BANK OF RAJASTHAN V. HAJARIMAL MILAP C.

SURANA1
[Before S.N. Variava and H.K. Sema, JJ.]

FACTS:

The respondent, Hajarimal Milap C. Surana (R), was indebted to the appellant, Bank of
Rajasthan (A), and had deposited expensive stones as security. For the recovery of the debt, a
suit had been filed within the court by A. In the course of the suit, the parties came to an
agreement, for the enforcement of which another suit was filed by A.

ISSUES:

 Whether the second suit is maintainable since, the first suit for recovery of the debt was
previously pending?
 Whether the precious stones comprise full and final settlement of the debt?
 Whether the A’ claim to interest is acceptable.

HELD:

Debts Recovery Tribunal: (favoured R)

Rejected A’s claim on 2 grounds; (a) Bank had taken the stones as full and final settlement (b)
Suit was barred underneath order 23 rule 1(4) of the CPC.

Appellate Tribunal (favoured R)

Acknowledged the second suit i.e., did not regard as it barred on the foundation of Civil
Procedure Code provisions, however, dismissed the appeal maintaining that the bank had taken
the valuable stones in complete and final settlement of the debt.

Supreme Court (favoured A)

1. (Issue 1) The case was not for the revival of the original debt but for the enforcement of
the agreement and as such not related to the first suit.

1
(2005) 10 SCC 238.
 2. (Issue 2) The costly stones did not amount to full and final settlement but were merely
security as specifically mentioned in clause 3 of the agreement.

3. (Issue 3) A’s claim to interest was justified as clause 2 of the agreement revealed that the
bank had agreed to charge any additional interest.

 S.176 is appropriate and valid; A was entitled to the recovery of the debt with interest.

LAW POINTS:

S.176 of Indian Contract Act: If the pawnor makes default in payment of the debt, or
performance, at the stipulated time of the promise, in respect of which the goods were pledged,
the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods
pledged as a collateral security; or he may sell the thing pledged, on giving the pawnor
reasonable notice of the sale. If the proceeds of such sale are less than the amount due in respect
of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are
greater than the amount so due, the pawnee shall pay over the surplus to the pawnor.

CRITICISM:

Reliance was placed by the respondent upon the authority in the case of L. Janakirama Iyer v.
P.M. Nilakanta Iyer2, wherein it has been laid down that the court must look at the substance of
the plaint. Relying on this authority it was submitted by the respondent that if the substance of
the plaint is looked at, it will be clear that the suit is for recovery of the original debt. It was
submitted that a second suit for recovery of the original debt was barred under the provision of
Order 23 Rule 1(4) of the Civil Procedure Code.
The Supreme Court has carefully looked at the plaint. Hence, it is clear that the suit is not for
recovery of the original debt. The suit is for enforcement of the agreement dated 11-07-1983.
When this agreement was entered into, there was a fresh contract between the parties. The debt
mentioned in this agreement could not have been dismissed by virtue of the provisions of Order
23 Rule 1(4) of the Civil Procedure Code which has no application to such a case.
In this view of the matter, the Supreme Court was unable to sustain the orders of the Debts
Recovery Tribunal and the Appellate Tribunal.
2
AIR 1962 SC 633.