Law of pledges in India

– Vrinda Bagaria | corplaw@vinodkothari.com

This article seeks to broadly explain the principle of a pledge and deals primarily with use of ‘pledge’ as a mode of creation of security on shares of a company to secure liabilities of the company.

1. PLEDGE – MEANING

• Definition

A ‘pawn’ or a ‘pledge’ is a bailment of personal property as a security for some debt or engagement. Under the Indian Contract Act, 1872[1] (“Contract Act”), pledge has been defined as:

“the bailment of goods as security for the payment of a debt or performance of a promise is called pledge”.

Further, the definition of bailment as provided in Section 148 of the Contract Act reads as:

“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 according to the directions of the person delivering them”.

Thus, a pledge constitutes the delivery of goods by the pawnor to the pawnee as a security under a contractual obligation that the goods shall be returned or disposed off as per pawnor’s direction on the debt being discharged or the fulfilment of the obligation.

• Essential conditions of a valid pledge

The definition of a pledge gives the two most essential conditions[2] of a valid pledge, which are:

• Delivery of goods:

The goods have to be delivered by the pawnor to the pawnee. Delivery is necessary for a complete pledge and it may be either actual or constructive[3].

• Actual Delivery: An actual delivery occurs when the physical possession of the goods is transferred by the pawnor to the pawnee.

• Constructive Delivery: Any act done which has the effect of putting the pawnee in possession of the goods pawned is known as constructive delivery. Physical possession of the goods need not be given.

• Security for a debt or performance of an obligation:

The goods should be given as a security to the pawnee for payment of the debt taken or the performance of the obligation.

The other essential conditions of a pledge are likewise as in a contract of bailment, which may be summarized as follows:

• Specific movable property:

The goods passed as security to the pawnee must be movable property and ascertainable at the time of the contract.

• Agreement to return goods:

The essence of a contract of pledge is that the pawnee should agree to return the goods on the satisfaction of the debt or the performance of obligation. In absence of such agreement, a valid pledge cannot come into existence.

A pledge, being essentially a contract of bailment, the pawnee is under a duty to take care of the goods pledged as a man of ordinary prudence would take under similar circumstances.

• Subject-Matter of Pledge

All goods, capable of actual or constructive delivery form the subject-matter of a pledge. Though the term “goods” has not been defined under the Contract Act, the Sale of Goods Act, 1930 defined the term “goods” as follows:

“every kind of moveable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”;

By way of few examples:

• Government promissory notes might be pledged as per statutory requirements;

• insurance policies, bonds, scrips, railway receipt;

• shares can also be pledged as securities by delivery of share certificates and rules of delivery and other rules applicable in case of bailment are applicable to them.

2. PLEDGE OF SHARES

• Backdrop

In the Indian scenario, pledging of shares has recently become a common practice as a mode of raising funds by the promoters of a company. The shares are pledged as collateral security to raise working capital, loans, to increase holding and also to fund acquisitions. This method of pledging shares to raise short-term finance is beneficial both for the promoters as well as the lenders since the promoters get easy access to such short-term financing and the lenders charge premium rates for making such arrangements. Moreover, the lenders also get the right to sell the shares pledged by the promoters in case of default made by the promoters[4].

However, as convenient as it seems, pledging of shares by promoters also has some risks associated with it, for example, in an event of default, if the shares are sold by the lenders in the open market, it might result in a fall in the stock price, lead to erosion of market capitalisation and if a major shareholding is involved, the promoters also run the risk of losing the management of the company. Moreover, if the prices of the shares decline, the promoters have to either make some payment or pledge more shares to cover the deficiency. If the promoter defaults or is unable to provide more shares as margin, the lenders have the right to sell the shares in open market.

• Mode of Delivery

There are two modes by which shares can be pledged to a pawnee:

• Actual Delivery: Earlier, physical possession of shares could be given to the pawnee by delivery of share certificates.[5] Simple delivery suffices the purpose of creating a pledge and transfer of title is not necessary[6].

• Constructive Delivery: Investments made through shares and debentures, are, nowadays held in electronic form or dematerialized (Demat) form through a depository[7].Thus, shares can now be pledged through Demat form more conveniently according to the procedure laid down in the Depositories Act, 1996. Section 12 of the Depositories Act, 1996 (“Depositories Act”) lays down the provision governing the pledge of shares in Demat form. According to this section:

• With the previous approval of the depository, a beneficial owner[8] (BO) may create a pledge or a hypothecation in respect of security owned by him through the depository.

