Judgment

RAMASWAMI, J. : This appeal is brought, by special leave, from the judgment of the High Court of Kerala dated September 11, 1963 in Appeal Suit No. 444 of 1960.

2. On February 27, 1956 respondents to 8 to 6, as partners of respondent No. 2 firm, entered into an agreement with the then Travancore Forward Bank Ltd. undertaking to open in the books of the Bank at Ernakulam a Cash Credit Account to the extent of Rs. 1,00,000 to remain in force until closed by the Bank and to be secured by goods to be pledged with the Bank. The said respondents also agreed that, if they failed or neglected to repay the Bank on demand the amount due to the Bank, it shall be lawful for the Bank, without any notice to them, to sell or otherwise dispose of all securities, either by public auction or by private contract and to apply the net proceeds of such sale towards the liquidation of the debt. It was also agreed that if any balance was still left the Bank shall be at liberty to apply any other money in the hands of the Bank standing to the credit of the said respondents towards repayment of the debt. The agreement between the Bank and the said respondents is Ex. P1. By Clause 2 of the document the borrowers agreed not to pledge or encumber the security nor permit any act whereby the security hereinbefore expressed to be given to the bank shall be in any way prejudicially affected. Clause 3 provided as follows :-

That the Borrowers shall with the consent of the Bank be at liberty from time to time to withdraw any of the goods for the time being pledged to the Back and forming part of the Securities the subject of this Agreement provided the advance value of the said goods is paid into the said account or goods of a similar nature and of at least equal value, are substituted for the goods so withdrawn. Provided always that with the previous consent of the Bank the Borrowers shall be at liberty to withdraw any of the goods for the time being pledged to the Bank without paying into the said account such advance value as aforesaid or substituting any goods as aforesaid provided the necessary margin required hereunder is fully maintained." Clauses 8 and 9 are to the following effect :-

"8. That the Borrowers shall make and furnish to the Bank such statements and returns of the cost and market value of the securities and a full description thereof and produce such evidence in support thereof as the Bank may from time to time require and shall maintain, in favour of the Bank a margin of 10 per cent at Bank s discretion between the market value from time to time of the Securities and the balance due to the Bank for the time being. Such margin shall be calculated on such valuation of the Securities as fixed by the Bank from time to time and shall be maintained by the Borrowers either by the delivery of further securities to be approved by the Bank or by cash payment by the Borrowers immediately on the market value for the time being of the securities becoming less than the aggregate of the balance due to the Bank plus the amount of the margin as calculated above;

9. That the Borrowers shall be responsible for the quantity and quality of the goods pledged with the Bank and also for the correctness of Statements and Returns furnished by them to the Bank from time to time as mentioned above. The Borrowers have assured the Bank that all information regarding the quantity, quality, value, etc; and other description of the goods pledged with the Bank as given in the said statements and a returns is or would be correct and the Bank has agreed to advance monies under the above account on such representations. The Borrowers further declare and agree that the goods pledged with the Bank have not been actually weighed and/or valued and in order to verify the quantity or quality of the goods pledged or Statements and Returns furnished by the Borrowers, the Bank shall be at liberty at any time, in its discretion, to get the goods weighed and valued at the expense of