THE Learned Civil Court OF Anchi: Roll No. 1041

Roll No.
1041
THE LEARNED CIVIL COURT OF RANCHI
IN THE MATTER BETWEEN
Mr. Faizal Khan ….Plaintiff
v.
Mr. Sardar Khan ….Defendant
MEMORANDUM ON BEHALF OF THE PLAINTIFF
[This Memorandum has been prepared for Plaintiff: Faizal Khan]
Submitted by: Anushka V Sarathe
Submitted to: Soni Bhola Ma’am

NATIONAL UNIVERSITY FOR STUDY AND RESEARCH IN LAW, RANCHI
2
Memorial on behalf of the Plaintiff
TABLE OF CONTENTS
ABBREVIATIONS.........................................................................................................................3
INDEX OF AUTHORITIES...........................................................................................................4
CASES.........................................................................................................................................4
BOOKS........................................................................................................................................5
STATUES REFERRED................................................................................................................5
STATEMENT OF JURISDICTION...............................................................................................6
STATEMENT OF FACTS..............................................................................................................7
STATEMENT OF ISSUES.............................................................................................................8
SUMMARY OF ARGUMENTS.....................................................................................................9
ARGUMENTS ADVANCED.......................................................................................................11
ISSUE ONE...............................................................................................................................11
ISSUE TWO..............................................................................................................................11
ISSUE THREE..........................................................................................................................16
PRAYER........................................................................................................................................19
3
ABBREVIATIONS
AIR : All India Reporter
Hon'ble : Honorable
SC : Supreme Court
SCC : Supreme Court Cases
ICA : Indian Contract Act, 1872
v. : versus.
CoL : Court of Law
CRC : The Code of Civil Procedure, 1908
Sec. : Section
Cl : Clause
w.e.f : With Effect From
u/s : Under Section
r.w.s : Read with Section
HC : High Court
4
INDEX OF AUTHORITIES
Syndicate Bank vs C.H. Muhammed
Standard Chartered Bank v. The custodian and Ors.
Alliance Bank of Shimla v. Ghamandi Lal Jain Lal
M/S RK Jewelers v. UOI
Railroad Credit Corp. v. Hawkins.

