PTC INDIA FINANCIAL SERVICES LIMITED versus VENKATESWARLU KARI AND ANOTHER

Citation: [2022] 9 S.C.R. 1063 · Decided: 12-05-2022 · Supreme Court of India · Bench: M.R. SHAH · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 10 · see the full citation network in Lexace

Judgment (excerpt)

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   [2022] 9 S.C.R. 1063
1063
PTC INDIA FINANCIAL SERVICES LIMITED
v.
VENKATESWARLU KARI AND ANOTHER
(Civil Appeal No. 5443 of 2019)
MAY 12, 2022
[M. R. SHAH AND SANJIV KHANNA, JJ.]
Contract Act, 1872 – Depositories Act, 1996 – Securities and
Exchange Board of India (Depositories and Participants)
Regulations, 1996 - Whether the Depositories Act, 1996 read with
the Regulation 58 of the Securities and Exchange Board of India
(Depositories and Participants) Regulations, 19961 has the legal
effect of overwriting the provisions relating to the contracts of pledge
under the Indian Contract Act, 1872 and the common law as
applicable in India – Held: The Depositories Act prescribes how
the dematerialised securities can be pledged – The provisions of
the Depositories Act and the 1996 Regulations are not in derogation
of the Contract Act but in addition to it – In this regard, reference is
made to Section 28 of the Depositories Act – Therefore, the object
of the Depositories Act is not to rewrite the provisions of the Contract
Act but to regulate the creation and transfer of dematerialised
securities – Regulation 38(1)(e) requires a depository to maintain,
inter alia, records of all approvals, notices and entries, and
cancellation of pledge or hypothecation, as the case may be.
Contract Act, 1872 – ss. 148-171, 172-179 – Bailment and
Pledge – Legal Distinction – In the cases of bailment, the goods are
bailed for specific purpose and once the purpose is accomplished
the bailee is bound to deliver the possession of the goods back to
the bailor or to dispose off the goods as per the bailor’s direction –
Unlike bailment, in pledge there is the delivery of possession of the
goods by the pawnor to the pawnee by way of security upon the
promise of repayment of a debt or the performance of a promise,
thereby creating an estate that vests with the pawnee – Pledge is
preceded by bailment
Words and Phrases – “Pledge”, “Mortgage” – Movable
Property – Legal Distinction – A mortgage conveys the whole legal
interest in the chattel, while a pledge conveys only a special property
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SUPREME COURT REPORTS
[2022] 9 S.C.R.
leaving the general property in the pledger, and the pledgee never
has absolute ownership of property – Further unlike pledgee, a
mortgagee acquires general right in the things mortgaged subject
to the right of redemption of the mortgagor – Compared to the
pledge, a pawnee has only special right in the goods pledged,
namely the right of possession as security and in case of default, he
can bring a suit against the pawnor as well as sell the goods after
giving a reasonable notice.
Contract Act, 1872 – Accretion of the Pawned Goods – Duty
of the the Pawnee towards such accretion – The pledge extends to
accretions and additions, and therefore, when the pawnee returns
the pledged goods, the accretions and additions must be returned
to the pawnor – Further it also follows that the pawnee’s right to
retain and sell the pledged goods stretches to the right to retain and
sell any increase and accumulations to the pledged goods.
Contract Act, 1872 – s. 176, 177 – Pawnee’s duty to give
notice of intended sale of pawned goods – Extent - Section 176 of
the Contract Act, unlike some of the sections of the Contract Act,
does not specifically provide that the contractual terms can override
the provision by using the expression “in the absence of the contract
to the contrary” or “subject to special contract to the contrary” –
The notice, that is to be given for the intended sale by the pawnee,
is a special protection that the statute has given to the pawnor, and
the parties cannot agree that the pawnee may sell the pledged goods
without notice to the pledgor – Further, the mere tendering of notice
to the pawnor does not binds pawnee to put the intended sale to the
effect and he is not bound to sell even after tendering of such notice
– If the notice is served, the pawnor may redeem the goods as per s.
177 before the ‘actual sale’ by the pawnee.
Contract Act, 1872 – s. 63, 176 – Whether Parties to Pledge
Agreement can waive the requirement of Notice As contemplated by
s. 176 – Settled Legal position – S. 63 of the Contract Act governs
the domain of waiver and it is a general principle of law that
everyone has a right to waive the advantage of a law or rule made
solely for the benefit and protection of the individual in his private
capacity however, such a waiver cannot infringe any public right
or public p

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