Hong Kong And Shanghai Bank Et Al. V. Krishnapillai

1932 Present: Garvin S.P.J. and Drieberg J.

HONG KONG AND SHANGHAI BANK et al. v.
KRISHNAPILLAI

78-D. C. (Inty.) Ratnapura, 60.

Pledge-Shares in Joint Stock Company pledged with bank-Security for overdraft-Insolvency of pledgor-Rank's right to dispose of shares-Order of Court to sell shares-Preferential right of bank over proceeds of sale- English law.

A bank with whom scrip relating to shares in a Joint Stock Company is deposited by way of security for an overdraft, with written authority to dispose of the shares by sale or transfer, has no right to dispose of them without the intervention of Court, where the assignee in insolvency of the pledgor objects to such a course. The bank is, however, entitled to obtain an order from Court that, upon the sale of the shares by the assignee, it should be given preference in those proceeds for so much of its claim as is charged upon and secured by such shares.

The right of a pledgee to sell his security without recourse to a Court of law is peculiar to the English law of pledge, and the Roman-Dutch law in the matter of rights of mortgage and pledge does not give place to the English law, when the mortgagee or pledgee is a bank.

The Court ordered that the bank will be further entitled, in the event of its purchasing the property hypothecated, to credit to the extent of such claim provided the purchase is made for a price not less than the current market price of the shares.

APPEAL from an order of the District Judge of Ratnapura.

This was an application by the assignee in insolvency for an order to sell certain shares alleged to be the property of the insolvent. The application was opposed by the appellant-banks so far as it related to certain shares, the scrip of which had been deposited with them as security for overdrafts with written authority from the insolvent to dispose of or transfer them. The learned District Judge ordered that the shares should be sold, the proceeds brought into Court, and that the secured creditors should bring hypothecary actions against the assignee to establish their preferential claims to the proceeds.

B. F. de Silva, for appellants.-Pledgee of shares is entitled to sell. The English law should govern banking transactions (Ordinance No. 5 of 1852V The pledge or mortgagee can sell (Stubbs v. Slater 1[(1910) 1 Ch. 632.]; Colonial Bank v. Whinney 2[(1886) 11 App. Cases 426.]). Bankers have special lien under the law merchant (Grant on Banking, p. 288; Rock v. Garrissen 3[(1860) 3 Q. L. J. Ch. 39.]), in realizing lien on securities (Grant, p. 296; The Odessa case 4[(1916) 1 A. C. 158.]). Where share certificates are deposited as security for a debt the creditor may obtain an order for foreclosure (Grant on Banking, p. 403). Even under Roman-Dutch law, banks are in special position, as, for example, in the case of shares held by a bank (Wille on Mortgage, p. 183; Morice Roman-Dutch Law, p. 62).

Counsel cited Sankayar v. Mohamadu 5[8 Times 98.]; Raman Chetty v. Sarkuman 6[15 N. L. R. 337.]; Brand & Co. v. Assignee of Goerge Wall & Co. 7[5 S.C. C. 86.]

Keuneman, for assignee, respondent.

January 22, 1932. DRIEBERG J.-

This is an appeal from an order directing the sale by the assignee of certain shares alleged to be the property of the insolvent. The application for sale was made by the assignee and was opposed by the appellants so far as it related to the shares in their possession.

The history of the case, so far as it relates to the matter before us, and the respective positions of the several appellants as gathered from the record and the affidavits filed by them are as follows :-

The insolvent, when he filed his declaration of insolvency on January 31, 1930, was indebted to the first appellant, the Hong Kong and Shanghai Bank, on his overdrawn current account in a sum of Rs. 13,883.90. The bank held as security 1,000 shares in Broughams, Ltd

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