Rupchand Dawn vs Kamal Kumari Devi

Bachawat, J.—These appeals are by the Defendants. Appeal No. 57 of 1951 is by the Defendants 2 to 4 and appeal No. 58 of 1951 is by the Defendant No. 1.

The material facts of the case appear from the judgment of Das J.

Das, J. These two appeals are directed against the judgment and decree passed by Bachawat J., dated August 17, 1950, in Suit No. 1957 of 1940.

Appeal No. 57 of 1951 is at the instance of. Defendants 2, 3 and 4 and Appeal No. 58 of 1951 is at the instance of Defendant No. 1.

In the above suit, the Plaintiff (Sm. Kamal Kumari Debi) claimed an account of the amount due and payable by the Plaintiff on account of a loan of Rs. 12,500 lent and advanced on August 7, 1933, by the Defendant No. 1 to the Plaintiff''s mother, a decree that the Defendants do make over to the Plaintiff and transfer in her name 600 ordinary shares of the Bengal Trust, Ltd., on payment of the amount due and payable to the Defendant No. 1 on the taking of such account, alternatively, a decree for the sum of Rs. 36,000 by way of damages or indemnity under the Bengal Money-lenders Act.

One Apurba Kumar Bajpai is the father and one Santimati Debi, now deceased, was the mother of the Plaintiff Sm. Kamal Kumari Debi. Santimati died on March 29, 1939. At the time of her death, she left surviving her, her husband Apurba Kumar Bajpai, two sons and one daughter, namely, the Plaintiff. The Defendant No. 1, Haripada Dawn, is the father of Defendants Sanatan Dawn, Rupchand Dawn, Hiralal Dawn and Chunilal Dawn, who are respectively Defendants 2, 3, 4 and 5.

In 1932, Apurba Kumar Bajpai applied to the Local Government for a licence for the supply of electrical energy to Asansol. He had already incurred expenses to the tune of Rs. 3,821-6 for securing the licence. Before he had obtained the licence, he conceived the idea of floating a company, the Asansol Electric Supply Company, Ltd., to work the licence. He also contemplated that the work should be done by a partnership business, as the managing agent of the company. With this object he entered into an agreement with one Trailokya Nath Chatterji. Trailokya advanced a sum of Rs. 2,000 to Apurba for the purpose of securing the said licence. The understanding was that Apurba would take in Trailokya as a partner in the said managing agency partnership firm and would pay off Trailokya out of the moneys to be recovered from the Asansol Electric Supply Company, Ltd., The terms of the agreement, which was entered into between Apurba and Trailokya, were recorded in a letter dated September 5, 1932, written by Apurba to Trailokya. In November, 1932, the Asansol Electric Supply Company, Ltd., was incorporated. The licence which had been obtained by Apurba was transferred to this company. The Articles of Association of the company provided that for the first two years the managing agency would receive a sum of Rs. 300 per month as remuneration and thereafter remuneration would be increased to Rs. 500 per month. The terms of agreement between Apurba and Trailokya referred to above provided that the managing agency partnership firm would consist of Apurba and Trailokya or their nominees. By virtue of this power reserved to Apurba, Apurba nominated his wife Santimati as his nominee in the managing agency partnership firm. In December, 1932, Apurba obtained a power-of-attorney from his wife Santimati, conferring on him very wide powers of management. Between the years 1932 and 1934, Santimati and Trailokya entered into certain agreements with Defendant No. 1, Haripada Dawn, in order to raise the money and as consideration transferred to Haripada Dawn a one-fourth share in the profits of the managing agency partnership firm. It also appears that Santimati and Trailokya transferred another half anna share in the profits to one Subal Eaksbit. On June 19, 1934, Apurba obtained a lease from the Secretary of State of a plot of land on the Grand Trunk Road, on which a sub-station of the Asansol Electric Supply Company, Ltd., was built later on. Apurba''s rights under the lease were subsequently conveyed to the company on July 17, 1936. On October 1, 1936, the Bengal Trust, Ltd., was incorporated with a board of directors consisting of Apurba, Sanatan Dawn, Defendant No. 2, and one Mohit Kumar Mukherji. This company acquired the business of the Bengal Industrial Company in consideration of an allotment of 1,920 shares constituting the capital of the company in the following proportions: Trailokya was allotted 570 shares, Santimati Debi 600 shares, Haripada Dawn 450 shares, Subal Rakshit 180 shares and Mohit Kumar Mukherji 120 shares. In November, 1936, share certificates were issued to the allottees as aforesaid. On August 7, 1933, Haripada, Defendant No. 1, lent and advanced a sum of Rs. 12,500 to Sm. Santimati Debi, carrying interest at 9 per cent, per annum, a moiety of the loan was made repayable on August 7, 1934, and the other moiety on February 7, 1935. Santimati agreed not to alienate her interest in the Bengal Industrial Company and further agreed that, in default of payment, her interest was to vest in Haripada absolutely. Similar transactions also took place between Haripada and Trailokya. The time for making payment was extended to May 7, 1936. On January 9, 1936, Santimati and Trailokya each paid a sum of Rs. 2,500 to Haripada. On August 30, 1936, a fresh agreement was entered into between Haripada and Santimati and Trailokya. On taking accounts, it was found that Santimati and Trailokya were each liable to pay a sum of Rs. 11,198-9-6 to Haripada and a further sum of Rs. 598-9-6 was also found to be due by Santimati and Trailokya to Haripada. The aforesaid sums were to carry interest from September 1, 1936, at 9 per cent, per annum. The material terms of this agreement are embodied in paras 6, 7 and 8. These paragraphs read as follows:

