P L D 1966 (W (PLP)

Held that the principle in equity is that the creditor is not entitled to recover the amount of his secured debt when he cannot return the security. Lawton v. Newland 19 Revised Reports RR 676; Percy F. Fisher v. Ardeshir Hormasji Gazdar A I R 1935 Bom. 213; Nim Chand v. Jaga Bundhu Ghose (1895) 22 Cal. 21; Ellis & Company's Trustees v. Dixon‑Johnson (1925) A C 489; Official Assignee v. M. C. Harikrishna & Sons A I R 1935 Rang. 201 and D. Sundaravaradan v. M. K. Mani lyer A I R 1939 Mad. 915 ref. Sh. Abdul Haq for Appellants. Kh. Muhammad Habib Ullah with Jameel Ahmad Official Liquidator's Attorney for Respondent. Dates of hearing: 9th and 10th June 1964. SARDAR MUHAMMAD IQBAL, J.‑The appellant had three cash credit accounts with the respondent, the Central Exchange Bank Limited (now in liquidation). In the first account the appellant had pledged his shares as security for the re‑payment of the amount. In the other account the amount was advanced to him against the pledge of paper. The third account was in the name of Messrs Burq & Company, of which the appellant was the sole proprietor. The respondent instituted a suit against the appellant on the 20th of May 1948, for the recovery of Rs. 35,807‑8‑10, as the amount due to it under the three accounts inclusive of interest at the rate of 7 % per annum on the first account, 8 % per annum on the second account and 9% per annum on the third account. It also claimed future interest with half‑yearly rests from the date of the suit till the date, of the realization of the amount.

2. The suit based on the account in the name of Messrs Burq and Company for Rs. 11,517‑2‑1 was dismissed as barred by time. It was decreed for Rs. 20,207‑10‑1 on the basis of the share account and for Rs. 4,029‑12‑3 on the paper account. The plaintiff was also awarded future interest at the rate of 7 % in the share account and 8 % in the paper account from the date of the suit till the date of the decree and then to the date of the realization.

3. M. A. Burq has preferred this appeal. He has not challeng ed the decree in entirety. All that he claims in appeal is that he should have been allowed the price of twenty‑nine reams of paper in determining the amount due from him in the paper account and that the interest should not have been allowed on the rates claimed by the respondent without any proof given that there was any agreement of the parties to that effect. According to him the amount of interest should have been calculated at' the rate of 4 % per annum.

4. We may take the question of interest first. The appellant has not paid any court‑fee on the amount which he wishes to be reduced in the calculation of the interest. The plaintiff had paid the court‑fee on the amount of the interest for the entire period up to the date of institution of the suit. The interest so claimed was an ascertainable sum, and the plaintiff rightly paid the court‑fee for the same. The appellant was also liable to pay the court‑fee on the amount of interest which he wished to be reduced for this period. The point was conceded on behalf of the appellant. Since the appellant has not paid the court‑fee, nor did he make any offer to pay now, the appeal so far as it relates to the interest for a period prior to the filing of the suit merits to be rejected.

