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Issues: (i) whether a pledgee who exercises the power of sale under Section 176 of the Indian Contract Act, 1872, but sells the pledged shares to itself, acquires valid title to the shares; and (ii) whether the suit for registration of the transfer was barred by limitation.
Issue (i): whether a pledgee who exercises the power of sale under Section 176 of the Indian Contract Act, 1872, but sells the pledged shares to itself, acquires valid title to the shares.
Analysis: Section 176 permits the pawnee, on default and after reasonable notice, to sell the pledged property. A sale by the pledgee to itself may be unauthorised, but it does not automatically make the transaction void or destroy the pledge. Once the pledgee has exercised the power of sale, the pledger's right of redemption comes to an end, and the pledger is left with such remedies as may arise from an improper sale, including damages. On the authority relied upon, the self-sale did not prevent the pledgee from being treated as the owner for the purpose of transfer of the shares.
Conclusion: the sale was not void, and the bank was entitled to be treated as the legal owner of the shares, in favour of the respondent.
Issue (ii): whether the suit for registration of the transfer was barred by limitation.
Analysis: On the facts, the appellant had no continuing right to demand return of the shares after the pledgee had appropriated them by sale, and any question of limitation as between the pledger and the bank did not survive in the suit. As against the company, the appropriation occurred in 1954 and the suit was within time on any view adopted by the Court below. The plea of limitation therefore had no merit.
Conclusion: the suit was not barred by limitation, in favour of the respondent.
Final Conclusion: the appeal failed, and the decree in favour of the respondent was allowed to stand.
Ratio Decidendi: a pledgee's sale of pledged property to itself, though unauthorised, is not necessarily void; it may terminate the pledger's right of redemption and leave only a claim for damages, while the challenge of limitation must be tested on the surviving enforceable right.
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