The said Sm. Santimati Debi agreed to make over to the said Haripada Dawn the said 600 ordinary shares of Rs. 10 each to be allotted to her in the company to be formed as aforesaid under the name and style of the Bengal Trust, Ltd., together with a Transfer Deed to be signed by her in blank immediately upon allotment.

If the said Sm. Santimati Debi makes default in payment of the amounts due from her to the said Haripada Dawn as mentioned in para. 5 hereof on or before August 31, 1937, the said Haripada Dawn shall be at liberty at his option either to recover the said amounts from her on the basis of her personal liability or to appropriate the said 600 ordinary shares standing in her name in the said Bengal Trust, Ltd., in full satisfaction of his due from the said Sm. Santimati Debi as aforesaid and to insert his own name in the blank Transfer Deed hereinbefore mentioned without any consent from but after giving notice to the said Sm. Santimati Debi her heirs representatives in that behalf at her or their last known place of residence by registered post and to have his name registered in the books of the said company in respect of the said 600 ordinary shares, whereupon the said Sm. Santimati Debi will be discharged fully from her liability as mentioned in para. 5 thereof.

The said Sm. Santimati Debi hereby authorises the said Haripada Dawn to receive and give valid discharge for the said 600 ordinary shares to be allotted to her by the Bengal Trust, Ltd., as aforesaid.

In pursuance of the aforesaid agreement, Santimati and Trailokya each made over to Haripada the shares and the blank transfer deeds. In this transaction Apurba acted as the constituted attorney of Santimati. It does not appear that after January, 1937, Apurba acted on behalf of Santimati as her constituted attorney.

On September 1, 1937, Messrs. P.L. Mallik and Co., solicitors for Haripada, wrote a letter to Santimati intimating to her that Haripada had exercised his option reserved to him in the agreement dated August 30, 1936, and had appropriated her 600 shares in satisfaction of his dues. On September 5, 1937, the board of directors of the Bengal Trust, Ltd., passed a resolution for registration of the said 600 shares in the name of Haripada. Apurba, although served with notice of the meeting, did not attend the same. Later on, Haripada transferred the shares which he had received from Santimati to Rupchand Dawn, Hiralal Dawn and Chunilal Dawn, Defendants Nos. 3, 4 and 5. In pursuance of this transfer, the board of directors of the Bengal Trust, Ltd., passed a resolution on July 6, 1938, directing the registration of the transfer.

