Full Judgment Text
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PETITIONER:
KESHARICHAND JAISUKHAL
Vs.
RESPONDENT:
THE SHILLONG BANKING CORPORATION
DATE OF JUDGMENT:
16/02/1965
BENCH:
BACHAWAT, R.S.
BENCH:
BACHAWAT, R.S.
DAYAL, RAGHUBAR
MUDHOLKAR, J.R.
RAMASWAMI, V.
CITATION:
1965 AIR 1711 1965 SCR (3) 110
ACT:
Banker and Customer--Nature of relationship between.
Indian Limitation Act (9 of 1908), Art. 85---Mutual dealings
between Banker and Customer--If article applicable.
HEADNOTE:
The appellant had a combined overdraft and deposit
account, also described as a mutual open and current
account, with the respondent bank. In December 1946, the
respondent credited two cheques to the appellant’s
account one for Rs. 8,200 and the other for Rs. 600
and sent them for collection to the Shillong branch of the
Bharati Central Bank, on which they were drawn. Instead of
obtaining cash from that Bank, the respondent accepted a
cheque on the Nath Bank. This the respondent did without
consulting the appellant and on its own responsibility. When
the respondent presented the cheque to the Nath Bank, it was
returned with a note "full cover not received". The
respondent thereupon debited the appellant with the sum of
Rs. 8,800 in the accounts without informing him. On the
instructions of the appellant, who was informed about the
dishonouring of the cheque, the respondent accepted a
demand draft from the Bharati Central Bank drawn on its
Calcutta branch for the amount. The Calcutta branch of the
Bharati Central Bank however requested the respondent to
present it to the Shillong branch. The respondent presented
the draft to the Shillong branch of the Bharati Central
Bank, but the Bank applied for moratorium and closed its
business, in January 1947 and the draft was not cashed. In
the proceedings for the reconstruction of the Bharati
Central Bank, the respondent asked to be treated as a
preferential creditor in respect of the amount of the draft,
and was so treated. The dealings between the appellant and
respondent continued till December 1950. In May 1953, the
respondent Bank was ordered to be wound up and the
liquidator presented an application to the High Court under
s. 45D of the Banking Companies Act, 1949, for settlement of
the list of debtors, claiming a decree for about Rs. 6,000
and interest, against the appellant. The appellant resisted
the claim but the High Court decreed it.
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In the appeal to the Supreme Court, it was contended
that (i) the respondent acted negligently and in breach
of its duty as collecting agent of the appellant and was
bound to give credit for the sum of Rs. 8,800 and (ii) the
claim was barred by limitation.
HELD: (per Raghubar Dayal, Bachawat and Ramaswami. JJ.)-
(i) It was not shown that the respondent acted negligently
or in breach of its duties or contrary to any instructions
given by the appellant or any lawful usages prevailing
amongst bankers and therefore was not bound to give credit
to the appellant for the sum of Rs. 8,800. [114 H]
A banker entrusted by its customer with the collection
of a cheque is bound to act according to the directions
given by a customer, and in the absence of such directions,
according to the usages prevailing at the place where the
banker conducts his business
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and applicable to the matter in hand. The banker is also
bound to use reasonable skill and diligence in presenting
and securing payment of cheques and placing the proceeds to
his customers’ accounts and in taking such other steps as
may be proper to secure the customer’s interests. The
respondent in the instant case received the two cheques for
collection in the usual way as agent of the appellant and
not with the intention of acquiring title to them. The
appellant, instead of disowning the various acts of the
respondent in respect of the collection of the cheques, had
ratified them. By preferring a claim as creditor in respect
of the draft, in the liquidation proceedings of the Bharati
Central Bank, the respondent was not accepting the draft in
satisfaction of its dues from the appellant. It was only
preserving all the rights in respect of the draft and was
acting in his best interests. [114 A, F-H; 115 A-B]
(ii) The respondent gave loans on overdrafts and the
appellant made deposits. The loans and deposits created
mutual obligations. Since the account was mutual and
continued to be so until December 1950, the claim against
the appellant was not barred by limitation having regard to