Garvey v. Blatchford Calf Meal Co.
Bay City Bank v. St. Louis Motor Sales Co
Pawn brother’s Association and others v. state of Karnataka and others
T.B Ruia
Motilal Haribai v. Bai Mani
Lallan Prasad v. Rahmat Ali1, that
Vasant Deprao Deshpande v. SBI2
Jaswantrai Manilal Akhaney v. State of Bombay3
State Bank of India v. N. Sathiah and Etc.
Tejkumar Balakrishna Raju v. A.K. Menon
Sri Raja Kakarlapudi Venkata v Andhra Bank Ltd., Vijayawada and Ors.
STATUES
2
3
5
Indian Contract Act, No. 9 of 1872, INDIA CODE (1872)
THE CODE OF CIVIL PROCEDURE, 1908
BOOKS
Contract and specific relief, Avatar Singh
The Indian Contract Act, Pollock & Mulla
MISCELLANEOUS
Chitty on Contract", 28th Edition
Halsbury’s Laws of England, Vol 36
6
STATEMENT OF JURISDICTION
The plaintiff has approached this civil court under the statutory redressal mechanism as given in
Code of Civil Procedure, 1908 under section 15 which states that “Every suit shall be instituted
in the court of the lowest grade competent to try it.”4 And section 20 which states that “suites
must be instituted where the defendant resides or cause of action arise.5”
4
Section 15 cpc, 1908 “Court in which suits to be instituted. —Every suit shall be instituted in the
Court of the lowest grade competent to try it.”
5
Section 20 cpc,1908 “Other suits to be instituted where defendants reside or cause of action
arises. —Subject to
the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose
jurisdiction—
(a) the defendant, or each of the defendants where there are more than one, at the time of the
commencement of the suit, actually and voluntarily resides, or carries on business, or personally
works for gain; or
(b) any of the defendants, where there are more than one, at the time of the commencement of the
suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided
1. Subs. by Act 2 of 1951, s. 3 for “the States”
15
that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on
business, or personally works for gain, as aforesaid, acquiesce in such institution; or
(c) The cause of action, wholly or in part, arises. ”
7
STATEMENT OF FACTS
Some shares worth Rs. 12 lacs were pledged by Sardar Khan with Faizal Khan for a
credit of Rs. 10 lacs. Sardar Khan defaulted in making the repayment which led to the
swelling of the total debt up to Rs. 16 lacs including interest accrued in addition to the principal
sum. Meanwhile, the shares also had an augmentation of their worth derived from the
dividend received, surging its worth to Rs. 15 lacs. Faizal claims rights over the increased
value; Sultan contends that Faizal cannot claim any stakes in the increments, but only on
the original value.
8
STATEMENT OF ISSUES
ISSUE 1: Whether the suit filed by Faizal is maintainable in this court?
ISSUE 2: Whether the Pawnee has right over the pledged share?
2.1 Whether the Pawnee has right over the increased value of share?
2.2 Whether the Pawnee can sell the share in order to recover the pledged amount?
ISSUE 3: Whether Mr. Sultan has to pay the remaining amount?
9
SUMMARY OF ARGUMENTS
1. ISSUE ONE: WHETHER THE SUIT FILED BY FAIZAL IS MAINTAINABLE IN THIS COURT?
It is humbly submitted that the suit filed by the Plaintiff, Faizal Khan is maintainable in this court
of law. It is submitted that the redressal mechanism has been provided under the statue which
must be followed in cases where plaintiff is aggrieved. The Plaintiff has followed the statutory
redressal mechanism as given in Code of Civil Procedure, 1908 under section 15 which states
that “Every suit shall be instituted in the court of the lowest grade competent to try it.” 6 And
section 20 which states that “suites must be instituted where the defendant resides or cause of
action arise.7”
ISSUE TWO: WHETHER THE PAWNEE HAS RIGHT OVER THE PLEDGED SHARE?
2.1 WHETHER THE PAWNEE HAS RIGHT OVER THE INCREASED VALUE OF SHARE?
It is submitted that the Pawnee has the right over the dividend received as interest accrued on the
shares pledged are clearly accession to the shares pledged and since they are accession to the
shares, then they must also be regarded as forming part of the pledged property which could not
be ordered to be handed over unless redemption takes place as, by the pledge of a thing, not only
the thing itself is pledged, but also, accessory, the natural increase thereof. Thus, if during the
contract there is any increase in the value of the security, the Pawnee is entitled to that increase
as part of his security.
2.2 WHETHER THE PAWNEE CAN SELL THE SHARE IN ORDER TO RECOVER THE PLEDGED
AMOUNT?
It is submitted that the Pawnee has the right to sell the shares pledged by pawnor if he defaults in
making repayment. as given under section 176 of Indian Contract Act, 1872 If the pawnor makes
default in payment of the debt, or performance; at the stipulated time or the promise, in respect
of which the good were pledged, the Pawnee can retain the goods pledged as a collateral security
6
Section 15 of cpc,1908
7
Section 20 cpc,1908
10
or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale. The pawnor
at the time of the pledge not only transfers to the Pawnee, the special right in the pledge but also
passes on his right to transfer the pledged goods in the event of the pledge remaining
unredeemed resulting in the sale of the pledge by public auction through an approved auctioneer
ISSUE THREE: WHETHER MR. SARDAR KHAN IS LIABLE TO PAY THE REMAINING
AMOUNT?
It is submitted that section 176 of Indian Contract Act, 1872 states that “If the pawnor makes
default in payment of the debt, or performance ; at the stipulated time or the promise, in respect
of which the good were pledged, the Pawnee may bring a suit against the pawnor upon the debtor
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. Thus, if the proceeds of sales do not satisfy the debt then the pawnor is still liable to pay
the balance amount through any mode of payment.
11
ARGUMENTS ADVANCED
ISSUE ONE
WHETHER THE SUIT FILED BY FAIZAL IS MAINTAINABLE IN THIS COURT?
It is humbly contended before this court that the suit filed by the Plaintiff, Faizal Khan is
maintainable in this court of law. It is submitted that the redressal mechanism has been provided
under the statue which must be followed in cases where plaintiff is aggrieved. The Plaintiff has
followed the statutory redressal mechanism as given in Code of Civil Procedure, 1908 under
section 15 which states that “Every suit shall be instituted in the court of the lowest grade
competent to try it.”8 And section 20 which states that “suites must be instituted where the
defendant resides or cause of action arise.9”
ISSUE TWO
