Central Bank of India vs Santosh Kumar Awasthy and others

A.P. Sen, C.J.—This is a Decree-holder''s revision directed against an order of the 1st Additional District Judge, Bilaspur, dated 8-11-1977, rejecting its application under Order 21, Rule 46 of the Code of Civil Procedure.

The Decree-holder, Central Bank of India, obtained a decree for Rs. 22,133.71 against the non-applicants Judgment debtors on 8-4-1977, towards recovery of the loan advanced on pledgment of goods, i. e. the stock in trade. The decree provided, inter alia, that the Decree-holder should, in the first instance, recover the decretal amount by sale of the pledged goods, before proceeding against the Judgment-debtors personally. The Judgment-debtors were given time till 9-5-1977 to pay off the decretal amount. On failure of the Judgment-debtors to deposit the decretal amount, on 9-5-1977, the decree-holder filed an application for execution.

The State Government of Madhya Pradesh, in the Industries Department, had, in the meanwhile, advanced a loan of Rs. 70,000 to the judgment-debtor No. 1 Santosh Kumar Awasthy, which he credited to his account with the Bank of Maharashtra, Bilaspur Branch, Bilaspur. The decree-holder accordingly made an application under Order 21, Rule 46 of the Code of Civil Procedure, for restraining the Bank of Maharashtra from making any payment out of the said sum of Rs. 70,000, to the judgment-debtor No. 1, Santosh Kumar Awasthy, until further orders and also for restraining him from withdrawing any amount from the said deposit of Rs. 70,000 with the Bank of Maharashtra.

The learned Additional District Judge had earlier granted an ad interim ex parte injunction restraining the Bank of Maharashtra, Bilaspur Branch, but by his subsequent order vacated the ad interim ex parte injunction and also rejected the decree-holder''s application under Order 21, rule 46 of the Code.

The revision must be allowed on the short ground that the learned Additional District Judge acted illegally and with material irregularity in passing the order that he did. He has failed to draw a distinction between a charge and a pledge. In coming to the conclusion that the decree-holder cannot proceed, except in the manner provided in the decree, the learned Additional District Judge has relied upon Fatechand v. Indian Cotton Co. Ltd., Bombay A I R 1935 Nag. 129. In that case, a Division Bench of the Judicial Commissioner''s Court held that, where a charge is created in the decree over certain specified properties for the payment of the decretal amount, the decree-holder should first exhaust his remedy against the charged property, before proceeding against any other property. I am afraid, the principle laid down in Fatechand v. Indian Cotton Co. Ltd., Bombay (supra) is not applicable to the facts of the present case.

As a pledgee, the decree-holder Central Bank of India, had the option u/s 176 of the Contract Act, in the event of default on the part of the pledger, to exercise any of the two rights, viz., (1) the right to file a suit for the recovery of the debt, while retaining the pledged goods by way of a collateral security, or (2) the right to sell the pledged goods, after giving the pledger a reasonable notice of sale. In a case where both the rights exist in a pledgee, as is clear from the terms of section 176 of the Contract Act, they are concurrent rights and the right to proceed against the property pledged is not merely accessory to the right to proceed against the debtor personally.

In Mahalinga Nadar v. Ganapathi Subbiea A I R 27 Mad. 528 (F. B.), a suit was filed for the recovery of the money advanced to the defendants on the pledge of jewels. The defendants contended that the suit was time-barred. That contention was upheld by the Subordinate Judge holding that Article 57 of the Limitation Act applied, but not Article 120. The plaintiff claimed the amount from the defendant from the proceeds by sale of the jewels. Their Lordships had to consider the applicability of the relevant article of the Limitation Act and in that context had to consider whether a pledgee of goods could ask for their sale. Subrahmania Ayyar and Banson JJ., holding that the claim to proceed against the properties pledged is governed by Article 120 of the Limitation Act, and that the claim to proceed against the debtor personally is governed by Article 57 of that Act, observed:

There can be no question but that the plaintiff is entitled to sue for the sale of the property pledged to him notwithstanding that he is also entitled u/s 176, Indian Contract Act, to sell the property without reference to the Court.

It is obvious that a right to sue for the sale of the property exists even in the absence of a right to sue for a personal decree against the debtor for the money lent. It would be clearly so if it had been agreed between the parties that no personal liability for the debt was to accompany the pledge of the jewels.

It would follow therefore that in a case where both rights exists they are concurrent rights and the right to proceed against the property pledged is not merely accessory to the right to proceed against the debtor personally.

It is thus clear that a pledgee is entitled to pray for sale of the goods pledged through Court, even though he is entitled u/s 176 of the Contract Act to sell them personally without reference to the Court: Jiwan Das and Another Vs. Sahu Sarju Prasad and Others, ; Haridas Mundra Vs. National and Grindlays Bank Ltd., ; and Bank of Chittoor Ltd., Chittoor by its Manager Sri V.R. Doraiswami Ayyar Vs. P. Narasimhulu Naidu and Others,

It is thus clear that section 176 of the Contract Act confers upon a pledgee two rights, in the event of default on the part of the pledgor: (1) Right to file a suit for the recovery of the debt, or (2) for performance of the promise. In each case, he is entitled to retain the pledged goods as and by way of a collateral security. If the pledgee does not file a suit, he is given the right to sell the pledged goods. But before selling the goods, he must give to the pledgor a reasonable notice of sale. Here the decree merely embodies the right of the pledgee to sell the pledged goods through Court. That does not imply that the decree holder cannot proceed in any other manner. In AIR 1934 140 (Nagpur) Vivian Bose, A. C. J., held that the Code gives the decree-holder the right to decide whether he should execute the decree in one way or the other or both It the Court considers that he should not exercise the right in the manner he desires, it must give reasons. It is not enough to say that there is property against which he may proceed and therefore he must proceed against that first, for that is precisely what the Code states he need not do: Chena Pemaji v. Ghelabhai Narandas I L R 7 Bom. 301; AIR 1926 110 (Lahore) ; Ramchandrarao v. Vithal Keshav A I R 1948 Bom. 143. Although in all these cases there was a charge created by the decree, the decree holder sought to attach certain other properties. It was held that the object of the charge being primarily for the benefit of the creditor, the decree holder can execute the decree in any order he pleases.

In the result, the revision succeeds and is allowed. The order passed by the Additional District Judge is set aside and the application filed by the decree holder, Central Bank of India, Bilaspur Branch, Bilaspur, under Order 21, rule 46 of the Code of Civil Procedure, is allowed. There shall be no order as to costs.