s. 45 (0) of the Banking Companies Act. [116 B, E]
Per Mudholkar, J. (Dissenting), the appellant’s name
could not be included in the list of the respondent’s
debtors. [121 A]
Where a customer hands in a cheque to his banker for
collection, the banker accepting the performance of that
duty becomes the agent of the customer for the purpose of
collection. But if a banker credits a cheque in the
customer’s account with the bank, the banker would not
necessarily be deemed to be the customer’s agent, when he
takes steps for collecting the amount payable under the
cheque. The facts, that the cheques when paid in, were
credited in the appellant s account with the respondent and
that when the cheques were returned unpaid, the respondent
made a debit entry against the appellant’s account without
informing the appellant show mat the respondent accepted the
position that it was acting in the matter not as the
appellant’s agent but as a payee. Since the appellant had a
mutual open and current account with the respondent, the
respondent would, with respect to the amounts for which
the cheques were drawn, have become upon realisation of the
cheques drawn by the appellant an actual recipient of
the money from the appellant. Therefore, though it is true
that the amount was not received by the respondent in cash
it must be deemed to nave received the sum either by reason
of the fact that it obtained from the Bharati Central Bank a
cheque for the amount on the Nath Bank, or by the acceptance
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of the demand draft. Having claimed as against the Bharati
Central Bank to be treated as a preferential creditor for
the sum of Rs. 8,800 whatever rights the respondent would be
against that Bank and not against the appellant. [118 H;
120 A, C, F-H]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 892 of 1963.
Appeal by special leave from the judgment and order
dated December 22, 1958, of the Assam High Court in Misc.
(First) No. 39 of 1955.
D.N. Mukherjee, for the appellant.
P.K. Chatterjee, for the respondent.
112
The Judgment of RAGHUBAR DAYAL, R.S. BACHAWAT and V.
RAMASWAMI, JJ. was delivered by BACHAWAT, J. MUDHOLKAR, J.
delivered a separate Opinion.
Bachawat, J. The respondcnt is a banking company now in
liquidation. The appellant had a combined overdraft and
deposit account with the Shillong branch of the respondent.
On December 9, 1946, the appellant gave the respondent for
collection two cheques for Rs. 8,200 and Rs. 600
respectively drawn on the Bharati Central Bank, Shillong. On
receipt of the cheques, the respondent credited the
appellant with the sum of Rs. 8,800 in the accounts. The
respondent then sent the cheques to the Bharati Central
Bank, Shillong for collection. Instead of paying cash, the
Bharati Central Bank sent to the respondent a cheque dated
December 9, 1946 for Rs. 8,800 drawn by the Bharati Central
Bank on the Nath Bank, Shillong in favour of the respondent.
The respondent accepted this cheque on its own
responsibility without consulting the appellant. On December
10, 1946, the respondent presented the cheque to the Nath
Bank for payment. The Nath Bank returned the cheque with the
remark "full cover not received". The respondent orally
informed the appellant of the non-payment of the cheque on
the Nath Bank, and on December II, 1946 under oral
instructions from the appellant, represented the cheque to
Nath Bank for payment. The Nath Bank again returned the
cheque with the remark "full cover not received", and the
respondent thereupon debited the appellant with the sum of
Rs. 8,800 in the accounts. On the same day, the respondent
wrote to the Bharati Central Bank demanding cash payment of
the two cheques drawn on them and dated December 9, 1946.
The respondent also contacted the appellant. Under
instructions from the appellant, the respondent accepted
from the Bharati Central Bank a demand draft for Rs. 8,800
dated December 13, 1946 drawn by its Shillong Branch on its
Calcutta Head Office towards payment of the two cheques. The
respondent presented the draft to the Bharati Central Bank,
Calcutta for payment, but instead of making payment, the
Bharati Central Bank wrote on December 16, 1946 requesting
the respondent to obtain payment from its Shillong Branch.
The respondent orally communicated this advice to the
appellant. On several dates thereafter, the respondent
presented the draft to the Bharati Central Bank for payment,
but the draft was not paid. On January 2, 1947, the Bharati
Central Bank closed its business.
