K.V. Viswanathan & Kunathukalathil Bankers v. Sunny Thomas

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE A.HARIPRASAD WEDNESDAY, THE 13TH DAY OF JANUARY 2016/23RD POUSHA, 1937 RFA.No. 684 of 2014 () ----------------------AGAINST THE ORDER/JUDGMENT IN OS 522/2012 of ADDL.SUB COURT,KOTTAYAM DATED 27-06-2014 APPELLANT(S)/DEFENDANTS: ---------------------------------------------- 1. K.V.VISWANATHAN, AGED 62 YEARS S/O VASUDEVA PANICKER, PROPRIETOR (WRONGLY SHOWN AS K.S VISWANATHAN IN THE CAUSE TITLED OF THE JUDGMENT) KUNNATHUKALATHIL BANKERS CSI COMMERCIAL CENTRE, BAKER JUNCTION, KOTTAYAM 2. M/S KUNNATHUKALATHIL BANKERS, CSI COMMERCIAL CENTRE, BAKER JUNCTION, KOTTAYAM KARA KOTTAYAM VILLAGE REPRESENTED BY ITS ONE OF THE PARTNERS K.V. VISWANATHAN AGED 62 YEARS, S/O VASUDEVA PANICKER, PROPRIETOR KUNNATHUKALATHIL BANKERS, CSI COMMERCIAL CENTRE BAKER JUNCTION, KOTTAYAM BY ADV. SRI.K.P.SREEKUMAR RESPONDENT(S)/PLAINTIFF: ------------------------------------------------ SUNNY THOMAS, S/O THOMAS OUSEPH, RESIDING AT MYLELLUMKUNNEL HOUSE COLLECTORATE P.O, MUTTAMBALAM VILLAGE NOW AT MYLELLUMKUNNEL HOUSE, VADAVATHOOR P.O VIJAYAPURAM VILLAGE. R1 BY ADV. SRI.VARGHESE C.KURIAKOSE THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 13-01-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ANTONY DOMINIC & A. HARIPRASAD, JJ. ----------------------------------R.F.A.No.684 of 2014 ----------------------------------Dated this the 13[th] day of January, 2016 ## JUDGMENT ## Antony Dominic, J. 1. This appeal is filed by the defendants in OS.522/12 on the file of the Additional Sub Court, Kottayam, calling in question the judgment passed by the trial court on 27.6.2014, decreeing the suit. - 2.We heard the learned counsel for the appellants and the learned counsel appearing for the respondent. - 3.O.S.522/12 was filed by the respondent herein. The material averments in that plaint are that by Ext.A1 dated 16.10.2006 and Ext.A2 dated 1.11.2006, the plaintiff had pawned two chains weighing 69.200 gms and two bangles plus two rings weighing 42 gms respectively with the second appellant, whose proprietor is the first appellant and received `41,500/- and `25,000/- each. According to the plaintiff, he demanded redemption by Ext.A3 notice dated 21.7.2012, which was denied by Ext.A4 notice issued on behalf of the appellants on 7.8.2012. It was thereupon that suit seeking a decree for RFA.684/14 2 redemption of the plaint schedule pledge accepting `1,14,380/- or in the alternative, for realization of `2,12,548/- together with costs, was filed. - 4.In the written statement filed, though the pledge of ornaments was admitted, it was contended by the appellants that the respondent plaintiff having defaulted payment of monthly interest and not redeemed the pledge, registered notice intimating sale of the gold ornaments was issued and that despite notice, the plaintiff evaded from taking back the gold ornaments by repaying the entire amount or by paying the interest. It was stated that thus, the appellants had fulfilled their liability before selling the gold ornaments. It was also contended that as on the date of sale, an amount of `1,61,760/was due from the plaintiff to the appellants, for the realisation of which, the gold ornaments in question were sold. A plea of limitation was also raised by the appellants. - 5.Before the court below, the plaintiff was examined as PW1 and Exts.A1 to A6 were marked. On behalf of the RFA.684/14 3 appellants, apart from the first appellant who was examined as DW1, a Postman was examined as DW2. Exts.B1 to B5 were also marked. The court below, after appreciating the provisions of sections 176 and 177 of the Indian Contract Act, 1872 and the provisions of the Kerala Money Lenders Act, 1958, decreed the suit allowing the respondent herein to redeem the pledged gold ornaments after paying `1,14,380/- or in the alternative, to realise `2,12,548/- with 12% future interest till realization with costs from the appellants and their assets. It is this decree and judgment which are under challenge before us. 6.Learned counsel for the appellants contended that the pledge in question was for a period of three months and that the respondent having defaulted in paying the interest or redeeming the pledge and having not demanded redemption till 2012, had lost his right of redemption. It is also his case that on account of the default committed by the respondent, Ext.B3 notice dated 31.12.2008 was despatched to the respondent on 5.1.2009, in which, the respondent was RFA.684/14 4 informed that on his failure to redeem the pledge, the ornaments in question would be sold. According to the learned counsel, as intimated to the respondent in Ext.B3, the ornaments in question were sold on 9.1.2009. It is stated that such notice given to the respondent satisfied the requirement of sections 176 and 177 of the Contract Act as explained by this Court in the judgment in Syndicate Bank v. Mohammed [2010 (2) KLT 563]. 