Full Judgment Text
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PETITIONER:
AGENCIA COMMERCIAL INTERNATIONALLTD. & OTHERS
Vs.
RESPONDENT:
CUSTODIAN OF THE BRANCHES OF BANCONACIONAL ULTRAMARINO
DATE OF JUDGMENT30/07/1982
BENCH:
PATHAK, R.S.
BENCH:
PATHAK, R.S.
REDDY, O. CHINNAPPA (J)
ISLAM, BAHARUL (J)
CITATION:
1982 AIR 1268 1983 SCR (1) 16
1982 SCC (2) 482 1982 SCALE (1)575
ACT:
Banking law and practice - Liberation of Goa and other
areas from Portuguese rule and integration with India - Head
office of the bank removed all documents to Lisbon on the
eve of liberation - President promulgated regulations
constituting an independent bank - Custodian empowered to
realise all debts - Agreements entered into and loans
granted by head office in Lisbon - Custodian - If could
recover debts - Position in banking law and practice
discussed - Promissory notes and bills of exchange if
necessary to be produced at the time of recovery of debts.
HEADNOTE:
The Banco Nacional Ultramarino (B.N.U.) with its head
office at Lisbon in Portugal carried on banking business in
Goa, Daman and Diu. On the eve of the liberation of these
territories from Portuguese rule and their integration with
India the B.N.U. removed a substantial portion of valuable
assets held there to its head office at Lisbon.
To relieve the distress closure to the people by reason
of the closure of the B.N.U. the President promulgated
regulations by which the branches at these places were
integrated into a fully constituted bank independent of the
B.N.U. and a Custodian was appointed to take charge of the
bank. The Custodian was empowered to realise all debts due
to the branches including any debts from the head office of
the B.N.U.
The Custodian filed a suit against the appellants
stating that the loan accounts of the appellants showed a
debit balance in favour of the branch. It was also stated
that the promissory notes were not in his possession but
that they could be presumed to have been removed to
Portugal. While suits similar in nature filed in some courts
had been dismissed, suits filed in other courts were decreed
against the original debtor as well as tho guarantor and
surety.
The Additional Judicial Commissioner on appeal decreed
the suits against tho appellants and granted the reliefs
claimed by the Custodian, holding that the
17
Custodian was entitled to maintain the suits and sue for the
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realisation of debts arising out of the transactions entered
into through the branches. He further hold that the
execution of the negotiable instruments having been admitted
in the written statement and these documents having been
removed by the B.N.U. to Lisbon there was nothing to
preclude the Custodian from claiming relief without
producing those negotiable instruments.
In appeal to this Court, it was contended on behalf of
the appellants that since the loans had been granted by the
head office of the B.N.U. and not its branches, the
Custodian was not entitled to sue for recovery of loans
granted by the head office.
Dismissing the appeals,
^
HELD: The transactions under consideration fell within
the scope of the regulations and the Custodian was fully
entitled to sue for the recovery of the debts covered by the
loan agreements. [28 C]
It is settled law that a body corporate and its
branches are not distinct and separate entities from each
other, that the branches constitute mere components through
which the corporate entity expresses itself and that all
transactions entered into ostensibly with the branches are
in legal reality transactions with the corporate body and
that it is with the corporate body that a person must deal
directly. In the case of a bank which operates through its
branches, however, the branches are regarded for many
purposes as separate and distinct entities from the head
office and from each other. If the bank wrongly refuses to
pay when a demand is made at the proper place and time, then
it can be sued at its head office as well as at its branch
office the reason being that the action is then not on the
debt, but on the breach of the contract to pay at the place
specified in the agreement. The regulations had been made
apparently in the light of this banking law and practice.
[24 B-C; 25 B]
The Delhi Cloth and General Mills Co. Ltd. v. Harnam
Singh and others, [1955] 2 SCR 402 at 422, referred to.
