The sale of pledged shares by the pledgee to itself is not void but merely unauthorized.

1. This appeal must be dismissed though on grounds different from those on which the Court below have proceeded to pass a decree in favour of the respondent.

2. The dispute in this appeal relates to shares of the Punjab Registered (Iron & Steel) Stockholders Association Ltd., Ambala City. The number of shares is 150 of the face value of Rs. 100/- each. Defendant No. 1, Messrs Dhani Ram & Sons, who were hardware merchants at Lahore, had a cash credit account with the plaintiff Bank. This account was secured by mortgage of immovable property as the partition of the country, Messrs Dhani Ram, & Sons moved to Delhi and the Bank also moved amount due to it from Messrs. Dhani Ram & Sons by a notice Exhibit D 2 dated the 24th July, 1948 and by another notice Exhibit D 3 dated 16th April, 1953.

In Exhibit D 3 the last paragraph is in these terms : "I am further directed to call upon you to please arrange to take delivery of the shares mentioned above against payment of their value in case at Delhi Office of my client within two weeks from the receipt of this notice, failing which my client will be free to sell them away at any price available in the market by private or public sale at your risks and cost."

It seems that instead of selling these shares, the Bank, which held the blank transfer deeds along with the share script, appropriated the same as its own property, though the question of appropriation is not admitted by the appellant inasmuch as the company did not recognise the Bank as the owner of these shares. The Bank filed the present suit for an injunction directing the company to register the Bank as the owner of those shares. The suit was resisted by the company as well as by Messrs Dhani Ram and Sons. The plea of Messrs Dhani Ram and Sons was that the shares had not been transferred to the Bank. It was further pleaded that the suit was barred by limitation. Both the Courts below found against the defendants on both these matters and decreed the suit. No second appeal has been preferred by the company but Messrs Dhani Ram and Sons have preferred one and by this order it is their appeal that will be disposed of.

3. The first contention advanced by Mr. Prem Nath Khanna, the learned counsel for the appellant, is that the Bank was merely a pledgee of the shares and as such had only right to sell the shares in the event of the pledger not paying back the debt owed by him on the due date or after notice by the pledgee for its payment. For this the learned counsel relies on the provisions of Section 176 of the Indian Contract Act, which are in these terms:

"If the pawner makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawner upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the pawner reasonable notice of the sale.

If the proceeds of such sale are less than the mount due in respect of the debt or promise, the pawner is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawner."

He further contends that the pledgee could not sell the shares to itself and such a sale would be void in law. Therefore the contention is that the pledger is still the owner of the shares, they having not been legally disposed of.

4. It is not disputed by both the learned counsel that before the opinion under Section 176 is exercised by the pledged, the pledger is the legal owner of the shares but once the option is exercised the pledger loses his right to redeem the shares, though certain other rights may arise if the sale of the shares is not properly carried out for instance right to recover damages for the sale below the market-price.

5. It is not disputed that the Bank did exercise its option vide notice Exhibit D. 3, but instead of selling the shares by