7. Learned counsel also contended that the suit filed in 2012, in relation to the pledge made by Exts.A1 and A2 dated 16.10.2006 and 1.11.2006 respectively, was barred by limitation. In support, counsel also referred us to the provisions of Article 70 of the Limitation Act, which, according to him, prescribed a three year period of limitation. - 8.However, the aforesaid contentions were refuted by the learned counsel appearing for the respondent plaintiff. According to the learned counsel, the allegation of sale of the pledged ornaments on 9.1.2009 itself is incorrect and is not proved. RFA.684/14 5 According to the counsel, the plaintiff had the right of redemption even at the time when the suit was filed. It was also his contention that the case of sale pleaded by the appellants itself would show that the alleged sale was conducted without complying with the requirements of Kerala Money Lenders Act, 1958 and the Rules framed thereunder. Counsel also contended that the suit was not barred as it was filed within three years from the date of demand for redemption of the pledge. - 9.We have considered the submissions made. The plea of limitation was raised by the learned counsel for the appellants placing reliance on Article 70 of the Schedule to the Limitation Act. Article 70 provides a three year period of limitation for suits for recovery of movable properties owned from a pawnee. Reading of the schedule would show that the three year period of limitation begins to run from the date of refusal after demand for redemption. In so far as this case is concerned, the demand for return of the gold was made by the plaintiff by Ext.A3 notice issued on 21.7.2012 and the refusal of demand was by RFA.684/14 6 Ext.A4 dated 7.8.2012. Therefore, having regard to the language of Article 70, the period of three year can commence only from the date of refusal, viz., the date of Ext.A4 or the date of its receipt. Since Ext.A4 having been issued only on 7.8.2012 and the suit having been filed in 2012 itself, the suit was filed well within the period of limitation prescribed in Article 70 of the Limitation Act. For that reason, we are not in a position to accept the case of the appellants that the suit was barred by limitation and the said plea is accordingly rejected. 10.Turning to the merits of the case, though sections 176 and 177 of the Contract Act provide for the pawner's right where the pawner makes default and the defaulting pawner's right for redemption, in so far as this case is concerned, we feel that the matter has to be decided in the light of the provisions contained in the Kerala Money Lenders Act and the Rules framed thereunder. The said Act was enacted to provide for regulation and control of the business of the money lenders in the State of Kerala. Section 2 contains the definitions. Sub-section 7 defines RFA.684/14 7 'money lender' and it includes a pawnbroker. The term 'pawnbroker' is again defined in sub-section 7A as a person who carries on the business of taking goods and chattles in pawn for a loan. Section 3 of the Act mandates that money lender has to obtain licence under the Act. The fact that the second appellant is a money lender who has obtained licence under the Act is evident from Exts.A1 and A2 which contains the endorsement, 'KMC Licence No.991'. Therefore, admittedly, the second appellant is carrying on business as pawnbroker on the strength of the licence obtained under the Kerala Money Lenders Act and its functioning is subject to the provisions of the Act. 11. Section 9E which provides for Redemption of pledge and section 9F which provides for sale of pledge and inspection of sale book, being relevant, are extracted below for reference: **“9E. Redemption of Pledge** - (1) Every