1959 (10) TMI 37 - HC - Indian Laws

Court rules sale of shares invalid due to lack of notice, rejects void sale claim. Suit for declaration and injunction unsustainable.

Sri Raja Kakarlapudi Venkata Sudarsana Sundara Narasayyamma Garu (died) and Ors. Versus Andhra Bank Ltd., Vijayawada and Ors.

The court determined the transaction as a pledge, not a mortgage. The sale of shares lacked notice as required by law, rendering it invalid. The ... - Issues Involved:1. Terms of the pledge.2. Validity and binding nature of the sale of shares by the 1st defendant to the 2nd defendant.3. Plaintiff's entitlement to the declaration prayed for.4. Necessity of obtaining probate for filing the suit.5. Maintainability of the suit as a mere declaration.6. Reliefs to which the plaintiff is entitled.Detailed Analysis:1. Terms of the Pledge:The court reviewed the terms of the pledge and determined that the transaction was indeed a pledge and not a mortgage. The distinction between a pledge and a mortgage was clarified, noting that a pledgee has only a special property in the goods pledged, while a mortgagee acquires general property. The court held that the transaction must be treated as a pledge based on the evidence and the consistent treatment of the transaction by the parties involved.2. Validity and Binding Nature of the Sale:The sale of the shares by the 1st defendant to the 2nd defendant was challenged on grounds of lack of notice as required by Section 176 of the Indian Contract Act. The court held that the expression in the pledge document allowing sale 'without reference to us' was not ambiguous and constituted a waiver of notice. However, it was determined that such a waiver is not permissible as it would be inconsistent with the mandatory terms of Section 176. The court cited several judicial authorities supporting the view that notice is mandatory and cannot be waived.3. Plaintiff's Entitlement to the Declaration:The plaintiff's claim for a declaration that the sale was void was not upheld. The court concluded that the proper remedy for the plaintiff, if the sale was invalid, would be to sue for redemption of the shares by tendering the money or for damages on the foot of conversion. The suit for a mere declaration and injunction was deemed misconceived and not maintainable.4. Necessity of Obtaining Probate:The court held that the plaintiff, who was appointed as an executrix under her husband's will, could not file the suit without obtaining probate. The plaintiff's own admissions and the letter from her counsel indicated that she was taking steps to secure legal representation for the estate, which implied obtaining probate. The court inferred that the will was executed at Madras, making probate necessary under Section 213 of the Indian Succession Act.5. Maintainability of the Suit as a Mere Declaration:The court found that a suit for declaration and injunction, as framed by the plaintiff, was not sustainable. The proper course of action for the plaintiff would have been to file a suit for redemption or for damages due to conversion. The suit as framed did not establish the plaintiff's legal character or right to the property, thus failing to meet the requirements under Section 42 of the Indian Specific Relief Act.6. Reliefs to Which the Plaintiff is Entitled:The court concluded that the plaintiff was not entitled to the reliefs sought. The sale by the 1st defendant to the 2nd defendant was conducted at the prevailing market rate, and there was no evidence of dishonesty or fraud. The 2nd defendant was considered a bona fide purchaser for value, and the plaintiff's suit was dismissed.Conclusion:The appeal was dismissed with costs, and the judgment of the learned Subordinate Judge was upheld. The plaintiff's suit for declaration and injunction was found to be misconceived and not maintainable, and the necessity of obtaining probate before filing the suit was affirmed. The court emphasized the mandatory nature of the notice requirement under Section 176 of the Indian Contract Act, which cannot be waived by contract.