• The beneficial owner is under an obligation to inform the concerned depository of the pledge or hypothecation so created and the depository is accordingly required to make the necessary entries in its record on such intimation.

• Such entries as recorded by the depository will be treated as evidence.

Further, Regulation 58 of the SEBI (Depositories and Participants) Regulations, 1996 lays down the manner of creating a pledge.In brief, it can be explained as follows:

An application has to be made by the BO who intends to create a pledge, to the participant who shall forward the same to the depository. After taking the necessary steps, the depository shall create a pledge and entries have to be made in the respective records by the parties to the pledge i.e. the pledger and pledgee, their participants and the depository as well. If the depository does not create the pledge as required, it shall inform the pledger and the pledgee through their participants along with the reasons for not creating such pledge.

It also makes a provision for invocation of pledge by the pledgee on default committed by the pledger, in which case the depository shall register the pledgee as the BO and make the necessary amendments in its record. An intimation of the same has to be given to the participants of the pledger and the pledgee who shall make the entries accordingly. 

• Disclosure under The Takeover Code, 2011

The SEBI(Substantial Acquisition of Shares and Debentures) Regulations, 2011(new Takeover Code) has made it mandatory for the promoters and their PACs[9] to make all disclosures relating to any ‘encumbrances’ created by them on their securities. The term ‘encumbrance’ has been specifically used to widen the scope of the disclosures to be made by the promoters. Regulation 28(3) of the new Takeover Code gives an inclusive definition of ‘encumbrance’ as: “it shall include a pledge, lien, or any such transaction, by whatever name called.” Thus, it does not include only a pledge or lien but similar transactions also.

Regulation 31 of the new Takeover Code incorporates the provision of making disclosure of encumbered shares:

• The promoter of every target company[10] is required to disclose the details of shares of such target company which is encumbered by him or by persons acting in concert with him in such form as required;
• The promoter shall also disclose in detail the invocation or release of such encumbrance on the shares in the form required;
• The disclosures as mentioned above have to be made within seven working days of the creation, invocation or the release of the encumbrance, as the case may be. Such disclosure is to be made to-

• every stock exchange where the shares of the target company have been listed 
• the registered office of the target company.

Under the Takeover Code, scheduled commercial banks and public financial institutions have been exempted from making disclosures as a pledgee in respect of pledged shares for securing indebtedness in the ordinary course of business[11]. On the basis of this exception, a question was raised recently as to ‘whether a company carrying on the activities of a trustee in its regular course of business and holding pledged shares on behalf of other banks and financial institution is required to make such disclosure as well.’

The SEBI opined that neither the Takeover Code of 1997 nor the new Takeover Code has specifically exempted trustees from making such disclosure, therefore even if a trustee merely holds the pledged shares in its capacity as an agent on behalf of the lenders; it is bound by the Takeover Code[12].

Prior to the introduction of disclosure requirements on pledged shares in the Takeover Code in 2009, the promoters could easily side-step such norms without much interference on the part of SEBI. However, since the advent of the new Takeover Code, strict compliance of disclosure norms is sought by SEBI, the violation of which by the promoters may attract severe punishment from the market regulator.

• Equity Listing Agreement[13]

A listing agreement is basically an agreement with the stock exchange governing the conditions of listing of shares of the target company[14]. The market regulator, SEBI has made certain provisions governing a listing agreement. It seeks to bring about transparency and efficiency in the governance of listed companies by improving the quality of disclosures required to be made under the provisions of such listing agreement. In pursuance thereof, an amendment[15] was affected in Clauses 35 and 41 dealing with the disclosure requirements to be made in the financial statements of the company.

Under Clause 35, a disclosure regarding the shareholding pattern of the company and the ‘promoter and promoters group’ has to be made while under Clause 41, the company is required to submit its financial results of every quarter. Both the clauses have been amended accordingly to include within its ambit necessary disclosure of shares pledged by the promoter and promoters group.