ISSUE II: WHETHER THE PAWNEE HAS THE RIGHTS OVER THE PLEDGED SHARES?
21. WHETHER THE PAWNEE CAN SELL THE SHARES IN ORDER TO RECOVER THE LOAN?
A bailment is the delivery of goods by one person to another for some purpose, upon a contract
that they shall, when the purpose is accomplished, be returned or otherwise disposed of
8
Section 15 of cpc,1908
9
Section 20 cpc,1908
12
according to the directions of the person delivering them. The person delivering the goods is
called the 'bailor'. The person to whom they ae delivered is called the 'bailee'.10
Thus, if a person already in possession of the goods of other contracts to hold them as a bailee,
he thereby becomes the bailee, and the owner becomes the bailor, of such goods although they
may not have been delivered by way of bailment." "The bailment of goods as security for
payment of a debt or performance of a promise is called 'pledge'. The bailor is in this case called
the 'pawnor'. The bailee is called the 'Pawnee'. In the present case, Some shares worth Rs. 12 lacs
were pledged by Sardar Khan with Faizal Khan for a credit of Rs. 10 lacs.
Under the Indian Contract Act, 1872- "IF the pawnor makes default in payment of the debt, of
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 remain the goods
pledged as a collateral security, or he may sell the thing pledged, on giving the pawnor
reasonable notice of the sale.”11 The Pawnee also has the right to bring a suit against the pawnor
for the recovery of the amount advanced by him. Thus, the choice of right the Pawnee wants to
exercise is his discretion.
It is, thus, clear that pledge is a kind of bailment and security. Its primary purpose is to put the
goods pledged in the power of the Pawnee to reimburse himself for the money advanced, when
on becoming due it remains unpaid, by selling the goods after serving the pawnor with a due
notice.12 The Pawnee at no time becomes the owner of the goods pledged. He has only a right to
redeem the goods13 until his claim for the money advanced thereon has been satisfied, with a
power to sell the goods pledged, after due notice in case of default by the pawnor.
10
Section 148, Indian Contract Act,1972
11
Section 176, Indian Contract Act, 1972
12
R.S. Nawal Kishore vs The Union of India. SC No. (179of 1955), 7/1 /1969
13
Section 177, Indian Contract Act, 1972
13
Further in Karnataka Pawn brokers Association and others v. state of Karnataka and others14 the
hon’ble supreme court held that “ "It cannot be and it is not disputed that the Pawnee has special
rights in the goods pledged, a right higher than a mere right of detention of goods by a right
lesser than general property right in the goods. To put it differently, the pawnor at the time of the
pledge not only transfers to the Pawnee, the special right in the pledge but also passes on his
right to transfer the pledged goods. To put it differently, the pawnor at the time of the pledge not
only transfers to the Pawnee, the special right in the pledge but also passes on his right to transfer
the goods in the event of the pledge remaining unredeemed resulting in the sale of the pledge by
public auction through an approved auctioneer. The position being what is stated above, the
natural consequence will be that it is the Pawnee who holds not only the absolute special right in
the pledge but also the conditional general interest in the pledge, the condition being that he can
pass on that general property only in the event of the pledge being brought to sale by public
auction in accordance with the Act and the Rules framed thereunder."”
It is further contended that In Syndicate Bank v. C.H Muhammed15, the court held that “The
Pawnee has the right to redeem good if the pawnor makes default in payment of debt, or
performance; at the stipulated time or the promise, in respect of which the good were pledged.”
Turing to the facts of the case, it is submitted that the pawnor, Sardar Khan defaulted in making
repayment of loan given by Faizal Khan which lead to swelling of the total debt up to Rs. 16
lacs. Thus, in light of the above argument, it is submitted that the Pawnee has the right over the
pledged shares and he call sell the shares in order to recover the amount of loan.
14
Pawn brokers Association and others v. state of Karnataka and others, SC No. () 29/10/1998
15
Syndicate Bank v. C.H Muhammed, HC of Kerala no. (674 of 1996), 6/4/2010
14
2.2 WHETHER THE PAWNEE HAS RIGHT OVER THE INCREASED VALUE OF SHARE?
The counsel contends that in the case of standard chartered bank v. the custodian and Ors. The
Hon’ble on Supreme court held that “the interest accrued on shares pledged are clearly accession
to the shares pledged and since they are accession to the shares then they must also be regarded
as forming part of the pledged property which could not be ordered to be handed over unless
redemption takes place.”16 According to Indian contract act, 1872 when goods are bailed for
securing payment of debt or the performance of a promise the bailor would get a right for the
return of the said goods when the purpose is accomplished, namely, the debt is returned or the
promise is performed.17
In the case of Hunsur Plywood Works Ltd. V. Commissioner.18 The court held that “It is perhaps
necessary to make clear that the income or usufruct of attached property is also attached
property. Thus, if the property be shares, dividends and bonus and rights share thereon would
also be attached property. It is only income generated by a notified person by dint of his own
labor.” Thus, if the accretions are regarded as property which come to existence after the date
when the shares were pledged, therefore it will become necessary for this court to observe that in
T.B Ruia’s19 case the court held that if pledged property is share then dividend received, bonus
shares etc., would also be regarded as pledged property as by the pledge of a thing, not only the
thing itself is pledged, but also, accessory, the natural increase thereof. As if a flock of sheep are
pledged, the young, afterwards born, are also pledged. 20 it is noted that "If during the pledge
there is an increase in the value of the thing pledged, the pledgee is entitled to the increase as part
of his security." To the same effect is the view contained in Halsbury’s Laws of England “where
it is stated in connection with the special property of the Pawnee "if during the contract there is
16
standard chartered bank v. the custodian and Ors, SC No. (762 of 1999), 18/4/2000
17
Section 172, 148 and 160 Indian Contract Act,1872
18
Hunsur Plywood Works Ltd. V. Commissioner, SC No. (), 19/11/1997
19
L.M. Devare v. Bhupendra Dalal, Bombay HC No. (), 30/8/2019
20
