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1959 Supreme(P&H) 76
PUNJAB & HARYANA HIGH COURT
Mehar Singh and Tek Chand JJ.
Grison Knitting Works
Versus
Laxmi Commercial Bank Ltd.
First Appeal No. 291 of 1951,
Decided On : APRIL 28, 1959
The interpretation of the phrase "reasonable notice of the sale" in Section 176 of the Indian Contract Act, 1872, and the requirements for a valid notice under this provision.
Headnote:
The judgment deals with the validity of a notice issued by the plaintiff Bank under Section 176 of the Indian Contract Act, 1872, for the sale of pledged goods. The defendants, who were partners in a firm, had obtained a cash credit account from the plaintiff Bank against the security of pledged goods and shares. When the defendants failed to repay the loan, the plaintiff Bank issued a notice under Section 176 of the Indian Contract Act, demanding payment and informing the defendants of its intention to sell the pledged goods. The defendants objected to the notice on various grounds, including the lack of a specific date, time, and place of the sale. The trial court found the notice to be invalid and dismissed the plaintiff Bank's suit for recovery of the loan. On appeal, the High Court held that the notice was valid and sufficient under Section 176 of the Indian Contract Act. The court interpreted the phrase "reasonable notice of the sale" to mean a notice that provides the pawnor with information about the date, time, and place of the sale, so that the pawnor can exercise their right to redeem the goods before the sale. The court also held that the defendants had not raised any objection to the sale being vitiated on the ground that the notice was defective, and that they had merely asked for the deferring of the sale, which request was granted by the Bank. The court further held that the defendants had not at any stage attempted to make the payment and clear off the account, and that their conduct showed that they had absolutely no intention of making the payment. The court concluded that the notice was valid and that the sale of the pledged goods by the plaintiff Bank was a proper and genuine sale in the circumstances of the case. The appeal of the defendants was dismissed, and the appeal of the plaintiff Bank was allowed, with a decree for the recovery of the loan amount and interest.
Fact of the Case:
The plaintiff Bank had advanced a cash credit loan to the defendants, who were partners in a firm, against the security of pledged goods and shares. When the defendants failed to repay the loan, the plaintiff Bank issued a notice under Section 176 of the Indian Contract Act, demanding payment and informing the defendants of its intention to sell the pledged goods.
Finding of the Court:
The High Court held that the notice issued by the plaintiff Bank under Section 176 of the Indian Contract Act was valid and sufficient. The court interpreted the phrase "reasonable notice of the sale" to mean a notice that provides the pawnor with information about the date, time, and place of the sale, so that the pawnor can exercise their right to redeem the goods before the sale. The court also held that the defendants had not raised any objection to the sale being vitiated on the ground that the notice was defective, and that they had merely asked for the deferring of the sale, which request was granted by the Bank. The court further held that the defendants had not at any stage attempted to make the payment and clear off the account, and that their conduct showed that they had absolutely no intention of making the payment. The court concluded that the notice was valid and that the sale of the pledged goods by the plaintiff Bank was a proper and genuine sale in the circumstances of the case.
Issues: 1. Whether the notice issued by the plaintiff Bank under Section 176 of the Indian Contract Act was valid and sufficient? 2. Whether the defendants had raised any objection to the sale being vitiated on the ground that the notice was defective? 3. Whether the defendants had at any stage attempted to make the payment and clear off the account? 4. Whether the conduct of the defendants showed that they had absolutely no intention of making the payment?
Ratio Decidendi: The court interpreted the phrase "reasonable notice of the sale" in Section 176 of the Indian Contract Act to mean a notice that provides the pawnor with information about the date, time, and place of the sale, so that the pawnor can exercise their right to redeem the goods before the sale. The court held that the notice issued by the plaintiff Bank was valid and sufficient as it provided the defendants with the necessary information. The court also held that the defendants had not raised any objection to the sale being vitiated on the ground that the notice was defective, and that they had merely asked for the deferring of the sale, which request was granted by the Bank. The court further held that the defendants had not at any stage attempted to make the payment and clear off the account, and that their conduct showed that they had absolutely no intention of making the payment.