The abovementioned amendments had been incorporated in the Listing Agreement as a consequence of the introduction of Regulation 8A in the old Takeover Code for the purposes of convenience and uniformity in the information filed with the stock exchanges[16]. However, the term ‘pledge’ used in the old Takeover Code was replaced by ‘encumbrance’ in the new Takeover Code. Therefore, the amendment made in the Listing Agreement specifically uses the term ‘pledge’; the format required to be followed in reference to both the clauses uses the term ‘shares pledged or otherwise encumbered’. Thus, it may be inferred that the disclosure requirements under the Listing Agreement is not restricted to pledge of shares only but also includes other encumbrances which may be created on the securities.

The primary object of the amendment is to protect the interest of the investors in securities and to promote the development of the securities market through effective implementation of the disclosure norm. Thus, it is necessary that the widest possible interpretation be adopted in reference to the disclosure requirements and strict compliance of the same must be ensured by the concerned authorities. 

3. RIGHTS AND LIMITATIONS OF PAWNOR AND PAWNEE:

• Rights of the Pawnor – Right of redemption

The Contract Act[17] provides the pawnor with the only right of redemption of the pawned goods. The right of redemption of the pawnor can be exercised where under the contract of pledge a time has been stipulated within which the debt has to be repaid or the obligation has to be performed and the pawnor has defaulted in doing the same at the time so stipulated. In such a situation, the pawnor is entitled to redeem the goods so pledged until they are actually sold, but simultaneously he is also under an obligation to pay any additional expenses incurred by the pawnee by reason of his default.

• Rights and Limitations of Pawnee

• Right of retention[18]:

The pawnee has the option of exercising his right to retain the pledged goods in relation to the following:[19]

• payment of the debt or performance of the promise for which the pledge was created;

• interest on the debt;

• all necessary expenses incurred by the pawnee in respect of the possession or preservation of the goods pawned.

To explain this further, in case of M.R.Dhawan v. Madan Mohan[20], where certain shares of a company were pledged and bonus shares were issued during the period of redemption, it was held that the pawnor is entitled to the bonus shares so issued.

• Right as to extraordinary expenses[21]:

The pawnee is entitled to receive any extraordinary expenses incurred by him for the preservation of the goods pledged. However, the pawnee cannot exercise the right of lien provided in Section 173 of the Contract Act to claim extraordinary expenses. The right of lien is only restricted to the necessary expenses incurred and not the extraordinary expenses incurred. He can only bring an action to claim the extraordinary expenses.

• Pawnee’s right where pawnor makes default[22]:

This enables the pawnee to take certain measures in case of default made by the pawnor in the repayment of debt or performance of the obligation at the stipulated time. Thus, in essence it aims to protect the interest of the pawnee in case of an event of default on the part of the pawnor.

A pawnee is not entitled to sell the goods before the time of loan becomes due. This shall also be the case where the time has not been stipulated in the agreement and the debtor in such cases is not in default until notice has been given by the creditor asking the debtor to repay the loan by a certain time and that time has passed.

There are three rights available to the pawnee in case of default committed by the pawnor[23], which are:

• He may bring a suit upon the debt; and

• He may retain the pawn as a collateral security; or

• He may sell it giving the pawnor reasonable notice of sale.

                   The rights have been discussed in detail as follows:

• Right to sue:

The pawnee has been conferred with the right to institute a suit claiming the repayment of debt in the event of default by the pawnor and to retain the pledged goods as collateral security. An express authority given by the pawnor to the pawnee to sell the goods does not take away his right to institute proceedings against the pawnor.

• Right of sale:

The pawnee has also been given the right to sell the goods pledged for the repayment of the debt or the performance of the promise in case of default committed by the pawnor. The power of sale is conferred for the benefit of the pawnee, and can be exercised at his discretion.

A pawnor cannot force the pawnee to exercise the right of sale as a means for discharging the debt or satisfying the decree. However, if the pawnee agrees to sell a part of the pledged goods, he cannot then raise a plea of the right of lien, and he is bound to sell the property within a reasonable time.

In Vimal Chandra Grover v. Bank of India[24], the pawnor asked the pawnee to sell the shares at the prevailing market rate then. However, a delay by the bank to effect such sale led to a loss due to fall in the share price. Observing it to be the bank’s fault, the Apex Court upheld the claim of the pawnor.

• Right to retain accretions:

Unless otherwise so agreed, the pawnee has the right to claim any direct accretion to the pledged property as part of a security. However, no consequential or indirect accretions shall belong to the pawnee and the rights thereof shall belong solely to the pawnor.

