Full Judgment Text
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PETITIONER:
UNITED COMMERCIAL BANK LTD.
Vs.
RESPONDENT:
OKARA GRAIN BUYERS SYNDICATE LTD. & ANR.
DATE OF JUDGMENT:
04/03/1968
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
BACHAWAT, R.S.
MITTER, G.K.
CITATION:
1968 AIR 1115 1968 SCR (3) 396
ACT:
Banking-Deposit Receipt-Syndicate opening account in Bank-
Deposit receipt in the name of Syndicate account District
Magistrate if constitutes him owner of deposit-Condition of
deposit that on due date deposit receipt should be
discharged by depositor-Non production of deposit receipt-
Equitable jurisdiction of High Court.
HEADNOTE:
The respondent a syndicate with its registered office in
Montgomery in undivided Punjab, had deposited certain amount
with the appellant-Bank and obtained a Fixed Deposit
Receipt. The deposit was required to be made for due
performance of the conditions of a scheme for Procurement
devised by the Government of Punjab in 1946. The receipt
was made out in the name of the, Syndicate Account District
Magistrate, Montgomery. No account was opened in the bank’s
books in the name of the District Magistrate and under the
conditions of deposit it was repayable to the respondent on
demand on due date. The respondent served a notice of
withdrawal upon the Bank. An endorsement in that behalf was
made on the receipt which was handed over to the District
Magistrate, Montgomery. Following the communal riots in
1947 the staff of the respondent migrated to India and the
respondent set UP a new business at Amritsar. The
respondent demanded the money to which the appellant replied
that the amount could not be returned until the respondent
obtains a discharge from the District Magistrate, Montgomery
(in Pakistan) of his lien on the fixed deposit receipt. The
respondent filed a Petition before the Debt Adjustment
Tribunal, Amritsar, for an order directing the appellant to
pay the amount with interest, and impleaded the District
Magistrate, Montgomery as a respondent. The District
Magistrate filed no claim before the Tribunal. The Tribunal
dismissed the petition holding that the amount stood
forfeited by order of the District Magistrate, Montgomery.
In appeal, the High Court made an order in terms of the
prayers in the petition, subject to the condition that the
respondent shall give an indemnity for restitution of the
amount in case the bank had to pay the amount to the
District Magistrate, Montgomery.
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In appeal to this Court.
HELD : The deposit receipt gave rise to no contractual
obligation in favour of the District Magistrate, Montgomery
nor was the bank a trustee for that officer. By an express
condition the receipt was not transferable. The name in
which the receipt was made out was by itself not sufficient
to create an interest in the amount in favour of the
District Magistrate. The District Magistrate was not in law
constituted owner of the money deposited by the respond-ant
with the appellant by virtue of the delivery of the receipt.
In the books of the appellant the fund stood to the credit
of the respondent : the respondent was the owner thereof and
it was the respondent alone which was entitled to demand
payment of the fund. In the absence of any obligation-
contractual or fiduciary-undertaken by the appellant in
favour of the District Magistrate, the appellant could not
withhold payment of money deposited after the expiry of the
period of notice. [399 D-H]
397
Even if the condition in the terms of deposit that on due
date the deposit receipt should be discharged by the
depositors was to be considered a condition precedent to the
enforcement of the obligation of the Banking favour of the
respondent, the High Court was right in the exercise of its
equitable jurisdiction to direct that the money be paid to
the respondent without production of the receipt. It might
reasonably be inferred that the receipt was lost or was
destroyed and in such cases the court’s equitable
jurisdiction could appropriately be exercised. the direction
of the High Court that an indemnity be given by the
respondent to the Bank for restitution if the Bank was to,
pay the amount to the District Magistrate, MOntgomery has
fully protected the Bank against any possible loss and this
eminently reasonable direction was not liable to be set
side. [400 F-H]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 449 of 1965.
Appeal from the judgment and order dated August 29, 1960 of
the Punjab High Court in F.A.0. No. 14 of 1954.
Bishan Narain and Hans Rai Dhawan, for the appellant.
S. V. Glipte, B. K. Maheshwari and B. P. Maheshwari, for
respondent No. 1.
The Judgment of the Court was delivered by
Shah, J. This appeal is filed with certificate granted by
the High Court of Punjab.
The Okara Grain Buyers Syndicate Ltd.-hereinafter called
’the Syndicate was incorporated under the Indian Companies
Act, 1913, with its registered office at Okara, District
Montgomery in the undivided Punjab. In 1946 the Government
of undivided Punjab devised a scheme for procurement of food
grains and appointed the Syndicate to buy food grains on its
behalf." For due performance of the conditions of the
scheme, the Syndicate was required to make a deposit with a
recognized Bank. The Syndicate deposited an amount of Rs.
40,000/- on March 29, 1947, with the United Commercial Bank
Ltd.-hereinafter called ’the Bank’-and obtained a Fixed
Deposit Receipt dated March 29, 1947. The terms of the
receipt were these :
"The United Commercial Bank Limited.
No. Misc. 9872-4/18 Okara (Punjab) 29th March,
1947.
Received from the Okara Grain Buyers Syndicate
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Limited, Okara A/c District Magistrate,
Montgomery Rs. Forty thousand only as a
deposit at the rate of 2 per cent per annum to
remain till notice of twelve months for its
withdrawal by either side expires.
For the United Commercial Bank Ltd.
(Sd.) ................
Accountant Manager.
Rs. 40,000/-
398
Terms for the Deposit Receipt
This deposit receipt is issued subject to the
following terms and conditions.
1 . This receipt is not transferable.
2. This deposit cannot ’be withdrawn before
due date.