5. The learned counsel for the appellant contended that as the plaintiff had not paid any court‑fee on his claim for pendente lite and future interest, he was also not liable to pay any court -fee on interest for this period. The appellant, however, cannot avoid liability to pay the court‑fee on that basis because when a suit is filed, a claim for interest to accrue during the pendency of litigation is not for an ascertainable sum. Court‑fee is leviable on sums which can be ascertained with certainty but not on those which cannot. Consequently, as a general rule court‑fee on a plaint is payable on interest claimed up to the date of suit but not beyond. No court‑fee, therefore, is required on account of the claim for interest from the institution of the suit until payment. The position, however, is quite different when once the suit has been decreed and an appeal is preferred with regard to the pendente lite interest allowed or disallowed up to the date of the decree. In such a case the claim for this interest is ascertainable and, therefore, ad valorem court‑fee must be paid under Article 1, Schedule I for the amount in appeal as pendente lite interest which was allowed or disallowed by the trial Court. In Bhag Shah v. Labha Mal (A I R 1933 Lah. 941), it was held, "that court‑fee was necessary on the claim for interest from date of suit up to the date of appeal. In Damodar Parshad v. Hardo Parashad (A I R 1931 All: 351), King J., observed that when the appellant had expressly claimed a definitely ascertainable sum by way of pendente lite interest which was disallowed by the trial Court, that sum must be held to be a part of "the amount or value of the subject‑matter in dispute." The process of reasoning can be that section 6 of the Court Fees Act, authorizes the levy of court‑fee and according to this section no Court of Justice is to entertain a document unless in respect of such a document there has been paid a fee of an amount not less than that indicated by either of the Schedule to the Act as the proper fee for such a document. Article 1 of Schedule I deals with memorandum of appeals and directs that unless it is otherwise provided for, court‑fee must be paid valorem on the value of the subject‑matter in dispute. In the case of appeals that can only mean the dispute in appeal. The appellant claims that the interest awarded be reduced on the calculation at the rate of 4 % per annum. He, therefore, must pay the court‑fee on the amount by which he seeks the decree to be reduced, because the same is the subject‑matter of the appeal. In Kala Ram v. Punjab National Bank (A I R 1937 Pesh. 3), it was held that when a party in appeal prays for reduction of the interest awarded by the trial Court, it must pay ad valorem court‑fee on the interest sought to be reduced. We may, however, make a note of Muhammad Saeed v. Abdul Aleem (A I R 1947 Lah. 40). The facts in that case are that a suit to recover mortgage amount with future interest was dismissed and the appeal was directed against the decree dismissing the suit. The interest up to the date of decree had, of course, to be ascertainable. The mortgage preferred an appeal. He paid the same amount of court‑fee which was paid in the plaint. He, therefore, did not pay any additional court‑fee on the amount of interest from the date of suit till the date of appeal. It was held that no court‑fee in addition to what was paid on the plaint was payable. This view can be explained because where the plaintiff appeals from the entire dismissal of the suit, it is not at all necessary for him to claim pending or future interest specifically, as such relief is more or less con sequential or accidental and it is, therefore, not necessary to pay court‑fee on pendente lite and future interest claimed by him. In fact, in an appeal against a decree awarding a sum of money and future interest, no court‑fee is payable on the interest pendente lite unless a specific ground of appeal is taken in respect of such an award. In this view of the matter, since the appellant has challenged the rate of interest, he was liable to pay court‑fee on the amount by which he wished the decretal amount to be reduced. He has not applied and, in fact, made no request even before us for grant of time under section 149 of the Code of Civil Procedure. Since no court‑fee is paid, the appeal, so far as it relates to interest, is liable to be dismissed.

6. The next question which falls for determination is whether the appellant can ask for the reduction of the decretal amount on account of the price of 29 reams of paper which were admittedly in possession of the respondent but it was not in a position to return it ‑ to the appellant. The appellant had opened a cash credit account with the plaintiff‑Bank on the 1st of February 1944. The loan was advanced to the defendant against the pledge of the paper. In this way, the appellant was advanced Rs. 7,600 against the pledge of 100 reams of paper. As and when the appellant desired he was released the paper on the deposit of the amount at the rate of Rs. 80 per ream. From the entries in godown register (Exh. C.P/1), produced by the plaintiff, it is proved that the defendant received back 71 reams of paper from time to time on payment of the corresponding amount. The plaintiff according to these documents, should have had in its possession 29 reams of paper at the time of the institution of the suit. Mr. F. A. Cooper, a Local Commissioner appointed in this case, has stated, in his report, dated the 22nd of June 1953, (the report is at pages 56 to 63 of the paper book and the relevant statement is at page 61), "from the godown register and from the statement of account it is clear that 71 reams were delivered to the defendant and that 29 reams are still held by the plaintiff Bank in the paper account". The parties do not con trovert this position before us either. The respondent does not have these 29 reams in its possession now and on its behalf it is stated that the paper had been completely damaged and was consequently destroyed. The case of the appellant is that there was no proof of the damage to or destruction 'of the paper and the respondent should, therefore, deliver this paper to him of, at any rate, it should have adjusted its price towards the payment of the amount due from him. It may be noted that the plaintiff respondent had rendered no proof of the fact that the paper had been damaged or that it had been destroyed. If the paper had in fact, been destroyed, the respondent would have made an entry to that effect in the Register Exh. C.P./22 just as it had made an entry about the destruction of two‑and‑a‑half reams (it is not a subject‑matter of this dispute) in that register and is at page 168 of the paper book. The fact that there is not a similar entry about the destruction of 29 reams of paper militates against the stand of the respondent and shows that the paper had not been destroyed. The respondent, under the circumstances, is liable to account for 29 reams of the paper which was pledged with it as security for the payment of the loan.