"Chitty on Contract", 28th Edition at page 162
15
any increase in the value of the security, the Pawnee is entitled to that increase as part of his
security"21.
The counsel contends that in the case of Motilal Haribai v. Bai Mani22 the high court of Bombay
held that “the interest accrued on the shares is related to the share and thus must be considered as
accretions.” Further in the case of M/S.R.K.Jewellers vs Union of India 23 the apex court held that
in the That in case of pawner's default in payment of the debt, Pawnee has also a right to sell the
accretion along with the original goods pledged after giving reasonable notice to the
Pawnee. And that bonus shares arising out of and appertaining to the original shares and that it
was impossible to contend that the right to these shares could be differentiated from the right to
the original shares. Applying the same logic dividend and interest which were relatable to the
pledged stocks must also be regarded as accretions thereto. Thus, pledgee is considered to be
entitled to any increase or increment of the thing pledged which may be used for the purpose of
liquidating the debt or held in trust for the pledgor. This right in the pledgee is held to arise by
implication even though there has been no transfer upon the books of the corporation; and if the
corporation after notice pays the dividends to the pledgor, it becomes liable in that amount to the
pledgee.24 The courts are even more strict where the dividend payments are in liquidation of
corporate assets, for in those cases notice is not a prerequisite of liability. Under such
circumstances, the corporation can protect itself by requiring that the stock certificate be
presented before payment of the liquidating dividend.25 It is therefore clear that a pledgee has the
discretion to decide whether he wants to sell the pledge security; when to sell it; and how much
of it to sell. The pledgor cannot dictate terms to the pledgee on how he is to exercise his right.26
21
Halsbury’s Laws of England, Vol 36 para 123
22
Motilal Haribai v. Bai Mani, Bombay HC No. (87 of 269), 5/12/1924
23
M/S.R.K.Jewellers vs Union of India, Bombay HC No. (2777 of 2003), 4/5/2010
24
Garvey v. Blatchford Calf Meal Co. 119 F. 2d 973(7th Cir. 1941)
25
Bay City Bank v. St. Louis Motor Sales Co 11 Mass. App. Ct. 539 (1981)
26
Reliance Project Ventures and Management Pvt. Ltd. and Ors. vs. ECL Finance Limited and Ors. Bombay HC
No. () (13.02.201)
16
On the aforesaid backdrop, turning to the present case, the doctrine of accretion is clearly
applicable to the facts of the present case wherein the dividend received is on the shares pledged
and therefore it cannot be handed over unless Sardar khan repays the debt. Thus, the plaintiff,
would be entitled to accrued interest on the pledged shares. Also, the appellant is genuinely
seeking the release of income which he earned from his service. There can be no dispute, as there
is no justification on the part of the defendant in retaining the amount of interest earned on the
pledged amount especially, on the touchstone of the doctrine of accretion, which is squarely
applicable to the facts of the case in hand.
ISSUE THREE
ISSUE III: WHETHER MR. SARDAR KHAN IS LIABLE TO PAY THE REMAINING AMOUNT?
The counsel humbly submits that “If the pawnor makes default in payment of the debt, or
performance ; at the stipulated time or the promise, in respect of which the good were pledged,
the Pawnee may bring a suit against the pawnor upon the debtor 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.27"
It was held in the case of Lallan Prasad v. Rahmat Ali28, that “Satisfaction of the debt or
engagement extinguishes the pawn and the Pawnee on such satisfaction is bound to redeliver the
property. The pawnor has an absolute right to redeem the property pledged upon tender of the
amount advanced.” A similar point was made out in another case of Maharashtra, named Vasant
Deprao Deshpande v. SBI29 and in another case named Jaswantrai Manilal Akhaney v. State of
27
Section 176 Indian Contract Act, 1872
28
Lallan Prasad v. Rahmat Ali, SC No. (776 of 1964), 15/9/1966
29
Vasant Deprao Deshpande v. SBI, Bombay HC No. () 26/6/1992
17
Bombay30, it was pointed out by the Supreme Court that, the special interest of a pawnee comes
to an end as soon as the debt is discharged. It is now on the pawnor to decide whether to redeem
the pledge by full payment of the amount for which the pledge had been made at any time if
there is no fixed period for redemption or at any time after the fixed date and the right continues
until the thing pledged is lawfully sold.31 The right to redeem the goods extends to the time till
the goods are actually sold and is not extinguished by the time provided in the notice of sale. “So
as long as the actual sale does not take place, the pawnor is entitled to redeem the goods on
payment of the debt.”32 Although, if the goods are restored by the pawnor after the termination of
the stipulated time period then the pawnor is liable to pay the expenses which have been incurred
due to this default to the pawnee. And if the goods are restored before the stipulated time period,
he would remain bound by the terms of the loan, if any, that a premium would be leviable on
premature payment.
Further in the case of State Bank of India v. N. Sathiah and Etc. the court held that “if the
proceeds of sales do not satisfy the debt then the pawnor is still liable to pay the balance
amount.”33 Thus, in the present case Mr. Sardar Khan is liable to pay the remaining amount as
the total value of the loan is 16 lacs and the shares worth Rs. 15 lacs thus, the remaining 1 lac
must be paid by Sardar Khan in any mode which suits him.
30
Jaswantrai Manilal Akhaney v. State of Bombay, SC No. (575 of 1956), 4/5/1956
31
Avtar Singh, Contract and Specific Relief 727 (ed. 2017).
32
The Indian Contract Act, Pollock & Mulla(ed.2018)
33
State Bank of India v. N. Sathiah and Etc., Madras HC No. (), 7/10/1988
18
PRAYER
WHEREFORE, in light of the legal precedents and principles cited; and in light of the provisions
of The Indian Contract Act, 1809 and arguments advanced; and in light of the scientific studies
relating to the issues referred to, the petitioner most humbly prays the Hon’ble court to declare
that Mr. Faizal Khan has right over the increased value of share and to direct Mr. Sardar Khan to
pay the remaining amount of loan.
AND/OR
19
The court may also be pleased to pass any other order, which this Hon’ble Court may deem fit in
light of justice, equity and good conscience. All of which is respectfully submitted on behalf of
The Plaintiff
Faizal Khan
20