On March 28, 1939, Santimati died. On August 27, 1940, the Plaintiff, Sm. Kamal Kumari Debi, as the heir to her mother Santimati, caused a letter to be written through her solicitor, Mr. Somnath Chatterjee, to Haripada Dawn asking him to make over to her the said 000 shares pledged by Santimati. As the Defendant did not comply with her request, the Plaintiff instituted the present suit on August 29, 1940, for the reliefs which I have already mentioned.

Two sets of written statements were filed respectively by Defendant No. 1 and Defendants Nos. 3 to 5.

On these pleadings several issues were raised. The learned Judge came to the following findings:

(1) The Plaintiff''s mother Santimati was not a benamdar for her husband. The disputed 600 shares were stridhan property of Santimati. Under the Mitdkshara school of Hindu law, by which they were governed, on Santimati''s death the Plaintiff has become entitled to the shares as or mother''s heir.

(2) The transaction evidenced by the agreement, dated August 30, 1936, was in essence a mortgage. The parties intended that the shares were to remain charged for payment of the loan with interest as stipulated. As Santimati had a right to redeem the said shares, Haripada had no right to appropriate the said shares without giving a prior notice to Santimati. The parties also intended that, on the payment of the loan, the option of appropriation would come to an end. The option of appropriation was prima facie penal and was a clog on Santimati''s right to redeem the said shares.

(3) Even, assuming that the said transaction can be regarded as pawn simpliciter, the option of appropriation was void u/s 177 of the Indian Contract Act.

(4) Assuming that the option of appropriation is valid in law, such option had to be exercised after giving prior notice, and as no such notice was given, the alleged appropriation was of no effect.

(5) The said shares never became the absolute property of Haripada.

(6) The Defendants Nos. 2 to 5 did not pay for the transfers and cannot be regarded as bonafide transferees for value without notice to the rights of Santimati.

(7) The Bengal Money-lenders Act has no application to the facts of this case.

(8) The Plaintiff was, accordingly, entitled to redeem the said shares on the terms embodied in the decree.

In the result, the learned Judge directed that the suit be dismissed, with costs against Defendant No. 2, who had no interest, but there will be a preliminary decree against Defendants Nos. 1, 3, 4 and 5 for redemption of the 600 shares of the Bengal Trust, Ltd., mentioned in the plaint. The Plaintiff and Defendants Nos. 1, 3, 4 and 5 were directed to bear their own costs up to the date of the decree. Further costs were reserved.

The learned Judge recorded in his judgment that a draft of the decree was supplied to both the parties before the decree was formally pronounced in Court and both parties have informed the learned Judge that, on the footing that his findings are correct, there was no objection to the form of the decree and the reliefs granted.

In Appeal No. 58 of 1951, Mr. Mitter, learned Counsel for the Appellant Defendant No. 1, contended-

(1) that the Plaintiff has failed to prove her title to the shares in suit;

(2) that, conceding that the delivery of shares by Santimati to Haripada together with blank transfer deed signed by Santimati constituted a pledge, the right of appropriation reserved to Haripada under the agreement dated August 30, 1936, cannot be regarded as a clog and was enforceable by Haripada;

(3) that, in the view that the transaction was merely a pawn, the option of appropriation was not void but was enforceable in law and that the Defendant No. 1 had properly exercised his right of appropriation.

In Appeal No. 57 of 1951, learned Counsel appearing for the Appellants, Defendants Nos. 3 to 5, merely, adopted the argument of Mr. Mitter.

I shall now deal with the contentions raised by Mr. Mitter in support of his appeal. The first contention was that the Plaintiff, who was a daughter of Santimani, had failed to prove her title. This contention was based on a three-fold ground:

(1) that Santimati was the benamdar of her husband, Apurba, and, as such, on Santimati''s death the right to the shares could not devolve on Santimati''s heirs, and

(2) that Santimati''s right in the shares in suit was not her stridhan property, and

(3) that, assuming that the said shares were the stridhan property of Santimati, the Plaintiff had failed to prove that she was the heiress to Santimati.

