PUTRAJAYA: The Court of Appeal has ruled that licensed pawnshops are prohibited from selling unredeemed pledges, including gold or other valuables, as such sales are not part of the “pawnbroking business”.
Justice Supang Lian said the customary meaning of that term refers to the act of advancing funds for commercial purposes by granting a loan in exchange for the provision of security items.
If a loan is not repaid within a certain period, the pawnbroker may dispose of the item, she said.
However, Supang said in a 34-page written judgment issued last week, “it does not necessarily mean that the sale of unredeemed pledges is to be construed as the integral aspect of the pawnbroking business”.
The appellant, Kedai Pajak Shin Ngien Sdn Bhd, was charged in a magistrates’ court under Section 16(3) of the Pawnbrokers Act 1972 with selling unredeemed pledges of gold at its business premises in Sungai Way, Petaling Jaya.
During a raid on March 1, 2017, enforcement officers from the housing and local government ministry found gold items, which had been weighed and bearing price tags, on display at the pawnshop.
Following a trial, the company was fined RM9,000 under Section 41A of the Act. Section 41A allows for a maximum RM10,000 fine, or up to six months’ jail, or both, upon conviction.
On appeal, the High Court reduced the fine to RM5,000.
On Oct 3, 2020, the company obtained leave to appeal to the Court of Appeal from its conviction and sentence.
A three-member appeals court bench, which included Justices Kamaludin Said and Ahmad Nasfy Yasin, dismissed the appeal.
In the appeal, the company questioned whether the activity of selling unredeemed pledges formed part of the pawnbroking business under Section 16(3) of the Act.
Supang said a pawnbroking business transaction “concludes once a pawned article becomes the possession of a pawnbroker upon the customer’s failure to redeem the article”.
Under Section 23, a pawned item valued at RM200 or less becomes the property of a pawnbroker automatically if it is not redeemed within six months. However, articles valued above RM200 must go through an auction process.
Supang said a pawnbroking transaction comes to an end once the pawnbroker gains possession of unredeemed pledges.
“The selling of unredeemed pledges, in our view, constitutes a distinct and separate business, namely selling second-hand goods,” she said.
Under the Act, licensed pawnshops allow their customers to pawn valuables like gold for a maximum period of six months.
The maximum loan one can get from pawnshops is RM10,000 with a maximum flat interest of 2% per month or 24% per year.
If a borrower is unable to pay the loan amount on its due date together with all fees and accrued interest, the pawnshop must put the valuable or valuables up for auction to recover money previously loaned to the customer.
Lawyers J Amardass and Terrence Chan appeared for the appellant while deputy public prosecutor Dhiya Shazwani Izyan Akhir represented the prosecution.