JUDGMENT
P.K. Misra, J.
1. The opposite party filed Money Suit No. 31 of 1985 against the present petitioners for realisation of Rs. 15,15,915.84 paise. During the pendency of the suit, the opposite party filed an application seeking permission of the Court to sell away the raw materials and machineries of the petitioners’ industry which had been given by way of pledge to the Bank. The said application was rejected. Civil Revision No. 805 of 1987 filed by the plaintiff against the aforesaid order was dismissed by the High Court by order dated 11.7.1990. Therefore, the suit was decreed ex parte on 13.3.1994 and the defendant-petitioners were directed to pay up the decretal amount within three months failing which the plaintiff was permitted to realise the amount through process of law. Thereafter, the present petitioners filed Misc. Case No. 127 of 1994 under Order 9, Rule 13 of the Code of Civil Procedure (hereinafter referred to as the ‘C.P.C.’) to set aside the ex parte decree and the said petition is still pending before the trial Court.
2. While the matter stood thus, the opposite party published a notice in the daily ‘Samaj’ for auction sale of raw materials and other finished products of the industry. The present petitioners filed an application under Order 39, Rules 1 and 2 read with Sec. 151, C.P.C, before the trial Court to injunct the opposite party from holding such auction and the matter was fixed to 27.10.1995 for hearing. At that stage the opposite party sought for adjournment and the case was fixed to 17.11.1995 for hearing on the question of injunction and after completion of hearing the matter was posted to 27.11.1995 for pronouncement of the order. However, without waiting for the order, the opposite party sold the raw materials and other products to one Jayant Kumar Das of Balasore. It is alleged by the petitioners that the aforesaid sale took place in a clandestine and dubious manner and no other bidder except Jayant Kumar Das had participated. It is further alleged that the finished products and the raw materials were sold on weight basis for a paltry sum of Rs. 8,32,600/- According to the petitioners, the property if sold on piece basis would have fetched about Rs. 25,00,000/-. After such sale was effected, the counsel for the opposite party filed a memo on 22.11.1995 stating that the goods had already been disposed of by the bank and, thereafter, the trial Court rejected the application of the petitioners for injunction as being infructuous.
3. The petitioners have filed this revision against the order dated 27.11.1995 wherein the trial Court rejected the application under Order 39, Rules 1 and 2, C.P.C., as infructuous. The learned counsel for the opposite party-Bank, has justified the action of the Bank by stating that since the property had been pledged with , the Bank, it had the absolute right to sell the pledged property. The learned counsel for the petitioners has however combated this position and submitted that the sale was completely illegal.
4. The narration of facts clearly disclose the design of the Bank to overreach the process of law and also display the lack of application of judicial mind on the part of the trial Court. There is no doubt that the property had been pledged with the Bank. Keeping in view the provisions of Sec. 176 of the Contract Act, there is no doubt that the Bank had right to sue on the basis of the loan and keep the pledged articles as security or to sell the pledged articles. The Bank’s application for seeking a direction to sell the pledged articles during the pendency of the suit having been rejected by the trial Court as well as by the High Court, it did not behove the Bank to sell away the pledged articles after obtaining an ex parte decree, particularly when in the ex parte decree it had been mentioned that if the amount was not cleared within a particular period, the Bank had the right to realise the amount through the process of law.
5. It has been contended by the learned counsel for the Bank that the pledgee’s right to sell the goods pledged being absolute, the Bank had right to sell away the pledged goods even after obtaining the ex parte decree without taking recourse to process of law by filing execution case for realisation of the decretal amount by selling the secured goods. The learned counsel for the opposite party has placed reliance on a decision reported in AIR 1989 Madras 279 (State Bank of India v. N. Sathiah and etc.). There is nothing in the said decision to support the contention of the Bank that a pledgee after obtaining a decree for realisation of the amount can unilaterally sell the pledged articles. In the aforesaid decision, the defendants had obtained a loan by pledging some ornaments with the Bank. The Bank entertained suspicion regarding the genuineness of the jewels and on the basis of the complaint filed by the Bank, the matter was under investigation before the police and the jewels had been seized. At that stage, the Bank without prejudice to its right to proceed by way of sale of pledged articles, as and when they were returned to the plaintiff by the Criminal Court, filed suit on the basis of the promissory note. It was the contention of the defendants that the plaintiff had no right in law to file a suit on the basis of promissory note executed by way of security as the original cause of action was on pledge of the jewels. It was contended that the defendants were entitled to the return of the pledged articles noted on various dates of pledges. It was pleaded that if any decree should be passed it should be indicated in the decree that the plaintiff would be entitled to recover the amount only on returning the jewels pledged by the defendants. The trial Court while decreeing the suit for realisation of the principal amount along with the interest, imposed a condition that the plaintiff should deposit the ornaments into the Court within three months as per the description mentioned in the Gold Loan Demand Registrar and after satisfying the decree, the defendants were entitled to get back the pledged gold jewels. In appeal, the learned Single Judge of the Court modified the decree and directed that the amount under the decree would be realised by the plaintiff only after the question regarding the nature of pledged jewels is decided by the Court by filing an appropriate suit either by the plaintiff or by the defendants. The said judgment of the appellate Court was challenged before the Division Bench. The Division Bench held that imposition of such condition was contrary to the intention of Sec. 176 of the Contract Act and modified the decree by deleting the conditions imposed. It was observed in course of the judgment as follows :
“…… The pawnee is bound to return the jewels as soon as the amounts covered by the decrees are paid. As stated above, defendants have clearly stated in their written statement that “defendant is prepared to pay principal and interest up to date only proved, the plaintiff returns those items”, and therefore, this stand taken by them by itself entitled the plaintiff to secure the decree as prayed for. It is not the stand of the plaintiff- Bank that it would not return the jewels in specie, if the amounts claimed by it are paid by respective defendants would be in a position to decide whether the jewels as pledged by them are the same or otherwise. It is not open to them at this stage to claim that unless the jewels, as described in the registers of the Bank, are returned, decrees cannot be executed against them. This is an aspect, which is clearly foreign to the nature of the suits, and it is left to be considered in appropriate proceedings, which would be dependant upon what would transpire when the jewels are returned to defendants. If they find that the jewels returned to them in specie are not the jewels pledged by them or their description and quality is different from what they have pledged or that they do not satisfy the descriptions as found in the registers maintained by the Bank, it is then for the respective defendants to thereafter take appropriate proceedings against the Bank on the ground that the security furnished by them had not been returned in the same condition in which they had pledged them. How far the claims inter se between them relating to nature of pledged articles are true or not, would be gone into in the proceedings which they choose to institute, if circumstances warrant. Certainly, this right is available to them, and therefore, there is no need to impose any condition as done either by the trial Court or by the learned Judge. When the respective defendants deposit the amounts based on the plaint claims plaintiff- Bank is obliged to return the jewels in specie in whatever condition they are found and which will have to be noted down with a., much precision as required relating to gold jewels, so that if the defendants are aggrieved that the Bank officials have cheated them, it will help them to seek for appropriate remedies.”