The regulations were intended to achieve what emergency
legislation was designed to secure. In all such emergency
laws there is a departure from the general rule that the
branches and agencies of a business are no more than
components through which the entire enterprise is carried on
and that they cannot be considered as distinct and separate
from the head office. [26 A-B]
It is abundantly plain from the object and purpose of
the regulations and the provisions which seek to realise
them that all transactions effected by or through the
branches of the B.N.U. were intended to be brought within
the compass of the Regulations. [26 D]
New York Life Insurance Co. v. Public Trustee, [1924] 2
Ch. 101; In re: W. Hagelberg Aktien - Gesellschaft, 1916
Chancery Division 503 and Re The Banca Commercial Italiana,
[1943] 1 All England Law Reports 480, referred to.
18
In the instant case although the loan agreements might
have been entered into with the B.N.U, the branches were
authorised by the head office to give effect to those
agreements and accordingly the branch concerned embarked
upon the execution of the agreements and the working out of
the transactions. The entire business involved in those
transactions and dealings was effected by the branch
concerned and it was only when occasion strictly so required
that the branch made reference to the head office for
authority to amend or enlarge the scope of the operation.
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The transaction and the business nonetheless remained
throughout those of the branch and this is fully affirmed by
the existence and operation of the loan accounts in the
books of the branch by the pledge or hypothecation of goods
in almost all cases in favour of the branch and by the
overall nature and character of the transaction as an
ordinary banking transaction falling within the normal
business of a branch. [26 E-F]
The discharge of the debts under the Regulation
amounted to their complete discharge and it was not open to
anyone else to sue for their recovery. No indemnity was
required to be furnished by the Custodian on the ground that
the relevant documents could not be produced. Having regard
to the circumstances of this case it was within the
competence of The Court to base its decree on the books of
account of the branches in Goa and on other evidence. The
Portuguese law stands superseded by reason of the express
provisions of regulation 8 (1). [31 A]
The Delhi Cloth and General Mills Co. Ltd. v. Harnam
Singh and others, [1955] 2 SCR 402, 425, distinguished.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2475
to 2477 and 2579 of 1969
From the judgment and order dated the 15th April, 1969
of the Judicial Commissioner’s Court at Goa, Daman and Diu
in Civil Appeal Nos. 3217, 3334/64 and 3466 of 1965 and 3467
of 1965.
V.M. Tarkunde, Bernardo Doss Reis and Naunit Lal for
the Appellants in CA. 2476/69.
S.D. Tamba, Girish Chandra and Miss A. Subhashini, for
the Respondents.
The Judgment of the Court was delivered by
PATHAK, J. These appeals by certificate granted by the
Additional Judicial Commissioner of Goa, Daman and Diu arise
out of suits for the recovery of loans made to the
appellants at various branches of the Banco Nacional
Ultramarino in Goa during Portuguese rule,
19
The territories, of Goa, Daman and Diu constituted the
Estado de India of the sovereign State of Portugal. The
Banco Nacional Ultramarino (the National overseas Bank) with
its Head office at Lisbon in Portugal, carried on banking
business in Goa at different Branches, some of them being
situate at Vasco Da Gama, Margao and Panjim. It was also a
currency issuing Bank and discharged the functions of a
Government Treasury. It issued Portuguese currency notes in
Goa, and in its banking capacity it received deposits and
granted loans.
On December 20, 1961 the territories of Goa, Daman and
Diu were liberated from Portuguese rule and integrated with
India. On the eve of the transfer of power the Banco
Nacional Ultramarino closed its Branches at Goa and removed
a substantial portion of the valuable assets held there to
its Head office at Lisbon and to other places overseas.
To provide for the administration of the liberated
territories the President of India promulgated the Goa,
Daman and Diu (Administration) ordinance, 1962, which on
March 27, 1962 was replaced by Goa, Daman and Diu
(Administration) Act, 1962 enacted by Parliament. By virtue
of sub-s. (1) of s. 5 of the Act all laws in force
immediately before "the appointed day" (December 20, 1961)
in Goa, Daman and Diu were to continue to be in force
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therein until amended or repealed by a competent legislature
or other competent authority.