On January 11, 1947, the respondent wrote to the
appellant stating that it was holding the demand draft as
also the cheque on the Nath Bank and would be glad to
receive further instructions in the matter for necessary
action. As the appeilant refused to give any instructions,
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the respondent continued to hold the securities on account
of the appellant. In respect of the draft, the respondent
duly preferred a claim in the liquidation of the Bharati
Central Bank, and was admitted as a preferential creditor
for the amount
113
of the draft. On January 28, 1947, the appellant wrote to
the respondent alleging that the respondent had accepted the
demand draft at its own risk and responsibility and was
bound to give credit to the appellant for the sum of Rs.
8,800. The dealings between the appellant and the respondent
continued, and the last entry in the combined overdraft and
deposit account is dated December 29, 1950.
On February 26, 1953, a petition was presented in the
Assam High Court for the winding up of the respondent. By
order dated May 24. 1953, the respondent was ordered to be
wound up. On June 28. 1954 the liquidator of the respondent
Bank presented an application to the Assam High Court under
s. 45(D) of the Banking Companies Act, 1949 for settlement
of the list of debtors, claiming a decree for Rs. 5,965-8-9
and interest against the appellant. The appellant resisted
the claim. The two issues, which are now material, are:---
(1) Is the suit barred by limitation, and
(4) Whether the respondent is bound to give credit to
the appellant for the sum of Rs. 8,800?
A learned single Judge of the Assam High Court answered both
the issues in the negative, and decreed the claim. An appeal
preferred to a Division Bench of the High Court was
dismissed. The appellant now appeals to this Court by
special leave.
The main contention of the appellant in the Courts below
was that the respondent had accepted the demand draft on its
own responsibility. The High Court held that the respondent
accepted the draft with the consent and sanction of the
appellant. This finding is no longer challenged. But the
appellant before us contends that the respondent having
credited the appellant’s account with the amount of the two
cheques on the Bharati Central Bank and having accepted
on its own responsibility from the Bharati Central Bank the
cheque dated December 9, 1945 on the Nath Bank ought not to
be allowed to say that it received the cheque on account of
and as agent of the appellant, and that in any event the
respondent acted negligently and in breach of its duty as
the collecting agent of the appellant and is bound to give
credit for the sum of Rs, 8,800. These contentions in the
present form were not raised in the Courts below.
Nevertheless, we allowed the appellant to raise these
contentions, but we think that there is no substance in
them.
According to the uncontradicted testimony of the
witness called on behalf of the respondent, the two cheques
on the Bharan Central Bank were entrusted by the appellant
to the respondent for collection. In paragraph 2 of its
objections, the appellant admitted that the cheques were
entrusted to the responsible for realisation. Beyond doubt,
on December 9. 1946 the respondent received the two cheques
for collection in the usual way as agent of
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the appellant and not with the intention of acquiring title
to them. On the same day, the respondent credited the
appellant’s account with the amount of the cheques before
the cheques were cleared. But on December 11, 1946, before
the appellant drew upon this amount and as soon as the
cheque on Nath Bank received in course of collection of the
two cheques was dishonored, the respondent debited the
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appellant’s account with the like amount. It does not appear
that the credit entry in the accounts was contemporaneously
communicated to the appellant. Nor does the appellant prove
any arrangement that the appellant was entitled to draw
against the amount of the cheques before they were cleared.
In the circumstances. the fact that the appellant’s account
was credited with the amount of the two cheques does not
show that the respondent ceased to be an agent for
collection of the cheques.
The respondent duly presented the cheques on the
Bharati Central Bank for payment. Instead of paying the
cheques in cash, the Bharati Central Bank sent its own
cheque on the Nath Bank. According to the uncontradicted
testimony of the witness called on behalf of the respondent,
it was not the usual practice of the banks at Shilling to
collect cash in all cases in respect of cheques entrusted
for collection. When the respondent found that the drawer
Bank instead of paying cash offered to pay by a cheque, the
respondent acting in good faith in the interests of the
appellant, accepted the cheque on its own responsibility. On
being informed of the dishonour of the cheque on Nath Bank,
the appellant adopted and ratified the respondent’s
acceptance of the cheque. and on that footing, asked the
respondent to represent the cheque. Subsequently, the
appellant instructed the respondent to accept a demand draft
drawn by the Bharati Central Bank on the head office in
lieu of its cheque on the Nath Bank, and approved of all
steps taken by the respondent in the matter of collection of
the draft. Instead of disowning the acts of the respondent
in respect of the collection of the cheques on the Bharati
Central Bank, the appellant ratified them. In the
circumstances, it is not open to the appellant now to say
that the respondent accepted the cheque on the Nath Bank or
the draft of the Bharati Central Bank on the respondent’s
own account and not as agent of the appellant.
