Case: Niranjan Vs. State of Maharashtra

parties.14. Thus, the exercise of understanding the purview of term "Hypothecation", however, would finally be governed by stipulations of the promise relating to the hypothecation as agreed to between the parties.15. The property hypothecated can be of two categories, namely,1st category.(i) Movables which can be purchased, stored, used, consumed, treated, converted, stocked, sold and replenished, by virtue of express or implied condition of hypothecation.2nd category.(ii) Other movables, which may be fixed or not fixed to the earth and can be used as an aid in manufacturing, or other processes, have to be maintained, repaired, upgraded, replaced etc., but are not to be freely alienated, due to the character of the goods being such that they are not brought as tradable goods or salable commodity. These movables are ingredients in the activity, and are not brought in the premises as primarily tradable or salable goods and have to remain and continue as a security, such as, plant and machinery or movables of said class and character, by express or implied conditions as regards hypothecation.16. Therefore, on facts of present case, we have to see as to what are the stipulations attached to the hypothecation.17. It is seen from stipulation Nos. 13 and 14 that the company is obliged to keep the plant and machinery to be kpet perfect working order and condition.18. As regards right of removal etc. of machinery/goods, clause 15 of the agreement, provides as follows:"15. The Borrowers shall not remove or cause to be removed or dismantle any of the hypothecated machinery/goods now in use in the Borrowers premises without the consent in writing of the Bank except in case where such removal or dismantling shall in the opinion of the Borrowers be rendered necessary by reason of the same being worn out, injured, damaged or broken and shall also whenever necessary renew or replace all such parts of the hypothecated machinery with others of a like nature and value as now used or henceforth to be used for the purpose of or in connection with the business of the Borrowers when and as the same shall be worn out, injured, damaged or broken and intimate the same to the Bank and give inspection of the hypothecated machinery. "19. The stipulation as to freedom to alienate which is always attached to tradable goods, consumables and stores, is seen to be absent today as regards the plant and machinery-the movables under hypothecation.As is essential and indelible corollary, the borrower company has an inescapable obligation to preserve and conserve within the factory premises entire plant and machinery without any exception.20. The proposition relied on by the learned Advocate for the petitioner, based on reported judgments mentioned above, refer to the tradable stocks, consumables, stores, replenishment etc. Even livestock could fall in this category, as held in respect of buffaloes in 1986(3) Bom.C.R. 207 (supra).21. Admittedly, goods hypothecated, but disposed, for which breach of trust is alleged are machinery, to which the stipulation of free alienability and free physical movement is attached.22. The submissions advanced on behalf of the petitioner are based on ingenious reading of the hypothecation agreement, and moulding the interpretation to suit his own cause. Cases are always to be decided not by closing eyes, but with open eyes on the facts of given case.23. The stipulation on free alienability, which is an essential ingredient of stock in trade, does not, by any connotation, apply to plant and machinery of the borrower company in present set of facts.24. The proposition that the hypothecated properties continue to be under ownership of the borrower, is as clear as day light. However, due to stipulation as to restriction on alienability, the proposition that hypothecated goods being property of borrower, are absolutely alienable, is not an absolute rule of law or of practice in trade, commerce and Banking.25. Hypothecated properties can always be classified in two categories, namely, alienable and non-alienable, and alleged absoluteness of right always carries a clog on inalienability, and right of liquidation by redemption available with the lender, operates as a strong and rigid clog on alienability.26. On the sole ground that stipulation of free alienability was not attached to machinery, the borrower company was under a positive obligation to the contrary i.e. to preserve, conserve and to maintain those in usable and worthy condition.27. Hypothecation of plant and machinery is sui generis in nature and is distinct from generic hypothecation of freely tradable-salable and deliverable goods. The goods covered by generic hypothecation are freely movable, analogous to currency. Goods with restriction on saleability are inambulate due to the promise to that effect. Promise and Trust is the spinal cord of life, including trade and commerce.28. What else would be the breach of Trust, if promise to preserve and conserve the property in ones possession for the benefit and security of other, is betrayed. Had the Bank a grievance that stock-in-trade, or other tradable goods and consumables etc. were sold, such grievance could have been rebuffed as a cantankerous plea. Goods, which did not carry a qualification of saleability, attract the obligation of trust, and breach of such obligation would, prima facie, become a breach of Trust.29. Therefore none amongst the cases relied upon by the petitioner would apply to the facts of the present case.30. The result is that, the entire foundation of the petition is fictional and in the nature of hide and seek, and therefore, petition does not deserve any further indulgence31. The observations made hereinbefore, were necessary to have the reasons leading to conclusion duly spelt out and made vivid. The FIR is still at the stage of investigation. Therefore, the Investigating Officer shall be free to proceed on what emerges upon investigation, since whatever we have opined and expressed is what appears to us prima facie. The Investigating Officer in the process of investigation, and the trial court in case of a chargesheet, shall not be influenced by observations made hereinbefore and would be governed by the facts and evidence as would surface.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]23. The stipulation on free alienability, which is an essential ingredient of stock in trade, does not, by any connotation, apply to plant and machinery of the borrower company in present set of facts.24. The proposition that the hypothecated properties continue to be under ownership of the borrower, is as clear as day light. However, due to stipulation as to restriction on alienability, the proposition that hypothecated goods being property of borrower, are absolutely alienable, is not an absolute rule of law or of practice in trade, commerce and Banking.25. Hypothecated properties can always be classified in two categories, namely, alienable andand alleged absoluteness of right always carries a clog on inalienability, and right of liquidation by redemption available with the lender, operates as a strong and rigid clog on alienability.26. On the sole ground that stipulation of free alienability was not attached to machinery, the borrower company was under a positive obligation to the contrary i.e. to preserve, conserve and to maintain those in usable and worthy condition.27. Hypothecation of plant and machinery is sui generis in nature and is distinct from generic hypothecation of freelyand deliverable goods. The goods covered by generic hypothecation are freely movable, analogous to currency. Goods with restriction on saleability are inambulate due to the promise to that effect. Promise and Trust is the spinal cord of life, including trade and commerce.28. What else would be the breach of Trust, if promise to preserve and conserve the property in ones possession for the benefit and security of other, is betrayed. Had the Bank a grievance thator other tradable goods and consumables etc. were sold, such grievance could have been rebuffed as a cantankerous plea. Goods, which did not carry a qualification of saleability, attract the obligation of trust, and breach of such obligation would, prima facie, become a breach of Trust.29. Therefore none amongst the cases relied upon by the petitioner would apply to the facts of the present case.30. The result is that, the entire foundation of the petition is fictional and in the nature of hide and seek, and therefore, petition does not deserve any further indulgence31. The observations made hereinbefore, were necessary to have the reasons leading to conclusion duly spelt out and made vivid. The FIR is still at the stage of investigation. Therefore, the Investigating Officer shall be free to proceed on what emerges upon investigation, since whatever we have opined and expressed is what appears to us prima facie. The Investigating Officer in the process of investigation, and the trial court in case of a chargesheet, shall not be influenced by observations made hereinbefore and would be governed by the facts and evidence as would surface.