TaxTMI 
TaxTMI 
1963 (1) TMI 66
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....y note. The plaintiffs also pledged with the defendant share certificates of the Vazir Sultan Tobacco Co., Ltd. A memorandum of pledge was drawn up. The plaintiffs requested the defendant to receive the balance of amount due and sought the redemption of the suit shares. The defendant admitting the transaction of pledge pleaded that the plaintiffs have no right to redeem the same until the expiry of three years. As the defendant had raised the plea that the suit was not properly valued, the lower Court framed issue No. 5 in that respect. The Court-fee Examiner also raised an objection regarding the valuation of the suit and the court-fees paid thereon. According to the Court-fee Examiner the share scripts are movables having market value and therefore the plaintiffs should pay the court-fee as payable under Section 23(1)(a) of the Andhra Court-fees Act, hereinafter called the Act. 4. The lower Court after hearing the parties through the order abovementioned upheld the objection of the Court-fee Examiner and found that the Court-fee paid in regard to relief No. 1 that is, redemption of pledge, inadequate. With regard to other reliefs there appears to be no grievance. It is this or....
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....ght of possession but not the fight of enjoyment. A pledgee has the right of disposition which is limited to disposition of pledgee fights only and of a sale only after notice and subject to certain limitations as is dear from the various provisions of the Indian Contract Act. The distinction between pledge and ownership assumes importance when we consider the difference between pledge and mortgage. I am dealing with it later on. 7. Now according to Section 58 of the Transfer of Property Act various types of mortgages are defined, but all of such mortgages relate to immovable property, and it is clear that that Section has no application to a mortgage of a movable property. Thus as far as the Indian Law is concerned it can be said that only two types of hypothecations have been statutory recognised. One is the pledge as defined in Section 172 of the Indian Contract Act and the other is mortgage of immovable property as defined in Section 58 of the Transfer of Property Act. Perhaps a charge under Section 100 of the Transfer of Property Act may be another recognised form. Nevertheless it is now fairly settled that various other forms of hypotheca also are recognised although there....
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....uity gives effect to it. Jatindra Chandra v. Rangpur Tobacco Co. Ltd. AIR 1924 Cal 990, Co-operative Hindusthan Bank Ltd. v. Surendra Nath AIR 1932 Cal 524,, Peoples Bank v. F. F. Campbell and Co. Ltd. AIR 1939 Lah 398. 8.-9. It has therefore to be recognised that although the hypothecation and mortgage of movables are not specifically mentioned in the Contract Act, but that Act not being exhaustive law on the subject and as the abovesaid transactions have long been recognised as valid in India, these transactions will have to be given effect to. In the absence of specific rules applicable to any matter, the principle recognised in the various Civil Courts Act is that the Courts should decide according to justice, equity and good conscience which is considered to be equivalent to the English Law wherever such law is applicable to Indian conditions. It is only under this principle that the hypothecation or mortgage of movable property, although not specifically provided in the Contract Act, are valid and a decree can be passed in enforcement of such transactions. As an instance, Section 16 of the Madras Civil Courts Act, 3 of 1873 can profitably be cited in this respect. 10....
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....as established a true right in rem. The learned author opines again at p. 911: A mortgage of movable property without possession is perhaps the nearest survival of this form of absolute security. It will thus be seen that although the Indian law recognised only pledge, and mortgage of immovable properly statutorily nevertheless, the other forms once in vogue with various changes continued to remain in operation and hypothecation and mortgage of movables are, the two forms which can be said to be the direct descendants of the earlier forms of hypothecation as mentioned above. In England under the Civil law although the debt for which mortgage or pledge was given was not paid at the stipulated time, it did not amount to a forfeiture of the right of property of the debtor therein it simply clothed the creditor with an authority to sell the pledge and reimburse himself for his debt, interest and expenses and the residue of the proceeds of the sale then belonged to the debtor. But the creditor might not in ordinary cases without any judicial sanction or giving proper notice of the intended sale, sell the goods, and this authority to make a sale might be....