A banker entrusted by its customer with the collection
of a cheque is bound to act according to the directions
given by the customer, and in the absence of such
directions, according to the usages prevailing at the place
where the banker conducts his business and applicable to the
matter in hand. The banker is also bound to use reasonable
skill and diligence in presenting and securing payment of
the cheque and placing the proceeds to his customer’s
accounts and in taking such other steps as may be proper, to
secure the customer’s interests. In the instant case, it is
not shown that the respondent acted negligently or in breach
of its duties or contrary to any instructions given by the
appellant or any lawful usages prevailing amongst bankers
at Shillong.
115
There is no substance in the further contention of the
appellant that by preferring a claim as creditor in respect
of the draft in the liquidation of the Bharati Central Bank,
the respondent accepted the draft in satisfaction of its
dues from the appellant. The respondent owed a duty to the
appellant to take steps in the liquidation proceedings
for the realisation of the amount of the draft. By
preferring the claim the respondent preserved all rights in
respect of the draft and acted in the best interests of the
appellant. In the circumstances, the Courts below rightly
gave appropriate directions on the respondent for giving
credit to the appellant for all sums which may be realised
by the respondent from the Official Liquidator of the
Bharati Central Bank. The Courts below rightly answered
issue No. 4 in the negative.
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The next point in issue is whether the proceedings are
governed by Art. 85 of the Indian Limitation Act, 1908,
and if so, whether the suit is barred by limitation. The
argument before us proceeded on the footing that an
application under s. 45(D) of the Banking Companies Act is
governed by the Indian Limitation Act, and we must decide
this case on that footing. But we express no opinion one way
or the other on the question of the applicability of the
Indian Limitation Act to an application under s. 45(D). Now,
Art. 85 of the Indian Limitation Act, 1908 provides that the
period of limitation for the balance due on a mutual, open
and current account, where there have been reciprocal
demands between the parties is three years from the close of
the year in which the last item admitted or proved is
entered in the account; such year to be computed as in the
account. It is not disputed that the account between the
parties was at all times an open and current one. The
dispute is whether it was mutual during the relevant period.
Now in the leading case of Hirada Basappa v. Gadigi
Muddappa(1). Holloway, Acting C. J. observed:
"To be mutual there must be transactions
on each side creating independent obligations
on the other, and not merely transactions
which create obligations on the one side,
those on the other being merely complete or
partial discharges of such obligations."
These observations were followed and applied in Tea
Financing Syndicate Ltd. v. Chandrakamal Bezbaruah(2) and
Monotosh K. Chatterjee v. Central Calcutta Bank Ltd.(3),
and the first mentioned Calcutta case was approved by this
Court in Hindustan Forest Company v. Lal Chand(4).
Holloway, Acting C. J. laid down the test of mutuality on
a construction of s. 8 of Act XIV of 1859, though that
section did’ not contain the words "where there
(1) [1871] Vl Madras High Court Reports. 142, 144.
(2) [1931] L.L.R,. 55Cal. 642
(3) [1953] 91 C.L.J. 16.
(4) [1966] 1 S.C.R. 563.
116
have been reciprocal demands, between the parties". The
addition of those words in the corresponding Art. 87 of
Act IX of 1871, Art. 85 of Act XV of 1877 and Art. 85 of
the Act of 1908 adopts and emphasises the test of
mutuality laid down in the Madras case.
In the instant case, there were mutual dealings
between the parties. The respondent Bank gave loans on
overdrafts, and the appellant made deposits. The loans
by the respondent created obligations on the appellant
to repay them. The respondent was under independent
obligations to repay the amount of the cash deposits and
to account for the cheques, hundis and drafts deposited for
collection. There were thus transactions on each side
creating independent obligations on the other, and both
sets of transactions were entered in the same account.