As regards the first branch of the contention, namely, whether Santimati was the benamdar of Apurba, the trial Judge has found against the Appellant.

As I have already stated, these shares were acquired by Santimati as the nominee of Apurba in the managing agency partnership firm. The Plaintiff''s case was that her mother Santimati had paid to Apurba a sum of Rs. 3,000 on a pledge of her ornaments and that this money was applied by Apurba in securing the licence for the Asansol Electric Supply Company, Ltd. The evidence bearing On this point consists of the testimony of Prafulla a son of Santimati, and of Shailendra, a son of Surendranath Chatterji, who is alleged to have lent the sum of Rs. 3,000 to Santimati on a pledge of her ornaments. The trial Judge has disbelieved this part of the Plaintiff''s case and, in my opinion, rightly. The alleged loan of Rs. 3,000 is not borne out by any account papers of Surendra Nath Cbatterji, the lender. Shailendra, the son of Surendra, the pledgee, is a friend of Praphulla, the son of Santimati. Apurba, to whom the money was alleged to have been paid by Santimati was not examined. Praphulla is the Plaintiff''s brother and is the principal witness in support of her case. In this state of the evidence, it is difficult to believe the oral testimony of Praphulla and Shailendra.

Even, assuming that a sum of Rs. 3,000 was paid by Santimati to Apurba, there is no evidence to show that the sum was applied by Apurba in securing the licence. Praphulla admits in his answer to Q. 151 that he did not know what was done with the money, namely, Rs. 3,000. Mr. Mitter contended that the specific case made by the, Plaintiff about the source of the money required for the licence having failed, the Court should accept the Defendants'' version that Santimati was the benamdar for Apurba. It is the Defendant who alleges that the nomination by Apurba of his wife Santimati as his nominee in the managing agency partnership business, was a benami affair. As the Defendant alleges the transaction to be a benami one, the onus rests on him to prove the allegation. The main circumstance relied upon by the Defendant in support of the plea of benami is the relationship between the parties coupled with the fact that Apurba had obtained a general power of attorney from Santimati conferring on him the widest possible powers. Reference was also made to the fact that Apurba represented his wife Santimati in the relevant transactions. It was also pointed out that Apurba was adjudged an insolvent by the First Additional District Judge, 24-Pargands, on February 8, 1927, and this was a strong motive for the benami transaction. As against, the above circumstances, we have to consider other facts which clearly show that the transaction was not a benami one. The alleged motive for the benami did not exist. The adjudication referred to was annulled on December 10, 1927. There is no proof that in 1932, when Santimani came in as a partner of the Bengal Industrial Company as nominee of Apurba in accordance with the agreement, dated September 5, 1932, Apurba was in financial difficulties. The evidence indicates that about that time Apurba was living with a film actress away from his family. It appears further that Apurba was on visiting terms with his wife and other members of his family. It also appears that, in the several agreements dated March 29, 1933, August 7, 1933 and August 30, 1936, the Defendant Haripada admitted that Santimati was partner of the Bengal Industrial Company and had shares in that firm. It also appears that Haripada took transfer from Santimati of a portion of her share of the remuneration in the said company. It further appears that, in the letters written by Messrs. P.L. Mallik and Co., solicitors for Defendant No. 1, dated September 1, 1937, and September 4, 1940; Santimati''s right to the shares in the Bengal Trust, Ltd., was admitted. Haripada has not examined himself to explain away these admissions. Adinath Chatterji, son of Trailokya Nath Chatterji looked after the managing agency business on behalf of his father. Adinath has not been called, nor have the papers of the said firm been produced to show who appropriated the profits of the partnership business. The power of attorney relied upon by the Defendant shows that Santimati was a partner in the firm. Apurba''s alleged statement in his own favour cannot be received in evidence, nor relied upon, as Apurba has not been examined. It may, however, be pointed out that Apurba admitted in various transactions that Santimati was the owner. In the agreement by which the loan was raised by Santimati from Haripada, Santimati accepted personal liability for the repayment of the loan. In my opinion, the evidence on record, taken as a whole, leads to the conclusion that Santimati was not the benamdar of Apurba. At the most, the facts may raise some suspicion in the mind of the Court. But in judging about the nature of a transaction alleged to be bendmi, the Court must rest its findings not on suspicion but on evidence. Mina Kumari Bibi v. Bijoy Singh Dudhuria (1916) ILR 44 Cal. 662 : L.R. 44 IndAp 72. The learned trial Judge was, therefore, right in his finding that the Defendant had failed to prove that Santimati was the benamdar for Apurba, as regards he disputed 600 shares.

