1975 (10) TMI 111 - HC - Indian Laws

Summary

Issues Involved:
1. Nature of the transaction (pledge vs. sale vs. mortgage)
2. Interpretation of the agreement dated 6th July 1965
3. Right to sue on the original debt
4. Limitation period for filing the suit
5. Right to private sale of shares

Detailed Analysis:

1. Nature of the Transaction:
The plaintiffs argued that the transaction was a pledge, while the defendants contended it was an outright sale with an option to repurchase. The court held that the transaction was neither a simple pledge nor a sale but constituted a mortgage. The agreement allowed the plaintiffs to enjoy certain rights over the shares, including voting rights and the ability to transfer shares to their names, which is consistent with a mortgage rather than a pledge. The court concluded that the transaction was a mortgage because it involved more than just a bailment of goods as security; it also included the right to enjoy and dispose of the shares under specific conditions.

2. Interpretation of the Agreement:
The agreement dated 6th July 1965 outlined several terms, including:
- The shares shall be lodged for transfer in the plaintiffs' names.
- Sri A.K. Babu Khan could redeem the shares within two years without interest.
- If not redeemed within two years, a 9% interest would be charged for one year.
- If still not redeemed, the plaintiffs could dispose of the shares at the risk of Sri A.K. Babu Khan.
The court emphasized that the interpretation of the agreement must depend on its terms and the surrounding circumstances. The agreement's terms indicated that it was not an outright sale but a mortgage, as it allowed Sri A.K. Babu Khan to redeem the shares under specific conditions.

3. Right to Sue on the Original Debt:
The court held that even if the transaction was not a pledge, the plaintiffs had the right to sue on the original debt. The plaintiffs had paid Rs. 54,000 to redeem the shares and were entitled to recover this amount along with interest. The court found that the plaintiffs were entitled to sue for the recovery of the amount based on the principle of money had and received.

4. Limitation Period for Filing the Suit:
The defendants argued that the suit was barred by limitation, as it was filed beyond three years from the date of the agreement. The court held that the right to sue accrued at the end of the three-year period given for repayment under the agreement. The suit was filed within three years from the expiry of this period, making it within the limitation period. The court applied Article 113 of the Limitation Act, which provides a three-year period from the date when the right to sue accrues.

5. Right to Private Sale of Shares:
The plaintiffs sold the shares through a public auction after giving notice to the defendants. The defendants contended that the plaintiffs had no right to sell the shares privately if the transaction was a mortgage. The court held that the right to sell the shares was conferred by the express terms of the agreement and did not make the transaction a pledge. Even in the case of a mortgage of moveables, the parties could stipulate a right of private sale. The court cited precedents to support the view that a mortgagee of moveable property has the right to sell the property without the intervention of the court if the debtor fails to repay the amount after proper notice.

Conclusion:
The court concluded that the transaction was a mortgage, not a pledge or sale. The plaintiffs were entitled to recover the amount due along with interest, and the suit was within the limitation period. The appeal was dismissed with costs.