The clo sure of the Branches of the Banco Nacional
Ultramarino at Goa gave rise to considerable confusion. It
was necessary to take measures for the exchange of over nine
crore rupees worth of Portuguese currency notes for Indian
currency, and likewise to provide for the repayment of
moneys and the return of valuables deposited with the
Branches. As the Banco Nacional Ultramarino had closed those
Branches no one could operate on them. To relieve the common
confusion and distress, the President of India promulgated,
under Article 240 of the Constitution, the Goa, Daman and
Diu (Banks Reconstruction) Regulation, 1962 (hereinafter
referred to as "the Regulation"). Section 3 declared that in
view of the closure of the branches and the transfer of a
substantial portion of their assets out of India on or about
the "appointed day" and the difficulties experienced by
depositors, the
20
Branches would, as from that day, be reconstructed in the
interests of the general public in accordance with the
provisions of the Regulation. An examination of the
provisions which follow shows that the Branches were
integrated into a fully constituted Bank independent of the
Banco Nacional Ultramarino, the purpose being to dispose of
the business pending on December 20, 1961, with no fresh
business being undertaken, and its functions being confined
to the discharge of existing liabilities and the recovery of
existing debts and other assets with a view to the ultimate
winding up of the Bank. A Custodian was appointed by the
Central Government to take charge of the Bank. The
properties and assets as well as the obligations and
liabilities of the Bank stood transferred to and vested in
him, and he was empowered to realise any debts or other
amounts due to the said Branches including any debts or
other amounts due from the Head office of the Banco Nacional
Ultramarino.
On March 30, 1963, the Custodian filed a suit in the
Court of the Civil Judge at Ilhas, Panaji against the
Agencia Commercial International, its managing partner, Jose
Antonio Gouveia and his wife Geraldina Pereira Gouveia,
alleging that the branch of the Banco Nacional Ultramarino
at Panaji had, pursuant to a request of the Agencia, opened
a current account in its favour upto the limit of Escudos
300.000$00 for three months renewable at 4% interest, 3%
fine, 1-1/4% quarterly commission, penal interest at 6% and
court expenses, the loan account being secured by a
promissory note with its maturity date in blank, executed by
the Agencia and guaranteed by the managing partner and his
wife. The limit was raised subsequently, and the excess was
also guaranteed by a promissory note with its maturity date
in blank and signed by the defendants. The plaintiff stated
that the loan account showed a debit balance of Escudos
428.612$37, equivalent to Rs. 71,435.40, in favour of the
Panjim branch of the Banco Nacional Ultramarino, the account
being closed on December 20, 1961 and the balance thereof
becoming payable. It was stated further that the promissory
notes were not in the possession of the plaintiff and could
be presumed to have been removed to Portugal. The plaintiff
prayed for a joint and several decree against the defendants
for Rs. 71,435.40 with accrued interest, Penal interest,
commission, fine and court expenses.
21
The suit was resisted by the defendants, principally on
the ground that the Banco Nacional Ultramarino was a public
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limited company with its head office at Lisbon, that the
Branch at Panjim did not possess a separate juridical
personality from the Company and could not be said to
possess assets or liabilities of its own, that transactions
by the Panjim Branch were made under the direct
superintendance of the Head office and credit was granted
directly by B the Head office, and that the credit in
question was incorporated in promissory notes lying with the
Banco Nacional Ultramarino which had already informed its
debtors that it would take action on the bills directly or
by transferring them to a third party. It was also pleaded
that the debtors could be compelled to pay the credit
incorporated in a promissory note only when the creditor
returned the promissory note for payment, so that future
duplication of payment would be avoided. The defendants
asserted that Escudos 25,794$45, equivalent to Rs. 4,234.09,
had been entered to their credit in the Bank account and
that they were entitled to a set-off. The plaintiff filed a
replication to the written statement of the defendants, and
the defendants followed with a rejoinder. Civil suits were
also filed by the Custodian against other defendants in
respect of similar transactions, and a substantially similar
defence was set up in all of them. The suits were instituted
in the Court of the Civil Judge, Senior Division at Margao.
