1975 Supreme(AP) 197

Andhra Pradesh High Court
Judges : K.JAYACHANDRA REDDY, K.MADHAVA REDDY
Shatzadi Begum Saheba - Appellant
Versus
Girdharilal Sanghi - Respondent
Decided On : 10-09-75

The essential distinction between a pledge and a mortgage is that in the former there is no right to enjoyment while in the latter such a right is given.

Headnote:

PLEDGE - MORTGAGE - DISTINCTION - MORTGAGE OF MOVEABLES - RIGHT OF ENJOYMENT - RIGHT OF SALE - LIMITATION - ARTICLE 19 AND 113 OF THE LIMITATION ACT, 1963.

Fact of the Case:

Plaintiffs filed a suit for the recovery of a sum of Rupees 57,751-90 together with interest pendente lite until realization and costs against the estate of late Sri A. K. Babu Khan in the hands of defendants 1 to 11. The plaintiffs, respondents 1 and 2 herein filed a suit for the recovery of a sum of Rupees 57,751-90 together with interest pendente lite until realization and costs against the estate of late Sri A. K. Babu Khan in the hands of defendants 1 to 11. It is the case of the plaintiffs that late Sri A. K. Babu Khan pledged 2650 shares of the Hyderabad Construction Company Limited, Hyderabad through one Kapurachand Shrimal, Share and Stock Broker with Smt. Najeebunisa Begum to whom Sri Babu Khan had to pay Rs. 54,000. Sri A. K. Babu khan requested the plaintiffs 1 and 2 and one Sri Hargovind 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 Rs. 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 Rs. 54,000 to Smt. Najeebunnisa Begum and redeemed the shares Sri A. K. Babu Khan, executed an agreement of pledge on 6/07/1965 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 and responsibility of Sri A. K. Babu Khan after intimating him.

Finding of the Court:

The court held that the suit transaction cannot by any stretch of imagination be described as a pledge but that the transaction under Ex. A-1 is one of sale. But at the same time he was of the view that this finding does not deprive the plaintiffs of their right to sue on the original debt on 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 Rs. 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.

Issues: 1. Whether the suit transaction was one of sale of shares as pleaded by the defendants? 2. Whether the transaction is one of pledge or a mortgage? 3. Whether the plaintiffs can succeed only if the transaction is proved to be one of pledge and according to them it is not a pledge? 4. Whether the suit is barred by limitation.

Ratio Decidendi: 1. The court held that the transaction was not one of sale but a mortgage. The court observed that the transfer of 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 out sale and that the plaintiffs had purchased these shares for Rs. 54,000. 2. The court held that the transaction was a mortgage and not a pledge. The court observed that the essential distinction between a pledge and a mortgage is that in the former there is no right 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. 3. The court held that the plaintiffs are entitled to the relief on the footing that the suit agreement constitutes a mortgage. The court observed that the determination in a case should be founded upon a amendment to be found in the pleadings and as observed in Trojan and Co. , v. Nagappa Chettiar, AIR 1953 SC 235 = (1953 SCR 789) 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 such alternative claim in the plaint or even at the later stage when he sought to amend the plaint. But in this case, it cannot be said that the claim of the plaintiff for the recovery of the money due does not arise from the pleading and the terms of the agreement. Whether that agreement constitutes a pledge or a mortgage it is for the Court to determine. 4. The court held that the suit is not barred by limitation. The court observed that the suit is one for which no period of limitation is provided elsewhere in the new Act, and therefore, Article 113 would apply. That provides a period of three years and the period would begin to run form the date when the right to sue accrues. In the instant case, the suit is filed within three years after the period for repayment allowed to Sri A. K. Babu Khan.

Final Decision: Appeal dismissed with costs.