• Special property in the pledged goods:

A special property or interest exists in the goods pawned so that the pawnee can compel payment of the debt, or can exercise his right to sell the goods as and when it arises. It is to be noted that only a special property and no legal title to the goods pledged is vested in the pawnee. The pawnor, therefore, continues to be the member of the company in respect of the said shares[25] and retains a right to exercise all his rights in relation to such pledged shares.

In the case of Mohini Mohan Chakravartty v. MohanlalThalia[26], it was held by the Hon’ble Calcutta High Court that the shares when pledged with the pledgee, only create a special property in the shares and the pawnee of shares in a company cannot be treated as the holder of shares nor is he entitled to receive any dividend on the shares.

Since there is no absolute ownership in the goods pledged, there exists neither the right of foreclosure, nor an equitable title more than what is specifically granted to him by law.

• Limitations on the right to retain:

The right of retention is not absolute and comes with certain limitations. These limitations have been established through interpretation of the provision in various judicial precedents.

For instance, in Lallan Prasad v. Rahmat Ali[27], it has been held that a pledgee cannot maintain a suit for recovery of debt as well as retain the pledged property. He is only entitled to recover the difference between the debt and the price of the goods if it is less than the debt.

Where a suit has been filed by the pawnee for realisation of the debt, it is to be presumed that he has not sold the pledged article, and will return the same to the pawnor on the suit claim being satisfied.

Furthermore, Section 174 of the Contract Act specifically provides that in the absence of any contract to the contrary, a pawnee cannot exercise his right of redemption for any other debt or promise except that for which the goods have been pledged.

4. SALE OF PLEDGED GOODS BY THE PAWNEE[28]

• Notice of sale

A proper and reasonable notice of sale is required to be given by the pawnee to the pawnor before effecting a sale of the pledged good without the intervention of the court. This is a mandatory requirement, the non-compliance of which will invalidate the sale. The requirement cannot be waived at the time of making a contract of pledge, and supersedes any contract to the contrary.

The notice has to be clear and specific and must indicate the intention of the pawnee to dispose off the security. In case of multiple debts, it must specify the debt for which the pledged goods are being sold.

In relation to sale of pledged goods, it is pertinent to discuss the recent case of GTL Ltd. v. IFCI Ltd. &Ors.[29] (referred to as the “GTL Case”). Brief facts of the case are as follows:

A subsidiary of the plaintiff company pledged around 17.63 crores shares to the defendants, financial institution against a loan of Rs. 250 crores.The shares were placed in the escrow account as security as stipulated by the loan agreement.The subsidiary company was required to maintain a security cover of twice the loan amount through shares placed in the escrow account. However, due to its inability to do so, the defendants appropriated the said shares to themselves and realized an amount of Rs. 251 crores.A plea was, thus, raised by GTL against the measure taken by the borrower company that such appropriation of shares is contrary to the provision of the Contract Act as Section 176 makes it mandatory for the pledgee to issue a reasonable notice before selling the pledged goods.Such a move amounts to a forfeiture of share, a right available only under a mortgage and not a pledge.

The following observations have been made by the Delhi High Court in reference to the matter:

• The plea has been admitted on the ground that the Contract Act makes it mandatory to issue a notice by the pawnee to the pawnor giving him an intimation of the sale of pledged goods, which the defendants have failed to do.

• Secondly, is has held the act of the defendants to be illegal and amounting to forfeiture which is impermissible under the law concerning pledge.

• It has also been held that the status of the financial institution will remain that of a pledge only as the forfeiture of pledged shares is ‘illegal’;

• In addition, the Hon’ble Court also held as illegal the sale of certain shares of GTL in the open market and suggested civil proceedings as such sale was irreversible.

Hence, the judgement passed by the Delhi HC establishes two essentials in relation to a pledge:

• Firstly, the right of forfeiture is not available and admissible in a pledge;

• Secondly, a notice of sale has to be issued by the pawnee to the pawnor before selling the pledged goods.

• Proceeds of Sale

The second part of the Section 176 lays down the application of the proceeds realised on the sale of the pledged goods. The provision contemplates two situations:

• When the sale proceed received is less than the amount of the debt, the pawnee is further entitled to receive the deficiency in the amount of the sale proceed and the debt amount;

• On the contrary, if the sale is made for an amount greater than the amount so due, it is the duty of the pawnee to reimburse the surplus amount to the pawnor.