Some of the suits filed at Margao were tried by Shri E.S.
Silva, Comarca Judge, while the other by Shri Justino
Coelho, Comarca Judge. The preliminary objections to the
maintainability of the suits found favour with Shri Silva,
and he dismissed the suits before him altogether. Sheo
Coelho, however, found it necessary to try the suits
instituted in his court on their merits, and he decreed them
against the original debtor as well as the guarantor and
surety. The lone suit decided by Shri Ataide Lobo, the
Comarca Judge, Ilhas at Panaji was decreed against the
principal debtor but dismissed against the guarantors.
Ten appeals were filed before the Addl. Judicial
Commissioner. The Additional Judicial Commissioner dismissed
the appeals against - the judgment of Shri Ataide Lobo.
Allowing the appeals against the judgments of Shri E.S.
Silva, he decreed the suits and granted the reliefs claimed
by the Custodian. The appeals against the judgment of Shri
Justino Coelho were dismissed except that the appeal tiled
by Amalia Gomes Figueiredo, one of the guarantors, was
allowed and the suit dismissed as against her.
22
The Additional Judicial Commissioner held that the
Regulation effected a reconstruction of the Branches in Goa,
Daman and Diu of the Banco Nacional Ultramarino, that the
rights and obligations of the Branches referred to in the
Regulation must be understood to mean the rights acquired
and the obligations undertaken by the Banco Nacional
Ultramarino through those Branches and therefore the
Custodian was entitled to maintain the suits and sue for the
realisation of debts arising out of transactions entered
into through those Branches. The Additional Judicial
Commissioner also held that as the execution of the
negotiable instruments had been admitted in the written
statements and it was commonly agreed that they were not
within the reach of the Custodian, having been removed by
the officers of the Banco Nacional Ultramarino to Lisbon or
elsewhere on December 20, 1961, there was nothing to
preclude the Custodian claiming relief without producing
those negotiable instruments. He also repelled the
contention that the bills of exchange and the promissory
notes could on endorsement by the Banco Nacional Ultramarino
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in favour of others result in the defendants having to make
payment a second time. He recorded an oral undertaking
furnished by the Custodian that in the event of a decree in
such suits the Custodian would render compensation to the
defendant to the extent that the Custodian had made
realisation pursuant to the decrees under appeal. Having
regard to Article 53 of the Uniform Law on Bills of Exchange
and Promissory Notes, the Additional Judicial Commissioner
held that the holder had lost his right of recovery against
all except the acceptor in respect of whom, observed the
Judicial Commissioner, the suits were within time in view of
Article 70 of the Uniform Law.
Shri V.M. Tarkunde appearing for the appellants in
Civil Appeal No. 2476 of 1969 contends that the loans were
granted by the Head office of the Banco Nacional
Ultramarino, and not by the Branches at Goa, and that as the
properties and assets, rights and claims of the Branches
alone vested in the Custodian under the Regulation, the
Custodian was not entitled to sue for recovery of the loans
granted by the Head office. Shri Tarkunde relies on the
distinction made by the Regulation between the Head office
and the Branches of the Bank and says that they have been
regarded as separate entities. Shri Tarkunde further says
that even if the suits are held maintainable, the Additional
Judicial Commissioner erred in not proceeding further to
determine whether the appellants were
23
entitled to credit for the adjustments claimed by them in
the loan accounts.
Shri Naunit Lal, appearing for the appellants in Civil
Appeals Nos. 2475, 2477 and 2579 of 1979, adopts the
submissions of Shri Tarkunde.
Shri F.S. Nariman, appearing for the appellants in
Civil Appeals Nos. 2464 to 2468 of 1969, also disputes the
maintainability of the suits. He has strenuously urged that
no dichotomy can be envisaged between the Head of the Banco
Nacional Ultramarino and its Branches in Goa, and it is only
the Banco Nacional Ultramarino at its Head office at Lisbon
which can sue for recovery of the debts. Alternatively he
contends that even if the Head office and the Branches can
be regarded in law as separate entities some, if not all, of
the loans had been extended directly by the Mead office and
in respect of them, he says, the Regulation cannot be
applied. He also urges that even if all the transactions are
held covered by the Regulation, the suits cannot be decreed
as there is no statutory discharge of the appellants’
liability to the Banco Nacional Ultramarino in respect of
the debts. The indemnity offered by the Custodian, he urges,
is of no value in law. Another reason why the suits cannot
be decreed, says Shri Nariman, is because the promissory
notes have not been produced.