As regards the second branch of the contention, namely, whether these shares were the stridhan property of Santimati, the learned Judge has accepted the evidence of Praphulla that the shares were the stridhan property of Santimati and that the Plaintiff, as the daughter of Santimati, was her heir. In my pinion, this view is correct, and must be accepted. The parties re admittedly governed by the Mitakshara school of Hindu law. is settled law that, with the exception of property inherited by woman or allotted to her on partition, all other kinds of property acquired by a female constitute her stridhan; vide (sic)ayne''s Hindu Law, Tenth Ed. Article 616. There is no suggestion that these shares were inherited by Santimati or were allotted to (sic)er on partition. She received these shares as nominee of her husband. Her acquisition of the shares was, therefore, made otherwise than by inheritance or allotment on a partition. These (sic)ares must, therefore, be regarded as the stridhan property of (sic)antimati.

The third branch of the contention that, even assuming that the said shares were the stridhan property of Santimati. the Plaintiff, who was the daughter of Santimati, did not inherit the same. In Mulla''s Hindu Law, Tenth Ed., Article 147, the learned author states that for the purpose of succession, the Mitakshara divides stridhan, into two classes, namely-

(1) sulka, which is defined as gratuity for which a girl is given in marriage; and

(ii) other kinds of stridhan.

As I have already said, the disputed shares were not obtained as gratuity for which the girl was given in marriage. Santimati'' marriage must have taken place long ago. There was no possibility at the time of her marriage, of Apurba taking a licence and nominating Santimati as his nominee in the managing agency partnership firm. For the purpose of succession the disputed property must, therefore, fall on the second category namely, kinds of stridhan other than sulka. Such stridhan descends in the following order:

(1) unmarried daughter,

(2) married daughter, who is unprovided for;

(3) married daughter, who is provided for;

(4) daughter''s daughter,

(5) daughter''s son,

(6) son,

****

As such, on Santimati''s death, the disputed shares did no devolve on the sons, but on her daughter Sm. Kamal Kumar Debi, the Plaintiff. The first contention raised by Mr. Mitte must, therefore, be overruled.

I shall now deal with the second contention raised by M Mitter, namely, that the option of appropriation reserved Haripada under the agreement dated August 30, 1936, was not clog on the equity of redemption.

I have already stated that, under the said agreement Santimati delivered the shares in suit, together with blame transfer deed signed by her, to Haripada. The agreement provided for repayment of the sum advanced with interest, the case of Kannambra Nayar Veettil Valia Ammukutti Neithiar''s son Kunhunni Elaya Nayar Avergal (deceased) Vs. P.N. Krishna Pattar and Others, , a Bench of the Madras High Court held that when person delivers a share certificate to another to be held by him security, there is under the law of India, a valid pledge, which he can enforce, but, unless the pledgee, at the time of depos secures a deed of transfer, which he can use in case of necessity or obtains one from his debtor at a later stage, he must ha recourse to the Court, when he wishes to enforce the security was pointed out in that case that, though, under the English law, the share is regarded as a chose in action, according to the Indian law it was not so. Reference was made to Section 137 of the Transfer of Property Act, Section 28 of the Companies Act and Section 2(7) of the Sale of Goods Act. The Bench also held that the shares must be considered as movable property. The above view is not disputed. But it is contended that, in this company, the option to appropriate the shares which were given to Haripada under the agreement dated August 30, 1936, should not be regarded as a clog on the equity of redemption.