• Limitations on sale of pawned goods

• Simultaneous exercise of right to sue and the right to sale

The right to sue and the right to sell are not concurrent rights and the pawnee can only exercise either of them.

In Lallan Prasad v. Rahmat Ali[30], it has been held that if the debt is paid, the goods have to be delivered; and if sold, the sale proceeds can be appropriated towards the satisfaction of the debt. However, the pawnee cannot retain the goods as well as sue for the payment of debt.

Prior to the above decision passed by the Apex Court, when the same question was raised in the Calcutta HC in HaridasMundra v. National &Grindlays Bank Ltd[31] as to whether the right to sue and the right to sell can be exercised simultaneously in relation to a pledge, it was held that the word ‘or’ does not necessarily imply mutual exclusion and the pledge can exercise both the rights at the same time.

However, the decision of the Apex Court has adopted a fairer approach as it does not confer an absolute and arbitrary right on the pawnee and also protects the interests of the pawnor.

• Sale of pawned good to the pawnee himself

While exercising the right of sale of pledged goods, the pawnee is restricted from making a sale of the pledged goods to himself, though such a restriction has not been explicitly provided in the Contract Act with respect to pledge of goods in general, the following approach has been adopted through various judicial precedents.

For instance, it has been held in Shatzadi Begum Sahiba v. GirdharilalSanghi[32] by the Andhra Pradesh High Court that under a contract of pledge,

‘While the owner has the right of possession as well as the right of enjoyment and right of disposition, the pledgee has only the right of possession but not the right of enjoyment. The pledgee’s right of disposition is governed by the terms of the pledge and is limited to the recovery of the amount due to him under that pledge.’

Furthermore, in S.L. RamaswamyChetty v. M.S.A.P.L. PalaniappaChettiar, it has been held by the Madras High Court that a sale by the pledgee of the pledged goods to himself amounts to unauthorized conversion and the pledger is rightfully entitled to have his property back on full value.

The question when dealt with in relation to pledge of securities was determined by the Privy Council in NeikramDobey v. Bank of Bengal[33]. The facts of the case are that certain government securities were pledged with the defendant bank, who exercised its right to sell the pledged securities on default by the pawnor. However, instead of selling the pledged securities to a third party, the same was appropriated by the bank towards itself. Thus, a suit was filed by the plaintiff before a Single Bench of the Calcutta High Court contending that such a sale was void and unauthorised. The Single Bench upheld the contention in favour of the plaintiffs. Later, an appeal was also preferred before the Privy Council.

Based on the decision of Johnson v. Stear[34], the Privy Council made the following observations:

1. A sale by a pawnee to himself, though unauthorised, does not put an end to the pledge itself so as to relieve the pawnor from the payment of the debt as well as to entitle to him to get back the things pledged.
2. The pawnee bank was held liable for damages due to wrongful conversion made by him in his favour and was no longer allowed to treat the securities as subject of pledge.
3. But at the same time it was also held that on the bank being liable, the sale proceeds cannot be credited against the debts and the pawnor cannot both affirm and disaffirm the sale.

Presently, however, the view adopted in relation to appropriation of pledged shares is different from the abovementioned judgement.

 In MarutiUdyog Ltd. v. Pentamedia Graphics Ltd.[35], it was held that:

‘Unlike other movable goods, in normal commercial practice, when shares are pledged with blank transfer forms, the pledgee has the option of retaining the shares without registering the transfer in his name or get the shares registered in his name. Both the practices are common. Registering the shares in the name of the pledgee does not in any way constitute a sale requiring notice to be given to the pledger. Therefore, by getting the shares registered in its name, the petitioner-company cannot be deemed to have effected a sale.’

In a similar case of Liquid Holdings Pvt. Ltd. v. SEBI[36], one of the contentions on behalf of the appellants was that the pawnee banks who invoked the pledge on default of the appellants were only the beneficial owners of the shares and no legal ownership vested in them. This contention was held to be without merit on the basis that the Depositories Act dealt with only two classes of owners- ‘registered owners’ who will necessarily be a depository and ‘beneficial owner’ in whom all the rights vest. It was also held that the procedure under Regulation 58 of the Depositories Act is not in contravention of the substantial law contained in Contract Act and Sale of Goods Act as there was ‘no sale of shares involved in the case’.