There has been considerable dispute on the point
whether the transactions were entered into by the Branches
of the Banco Nacional Ultramarino or could be attributed to
the Head office at Lisbon. It seems to us clear from the
material on the record that the appellants entered into the
loan agreements with the Banco Nacional Ultramarino, and the
Head office of the Bank at Lisbon authorised the relevant
Branch at Goa to give effect to the agreement. The evidence
is clear that the agreements were signed on behalf of the
bank by the Manager of the relevant branch and the loan
accounts were opened by the branches in their books, that
payments were made by the Branches to the appellants, that
deposits by way of repayment were made by the appellants in
these accounts maintained by the Branches, and the
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appellants pledged or hypothecated their goods in favour of
the branches; in short while the Head office authorised the
Branch to execute the agreements the transactions were
regarded for all purposes as transactions pertaining to
24
the respective Branches, to be actually controlled and
worked out by them. The suits, it may be noted, were filed
on the basis of the balance recorded in the accounts books
of the relative Branch.
Now it is indisputable as a general proposition that a
body corporate and its branches are not distinct and
separate entities from each other, that the branches
constitute mere components through which the corporate
entity expresses itself and that all transactions entered
into ostensibly with the branches are in legal reality
transactions with the corporate body, and it is with the
corporate body, that a person must deal directly. But it is
also now generally agreed that in the case of a Bank which
operates through its Branches, the Branches are regarded for
many purposes as separate and distinct entities from the
Head office and from each other. This Court observed in The
Delhi Cloth and General Mills Co. Ltd. v. Harnam Singh and
others :(1)
"In banking transactions the following rules are
now settled: (1) the obligation of a bank to pay
the cheques of a customer rests primarily on the
branch at which he keeps his account and the bank
can rightly refuse to cash a cheque at any other
branch: Rex v Lovitt (1912) A.G. 212 at 219, Bank
of Travancore v. Dhrit Ram (69 I.A. 1, 8 and 9)
and New York Life Insurance Company v. Public
Trustee (1924) 2 Ch. 101, 110 at page 117; (2) a
cumtomer must make a demand for payment at the
branch where his current account is kept before he
has a cause of action against the bank: Joachimson
v. Swiss Bank Corporation (1921) 3 K.B. 119 quoted
with approval by Lord Reid in Arab Bank Ltd. v.
Barclayas Bank (1954 A.C. 495, 531) The rule is
the same whether the account is a current account
or whether it is a case of deposit. The last two
cases refer to a current account; the Privy
Council case Bank of Travancore v. Dhrit Ram
(supra) was a case of deposit. Either way, there
must be a demand by the customer at the branch
where the current account is kept, or where the
deposit is made and kept, before the bank need
pay, and for these reasons the English Courts hold
that the
(3) [1955] 2 S.C.R, 402 at 422.
25
situs of the debts is at the place where the
current account is kept and where the demand must
be made."
It was explained further that if the bank wrongly refused to
pay when a demand was made at the proper place and time,
then it could be sued at its head office as well as at its
branch office, but the reason was that "the action is then,
not on the debt, but on the breach of the contract to pay at
the place specified in the agreement", and reference was
made to Warrington, L.J. at page 116 and Atkin, L.J. at page
121 of New York Life Insurance Co. v. Public Trustee.(l)
That is the position in regard to banking law and practice,
and it is apparently in that light that the Regulation has
been framed.
The Regulation was intended to achieve what emergency
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legislation was designed to secure in a somewhat different
context by somewhat comparable methods. In England, during
the First World War the Trading with the Enemy Amendment
Act, 1916 provided for the winding up of the business
carried on in England by companies incorporated in Germany.