pledge shall be redeemable within one year from the day of pawning, exclusive of that day; and there shall be added to that year of redemption seven days of RFA.684/14 8 grace within which every pledge (if not redeemed within the period of redemption) shall continue to be redeemable. (2) A pledge shall further continue to be redeemable until it is disposed of as provided in this Act, although the period of redemption and days of grace have expired. - **9F. Sale of pledge and inspection of sale book** (1) A pledge may be disposed of by the pawnbroker, after the expiry of one year and the days of grace provided in sub-section (1) of Section 9E by sale by auction and not otherwise, and the sale shall be conducted in accordance with such rules as may be prescribed. (2) A pawnbroker may bid for and purchase at a sale by public auction conducted under subsection (1), a pledge pawned with him; and on such purchase, he shall become the absolute owner of the pledge. (3) At any time within years after the public auction, the holder of the pawn-ticket may inspect the entry relating to the sale either in the pawnbroker's book or in such catalogue of the auction as may be prescribed. (4) (a) Where on such inspection or otherwise the pledge appears to have been sold for more than the amount of the loan and the interest and charges due at the time of the sale, the RFA.684/14 9 pawnbroker shall pay to the holder of the pawnticket, on demand made within three years after the sale, the surplus after deducting therefrom the necessary costs and charges of the sale. (b) If on such demand it appears that the sale of the pledge has resulted in a surplus but that within twelve months before or after such sale the sale of another pledge or pledges of the same person has resulted in a deficit the pawnbroker may set off the deficit, against the surplus and shall be liable to pay only the balance, if any, after such set off.” 12.In exercise of the powers conferred under section 21 of the Kerala Money Lenders Act enabling the State Government to make rules, the Kerala Money Lenders Rules, 1964 have been framed. Rule 16 dealing with the sale of property, being relevant, is also extracted below for reference: **“16. Sale of property** - (1) The sale of property under Section 9F shall be conducted by public auction (after giving registered notice with acknowledgement due to the pawner). The details of the sale such as the nature of the articles to be auctioned, date and place of auction shall be notified to the public at least two weeks before the date of auction by affixing notices to that RFA.684/14 10 effect at the business place of the pawnbroker and other public places: Provided that in the case of ornaments made of a gold of a purity exceeding 14 carats of an estimated total value specified in column (1) of the table below, the auction shall be subject to the general control of and to the confirmation of sale by the authorities specified in the corresponding entries in column (2) thereof: Provided further that the authorities specified in column (2) of the table below shall not proceed to confirm the sale, unless proof of the payment of the Sales Tax due under the Kerala General Sales Tax Act, 1963 (15 of 1963) on the total value of the gold sold is produced. ## TABLE |**_Estimated Total Value_**|**_Authorities_**| |---|---| |-1|-2| |Does not exceed Rs.25,000<br>Exceed Rs.25,000 but does<br>not exceed Rs.1,00,000.<br>Exceeds Rs.1,00,000 but<br>does not exceed Rs.3,00,000.<br>Exceeds Rs.3,00,000.|Inspector having jurisdiction<br>over the place of business.<br>Inspecting<br>Assistant<br>Commissioner<br>of<br>having<br>jurisdiction over the place of<br>business.<br>Deputy Commissioner having<br>jurisdiction over the place of<br>business.<br>Board of Revenue.