Hence, it can be inferred from a plethora of cases that the appropriation of pledged shares by the pawnee does not amount to a sale and does not fall within the ambit of sale of shares by the pawnor to himself. Such an inference based on precedents can be said to fall within the exceptions to the general rule that a ‘pawnee cannot sell the pawn to himself’.

Thus, the rights conferred upon the pawnee are not absolute in nature and bring along with it reasonable restrictions with a view to protect the interest of the pawnor as well so that the pawnee cannot take undue advantage of the pawnor’s disability.

5. CONCLUSION

Pledge has now been increasingly used as a mode of creation of security and the Contract Act deals with the concept and law of pledge in great detail. Moreover, being one of the simpler methods of creation of security, such as avoidance of requirement to register the pledge document, pledge of shares is being widely resorted to by the promoters of a company and accepted by the lending banks / financial institutions. The various rules and regulations introduced by SEBI significantly contribute to ensure transparency, safeguard the interests of the investors and to lead to the development of the securities market in India.

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[1]Section 172 of The Indian Contract Act, 1872

[2]P.N. Krishna Pattar v. KannambraNayarVeettilValia, (1941)1 MLJ 178

[3]Lallan Prasad v. Rahmat Ali, AIR 1967 SC 1322

[4]http://www.moneycontrol.com/news/brokerage-recos-others/all-you-want-to-know-about-pledged-shares-icicidirect_623773.html

[5] Kanhaiyalal Jhanwar v. Pandit Shirali & Co., AIR 1953 Cal 526

[6] Ibid.

[7] Depository is an entity which holds the shares in electronic form on the request of the investors. NSDL and CSDL are the two depositories licensed to operate in India and registered under SEBI.

[8] Under Section 2(1)(a) of the Depositories Act, “beneficial owner” means a person whose name is recorded as such with a depository.

[9] Regulation 2(q): “persons acting in concert” means,—(1) persons who, with a common objective or purpose of acquisition of shares or voting rights in, or exercising control over a target company, pursuant to an agreement or understanding, formal or informal, directly or indirectly co-operate for acquisition of shares or voting rights in, or exercise of control over the target company.

[10]Regulation 2(z): “target company” means a company and includes a body corporate or corporation established under a Central legislation, State legislation or Provincial legislation for the time being in force, whose shares are listed on a stock exchange.

[11]Proviso to Regulation 29

[12]http://www.taxmann.com/taxmannflashes/whatsnew.aspx?sid=10181&stype=1

[13]Referred to as ‘Listing Agreement’

[14]Regulation 2(m): SEBI(Substantial Acquisition of Shares and Debentures) Regulations, 2011

[15]SEBI Circular No. SEBI/CFD/DIL/LA/2009/3/2 dated February 03, 2009

[16]http://www.sebi.gov.in/cms/sebi_data/attachdocs/1317272423720.pdf

[17]Section 177 of the Contract Act

[18]Section 173 of the Contract Act

[19]Pollock &Mulla, The Indian Contract Act & Specific Relief Acts, Vol.II, 14^th Ed., pg 1571

[20]AIR 1969 Del 313

[21]Section 175 of the Contract Act

[22]Section 176 of the Contract Act

[23]Pollock &Mulla, The Indian Contract Act & Specific Relief Acts, Vol.II, 14^th Ed, pg 1575.

[24](2000)5 SCC 122

[25]Balkrishna Gupta v. SwadeshiPolytex Ltd., AIR 1985 SC 520

[26]AIR 1964 Cal 470

[27]AIR 1967 SC 1322

[28]Section 176 of the Contract Act

[29]http://indiankanoon.org/doc/1555758/

[30]AIR 1967 SC 1322; See also Ellis &Co’s Trustee v. Dixon Johnson, [1925] All ER Rep 715

[31]AIR 1963 Cal 132

[32]AIR 1976 AP 273

[33](1891) 19 Cal 322

[34]As cited in NeikramDobey v. Bank of Bengal, ibid.( It was held that sale of pledged chattels by pledgee without performing required conditions amounted to wrongful conversion)

[35]2002 111 CompCas 56 CLB; see also  Dhani Ram & Sons v. Frontier Bank Ltd., AIR 1962  Punj 321

[36]http://www.sebi.gov.in/satorders/liquid.pdf