S.176 Contract Act | Court Should Not Be Used To Prevent Lender From Exercising His Rightful Legal Claim Against Borrower: Calcutta HC

The Calcutta High Court has recently underscored that the Court should not be used to prevent a loan giver from exercising his rightful legal claim against the borrower. Justice Shekhar B. Saraf was adjudicating upon an interlocutory application seeking injunction against the respondent bank from giving any effect to letters dated 23rd February, 2022 vide which the bank had invoked the pledge and had expressed its intention as a pawnee to dispose of the security under Section 176 of the Indian Contract Act, 1872 (Act). A pledge is a bailment of goods as security for payment of debt or performance of a promise. Section 176 of the Act permits the pawnee to sell the goods pledged if the pawnor makes default in payment of the debt by first giving the pawnor a reasonable notice of the sale.The Court had earlier passed an order in favour of the petitioner by opining that the notices dated July 17, 2021 previously issued by the respondent bank did not adhere to the requirements laid down under Section 176 of the Act. The Court had averred that the notices did not provide the petitioner with a clear intent of sale as is required under Section 176 and had further held that the phrase 'right to sale mentioned in the notices was insufficient and did not convey an intention to sale. However, this time around, the Court observed that the notices dated 23rd February, 2022 was without any ambiguity and expressed a clear intention to sale as is required under Section 176 of the Act. Opining that the petitioner cannot be allowed to nitpick on the notices being issued by the respondent bank, Justice Saraf underscored, "The undisputed fact in the present case is that the petitioners have failed to pay back the amounts due to the respondent bank and is now thwarting each and every step being taken by the bank to obtain its legitimate outstanding dues. In my view, the attempts being made by the petitioner by nitpicking on the notices being issued by the respondent bank is only a ploy to avoid the harsh reality that loans are required to be paid back. The resultant consequences of failure to pay will have to necessarily follow and this court should not be used, rather abused, to prevent the loan giver from exercising his rightful legal claims against the borrower. The balance of convenience and inconvenience is also in favour of the respondent bank, and accordingly, I do not find this to be a fit case to interfere in any manner whatsoever."The Court noted that the words used in the new notices indicate that the payment is required to be made by by 12 pm IST on March 16, 2022 post which DBIL shall sell the new pledge shares. Furthermore, the Court observed that the phrase "at its discretion" used in the notices does not create any ambiguity at all and only leaves the date, time and place to be decided by the respondent bank at its discretion. The Court also took into consideration that notice of sale had been given for a period of approximately 18 days, and is therefore, reasonable notice. The clause dealing with Section 176 of the Act in both the notices is unequivocal with regards to the factum of sale that is to take place after the prescribed time of March 16, 2022, it was stated further. Opining that the new notices do not require any interference, the Court observed, "As is clear from the present notices, the recall of the loan had taken place by the earlier notices and the present notice is specifically a notice under Section 176 of the Indian Contract Act, 1872. The present notices, in my view, is without any ambiguity, is precise in its words, provides the time as contemplated under Sections 176 and 177 for the purpose of redemption, and accordingly, does not require any interference whatsoever."Case Title: Manav Investment and Training Company Ltd v. DBS Bank India Ltd. Case Citation: 2022 LiveLaw (Cal) 134Click Here To Read/Download Order

S.176 Contract Act | Court Should Not Be Used To Prevent Lender From Exercising His Rightful Legal Claim Against Borrower: Calcutta HC

Aaratrika Bhaumik

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