Legal Question in Credit and Debt Law in India
M/S. AIV Ltd, a Mumbai based company(Importer) had an agreement with the Russian Company(Exporter) for import of equipment for producing utensils in March 2016. The exporter company had taken loan from a Russian Bank in which it undertook a Pledge Agreement that in case of failure in payment of loan, the pledged goods for export to AIV Ltd can be sold by the bank.
After 3 months, the imported goods reaches to India and the goods are sent to the godowns of AIV Ltd. However, the Russian comapny defaults in payment of loan, due to which the Russian bank, on the basis of Pledge Agreement attaches the goods lying in India for recovery of loan.
The question is that whether the Foreign Bank can attach the goods of Indian Importer on the mere basis of Pledge Agreement without filing any suit in Indian Courts? Are the rights of the Indian Importer protected under Indian law regarding the goods lying in the AIV Ltd's godown?
2 Answers from Attorneys
24.06.2016
Dear Sir / Madam,
The title in the goods already passes to the importer once the seller receives payment thereon. So the foreign bank cannot attach the goods since it no longer belongs to the seller.
Regards,
1) As per the Pledge Agreement in case of failure in payment of loan, the pledged goods for export to AIV Ltd can be sold by the bank. AIV Ltd is also a party to the agreement.
2) No need to file to civil suit. The lien itself is sufficient.
3) Where in a contract, time for the payment of the debt is stipulated, or performance of the promise, for which the pledge is made, and the pledgor makes default in payment of the debt or performance of the promise at the stipulated time, he may redeem the goods pledged at any subsequent time before the actual sale of them; but he must, in that case, pay, in addition, any expenses which have arisen from his default
4) Indian Contract Act, 1872 (�Contract Act�)
Upon default by the debtor of secured debt secured by way of pledge or performance of promise, at the stipulated time, in respect of which the goods were pledged, the pledgee has the option to (i) bring a suit against the pledgor upon the debt or promise, and retain the goods pledged as a collateral security; or (ii) sell the goods pledged, on giving the pledgor reasonable notice of the sale.
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