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Report No. 13

129. Section 178.-

In relation to this section the Law Ministry has posed the question whether an owner of goods who is in possession of documents of title to goods can create a valid pledge by delivery of the said documents.

The difficulty has been created by reason of the amendment of this section in 1930. Before the amendment, "a person who is in possession of any, goods or of any document of title to goods" could validly effect a pledge by pledging such documents. This was the view taken of the section by the Judicial Committee in Official Assignee of Madras v. Mercantile Bank of India, ILR 58 Mad 181 (PC). The words quoted above were omitted in 1930 and the section as it now stands seems to confer only on a mercantile agent the right to effect a pledge by mere delivery of documents of title.

It has been pointed out by Pollock and Mulla1 that this is a lacuna in the Act and it leads to the situation that what a mercantile agent could do, the owner cannot. Referring to this amended section, the Judicial Committee in the aforesaid case, also observed that the legislature when it made the amendment in 1930 did not appreciate fully the effect of the actual words of the amended section.

1. Pollock & Mulla; Op. Cit., p. 606.

It may be possible to argue that notwithstanding the amendment of the section 1930 the owner's rights to effect a pledge of the goods by mere delivery of documents of title is not taken away. We think it is necessary to remove any uncertainty that may exist on the point. We have, therefore, recommended the addition of the Explanation to section 149, to the effect that the delivery of documents of title to any goods by the owner or by a person in possession of the documents with his consent, should be treated as delivery of possession within the meaning of section 149. We have further added a sub-section in section 178, restoring the law as it stood before 1930 and also retaining the existing section.

We further recommend that the definitions of 'documents of title' and 'mercantile agent' be put in section 2 and be not limited to the purposes of section 178.

130. Sections 179-180.-

No change is necessary in sections 179 and 180.

Indian Contract Act, 1872 Back

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