Pledgee cannot pass better title than owned, and Sale of Goods Act protection applies only to mercantile agents.

A pledge of shares or units does not transfer ownership to the pledgee, so a purchaser from the pledgee cannot acquire better title than the pledgee possessed and the true owner's claim is not defeated. The proviso to Section 27 of the Sale of Goods Act applies only where goods are held by a mercantile agent with authority to sell in the ordinary course of business; mere possession by a pledgee with blank transfer forms is insufficient. The pledgor retains the right to redeem the pledged units until actual sale and remains liable to pay interest on the secured debt.

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Issues: (i) whether a purchaser from a pledgee of share units, delivered with blank transfer forms, acquires a title superior to that of the true owner; (ii) whether the proviso to Section 27 of the Sale of Goods Act protects such purchaser; and (iii) whether the pledgor remains entitled to redeem the units and whether interest is payable on the secured debt.

Issue (i): whether a purchaser from a pledgee of share units, delivered with blank transfer forms, acquires a title superior to that of the true owner.

Analysis: Shares and units were treated as movable property and goods. A pledge under the Indian Contract Act leaves ownership with the pledgor, and the pawnee's rights are confined to retention and sale after notice on default. A person dealing with a pledgee cannot obtain better title than the pledgee had, and a sub-pawnee or purchaser merely steps into the shoes of the pawnee. The authorities relied upon for protecting bona fide purchasers were distinguished because they dealt with transfers or deliveries made for sale, not with mere pledge transactions.

Conclusion: The purchaser from the pledgee does not acquire a title superior to that of the true owner, and the true owner's claim is not defeated.

Issue (ii): whether the proviso to Section 27 of the Sale of Goods Act protects such purchaser.

Analysis: The proviso applies only where goods are in the possession of a mercantile agent as such, with authority to sell in the ordinary course of business. Mere possession of share certificates and blank transfer forms by a pledgee, even if the pledgee also carries on business as a broker, does not make the pledgee a mercantile agent for purposes of that transaction. Since the units were pledged and not entrusted for sale, the statutory exception could not be invoked.

Conclusion: The proviso to Section 27 of the Sale of Goods Act does not protect the purchaser.

Issue (iii): whether the pledgor remains entitled to redeem the units and whether interest is payable on the secured debt.

Analysis: A pledgor retains the right of redemption until actual sale. As the pledged units remained redeemable even in the hands of a third party, the pledgor was entitled to recover them on repayment. On the question of interest, the pledgor had enjoyed the benefit of the borrowed money and was therefore bound to pay interest; the rate and computation were left to be worked out for final orders.

Conclusion: The pledgor remains entitled to redeem the units, and interest is payable on the secured debt.

Final Conclusion: The decision accepts the pledgor's substantive right to recover the pledged units even from a third party and rejects the claim that the purchaser acquired a better title, while leaving consequential working out of redemption and interest for final orders.

Ratio Decidendi: A pledgee or purchaser from a pledgee cannot convey better title than the pledgee has, and the proviso protecting bona fide purchasers applies only where the goods are entrusted to a mercantile agent for sale in the ordinary course of business.

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