7. The learned counsel for the respondent contended that if the appellant had any claim to make on account of 29 reams of paper he should have done so by way of equitable set off in the suit itself, but he cannot compel the respondent to adjust the price of these reams towards the payment of the amount due to it in the paper account. Reliance was placed on Lawton v. Newland (19 Revised Reports 676). In this case A lent money to B and received a gun as security for the re‑payment. In an action by A for money lent, it was contended in defence that the sum in question had been advanced by the plaintiff upon the pledging of a gun and that he was not entitled to recover the amount without having first delivered up or offered to deliver up the gun which he held in pledge. It was held, "that the plaintiff was entitled to recovery, although the gun had not been returned or tendered, the defendant might enforce the return by bringing his action or trove." The respondent could invoke successfully the principle laid down in this judgment if he had still been in possession of 29 reams of paper. It is a right of the pawnee‑pledgee either to bring a suit upon the debt or to sell the things pledged upon giving a reason able notice of sale. Both these rights are concurrent and they are provided in section 176 of the Contract Act. Under this section, as interpreted in Percy F. Fisher v. Ardeshir Hormasji Gazdar (A I R 1935 Bom. 213) the Pawnee has a right of action for the debt notwithstanding the possession of the goods, subject to the pawnor's right to redeem the goods upon tender of the amount due before the sale. In Nim Chand v. Jaga Bundhu Ghose ((1895) 22 Cal. 21), it was held :‑ "There can be no doubt that when movable property is pledged to a person for money lent, he acquires, a special property therein; he has a charge upon it for the satisfaction of the loan advanced, and he is entitled under section 176 of the Contract Act, either to bring a suit against the owner upon the debt or promise, retaining the goods pledged as collateral security, or he may sell the things pledged upon giving reason able notice of the sale." It is, therefore, clear that the right to proceed against the property is not merely accessory to the right to proceed against the debtor personally. Thus a pledger cannot compel the pledgee to exercise the power of sale or its adjustment as a means of discharging or satisfying the amount due to him. The pledger, therefore, is 1 competent in law to sue for his debt without selling the pledged property and adjusting its price towards the payment of the debt. He has, however, to keep the property pledged in tact so that he may be able to hand over the security to the pledger on payment of the debt by him. The respondent is, admittedly, not in possession of 29 reams of paper pledged to it as a security for the payment of the loan. He has also not proved that it had been damaged or destroyed at the risk of the appellant. It may be a case of an unauthorized conversion. Question, however, arises whether the appellant can be granted a relief in respect of this property in the suit filed by the respondent. The principle in equity is that the creditor is not entitled to recover the amount of his secured debt when he cannot return the security. In Ellis, E & Company's Trustees v. Dixon‑Johnson ((1925) A C 489 p. 49), it was held by the House of Lords that the stock‑brokers could not have maintained an action for their debt if they were not in a position to restore the shares which he had pledged as a security, since payment of the defendant would entitle him to the return of the security which he furnished. The facts were as follows: The bankrupts were a firm of stock brokers with whom the defendant had many years ago opened a speculative account, which was still current at the date of the bankruptcy, although there had been no transactions since 1913. As security for any debit balance due from him on the taking of their monthly account, the defendant had deposited with the firm the indicia of title to various invest ments, which included shares in two rubber companies, the value of which was about two‑fifteenths of the total value of all the investments pledged. In March and November 1921, the firm without the knowledge or authority of the defendant sold the rubber shares. On February 16, 1922, a receiving order was made against the firm, and on the same day they were adjudicated bankrupts, the effect of which was to close the defendant's account. On February 19, 1923, the trustee in bankruptcy of the firm rendered the defendant a final account, which showed a balance due from the defendant. The action was brought by the trustee to recover that balance. The defendant admitted indebted ness upon a proper account being stated, but denied the plaintiff's right to sue, in face of his expressed intention not to return the shares. Lawrence, J., ordered an account to be taken and directed that the value of the shares should be set off against the claim of the trustee. The decision of Lawrence, J., was affirmed by a majority in the Court of appeal. The House of Lords upheld the decision and in the course of his speech Lord Cave had observed, "I have always understood the rule in equity to be that, if a creditor holding security sues for his debt, he is under an obligation on payment of the debt to hand over the security; and if, having improperly made away with the security, he is unable to return it to his debtor, he cannot have judgment for the debt. If that rule had been strictly applied on the hearing of the action, the action must have been then and there dismissed. In the peculiar circumstances of the case, the action of the creditor was not dismissed and the House of Lords confirmed the decision of the Court of appeal and Lawrence, J., who in ordering an account to be taken had directed that the value of the shares should be set off against the claim of the plaintiff. This principle was followed in Official Assignee v. M. C. Harikrishna & Sons (A I R 1935 Rang. 201), and it was held that if a creditor holding security sues for his debt, he is under an obligation on payment of the debt to hand over the security and if having improperly made away with the security, he is unable to return it to his debtor he cannot have judgment for the debt. Hence, where the security has been dissipated he cannot sue to recover the debt in respect of which the security was burnished and the Official Assignee of the creditors estate is in no better position. The same view was taken in D. Sundaravaradan v. M. K. Mani lyer (A I R 1939 Mad. 915).

