The plaintiff was entitled to sue on the promissory note before exhausting the remedy of sale of the pledged goods, as per the provisions of the Indian Contract Act, 1872.

Plaintiff in a suit for realisation of money is the appellant.

2. The suit O. S. 595/81 before Sub Court, Ernakulam was filed by plaintiff for realisation of an amount of Rs. 17,427.77 due from defendant under a key loan transaction. A promissory note was executed by defendant on 11-12-1978 for Rs. 12,000/- and an instrument of pledge, of goods was also executed on the same day. The balance amount due was not paid in spite of a registered notice and hence the suit.

3. Defendant admitted the execution of the promissory note and the instrument of pledge, but contended that he had not received any consideration for the promissory note and that the documents were executed at the instance of the bank officials. He contended that the key loan transaction was entered into at the time of closure of a gift scheme sponsored by the plaintiff bank known as "Grihalakshmy Gift Scheme" as part of plaintiff's deposit mobilisation scheme. The washing machines pledged with the bank under Ext.A2 did not belong to defendant and he had no responsibility of selling those machines and to discharge the amount covered by Ext.A1. Defendant disclaimed liability to pay any amount.

4. Both parties produced documents and adduced oral evidence. On an appreciation of the documents and evidence the court below held that the transaction of key loan was not hit by undue influence. At the same time it was found that the transaction was entered into in the circumstances alleged by the defendant in his written statement. Relief was denied for the reason that plaintiff sued on the pronote without exhausting the remedy of sale of the goods available to plaintiff under the Banking Regulations. In consequence the suit was dismissed. Aggrieved by that decision plaintiff has come up in appeal.

5. It is urged by Sri C. M. Devan, learned counsel for appellant that a grave error was committed by the court below in denying the relief after finding that defendant had executed Exts. A1 and A2. It is also contended that the pledgee has a right to retain the goods as security for the loan and sue for the amount due. On the other hand it is contended by learned counsel for respondent that the promissory note was not supported by consideration and that the note and the instrument of pledge were executed only to oblige the officials of the bank to enable them to close the Grihalakshmy Gift Scheme started by them without the permission of the Reserve Bank. It is also contended that plaintiff cannot retain the goods pledged and at the same time sue for the amount due.

6. On the contentions raised by both sides the following points arise for consideration:

(i) Whether defendant is liable to pay the amount due on Ext.A1?

(ii) Whether plaintiff is entitled to sue on the promissory note before exhausting the remedy of sale of the pledged goods?

7. Point No. 1 : The execution of Ext. A1 pronote and A2 instrument of pledge of goods is admitted by defendant. Plaintiff bank had started a gift scheme by name "Grihalakshmy Gift Scheme" as part of deposit mobilisation. Defendant is a dealer in home appliances. The scheme was prepared by defendant at the instance of plaintiff bank. He acted as a promoter and the goods were ordered by him. The correspondence between defendant and the supplier on the one hand and defendant and plaintiff on the other would indicate that it was defendant who ordered for the goods though the documents were received by the bank and the goods taken delivery of by them. It may therefore appear that defendant had only acted as a promoter or agent on behalf of the bank. But there are documents to suggest that defendant had undertaken to pay the amount mentioned in Ext.A1 on the pledge of the goods mentioned in Ext.A2.

8. As observed earlier the execution of the documents is admitted. It might have been executed in the circumstances mentioned by defendant in his written statement. But he had undertaken the liability to pay the amount due under Ext.A1. Ext.A3 is a lett