JUDGMENT
Mohan, C.J.
1. The first respondent borrowed a sum of Rs. 1,45,000 from the appellant co-operative bank to enable her to purchase a motor vehicle. There was an agreement of hypothecation between the first respondent and the appellant-bank. The stage carriage vehicle bearing No. MYT 5292, was hypothecated to the appellant-bank for security of the repayment of loan. A promissory note was also executed for the said sum of Rs. 1,45,000. Thereafter, the first respondent committed default. In spite of several notices issued by the bank no payment was forthcoming. Consequent to that as per the terms of clause 5 of the agreement of hypothecation, the appellant-bank seized the vehicle. Concerning the seizure, a dispute was raised under section 70(2) of the Karnataka Co-operative Societies Act, 1959. The matter came up before the Assistant Registrar of Co-operative Societies, Tumkur. By his order dated April 18, 1983, in dispute No. 37/82-83, the contention of the bank that, in terms of section 176 of the Indian Contract Act read with clauses 5 and 10 of the hypothecation agreement, the bank had every right to seize the vehicle was upheld. Thereupon, the first respondent preferred an appeal to the Karnataka Appellate Tribunal. The Tribunal reversed the finding of the Assistant Registrar. Aggrieved by the order of the Tribunal, the appellant-bank preferred Writ Petition No. 20322 of 1984. By his order, the learned single judge (See [1991] 70 Comp Cas 850 (Kar)) held that the power under section 176 of the Contract Act was not available. Therefore, the seizure was illegal and consequently, the writ petition was liable to be dismissed. Hence, the appeal.
2. Before us, learned counsel for the appellant vehemently submits that having regard to the terms of the hypothecation agreement, particularly clauses 5 and 10 read with section 176 of the Indian Contract Act the bank had every right to seize the vehicle when there was a default in repayment of the loan. The very object of the hypothecation agreement is only to enable the appellant-bank to recover the loan advanced. Therefore, irrespective of any other consideration, the learned judge ought to have upheld the seizure and reversed the order of the Appellate Tribunal. In opposition to this, it is urged that where the seizure was illegal the Appellate Tribunal was right in setting aside the seizure and sale because a dispute ought to have been raised in regard to default. Otherwise, there was no power to seize.
3. On a careful consideration of the rival contentions advanced on either side, we are clearly of the opinion that there is no need at all on the part of the bank to a raise dispute owing to the non-payment. The matter is as simple as this. The first respondent borrowed a sum of Rs. 1,45,000 from the appellant-bank; that she is bound to repay. Concerning this, a hypothecation deed was executed. A promissory note by way of collateral security was also executed. Clauses 5 and 10 of the hypothecation deed categorically stipulate the right of the creditor to seize the vehicle and sell the same. Therefore, these are all matters governed by contracts, and having recourse to these clauses by way of enforcement of the contractual obligation, the bank seizes the vehicle. It is difficult to accept that a dispute ought to have been raised under section 70 in relation to default. On the contrary, it is the first respondent who should establish that she had fulfilled her contractual obligation. From this point of view, the Tribunal was not right in reversing the decision of the Assistant Registrar. Equally, therefore, the learned judge is not right in confirming the order of the Tribunal. Accordingly, we set aside the order of the learned judge as well as the Tribunal and uphold the right of the appellant-bank to seize the vehicle and to sell the same in accordance with the hypothecation agreement. Appeal allowed. No costs.