The deposits made by the appellant were not merely complete
or partial discharges of its obligations to the
respondent. There were shifting balances; on many
occasions the balance was in favour of the appellant and on
many other occasions. the balance was in favour of the
respondent. There were reciprocal demands between the
parties, and the account was mutual. This mutual account was
fairly active up to June 25, 1947. It is not shown that
the account ceased to be mutual thereafter. The
parties contemplated the possibility of mutual
dealings in future. The mutual account continued until
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December 29, 1950 when the last entry in the account was
made. It is conceded on behalf of the appellant that if
the account was mutual and continued to be so until
December 29, 1950, the suit is not barred by limitation,
having regard to s. 45 (O) of the Banking Companies Act. The
Courts below, therefore, rightly answered issue No. 1 in
the negative.
The claim by the respondent on account of interest was
contested in the Courts below, but that claim is no longer
contested before us.
The High Court discussed at length the legal characteristics
of a demand draft as also questions relating to the
interpretation of s. 45(O) of the Banking Companies Act.
In view of the contentions raised before us, those
questions do not arise, and we do not propose to express any
opinion thereon.
In the result, the appeal is dismissed with costs.
Mudholkar, J. I regret my inability to agree with the
judgment of my learned brother Bachawat. This appeal
arises out of a petition made under s. 45-D of the Banking
Companies Act, 1949 (10 of 1949) by the Liquidator of
the respondent, the Shillong Banking Corporation for
inclusion of the name of the appellant in the list of
debtors of the Bank. The liquidator filed a list of 20
debtors of the Company with necessary particulars in
Annexure A, to the application. One of the debtors
mentioned therein is the appellant and the amount of
debt due from him to the Bank is stated therein to be
Rs. 5,965-5-9. Annexure A appears to have been prepared in
accordance with the rules framed under the Banking Companies
Act. The fourth item in the Annexure is "Description of
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papers, writings and documents, if any, relating to each
debt". In respect of this item the following particulars
have been set out:
"A cheque for Rs. 8,800 on Bharati Central
Bank Ltd., Shillong was realised by the Bank
’on behalf of the party’ by a Demand Draft on
Calcutta Branch of the Bharati Central Bank
Limited, but the said Demand-Draft could not
be realised due to the suspension of business
by Bharati Central Bank Ltd. The Bank’s claim
to be treated as preferential Creditor has
been admitted." A notice of this claim having
been served on the appellant he preferred an
objection before the Court. There, the
appellant had contended that the claim of the
Bank is barred by time. Paras 2, 3, and 5 of
the objection are material and it would be
convenient to set them out in full. They run
as follows:
"2. That it is a fact that this
opposite-party did give a cheque for Rs. 8,800
to the Bank on the Bharati Central Bank Ltd.,
Shillong for realisation in 1947 and in
normal course it realised the amount in cash
but either for its own convenience or for
remitting its own money to Calcutta it
accepted a draft from the Bharati Central Bank
Limited on its branch at Calcutta without any
instruction or intimation to this opposite
party and also this opposite-party withdrew
their amount by a cheque after this and if
in the meantime the said bank stopped its
business this opposite-party cannot be held
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liable for the same.
(3) That had the bank not received any
cash payment in case of the opposite-party’s
cheque as it should have received it should
have informed them in time.
(5) That it is not a fact that the
demand-draft was accepted by the bank instead
of cash payment with any knowledge of this
opposite-party and as such the claim of the
Bank is false and frivolous." Deka J., who
heard the application framed four issues one
of which related to limitation and the fourth
was as follows:
"Issue No. 4, whether the plaintiff bank
is bound to give credit to the defendant for a
sum of Rs. 8,800 covered by a cheque or
cheques on the Bharati Central Bank Limited,
Shillong Branch?"
