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TMI Blog1975 (10) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... ovind Bajjaj (who will be hereinafter referred to as the 'plaintiffs') who not being available to join the plaintiffs in filing the suit, has been impleaded as the 12th defendant, to redeem the said shares from Smt. Najeebunnisa Begum by paying ₹ 54,000 and to keep the said shares as pledge against the loan thus advanced to Sri A.K. Babu Khan. Accordingly, the plaintiffs paid ₹ 54,000 to Smt. Najeebunnisa Begum and redeemed the shares Sri A.K. Babu Khan, executed an agreement of pledge on 6th July, 1965 marked Ex. A-1 in the suit. Incorporating the terms agreed upon between the parties, Sri A.K. Babu Khan executed a document on 6-7-1965 the salient terms of the said agreement are : (i) that the shares shall be lodged by the plaintiffs for transfer in their names : (ii) that Sri A.K. Babu Khan would redeem the shares at any time within two years on payment of the said amount without interest together with the amount of transfer fee ; (iii) that if the amount is not paid within two years, interest at 9% shall be charged for a period of one year; (iv) that if the amount is not paid, the plaintiffs shall be entitled to dispose of the said shares at the risk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principle of money had and received. He also held that the estate of late Sri A.K. Babu Khan was liable to discharge the amount of ₹ 54,000 borrowed by late Sri A.K. Babu Khan through P.W. 2 for the purpose of redeeming the shares from Smt. Najeebunnisa Begum he further held that the cause of action arose at the end of two years period given under Ex. As-1 to Sri A.K. Babu Khan for repayment of the amount and that the suit was not barred by limitation. As regards the plaintiffs' claim of interest while declaring that they were not entitled to interest till 10-4-1970, it allowed interest of ₹ 4,860-00, it allowed interest on ₹ 49,446-90 at 6 per cent. 5. In this appeal, the learned counsel for the defendants appellants strenuously contends that the defendants appellants must succeed upon the finding of the court below that the transaction was not one of pledge but one of sale. The question of money had and received cannot arise when the transaction is one of sale. According to him in any event as the transaction covered by Ex. A-1 is not one of pledge, this suit must fail. He also contends that inasmuch as it is filed beyond three years of Ex. A-1 agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares were accompanied by blank transfer forms signed by the registered owners. Exs. X-2 to X-5 are the transfer forms which have been produced by D.W. 1. The plaintiffs submitted these transfer form s and obtained transfer of these shares in their respective names. Exs. X-6 to X-9 are the original entries in the registers of the Company and Ex. X-9A are the true copies thereof. It may also be noticed that the first plaintiff was elected as Director of the Hyderabad Construction Company. He also field a complaint against Sri A.K. Babu Khan alleging that he had failed to send a notice of the meeting of the Board of Directors. These documents are not disputed. These documents are also proved by the evidence of D.W. 2 who is an employee of the Hyderabad Construction Company Sri A.K. Babu Khan never paid the amount and never took back these shares. A notice Ex. B-1 dated 12th July, 1968 was issued on behalf of the plaintiffs to Sri A.K. Babu Khan calling upon him to pay ₹ 54,000 with interest from 7-7-1967 to 6-7-1968 amount to ₹ 4,860-00 and ₹ 300-00 being the notice charges and redeem his shares within one week of receipt of the notice failing which he was threate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he suit transaction, these shares were pledged with Najeebunnisa Begum for ₹ 54,000. The plaintiffs were requested to obtain release of these shares by paying a sum of ₹ 54,000 due to due to Najeebunnisa Begum from Sri A.K. Babu Khan. Unless Sri A.K. Babu Khan thought the value of the shares was more than ₹ 54,000 he would not have obtained release of the shares by paying that amount. The amount paid to Najeebunnisa Begum was not the consideration for the sale of these shares in favour of the plaintiffs. It was in view of the terms of the agreement, the plaintiffs paid ₹ 54,000 to Najeebunnisa Begum and obtained transfer of shares in their names. 