Prior pledge rights prevail over unsecured recovery claims, letting the pawnee appropriate pledged sale proceeds first.

A prior pledge gives the pawnee a special property and lien over the pledged goods, including the right to retain, sell on default, and appropriate the sale proceeds towards the debt. In the absence of winding-up proceedings, competing claims by the Cane Commissioner and workmen were treated as unsecured claims and did not override the bank's pledge. Section 529 of the Companies Act was held inapplicable because the statutory liquidation regime was not attracted. The pledged asset's sale proceeds therefore had to be applied first to satisfy the pawnee's debt, with any surplus available for other claimants.

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Issues: Whether the pawnee's rights in pledged goods and their sale proceeds prevailed over claims of the Cane Commissioner and workmen in the absence of winding up proceedings.

Analysis: The pledge created a special property and lien in favour of the bank under the Contract Act, entitling it to retain and, on default, sell the goods and appropriate the proceeds towards the debt. The claims of the Cane Commissioner and the workmen were treated as claims of unsecured creditors in the absence of liquidation, and Section 529 of the Companies Act had no application. Earlier decisions on government priority and workmen's dues in winding up did not displace the settled rule that a prior pledgee's rights are not defeated by lawful seizure or by competing unsecured claims.

Conclusion: The pawnee's claim had priority over the competing claims, and the bank was entitled to satisfy its debt out of the sale proceeds before any surplus could be distributed to the other claimants.

Ratio Decidendi: A prior pledge creates a special property in favour of the pawnee, and that right prevails over claims of unsecured creditors, including governmental recovery claims and workmen's dues, unless a statutory winding-up regime giving them priority is attracted.

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