That Act was considered by the court In re W. Hagelberg
Aktien-Gesellschaft(2) and it was observed that although the
branches and agency of a business could not be regarded as
distinct from the principal business of. the owner,
nonetheless, if a statute was enacted to create that effect,
effect had to be given to the statute for the purposes
incorporated therein. During the Second World War the courts
in England were called upon to consider the Defence (Trading
with the Enemy) Regulation, 1940 under which a winding up
order could be made in respect of the business of any enemy
bank carried on at its London offices. In Re The Banca
Commercial Italiana(3) the court observed that having regard
to the language of the statute and previous cases on the
point "a winding-up order made under the regulation must be
held to create for the purpose of winding-up a new entity,
namely, the business ordered to be wound up, and this entity
is considered as one which can possess assets and have
liabilities of its own." Corresponding legislation in India
during the Chinese invasion and
(1) [1924] 2 Ch. 101.
(2) [1916] Chancery Division 503.
(3) [1943] 1 All Eng. L.R. 480.
26
the Indo-Pakistan Wars was incorporated in the Defence of
India Rules framed from time to time. In all these cases
there is a departure from the general rule that the branches
and agencies of a business are no more than the components
through which the entire enterprise is carried on, and that
they cannot be considered as distinct or separate from the
Head office. The departure was necessitated by an emergent
or a normal situation, and incorporated and regulated by
specific legislation enacted for the purpose of coping with
the problems arising out of such a situation. It is only
right then that the true scope of what is intended by the
legislation should be determined by close reference to the
express terms of the legislation.
It is abundantly plain from the object and purpose of
the Regulation and the provisions which seek to realise them
that all transactions effected by or through the Branches of
the Banco Nacional Ultramarino were intended to be brought
within the compass of the Regulation. As observed earlier,
although the loan agreements may have been entered into with
the Banco Nacional Ultramarino, the Branches were authorised
by the Head office to give effect to those agreements, and
accordingly the Branch concerned embarked upon the execution
of the agreements and the working out of the transactions.
The entire business involved in those transactions and
dealings was effected by the Brancn concerned, and it was
only when occasion strictly so required that the Branch made
reference to the Head office for authority to amend or
enlarge the scope of the operation. The transaction and the
business nonetheless remained throughout those of the
Branch, and this is fully affirmed by the existence and
operation of the loan accounts in the books of the Branch,
by the pledge or hypothecation of goods in almost all cases
in favour of the Branch and by the overall nature and
character of the transaction as an ordinary banking
transaction falling within the normal business of a Branch.
It will be noticed that s. S of the Regulation
expressly speaks of "properties and assets, all rights,
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powers, claims, demands, interests, authorities and
privileges and all obligations and liabilities" of the
Branches and of "all contracts, deeds, bonds, agreements..."
to which the Branches are a party or which are in their
favour. It proceeds clearly on the basis that the Branches
must be regarded as entering into and carrying out
transactions identifiable as theirs. These are transactions
distinct from those exclusively carried on by
27
the Head office of the Banco Nacional Ultramarino, with
which transactions in their essence the Branches had nothing
to do. It will also be noticed that by sub-s. (2) of s. 7
the Regulation envisages financial transactions between the
Branches and the Head office. The entire purpose of the
Regulation is to reconstruct by operation of statute the
closed Branches of the Banco Nacional Ultramarino and to
constitute them into a Bank and to work out existing
transactions and square up all pending business with a view
to ultimately winding-up the affairs of the Branches. S. 14
of the Regulation provides:-
"The Central Government shall, on the expiry of
twelve years, and may, at any time before such expiry,
direct that the books of account and affairs of the
branches of the Banco Nacional Ultramarino in Goa,
Daman and Diu shall be inspected by the Reserve Bank or
by such other agency as the Central Government may
determine and that a report on the basis of such
inspection shall be made and the Central Government
may, after considering the said report, direct the
winding-up of the affairs of the said branches on such
terms and conditions to be specified by that Government
which shall, as far as practicable, be in consonance
with the provisions relating to winding-up of a banking
company under the Banking Companies Act, 1949".