It is of the essence of a mortgage that the mortgagor should have a right to redeem. Any clog or fetter on the equity of redemption is void. No agreement between the mortgagor and the mortgagee contained in the mortgage deed can make the mortgage irredeemable. It is also not legal in the mortgage deed to confer on the mortgagee a collateral benefit outside the mortgage contract and subsisting after redemption or to impose any restriction upon the mortgagor after he has paid the mortgagee his mortgage money. In the case of Samuel v. Jarrah Timber and Wood Paving Corporation, Limited (1904) AC 323 (H.L), a limited company borrowed money upon the security of their debenture stock subject to the lender having the option to purchase the stock at 40 per cent, within twelve months; the loan to become due and payable with interest at thirty days'' notice on either side. Within the twelve months and before the company gave notice of their intention to repay the loan, the lender claimed to purchase the stock at the agreed price. It was held by the House of Boards that the option was void, and that the company was entitled (sic)o redeem the loan on payment of principal, interest, and costs, Bord Lindley in his speech before the Lords observed that the transaction was a mortgage, plus, among other things, an option (sic)o purchase, which if exercised by the mortgagee, would put an and to the mortgagor''s right to redeem, i.e., would prevent him (sic)rom getting back his mortgaged property.

It was further observed as follows:

But the doctrine is not confined to deeds creating legal mortgages. It applies all mortgage transactions. The doctrine "Once a mortgage always a mortgage" leans that no contract between a mortgagor and a mortgagee made at the time of the mortgage and as part of the mortgage transaction, or, in other words, as one of the terms of the loan, can be valid if it prevents the mortgagor from getting back his property on paying off what is due on his security. Any bargain which as that effect is invalid, and is inconsistent with the transaction being a mortgage. (sic)t, therefore, follows that the option of purchase embodied in he agreement, dated August 30, 1936, is a clog or fetter on the equity of redemption. As was pointed out in the above case, the doctrine of clog applies to all mortgage transactions including a mortgage of movables. The above view was adopted in India, vide the cases of Mehr Ban Khan v. Makhna L.E. 57 I.A. 168, and Dharba Veera Venkata Satyanarayana v. National Insurance Co. Ltd., Calcutta AIR (1947) (Mad.) 51.

Mr. Hitter, however, contends that the application of the English doctrine of clog on the equity of redemption should not he extended to India, in view of the conditions now prevailing in India. He referred us to the criticism of this doctrine by Viscount Haldane, Lord Chancellor, in G. and C. Kreglinger v. New Patagonia Meat and Coal Storage Company, Limited (1914) AC 25 (H. L), 41-43.

He also laid stress on the following observations of Dr. Eashbehary Ghose in his Law of Mortgage in India (Tagore Law Lectures, 1875-76), Fourth Ed., p. 221:

The doctrine in question may have been useful when it was first invented, but at the present day, it would seem to be an anachronism. There is no such rule in Scotland nor, as. far as I have been able to gather, in America. It belonged to a time "when money was scarce, the lending of it in bad hands, the rate of interest limited by laws which were constantly evaded and borrowing facilities very different from the open market of to-day; * * * *

The whirligig of time brings about strange revenges. Now it is the mortgagor who has become the quasi-oppressor, trying to defeat the just rights of the mortgagee and to back out of an honest bargain on the strength of this time-honoured doctrine of clogging; * * * *

The "benevolent supervision" of equity would only raise the lenders'' terms, You may relegate political economy to Saturn; but it has a tendency to return, eloquent denunciations and learned judgments notwithstanding.

I may point out that, in spite of these criticisms, the doctrine, as I have said, was applied by the Judicial Committee in Mehr Ban Khan''s case, referred to above, and by the different High Courts. I may also refer to certain other observations of Dr. Eashbehary Ghose at p. 221, which are as follows:

In this country, the application of the rule that the equity of redemption must not be clogged nor any collateral advantage obtained by the mortgagee might not perhaps, be open to the same objection as in England, where the mortgagee can no longer be treated as an oppressive usurer to be held down at every turn by Parliament with its usury laws and the Chancellor with the Kings'' conscience in his hand.