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....perty will stand transferred to the borrower and if it be not re-paid, the borrower will give up possession also to the lender to satisfy the debt. Broadly it can thus be stated that in case of hypothecation a general lien is created, but possession of the property is not transferred, whereas in case of a pledge a special interest and not special property is transferred to the pledgee who is impliedly authorised to sell the goods pledged in case of default in accordance with the provisions of the Contract Act. In case of mortgage, however, a general but limited property is transferred to the creditor, but the possession may or may not be transferred to the mortgagee. I have, already pointed out the difference between pledge and ownership. 12. It is useful in this connection to refer to some of the decisions on this point. That there can be a valid mortgage of movables is sufficiently borne out by the following decisions, Basivi Reddy v. Kamaraju AIR 1933 Mad 241, Venkatachalam Chetti v. Venkatarami Reddi , AIR 1940 Mad 929. 13. Now regarding the difference between pledge and mortgage the following cases may be considered. 14. In Official Assignee, Madras v. Hukumchand A....
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....pproval on the abovesaid distinction between a pledge and a mortgage of movables. Seshachalapathi, J., who delivered the opinion for the Bench in Narasayamma v. Andhra Bank Ltd., AIR 1960 AP 273 said: The essential distinction between a pledge and a mortgage is that unlike a pledgee a mortgagee acquires the general property in the thing mortgaged subject to the right of redemption of the mortgagor, in other words, the legal estate in the goods mortgaged passes on to the mortgagee. But a pledgee has only the special interest in the goods pledged, namely, the right of redemption of the goods as security and in case of default he must either bring a suit against the pawner or sell the goods after a suitable notice. Whether a particular transaction is a mortgage of moveable property or a pledge cart only be determined by reference to the evidence of the parties and other surrounding circumstances. It is pertinent to note that in that case unlike the one which I am considering, shares were pledged. It was found in reference to the shares thus pledged; Under the Indian Law unlike in England a share is not a mere chose in action. With respect....
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....unt to the pledger for any surplus after paying the debt. He must take care that the sale is a provident sale, and if the goods are in bulk he must not sell more than is reasonably sufficient to pay off the debt, for he only holds possession for the purpose of securing himself the advance which he has made. He cannot use the goods as his own. These considerations show that the right of sale is exercisable by virtue of an implied authority from the pledger and for the benefit of both parties. It creates no jus in re in favour of the pledgee; it gives him no more than a jus in rem such as a lien holder possesses, but with this added incident, that he can sell the property motu proprio and without any assistance from the Court. 21.-23. This observation very aptly applies to the nature of the transaction under my consideration. I have therefore no hesitation in reaching the conclusion that the nature of the suit transaction is not that of a mortgage of movables, but is a pledge as defined in Section 172 of the Indian Contract Act and the present suit is instituted under Section 177 of the Indian Contract Act for the redemption of the pledge. It is clear from the above said discussio....
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....;document of titled is now specially defined in Section 23 of the Act. The definition is wide enough to include any kind of document which creates a right to property, the word 'property' itself being taken in its widest sense. It is useful to refer in this connection to the definition of valuable security in Section 30 I.P.C. which runs thus: The words 'valuable security' denote a document which is, or purports to be, a document whereby any legal right is created, extended, transferred, restricted, extinguished or released, or whereby any person acknowledges that he lies under legal liability, or has not a certain legal right. 27. It is conceived that the words 'documents relating to title' or 'documents of title' are scarcely less wide than the above definition of 'valuable security' under Section 30 I.P.C. Thus the expression will include not only documents of title to Immovable property like deeds of sale or mortgages of movable property but also such documents as promissory notes, bonds, Government Securities etc. I was referred to Section 2(46) and Section 82 of the Indian Companies Act, which are in the followi....