The only oral evidence tendered was that of Narendra Nath
Dutta, Assistant of the respondent Bank. Upon a
consideration of the evidence of Dutta and the documents
placed on’ record Deka J. found against the appellant on
these issues and passed a decree in favour of the Bank for
Rs. 5,965-5-9 in addition to Rs. 2,000 by way of
interest. He further allowed Rs. 300 as costs and 6 per cent
p.a. interest on the decretal amount till realisation. An
appeal was preferred by the appellant under the Letters
Patent
118
and that having been dismissed he has come up before this
court by special leave. It is the case of the respondent
Bank that the appellant had a mutual open and current
account with the Bank. It is upon that basis that they have
met the appellant’s contention that the suit was barred by
time. On December 9, 1946 the respondent credited two
cheques to the appellant’s account one for Rs. 8,200 and
another for Rs. 600 and sent them for collection to the
Bharati Central Bank Ltd., Shillong Branch upon which they
were drawn. Instead of obtaining cash from the Bharati
Central Bank the respondent obtained and accepted from that
Bank a cheque on the Nath Bank Limited. This the respondent
did, as admitted by Dutta, without consulting the
appellant. Dutta has further admitted that the respondent
Bank obtained the cheque on their own responsibility. They
then presented the cheque to the Nath Bank on December 10,
1946. The Nath Bank returned the cheque with a note "full
cover not received". According to the witness the Bank
referred the matter to the appellant and with his specific
instruction the cheque was presented the next day to the
Nath Bank, when also it was returned. Thereafter, the
witness proceeds, the respondent connected the appellant
for instructions. On December 13, 1946 they accepted a
demand draft from the Bharati Central Bank for an identical
amount which they sent to their Calcutta Branch for
collection. When the demand draft was presented to the
Calcutta Branch of the Bharati Central Bank they
requested by letter dated December 16, 1946 to present it to
the Shillong Branch. Then, according to Dutta. on the advice
of the appellant they presented the draft to the Shillong
Branch of the Bharati Central Bank. In the meanwhile the
Bharati Central Bank had applied for moratorium and this
demand draft was not cashed. It would appear that in the
proceedings for reconstructing the Bharati Central Bank the
respondent asked to be treated as preferential creditors in
respect of the amount for which the draft had been made out
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and have been so treated.
It is contended on behalf of the appellant that the
respondent having accepted the demand draft on their own
responsibility and having sought to be treated as
preferential creditors of the Bharat, Central Bank and
having in fact been so treated cannot now turn round and say
that the appellant’s cheques were not honoured and that,
therefore, they are entitled to claim the sum of Rs.5,965-5-
9 and interest from him. The question to which I would
address myself is whether the respondent has to be regarded
as the appellant’s agent only for the collection of these
two cheques or whether they received these two cheques for
being credited in the mutual and open current account
between themselves and the appellant. It is no doubt that
where a customer hands in a cheque to his banker for
collection the banker accepting the performance of that duty
becomes the agent of the customer for the purpose of
collection. But if a banker credits a cheque in the
customer’s account with the bank would the banker be
necessarily deemed to be his agent when he takes the step of
collecting the amount
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payable under the cheque. If the customer makes an
endorsement on the cheque to the effect that it is handed in
for collection no difficulty would arise. But if there were
no such endorsement what would be the position? The
accepted position in banking law is that when a banker
receives money from a customer he does not hold it in a
fiduciary capacity. (see Practice and Law of Banking by H.P.
Sheldon, 8th edn. p. 201). As the author points out : "To
pay that money is ’deposited’ with a banker is likely to
cause misapprehension. What really happens is that the money
is not deposited with, but lent to the banker, and all that
the banker engages to do is to discharge the debt by
paying over an equal amount when called upon." Sheldon has
quoted the following observations of Lord Cottenham in Foley
v. Hill (1948).
"Money, when paid into a bank, ceases
altogether to be the money of the principal;
it is then the money of the banker, who, is
bound to return an equivalent by paying a
similar sum to that deposited with him when he
is asked for it. The money paid into the
banker’s is money known by the principal to be
placed there for the purpose of being under
the control of the banker; it is then the
banker’s money; he is known to deal with it as
his own; he makes what profit he can, which
profit he retains to himself, by paving back
only the principal, according to the custom of
bankers in some places, or the principal and a
small rate of interest, according to the
custom of bankers in other places .........
That being established to be the relative
situations of banker and customer, the banker
is not an agent or factor, but he is a
debtor."
