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1980 Supreme(Del) 334
High Court Of Delhi
PUNJAB NATIONAL BANK - Appellant
Versus
UNION OF INDIA - Respondent
Suit 159 of 1978
Decided On : 11/27/1980
A.K.Tandon, D.S.DANG, G.L.SANGHI, S.N.CHARI, U.L.VATVANI
The rights of a pledgee in the goods pledged do not vest in the Custodian upon the takeover of management of the company under the Laxmirattan and Atherton West Cotton Mills (Taking over of Management) Ordinance, 1976.
Headnote:
PLEDGE - RIGHTS OF PLEDGEE - LIABILITY OF CUSTODIAN - JURISDICTION - INTEREST - The rights of a pledgee in the goods pledged do not vest in the Custodian upon the takeover of management of the company under the Laxmirattan and Atherton West Cotton Mills (Taking over of Management) Ordinance, 1976. The liability incurred by the company before the appointed day can be enforced against the company and not against the Central Government or the Custodian. The Court has jurisdiction to entertain a suit for recovery of the value of pledged goods taken over by the Custodian, even if the cause of action in another suit filed by the plaintiff against the company is based on the same credit facilities. The plaintiff is entitled to interest on the value of the goods from the date of takeover until payment.
Fact of the Case:
Punjab National Bank filed a suit against Atherton West and Co. Ltd. and the Central Government for recovery of Rs. 79,15,552, the value of hypothecated and pledged goods taken over by the Custodian under the Laxmirattan and Atherton West Cotton Mills (Taking over of Management) Ordinance, 1976. The defendants contended that the liability incurred by the company before the appointed day could only be enforced against the company and not against the Central Government or the Custodian, and that the suit was bad for non-joinder of the company.
Finding of the Court:
The Court held that the rights of the pledgee in the goods pledged did not vest in the Custodian upon the takeover of management of the company under the Ordinance. The liability incurred by the company before the appointed day could be enforced against the company and not against the Central Government or the Custodian. The Court had jurisdiction to entertain the suit, even if the cause of action in another suit filed by the plaintiff against the company was based on the same credit facilities. The plaintiff was entitled to interest on the value of the goods from the date of takeover until payment.
Issues: 1. Whether the suit is maintainable against the defendants in view of sub-section (7) of section 3 of the Laxmirattan and Atherton West Cotton Mills (T. O. O. M.) Act, 1976? 2. Whether the suit is bad for non-joinder and/or misjoinder of parties because M/s. Atherton West and Co. have not been joined as a party? 3. Whether the Court has jurisdiction to entertain and try the suit? 4. Whether the plaintiff has filed a suit for the recovery of Rs. 1,27,32,578 in Kanpur which also covers the present claim and what is the effect of the filling of that suit? 5. What was the value of the pledged and hypothecated goods taken over by the defendants? 6. What is the rate of interest to which the plaintiff is entitled?
Ratio Decidendi: The Court relied on the provisions of the Contract Act, 1872, and the Laxmirattan and Atherton West Cotton Mills (Taking over of Management) Ordinance, 1976, to hold that the rights of the pledgee in the goods pledged did not vest in the Custodian upon the takeover of management of the company under the Ordinance. The Court also relied on the decision of the Supreme Court in The Bank of Bihar v. The State of Bihar and others, A. I. R. 1971 Supreme Court 1210, to hold that the plaintiff was entitled to recover the value of the pledged goods from the defendants.
Final Decision: The Court decreed the suit in favor of the plaintiff for Rs. 63,47,950 along with interest at 17% per annum from the date of takeover until payment.
( 1 ) THE dispute in this suit is between the Punjab National Bank, a Banking Company nationalised under the Acquisition and Transfer of Undertakings Act, 1970, and M/s. Atherton West and Co. Ltd. Kanpur, a public company whose management" was taken over by the Central Government by an Ordinance known as "the Laxmirattan and Atherton West Cotton Mills" (Taking over of Management) Ordinance No. II of 1976 (now Act No. 98 of 1976 ).
( 2 ) THE relevant facts are that M/s. Atherton West and Company Limited, a limited company was carrying on the business of manufacturing and sale of textiles at Kanpur (hereinafter called the Company ). The Company had taken credit facilities from the plaintiff Bank against hypothecation and pledge or its goods. On the coming into force of the Ordinance No. II of 1976 the Custodian of the Company under a threat of prosecution obtained possession of the pledged and hypothecated goods and sold the same. The value of the hypothecated pledged goods according to the plaintiff Bank was Rs. 79,15,552. The Plaintiff Bank has filed this suit for recovery of Rs. 79,15,552 on the allegation that the recovery of the goods by the defendants from the Bank was illegal, unwarranted and unauthorised and they are entitled to recover the price of the goods which were taken into possession by the defendants from the plaintiff Bank and sold. The plaintiff Bank has alleged that although the amount due to the Bank from the company as on 31st December 1977 amounted to Rs. 1,27,32,578 but the Bank was limiting its claim against the defendants to the value of the pledged and hypothecated goods. The plaintiff also claimed interest at the rate of 17 per cent per annum from the date the defendants had taken possession of the goods and until the recovery of the value of the goods.
( 3 ) THE suit is contested by the defendants. It is not disputed that the defendants had taken into possession all the goods lying in the godowns of the Punjab National Bank. The defendants have disputed the value of the goods of which possession was taken by them. According to the defendants the value of the stock of stores and spares was taken at 40 per cent less as the condition of the stock was unsatisfactory and the value of the stock of cloth bales was taken 30 per cent less due to the unsatisfactory condition of the stocks. Defendant No. I denied that the alleged goods were pledged or hypothecated by the defendants. The defendants further submitted that the action taken by defendents Nos. 2 and 3 in recovering possession of the goods in dispute was in accordance with law and was taken in good faith to protect the interest of the company. The defendants pleaded that in view of sub-section (7) of section 3 of Act No. 98 of 1976 the plaintiff has no claim against the defendants.
( 4 ) BESIDES the pleas on merits, the defendant No. I raised a few preliminary objections, inter alia, (i) that under sub-section (7) of section 3 the alleged liability incurred by the company before the appointed day can be enforced only against the company and not against the Central Government, (ii) that M/s Atherton West and Company Limited was a necessary party to the suit and the suit is bad for its non-joinder, and (iii) that this Court has no jurisdiction to entertain the suit.
( 5 ) ON the pleadings of the parties, the following issues were framed: "1. Is the suit not maintainable against all or any of the defendants by reason of the provisions of section 3 (7) of the Laxmi Rattan and Atherton West Cotton Mills (T. O. O. M.) Act, 1976 ? 2. Is the present suit bad for non-joinder and or misjoinder of parties because M/s. Atherton West and Co. have not been poined as a party ? INDIA AND TWO OTHERS 3. Does this Court not have jurisdiction to entertain and try the suit ? 4. Has the plaintiff filed a suit for the recovery of Rs. 1,27,32,578 in Kanpur which also covers the present claim and what is the effect of the filling of that suit ? 5. What was the