THE Learned Civil Court OF Anchi: Roll No. 1041

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Roll No.

THE LEARNED CIVIL COURT OF RANCHI

IN THE MATTER BETWEEN

Mr. Faizal Khan ….Plaintiff

Mr. Sardar Khan ….Defendant

MEMORANDUM ON BEHALF OF THE PLAINTIFF

[This Memorandum has been prepared for Plaintiff: Faizal Khan]

Submitted by: Anushka V Sarathe

Submitted to: Soni Bhola Ma’am

AIR : All India Reporter

SCC : Supreme Court Cases

ICA : Indian Contract Act, 1872

CoL : Court of Law

CRC : The Code of Civil Procedure, 1908

w.e.f : With Effect From

u/s : Under Section

r.w.s : Read with Section

Syndicate Bank vs C.H. Muhammed

Standard Chartered Bank v. The custodian and Ors.

Alliance Bank of Shimla v. Ghamandi Lal Jain Lal

M/S RK Jewelers v. UOI

Railroad Credit Corp. v. Hawkins.

Bay City Bank v. St. Louis Motor Sales Co

Pawn brother’s Association and others v. state of Karnataka and others

Motilal Haribai v. Bai Mani

Lallan Prasad v. Rahmat Ali1, that

Vasant Deprao Deshpande v. SBI2

Jaswantrai Manilal Akhaney v. State of Bombay3

State Bank of India v. N. Sathiah and Etc.

Tejkumar Balakrishna Raju v. A.K. Menon

Indian Contract Act, No. 9 of 1872, INDIA CODE (1872)

THE CODE OF CIVIL PROCEDURE, 1908

Contract and specific relief, Avatar Singh

The Indian Contract Act, Pollock & Mulla

Chitty on Contract", 28th Edition

Halsbury’s Laws of England, Vol 36

the original value.

ISSUE 1: Whether the suit filed by Faizal is maintainable in this court?

ISSUE 3: Whether Mr. Sultan has to pay the remaining amount?

WHETHER THE SUIT FILED BY FAIZAL IS MAINTAINABLE IN THIS COURT?

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