What would be the position if instead of
paying in cash the customer hands in cheques
or bills? With regard to this Sheldon has said
as follows:
"In Joachimson v. Swiss Bank Corporation,
1921 Lord Justice Atkin gave an admirable
summary of the position. He stated that the
banker undertakes to receive money and collect
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bills for his customer’s account, and that
money so received is not held in trust for the
customer but borrowed from him with a promise
to repay it or any part of it .........
against the customer’s written order addressed
to the bank at such branch." (pp. 201-202).
In the appeal before us the two cheques for Rs. 600 and Rs.
8,200 have not been placed on record and so we do not know
in whose favour they were drawn and if they were drawn by
the appellant in fayour of "self" what endorsement he had
made on the back of the cheques. The cheques could have been
drawn by the appellant either in his own favour or in favour
of the bank. Whichever be the position the fact remains that
these two cheques were credited by him in his account with
the respondent. That is not all. Since the appellant had a
mutual open and current account
120
with the respondent it may well be that money was owing by
him to the respondent on that date and, therefore, he drew
these two cheques on the Bharati Central Bank and credited
them in his account with the respondent. Or it may be that
the appellant merely credited’ the money in his own
account even though nothing may have been owing from him to
the respondent on that date. Whether it was one or the other
the respondents would, with respect to the amounts for
which the cheques were drawn, have become actual
recipients of the money from the appellant, upon
realisation of the cheques drawn by the appellant. Indeed.
as the cheques were returned unpaid by the drawee bank the
respondent have made a debit entry on December 11, 1960 of
Rs. 8,800 against the appellant in his account with them.
This would show that the respondent accepted the position
that they were acting in this matter not as the appellant’s
agents but as payee. This explains why, as admitted by
Dutta. the respondent accepted from the Bharati Central Bank
cheques on Nath Bank on their own responsibility instead of
insisting upon cash. Indeed. as pointed out at p. 300 in
Chalmers on Bills of Exchange (8th ed) "consequently an
authority to an agent to receive a payment due to his
principal is not in itself an authority to receive it by
bill or cheque". Therefore, the respondents would not have
acted in the way they did had they regarded themselves as
merely agents of the appellant for collecting his cheques.
Dutta has, in his evidence, stated that no formal note in
writing was sent to the appellant by the respondents about
the dishonouring of the cheque by the Nath Bank. Nor did
they inform him of having debited his account with Rs.
8,800. No doubt, according to him. after a demand draft was
issued to them by the Bharati Central Bank the respondents
informed the appellant. But after that draft was
dishonoured on presentation no information whatsoever was
given to the appellant. This would further strengthen the
conclusion that the respondents were acting for themselves
at every stage after the cheques for Rs. 600 and Rs. 8.200
were credited in his account with them by the appellant.
Therefore. though it is true that the sum of Rs. 8,800 was
not received by the respondent in cash they must be deemed
to have received the sum either by reason of the fact that
they obtained from the Bharati Central Bank a cheque for
Rs. 8,800 on the Nath Bank or by the acceptance by them of a
demand draft drawn by the Bharati Central Bank, Shilling.
on their Calcutta Branch. It is difficult to see how they
can hold the appellant, whose account with the Bharati
Central Bank has been debited by that Bank to the extent of
Rs. 8,800, as being still liable upon those cheques.
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Whatever rights the respondents have. are against the
Bharati Central Bank and not the appellant. Indeed, having
claimed, as against the Bharati Central Bank to be treated
as preferential creditors of that Bank to the rune of Rs.
8,800, particularly on their own showing what was owing to
them from the appellant was something less than Rs. 6,000
they cannot now be heard to say that they merely acted as
the appellant’s agents.
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For these reasons, disagreeing with the High Court, I
hold that the appellant’s name cannot be included in the
list of the respondent’s debtors. I would, therefore, allow
the appeal and dismiss the application of the Liquidator
under s. 45-D of the Banking Companies Act in so far as it
relates to the appellant, with costs throughout and would
direct further that the respondents pay the appellants costs
both here and in the High Court.
ORDER BY COURT
In accordance with the opinion of the majority, this
appeal is dismissed with costs.
122