10. It was argued by Mr. Balagopal, the lac for the appellants that only because there was a sale of shares in favour of the plaintiffs-respondents, blank transfer forms were signed and delivered to them, they were given the right to vote and stand for election. In fact, their names were recorded in the books of the company as shareholders and on the strength of the shares one of them was also elected as a Director. One of the plaintiffs also filed a complaint against Sri A.K. Babu Khan in Criminal Court for not gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shares to Sri A.K. Babu Khan if he chose to take them back within two years. Even at the end of two years but within one year thereafter Sri A.K. Babu Khan had the right to a return of all the shares on payment of ₹ 54,000 and interest at 9 per cent thereon. The plaintiffs were bound to return the shares even then. The question of Sri A.K. Babu Khan's paying ₹ 54,000 with interest at 9 per cent could never have provided for the same if the transaction was one of sale. This shows that the transfer of these shares in favour of the plaintiffs was not absolute. It was subject to certain conditions. This transfer was subject to Sri A.K. Babu Khan repaying the amount at any time within three years and asking for return of these shares. In fact, one of the terms of the agreement stipulates that whenever part payment is made by Sri A.K. Babu Khan, the shares will be returned to him in proportion to the amount paid by him. If the shares were sold outright to the plaintiffs and the plaintiffs had purchased the same such a condition would not have found a place in the agreement. This condition totally belies the claim of the defendants that the transaction was one of out and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintiff's notice Ex. A-2. Only in response to the second notice they took up the plea that the shares were sold by Sri A.K. Babu Khan to the plaintiffs. In the face of the recitals of the document, Ex. A-1, the evidence on record and the conduct of Sri A.K. Babu Khan and the defendants themselves, the plea of the defendants that there was a sale of these shares in favour of the plaintiffs cannot be upheld. The finding of the court below in this behalf cannot be sustained. 15. If the transaction is not one of sale, what then is it? Is it pledge or a mortgage? The defendants-appellants contend that the plaintiffs can succeed only if the transaction is proved to be one of pledge and according to them it is not a pledge. 16. Whether a transaction is one of 'pledge' or a 'mortgage' is not often free from difficulty. As observed by the learned Author Mulla in the Transfer of Property Act, the Transfer of Property Act refers to mortgages of immovable property and the Indian Contract Act refers to pledges of moveable property but neither Act deals with mortgages of moveable property. Section 172 of the Indian Contract Act defines 'pledge' as follows : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty............." In a judgment of a single Judge of the High Court in Md. Sultan v. Firm Rapratap Kannya Lal, AIR1964AP201 is was held : "A pledge is the delivery of goods by the pledgor to the pledgee by way of security upon a contract that they shall when the debt is paid or the promise is performed, be returned or otherwise disposed of according to the directions of the pledgor. A pledge would therefore, create an estate which vests in the pledgee, which is distinguishable from ownership since an owner owns (a) the right of possession, (b) the right of enjoyment and (c) the right of disposition. But a pledgee does not have the right of ownership though he has the right of a pledgee which include only the right of possession but not the right of enjoyment. A pledgee has the right of disposition which is limited to the disposition of pledgee rights only and of a sale only after notice and subject to certain limitations as is clear from the various provisions of the Indian Contract Act." 19. It is therefore to be recognised that although the hypothecation and mortgage of moveable are not specifically mentioned in the Contract Act, but that Act not being exhaustiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares are treated as moveable property in India, the mere fact that along with the instrument of security some shares were delivered along with the blank share transfer forms duly signed without more, does not mean that the transaction is one of mortgage. A pledge of shares can also be accompanied by blank transfers. Obtaining of blank transfers is a convenient mode of exercising the right of sale when the pledgee in law is entitled to do. 23. In view of the above position of law the contention of the learned counsel for the appellants that since the blank transfer forms are obtained, it is necessarily a pledge cannot be upheld. Such forms may be obtained both in case the pledge as well as mortgage. But the main point of distinction between a pledge and a mortgage is that the right of enjoyment of the property is not given to a pledgee, that right vests in a mortgagee. In the instant case, it is seen that the shares wee not only accompanied by blank transfer forms but under the agreement Ex. A-1, the transferee was specifically given the right to obtain the transfer of shares in his favour and also exercise the rights of a shareholder. In fact, it was stipulated that the shares sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have always been deemed to be moveable in India. Even in the case of a mortgage of moveables if under the terms of the contract entered into between the parties a right of private sale is given, that could be exercised. As stated by the learned Author, Mulla in his book on Transfer of Property Act, it is not as if the right of private sale could be vested only under a pledge and that a constitutes the distinguishing feature between a mortgage and a pledge. 