To accept the contentions advanced by the appellants
would be to negative the very object and purpose of the
Regulation and to nullify its provisions. Such a
construction of the Regulation is not open to the Court, for
it could never be supposed that in enacting the Regulation
the President intended an exercise in futility. It is well
settled that the construction put by a court on the
provision of a statute should accord with the object and
purpose of the statute, and in that behalf the rule in
Heydon’s case(1) relied on by this Court in R.M.D.
Chamarbaugwalla v. The Union of India(2) is attracted. What
was the law before the statute was passed, what was the
mischief or defect for which the law had not provided, what
remedy had the legislation appointed and what was the reason
of the remedy ? That substantially was also the test laid
down in
(1) [1584] 3 Co. Rep. 7a.
(2) [1957] S.C.R. 930.
28
Vrajlal Manilal & Co. & Ors. v. State of Madhya Pradesh &
ors.(1) It was observed in Kanai Lal Sur v. Paramnidhi
Sadhukhan:(2)
"When the material words are capable of two cons-
tructions, one of which is likely to defeat or impair
the policy of the Act whilst the other construction is
likely to assist the achievement of the said policy,
then the courts would prefer to adopt the latter
construction."
We are of opinion that the transactions under
consideration in these appeals fall within the scope of the
Regulation and the Custodian is fully entitled to sue for
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the recovery of the debts covered by the loan agreements.
The contention of the appellants to the contrary is
rejected.
We now turn to the remaining points raised in these
appeals. It has been urged that the statutes cannot be
decreed because the Promissory Notes and the Bills of
Exchange have not been produced by the Custodian before the
trial court. Now, it is not disputed that the documents have
been removed from Goa to Portugal or to other places
overseas and are no longer in the possession of the
Branches. The debts were sought to be proved on the basis of
the accounts maintained in the books of account of the
relevant Branches. This was permissible by virtue of sub-s.
(1) of 8. 8 of the Regulation which provides:-
"8. (1) If for the prosecution of any suit, appeal
or other legal proceeding by the Custodian in any court
it is necessary to produce any document or other
particulars and the said document or particulars are
proved to the satisfaction of the Court to have been
removed to Portugal or to any of the territories under
Portuguese control, it shall be lawful for the Court,
in disposing of the suit, appeal or other legal
proceeding to base its decree or decision on the books
of account of the branches of the Banco Nacional
Ultramarino in Goa, Daman and Diu and on the evidence
which can be otherwise produced."
(1) [1970] 1 S.C.R. 400, 410.
(2) [1958] S.C.R. 360. 367.
29
Having regard to the circumstances, it is within the
competence of the court to base its decree on the books of
account of the Branches in Goa and on other evidence which
can be produced. It was not necessary for the Custodian,
indeed it was not possible, to produce the Promissory Notes
and Bills of Exchange. Our attention has been invited to a
passage in Byles on Bills of Exchange (1) which declares
that "in any action or proceeding upon a bill, the court or
a judge may order that the loss of the instrument shall not
be set up provided an indemnity be given to the satisfaction
of the court or judge against the claims of any other person
upon the instrument in question". The provisions of Rule 16
of order VII of the Code of Civil Procedure and s. 81 of the
Negotiable Instruments Act, 1881 were also referred to. It
is true that those provisions require the plaintiff to
furnish an indemnity before a suit can be decreed if the
negotiable instrument on which the suit is founded is proved
to have been lost or cannot be produced. It seems to us that
resort to those provisions cannot be justified inasmuch as
the cases fall to be determined under the Regulation and the
Portuguese law which continued in force in Goa. Even in
respect of the Portuguese law, that is to say, provisions in
the Portuguese Commercial Code and the Portuguese Uniform
Law, to which our attention has been specifically drawn, we
are of opinion that it stands superseded by reason of the
express provisions contained in sub-s. (1) of s. 8 of the
Regulation. No indemnity can be reasonably required of the
Custodian when it has been proved to the satisfaction of the
court that the document has been removed to Portugal or to
any of the territories under Portuguese control. The sub-
section plainly makes no provision for indemnifying the
debtors against any further claims made against them. Such a
measure was not considered necessary, because the Regulation
vested the entire right in the Custodian to recover the debt
and no further right was left in anyone else; The debts were
regarded as properties and assets of the Branches, and all
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rights in respect of them stood transferred to and vested in
the Custodian by virtue of sub-s. (I) of s. 5. Having regard
to the provisions of the Regulation and the object with
which it was enacted it is not possible to conceive that it
would be open to the Head office of the Banco Nacional
Ultramarino to sue the debtors for recovery of those debts.