| RFA.684/14 11 (2) The amount realised by such sales shall be separately credited to the account of the pawner in the books of accounts of the pawnbroker and an extract of the same showing the balance if any due on the loan or the excess if any due to the pawner after meeting the loan shall be furnished to the pawner within one week of the date of sale.” 13.Reading of the aforesaid provisions would show that in terms of section 9E, every pledge shall be redeemable within one year from the day of pawning, exclusive of that day and that there shall be added to that year of redemption, seven days of grace within which every pledge shall continue to be redeemable. As per sub section (2), a pledge shall further continue to be redeemable until it is disposed of as provided in the Act, although the period of redemption and days of grace have expired. As per section 9F, a pledge may be disposed of by the pawn broker after the expiry of the one year period and the days of grace, by sale by auction and not otherwise and the sale shall be conducted in accordance with such rules as may be prescribed. As per Rule 16, sale shall be conducted by public auction after giving registered notice with RFA.684/14 12 acknowledgment due to the pawners. It further provides that the details of the sale such as the nature of the articles to be auctioned, date and place of auction shall be notified to the pubic at least two weeks before the date of auction by affixing notices to that effect on the business places of the pawnbroker and in other public places. As per this provision, the confirmation of the authorities mentioned therein is also required depending upon the value of the gold ornaments pledged, which, in this case, admittedly, was of a purity exceeding 14 carats. 14.Having seen the aforesaid statutory provisions, the questions which survive to be considered are whether the appellants have proved their case of sale allegedly held on 9.1.2009 and even if the factum of sale is proved, whether the same was held in accordance with the provisions of the Kerala Money Lenders Act and the Rules framed thereunder. 15.First of all, Ext.B3 notice, which, according to the appellants, was despatched on 5.1.2009 and was RFA.684/14 13 returned unserved, did not contain any intimation that the gold in question would be sold on 9.1.20009 or for that matter, any particular date. Secondly, even if the sale was held as contended by the appellants, the first opportunity for them to have projected the same in defence of the demand for redemption made in Ext.A3, was at the time when Ext.A4 reply notice was issued. In that notice, the appellants did not have a case that the gold ornaments were in fact sold on 9.1.2009. On the other hand, the appellants only disputed the claim of the respondent plaintiff for redemption of the pledge. Even in the written statement filed in the suit, there is no specific averment that the gold ornaments in question were sold on 9.1.2009. However, such a vague assertion was made for the first time only when the first appellant was examined as DW1. When the law entitled the plaintiff for redemption of the pledge till the pawned articles were actually sold and if that right of the plaintiff was to be contested by the appellants, it was obligatory on the part of the appellants to have proved the factum of sale by adducing cogent RFA.684/14 14 evidence. In so far as this case is concerned, there is total dearth of evidence and therefore, the factum of sale is not proved by acceptable evidence. 16.Even if, for the sake of argument, it is accepted that the gold ornaments were sold by the appellants on 9.1.2009, that sale was held in violation of the provisions contained in the Kerala Money Lenders Act and the Rules framed thereunder. As we have already stated, the second appellant is a money lender licensed under the Act and the Rules and the second appellant is, therefore, amenable to the discipline of the Act. As per sections 9E and 9F of the Act and Rule 16 of the Rules, the manner of sale can be only in terms of the provisions of the Act. There is no case for the appellants that the sale was held after giving a public notice in the manner as provided in the Act and the Rules or by public auction. Therefore, even if the sale was held on 9.1.2009, such sale was not in compliance with the provisions of the Act and therefore, it is not a sale in the eye of law. This, therefore, entitled the respondent plaintiff for redemption of the pledge. Even RFA.684/14 15 according to the appellants, pledged goods are not available for redemption. Therefore, the only option available to the court was to decree return of the value of the gold, which, precisely, was what has been done by the court below. We do not find any illegality in the decree for interference. Appeal fails and is accordingly dismissed. Sd/ANTONY DOMINIC, Judge. Sd/A. HARIPRASAD, Judge. kkb. /True copy/ PS to Judge