8. On this principle of equity, sine the plaintiff respondent had not been able to account for 29 reams of paper, their whole action based on the paper account is liable to be dismissed. The appellant, however, has not made that claim. We are, therefore, not in a position to grant the relief. He has restricted his claim in appeal for the education of the decretal amount to the extent of Rs. 2,320.00. He has valued the paper at the rate of Rs. 80 per ream. The question is what could be reasonably the market price of one ream of paper in the absence of any positive evidence from either side. It is clear from the report of the local Commissioner, Mr. F. A. Cooper, that. it was a common ground of the parties before him that the appellant had pledged 100 reams of paper with the plaintiff bank against an advance of Rs. 7,600‑

00. This amount, of course, could not represent the market price of the paper. It is a matter of common knowledge that the banks do not advance loans corresponding with the actual price of the goods pledged with them as security for the re‑payment of loan, They invariably advance loan which is less than the market price of the pledged property. If the Bank, therefore, advanced Rs. 76‑0‑0 to the appellant against the pledge of one ream, the market price of the same must certainly be higher. The Bank, however, released the paper to the appellant on the payment of Rs. 80 per ream and there is not much of difference between the amount advanced on one ream and the amount on which the same was released. It is therefore, reasonable to infer that 'the market price of the paper in the proximity of Rs. 80 per ream. On that calculation price of 29 reams of the paper works out to Rs. 2,320.respondents are liable to set off this amount against amount which they claim from the appellant. The appeal accepted and the decree of the trial Court is set aside and decretal amount is accordingly reduced by Rs. 2,320 with interest which was charged on this amount and was included in the decretal amount of Rs. 4,029/12/8. The appellant will have the proportionate costs of this Court and that of the Court below. S. Q. Appeal accepted.