Shri Nariman contends that an express provision was
neces-
(1) 22nd Edn. p. 389 para. 70.
30
sary in the Regulation to effect a complete discharge of the
debtors from further liability as was the case in s. 11 (2)
of the Pakistan Ordinance considered in The Delhi Cloth and
General Mills Co. Ltd. v. Harnam Singh and others.(1) We
think it is not necessary that there should be such a
specific provision. rt is sufficient if the same conclusion
can be drawn from a proper construction of the general
provisions of the Regulation and the object with which it
has been enacted. We may point out that although reference
was made by this Court in The Delhi Cloth and General Mills
Co. Ltd. v. Harnam Singh and others (supra) to s. 11 (2) of
the Pakistan Ordinance, it was also observed on page 425
that alternatively:
"Such payment would operate as a good discharge
even under the English rules: see Fouad Bishara Jabbour
v. State of Israel(2) where a number of English
authorities are cited, including a decision of the
Privy Council in Odwin v. Forbes.(3) That was also the
result of the decisions in the following English cases,
which are similar to this, though the basis of the
decisions was the situs of the debt and the multiple
residence of corporations: Fouad Bishara Jabbour v.
State of Israel (supra), Re. Bangue Des March ands De
Moscou Barclays Bank(4), Arab Bank Lrd. v. Braclays
Bank(5).
The Learned Additional Judicial Commissioner has reached the
same conclusion, but in doing so he has relied on certain
provisions of the Portuguese Uniform Law. We have not found
it possible to examine the validity of his reasons because a
complete statement of the Portuguese Uniform Law is not
before us, and therefore we can find no justification for
disturbing the basis on which he has come to his finding.
The learned Additional Judicial Commissioner has also
adverted to an undertaking offered by the Custodian to
indemnify the debtors against any action by anyone else for
recovery of the debts, but on the view that we have taken we
need not examine the validity or sufficiency of that
undertaking,
(1) [1955] 2 S.C.R. 402, 425.
(2) [1954] 1 A.E.R. 145 @ 154.
(3) [1817] Buck. 57.
(4) [1954] 2 A.E.R. 746.
(5) [1954] AC. 495, 529.
31
We are satisfied that the discharge of the debts under
the Regulation amounts to their complete discharge and it is
not open to anyone else to sue for their recovery. No
indemnity is required to be furnished by the Custodian on
the ground that the relevant documents cannot be produced.
It is faintly urged that the suits filed by the
Custodian were premature. This point was not raised before
the courts below and we cannot allow it to be raised at this
stage.
There is one point, however, which, in our opinion,
requires consideration by the trial court. In some of the
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suits it has been pleaded by the appellants that they were
entitled to a set-off by reason of certain credits in their
favour. The learned Additional Judicial Commissioner has
held that the trial court was justified in declining to
enter into those claims. We think that in this regard the
courts below have erred. It was necessary to do complete
justice between the parties having regard to the peculiar
circumstances of these cases, and we are of opinion that so
far as these claims are concerned the trial court should now
examine them on their merits.
In the result, the appeals are dismissed subject to the
direction that the trial court will take up the suits again
solely for the purpose of examining the validity of the
claims to set-off made by the appellants in those suits. We
make no orders as to costs of these appeals.
P.B.R. Appeals dismissed.
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