26. In Inre Ahmed, Kania, J., held that even a mortgagee of moveable has a right to sell without the intervention of the court. He further held that "the rights of mortgagee of a moveable property are not in any way inferior to the rights of a pledgee because the mortgagee has the general estate in the property which is mortgaged to him. Besides he has the right to sell the property without the intervention of the court if the mortgagor after a proper notice is given to him to repay the money, fails to do so. 27. In Devarges v. Sandeman Clark & Co. (1902) 1 Ch 579 Lord Justices declared that the mortgagee of shares (the mortgage not being by deed) has in the absence of an express power of sale an implied power to sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to enjoyment while in the latter such a right is given the suit transaction must be held to be a mortgage. This transaction may also amount to a pledge but as it is something more than that and the rights of the parties are governed by the terms of Ex. A-1 it is held to be a mortgage. In bringing the shares to sale, the plaintiffs have only exercised their right under Ex. A-1 and not because they were pledgee. In our view the suit transaction constitutes a mortgage. 31. It was next contended by the lac for the appellants Mr. Bala Gopal that if the transaction is one of a mortgage the plaintiffs cannot be granted the relief prayed for, for they have sought the relief in the suit on the footing that the suit transaction is one of pledge. He points out that neither in the notice issued prior to the suit nor anywhere in the plaint has the suit transaction been described as a mortgage, it is only referred to as a pledge and relief was sought on that basis. If the plaintiff had put forward a case of mortgage, the defendants would have taken several pleas in defence. They would, therefore, be prejudiced if any relief is granted to the plaintiffs on the footing that the suit transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... footing that the suit transaction is a mortgage the defendants would be prejudiced, but what other defences were open to them. It is not stated. Merely because the plaintiffs specifically did not plead this as a mortgage, they cannot be denied the relief they are entitled to under that agreement. No doubt as contended by the learned counsel for the defendants appellants and as laid down in Kanda v. Waghu AIR 1950 PC 68 that the determination in a case should be founded upon a amendment to be found in the pleadings and as observed in Trojan & Co., v. Nagappa Chettiar, [1953]4SCR789 it is well settled that the decision of a case cannot be based on grounds outside the pleadings of the parties and that it is the case pleaded that has to be found in that case where the plaintiffs had based his claim for a certain sum of money on the ground that the defendant had sold certain shares belonging to him without his instructions but he was not able to prove that the sale was not authorised by him the Supreme Court reversing the decision of the High Court held that the plaintiff could not be given a decree for the sum claimed on the ground of failure of consideration as he had no set up any su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . But a reading of the agreement would clearly show that the plaintiff had no right to demand payment of the amount at any time after the execution of the agreement Sri A.K. Babu Khan was given the right to pay at any time within two years without being label to pay interest. He was given a further period of one year to pay the amount with interest The plaintiff was not therefore obliged to file a suit within the period of three years. He had the option to wait till the expiry of the three years and demand the payment of the principal with interest thereafter Art. 19 of the present Limitation Act which corresponds to Art. 57 of the old Act reads as follows : 'For money payable Three When the loan for money lent years is made." 36. This provision is a general article applicable for suits for recovery of money lent. That would be applicable when the right to recover the amount is based on mere lending of the amount and the suit is based on the factum of lending and not governed by any agreement giving option to the debtor to pay after a certain period stipulated, under the agreement, obviously the creditor cannot enforce his claim within that period. Any suit filed within ..... X X X X Extracts X X X X X X X X Extracts X X X X
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