I may add that, whatever may be said of the present day conditions in England or elsewhere, the application of the benevolent doctrine which was applied by the equity courts in England and which has been adopted in this country, is still necessary under the present day conditions in India where was find the different State Governments enacting statutes regulating money-lending in rural and urban areas.

In my view, the option of appropriation on the terms states in the agreement of August 30, 1936, must be regarded as a fette(sic) on the right of the borrower to redeem his security and must be held to be unenforceable and void. The second contention o(sic) Mr. Mitter must, therefore, be overruled.

I shall now deal with the third contention of Mr. Mitter, which proceeds on the assumption that the option of appropriation was a pawn simpliciter. It was contended that the time fixed for payment had passed and the Defendant was entitled to exercise his option and to appropriate the goods. The relevant section is Section 177 of the Indian Contract Act, which is in these terms:

If a time is stipulated for the payment of the debtor, performance of the promise, for which the pledge is made, and the pawner makes default in payment of the debtor, performance of the promise at the stipulated time, he may redeem the goods pledged at any subsequent time before the actual sale of them; but he must, in that case, pay in addition, any expenses which have arisen from his default.

The section, therefore, confers on the borrower the right to redeem the goods pledged at any time before the sale thereof. This section has not been made subject to any agreement to the contrary. The right of appropriation envisaged in the agreement dated August 30, 1936, being contrary to the express terms of Section 177 of the Indian Contract Act must, therefore, be void.

Conceding that the option of appropriation was not void, but was enforceable, the question still remains whether the pledgee, that is, Haripada, exercised his option in terms of the agreement dated August 30, 1936. In para 10 of the written statement of the Defendant Haripada it is stated that on September 1, 1937, the Defendant through his attorneys, Messrs. P.L. Mallik and Co., wrote a letter to the said Santimati giving her notice, that in exercise of the option reserved to this Defendant under the said agreement, dated August 30, 1936, he had appropriated the shares in suit in full satisfaction of his claim against her * *. The said letter dated September 1, 1937, states as follows:

Under an agreement dated August 30, 1936, between Babu Trailokya Nath Chatterji of the first part, yourself of the second part and our client of the third part, you acknowledged your liability to our client for the sum of Rs. 11,198-9-6 carrying interest at 9 per cent, par annum from September 1, 1936.

Pursuant to the said agreement you have made over to our client 600 ordinary shares of Rs. 10 each in the Bengal Trust, Ltd., standing in your name together with a Transfer Deed signed by you in blank.

The aforesaid sum with interest was to have been paid by you to our client on or before August 31, 1937, failing which our client was to be at liberty at his option either to recover the said sum on the basis of your personal liability, or to appropriate the said 600 ordinary shares in the Bengal Trust, Ltd., standing in your name in full satisfaction of his dues and to insert his own name in the blank Transfer-Deed without any consent on your part, with a view to getting his name registered in the book of the abovenamed company.

You having made default in payment of the aforesaid sum with interest, our client instructs us to give you notice, which we hereby do, that in the exercise of his option he has appropriated the said 600 ordinary shares in full satisfaction of his aforesaid dues from you, and has written to the company for registration of his name as transferee thereof in the books of the company. Upon such transfer being effected in the name of our client, you will be fully discharged from your liability for payment of the said sum.

This letter merely records the fact that the appropriation had already been made. There is no suggestion that any prior notice was given before the creditor made the appropriation in terms of the agreement. The object of giving notice prior to appropriation is to enable the borrower to redeem the shares pawned. In my opinion, in the absence of any prior notice the appropriation was not legal and there was no valid transfer of the shares to the pawnee Haripada Dawn. The third contention raised by Mr. Mitter must, therefore, be overruled.

All the contentions raised on behalf of the Appellants, therefore, fail. The appeals must, accordingly, be dismissed with costs. Certified for two counsel. There will, however, be ore set of costs.

Harries C.J.

I agree.