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Sunderlal Saraf and Ors. Vs Subhas Chand Jain and Ors.


Author: Surya, 3rd Year student at RNB Global University, Bikaner.


Citation: AIR 2006 MP 35

Date of decision: 30 March, 2005

Bench: A.K. Shrivastava

Original copy:  N/A

Statutes involved: Indian Contract Act, 1872, M.P. Money Lenders Act, 1934 

 

Issue in question:

  • Whether the sale made by the defendant was in contravention with Section 176 of Indian Contract Act, 1872?
  • Whether the weight of silver pledged was 107.540kg or 100.540kg?
  • Whether the defendant complied with the provisions of Section 3 of MP Money Lenders Act, 1934?

Background:

  • The Plaintiff were brothers and they were jointly carrying a business related to the sale and purchase of Silver. But Sunderlal was also carrying a business separate from the joint business and he used to borrow money for the same from the defendant by pledging the silver.
  • Plaintiff made some requests to the defendant to return the pledged goods on payment of the borrowed money. But the defendant ignored the same. That is why, the plaintiff sent a notice on 9 Dec.1972 and informed that the weight of silver that was pledged was 107.540 kg. The defendant responded by a letter on 5 Jan. 1973, that the sum borrowed by the plaintiff was Rs. 48,500/- and he didn’t deny the fact related to the amount of silver that was pledged.
  • The defendant had also made a “Rukka” and it contained all the details related to the transactions that were held between the plaintiff and the defendant. On 25 Nov. 1974 the defendant sent a notice and asked the plaintiff to return the borrowed sum of money along with the interest and informed that the pledged silver was only 100.540kg of impure quality.
  • In reply this plaintiff sent a telegram along with a notice that the silver was of pure quality and it was 107.540 kg. He also gave direction not to sell the pledged goods.
  • On 25 Dec.1974 the defendant sent a letter that he had sold the pledged silver and received only Rs. 73,924.40, he further stated that he had to incur Rs.500 for making sale of silver.
  • The plaintiff contended that the price of silver at that time was around Rs. 1000 per kg so according to this the amount recovered by the defendant should be Rs. 1,07,540/- thus after deducting the principal amount of Rs. 48,500/- the defendant need to return Rs. 59,040 to the plaintiff.
  • The plaintiff pleaded that the defendant succeeded his father in the business of money lending thus within the meaning of M.P Money Lenders Act, 1934 he is a money lender and he did not comply with Section 3 of the Act. Thus, the plaintiff filed a suit.
  • The defendant contended that the pledged silver was not pure and on selling that silver he was not able to recover even the principal amount so the plaintiff needed to give Rs.12,575.60 to the defendant.
  • After hearing both the parties the trial court dismissed the case and held that the silver was 107.540kg and the same was impure. Thus, an appeal was filed by the plaintiff in HC.

Judgment:

  • The Appellant contended that the defendant didn’t comply with section 176 of Indian Contract Act, 1872. He submitted that the defendant had only mentioned that he would make a sale of pledged goods, that is why it was not a reasonable notice.
  • The court said that the word ‘sale’ under Section 176 only refers to an intended sale and not an actual sale. So, it is not necessary that the time, date and place of slae must be stated in the notice.
  • On the statements of prosecution witnesses it was confirmed that the defendant was a money lender and he did not maintain any accounts of his transactions thus failed to comply with the provisions of Section 3 of MP Money Lenders Act, 1934.
  • The Appeal was dismissed without any orders as to the cost.

Case analysis:

  • Section 176 of Indian Contract Act, 1872 gives right to the Pawnee (the person with whom the goods are pledged) that he can file a suit against the pawnor or retain the goods or he may sell the pledged goods if pawnor makes a default in payment of debt or performance of contract. But this section also imposes a duty on the Pawnee that he needs to give a reasonable notice before making the sale of pledged goods.
  • In this case the defendant sent a notice that he was going to sell the pledged silver and also asked the plaintiff to redeem the goods after paying the principal amount along with the interest. He gave a time of 7 days. Though there was no mention of date, time and place of sale but even then, it was considered as reasonable notice because Section 176 is not talking about a particular time.
  • It was clear from the contentions given by both the parties that the Defendant was a money lender and he had not complied with the provisions of Section 3 of MP Money Lenders Act, 1934.

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