The observations made in the aforesaid Division Bench decision of Madras High Court do not go to the extent of supporting the present contention of the Advocate to the effect that after obtaining a decree for realisation of money, the Bank had the right of unilaterally selling the pledged articles.
6. The law on the point seems to have been settled by the decision of the Supreme Court reported in AIR 1967 SC 1322 (Lallan Prasad v. Rahmat Ali and another). As observed in the said decision :
“………….The pawner has an absolute right to redeem the property pledged upon tender of the amount advanced, but that right would be lost if the pawnee has in the meantime lawfully sold the property pledged.
If by his default the pawnee is unable to return the security against payment of the debt, the pawner has a good defence to the action….”
It was observed in the decision reported in 1925 AC 489, (Trustees of the Property of Ellis and Co. v. Dixon Johnson) which was cited with approval in the aforesaid Supreme Court decision :
“……If a creditor holding security sues for the debt, he is under an obligation on payment of the debt to hand over the security, and that if, having improperly made away with the security he is unable to return it to the debtor he cannot have judgment for the debt…….”
From the aforesaid observation which has received the imprimatur of the Supreme Court, it is obvious that where the pledgee by his illegal action is not in a position to return the secured articles to the pledger or pawner, he cannot have a judgment for the debt. It was observed by the Supreme Court :
“…….Where a pawnee files a suit for recovery of debt, though he is entitled to retain the goods he is bound to return them on payment of the debt. The right to sue on the debt assumes that he is in a position to re-deliver the goods on payment of the debt and, therefore, he has put himself in a position where he is not able to redeliver the goods he cannot obtain a decree……”
It has been further observed :
“.. Where the value of the pledged property is less than the debt and in a suit for recovery of debt by the pledgee, the pledgee denies the pledge or otherwise not in a position to return the pledged goods he has to give credit for the value of the goods and would be entitled then to recover only the balance…..”
The above decision of the Supreme Court has been consistently followed subsequently in other decisions, (See, AIR 1971 Supreme Court 1210 (Bank of Bihar v. State of Bihar) and AIR 1985 Supreme Court 520 (Balkrishnan v. Swadeshi Polytex Ltd.)
7. In this background of the law, a workable and just solution of the imbroglio brought about by the various actions of the Bank has to be found out. There is no doubt that the property having been sold to a third party, it would not be possible on the part of the Bank to return the pledged articles in specie to the pledger, that is to say, the defendants even if the defendants are to satisfy the decree. It has been urged by the defendants that goods have been sold at a much lesser price and the proceeding under Order 9, Rule 13, C.P.C. is still pending. Keeping in view all these aspects, I think, interest of justice would be served by giving the following directions :
(i) The proceeding under Order 9, Rule 13, C.P.c. shall be disposed of by the trial Court as expeditiously as possible, preferably by and of April, 1999.
(ii) If the ex parte decree is set aside and thereafter the suit is taken up for fresh disposal, a specific issue should be framed to find out about the market value of the property sold by the Bank on the date of such sale and the value of the property sold has to be adjusted against the claim of the plaintiff and necessary direction should be issued directing the plaintiff to return the excess amount, if any, with interest, or directing the defendants to pay the balance amount, as the case may be, depending upon the finding of the Court;
(iii) If, however, the ex parte decree is not set aside and is allowed to stand, such enquiry as directed in the preceding paragraph has to be undertaken by the executing Court before the ex parte decree can be executed and the direction contained in paragraph (ii) should be complied with by the executing Court;
(iv) The amount directed to be kept in fixed deposit by order of this Court shall be renewed from time to time so that the successful party can get the benefit of the accrued interest after the matter is finalised by the trial Court or the executing Court, as the case may be, in accordance with the directions contained in this order,
8. Subject to the aforesaid observations and directions, the Civil Revision is allowed. Since the present situation has been brought about by the high-handed illegal action of the Bank, it is directed that the Bank shall pay a consolidated cost of Rs. 5,000/- to the petitioners within a period of two months from today.