PRABHAT BANK LTD Vs. BABU RAM

JUDGEMENT

(1.) THIS appeal by the plaintiff arises under the following circumstances. The respondent had an overdraft account with the plaintiff Prabhat Bank, Ltd. since 1945. On 31st December 1946 the debit balance of the respondent rose to the extent of about Rs. 4,000 and on that date he executed a promissory note for a sum of Rs. 5,000 by way of security for repayment of the overdraft. On that very day the respondent executed a written agreement in favour of the appellant Bank and it was agreed that the respondent would be entitled to take advances upto the maximum of Rs. 5,000 upon his personal security, as well as collateral securities, to wit, stocks and shares pledged by the respondent with the appellant Bank. One of the terms of: the agreement was that the appellant Bank would be entitled to sell the securities without any notice to the respondent in the event of the loan not being repaid on demand. On 9-10-1947 the appellant Bank informed the respondent that his security had considerably deteriorated and that he should send Rs. 1,500 so that his account with the Bank may be closed.

(2.) ON 5-8-1948 another letter was sent by the appellant Bank asking the respondent to call at the Bank in order to settle his cash-credit account with the said Bank. To this the respondent replied by his letter, dated 13-8-1948, saying that he may be allowed time up to the 15th September 1948 to pay up the amount. He further requested the appellant Bank to postpone the sale of securities till the 15th September 1948. The appellant Bank relying on the terms of the agreement, dated 31st December 1946 sold the snares pledged by the respondent and credited the proceeds to the account of the respondent. Despite the sale of the securities a sum of Rs. 1,760-6-3 was still outstanding against the respondent and hence the suit for recovery of that amount.

(3.) THE lower appellate Court, however, came to the conclusion that the sate of the shares by the Bank was in contravention of 8. 176 of the Contract Act and, as such, was not binding on the respondent. It relied upon the decisions in the cases of Official Assignee, Bombay v. Madholal Sindhu, AIR 1947 Bom 217 and Bata Krishna Pramanik v. Bhawanipur Banking Corporation, Ltd., AIR 1932 Cal 521, for holding that provisions of Section 176 of the Contract Act were mandatory and were subject to any contract to the contrary. THE Court below came to the conclusion that the terms of the instrument of pledge giving unqualified power of sale to the appellant Bank was not consistent with the provisions of the Contract Act and, therefore, invalid. He accordingly dismissed the suit.