indicated the appellant's intention to sell the pledged goods, inconsistent with his claim that the goods were never delivered.

Issue 2: Entitlement to Relief
The second issue was whether the appellant could recover the loan amount despite denying the pledge and failing to offer to redeliver the goods.

- Legal Principles: Under common law and sections 172 to 176 of the Contract Act, a pledge is a bailment of goods as security for a debt. The pawnee has a special property in the pledge, while the general property remains with the pawner. The pawnee can sue for the debt while retaining the goods as collateral but must return the goods upon payment of the debt. If the pawnee cannot return the goods, he cannot obtain a decree for the debt.

- Supreme Court Conclusion: The court held that the appellant, having denied the pledge and found to be in possession of the goods, could not recover the debt without offering to redeliver the goods. The appellant's denial of the pledge and failure to return the goods meant he could not have both the debt payment and the goods. The court emphasized that the pawnee must give credit for the value of the goods if unable to return them, entitling the pawnee only to recover the balance.

Judgment:
The appeal was dismissed with costs, affirming the High Court's decision that the appellant was not entitled to relief due to his denial of the pledge and failure to redeliver the goods. The appellant could not recover the loan amount while retaining the pledged goods, as this would impose an undue liability on the pawner.

← Previous Next →