Final Decision: The appeal of the defendants was dismissed, and the appeal of the plaintiff Bank was allowed, with a decree for the recovery of the loan amount and interest.
Mehar Singh, J.
1. This judgment will dispose of two cross-appeals No. 291 of 1951 by the defendants and No. 38 of 1952 by the plaintiff Bank from the judgment and decree dated 29-11-1951, of the Subordinate Judge, 1st Class of Ludhiana.
2. The plaintiff Bank brought a suit to recover an amount of Rs. 29,785-4-3 from the seven defendants, of whom the first is firm Girson Knitting Works, Ludhiana, 2nd, 3rd, 4th and 5th, namely, Mangat Ram, Babu Ram, Jai Pal and Raj Pal, are sons of the 6th defendant. Labhu Ram, and the 7th defendant Poni Devi is the wife of defendant No. 6 and mother of defendants Nos. 2 to 5. The circumstances out of which the claim of the plaintiff the Laxmi Commercial Bank Ltd., has arisen are these.
3. The plaintiff Bank has a branch at Ludhiana. Defendant No. 1 is a firm which carries on hosiery and cloth manufacture business at Ludhiana. The plaintiff has alleged that defendants Nos. 2 to 6 are the partners of defendant No. 1. On 18-1-1946, the firm defendant No. 1 of defendants No. 2 to 6 made an application to the plaintiff Bank for a cash credit account to the tune of rupees one lac. The application was allowed to the extent of Rs. 50,000.00 , but, on a subsequent approach by the partners of the defendant firm, on 1-11-1946, the cash credit limit of the loan was enhanced to rupees on lac. On 18-1-1946, defendants Nos. 2 to 5 gave the promissory note Exhibit P. 2 for the amount of rupees one lac to the plaintiff Bank on behalf of defendant No. 1 as security for the cash credit account. It was accompanied by the letter, of even date, Exhibit P. 5 also signed by the same defendants. On the same date as security for the same loan a pledge of goods lying in the godown of the Imperial bank at Tuticorin port in Madras Presidency along with other property, was given, signed by defendants Nos. 2 to 5, to the plaintiff Bank. The plaintiff Bank averred in para No. 4 of the plaint that the value of the pledged goods was stated to be Rs. 60,000.00 . On 17-6-1947, defendant No. 7 deposited, with the plaintiff Bank, title deeds of the land, of which description is given in para No. 5 of the plaint, as an additional security for repayment of the debt due to the plaintiff Bank from defendant No. 1 and its partners. On the same date under letter Exhibit P. 8 the defendant firm pledged with the plaintiff five thousand shares of the value of Rs. 25,000.00 in Girson Cloth Mills authorising the plaintiff Bank, in the even of non-payment of the debt, to recoup the loan by the sale of the shares. In the agreement Exhibit P. 3 of 18-1-1946, it was further agreed by the defendants with the plaintiff Bank that the latter would have power to sell the pledged goods without giving any notice of sale to the defendants.
4. In para No. 7 of the plaint the plaintiff Bank says that demand letters were addressed to the defendants on April 23, June 2 and July 10, 1947, but the defendants did not clear the cash credit account and the amount of loan outstanding against their name in cash credit account. In the written statement by defendants Nos. 1 to 4 in reply to para No. 7 of the plaint there is no specific denial of those demands by these four defendants and in the written statement of defendants Nos. 5, to 7 all that is stated is that the allegations set forth in para No. 7 of the plaint were not known. It is clear that the defendants have not denied that the plaintiff Bank made demands for payment of the outstanding loan from the defendants. On the record there is one of these demand letters of 2-6-1947, which is Exhibit C-91. Defendants Nos. 1 to 6 having failed to repay the loan in consequence of demands made by the plaintiff Bank, the latter was then obliged to give formal notice Exhibit P. C. 1 on 18-11-1947, after referring to two items, one of Rs. 45,174/8/3 secured against the stocks lying at Tuticorin port and the other of Rs. 16,206/3/3 for which a security had been given for payment, that being a debt of Messrs. Jai