3. Interest on this deposit ceases on the
due date.
4. The amount of this deposit cannot be
withdrawn in part or by cheque or draft.
5. On due date this deposit receipt should
be discharged by the depositors on one anna
stamp if it is required to be repaid,
otherwise an endorsement as to its renewal
should be made in the space provided thereof.
6. Receipts will when so required, be
issued in the names of two or more persons and
will be made payable to any one or more of
them or to the survivors."
The Syndicate served a notice of withdrawal on March 29,
1947 upon the Bank and an endorsement in that behalf was
made on the receipt. The receipt was then handed over to
the District Magistrate, Montgomery. On account of
widespread communal riots in the month of August 1947, non-
muslim residents of the area found it unsafe to continue to
reside at Okara, and the staff and Managing Director of the
Syndicate migrated to India leaving all the property, goods
etc. of the Syndicate at Okara. The Syndicate set up a new
place of business at Amritsar and registered itself in the
State of Punjab.
In reply to a demand made on October 26, 195 1, by the
Syndicate the Bank replied that the amount deposited will
not be returned until the Syndicate obtains a discharge from
the District Magistrate, Montgomery, of his lien on the
fixed deposit receipt and an intimation in that behalf was
given by the District Magistrate relinquishing his lien’ on
the fixed deposit receipt. The Syndicate then filed a
petition before the Debt Adjustment Tribunal, Amritsar,
under s. 13 of the Displaced Persons (Debt Adjustment) Act
70 of 195 1, for an order against the Bank for payment of
Rs. 40,000/- as principal and Rs. 3,200/- as interest @ 2%
per annum upto March 3, 1952, and future interest at 6% per
annum till realization. To this petition, the District
Magistrate, Montgomery, was also impleaded as party-
respondent. The Tribunal dismissed. the petition holding
that the amount of Rs. 40,000/- deposited by the Syndicate
stood forfeited by order of the District Magistrate,
Montgomery, and the petition was
399
on that account not maintainable. In appeal, the High Court
of Punjab made an order in terms of the prayer in the
petition, subject to the condition that the respondent shall
give an indemnity for restitution of the amount in the event
of the Bank having to pay the amount to the District
Magistrate, Montgomery. The High Court held that the
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deposit was subject to conditions expressly mentioned in the
receipt and no others and that the District Magistrate was
not given any dominion over the amount of Rs. 40,000/-
deposited by the Syndicate.
In this appeal, counsel for the Bank urged that the terms of
the receipt created no obligation enforceable against the
Bank at the instance of the syndicate, and that in any event
the liability could be enforced only if the District
Magistrate discharged the receipt and handed it over to the
Bank acknowledging that he had no claim against the
Syndicate.
The deposit receipt is made out in the name of the
Syndicate. It is acknowledged by the receipt that an amount
of Rs, 40,000/was received from the Syndicate and the amount
was to remain with the Bank till notice of twelve months for
its withdrawal by either side expired. The deposit receipt
gave rise to no contractual obligation in favour of the
District Magistrate, Montgomery, nor was the Bank a trustee
for that officer. It is common ground that no account was
opened in the Bank’s books in the name of he District
Magistrate, Montgomery. Condition No. 5 of the Conditions
of Deposit also clearly indicates that payment of the amount
on the due date was to be made to the Syndicate, for t
expressly provides that on due date the deposit receipt
shall be discharged by the depositors if it is required to
be repaid, otherwise an endorsement as to its renewal shall
be made in the space provided in that behalf. It is not the
case of the Bank that the receipt was transferred to the
District Magistrate, Montgomery. By an express condition
the receipt is , not transferable. The name which the
receipt was made out is by itself hot sufficient to create
an interest in the amount in favour of the District Magis-
rate. The District Magistrate was not in law constituted an
owner of the money deposited by the Syndicate with the Bank
by virtue if the delivery of the receipt. In the books of
the Bank the fund stood to the credit of the Syndicate : the
Syndicate was the owner thereof and it was the Syndicate
alone which was entitled to demand payment of the fund. In
the absence of any obligation, contractual or fiduciary
undertaken by the Bank in favour of the District Magistrate,
the Bank could not withhold payment money deposited after
the expiry of the period of notice.
It was urged by counsel for the Bank that unless the receipt
is produced duly discharged, the Bank was not under an
ligation to repay the money. Reliance, was placed upon the
400
following observations in Sheldon’s Practice and Law of
Banking, 8th Edn., at p. 163 :
"If the deposit receipt merely acknowledges
the deposit of the money, the banker cannot
demand its production before paying. over the
money. But if the form of the receipt is such
that the signing of, the receipt is a
condition precedent to the withdrawal of the
money, then the deposit receipt must be
returned when the money is handed over. But
the banker is not entitled to withhold payment
of the money should the receipt be lost or
destroyed. All that he can do is to ask the
depositor for an indemnity. Whether he is
legally entitled to demand such an indemnity,
the receipt not being a negotiable instrument,
is another question.",
and upon the statement at p. 174, Art. 327
Vol. 2 of Halsbury’s Laws of England, 3rd Edn.
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:
"The receipt of money on deposit account
constitutes the banker a debtor to the
depositor, but not a trustee thereof for him.
The debt is repayable either on demand or on
condition agreed with the depositor. Speci-
fied notice may be stipulated for, and the
return of the deposit book (or receipt) made a
condition of repayment, or the deposit may be
for a fixed period. If the return of the
deposit book is a condition precedent, no
actual debt arises until its return. In case
of the loss of the book, however, a court
would exercise its equitable jurisdiction, and
not allow the absence of the receipt to stand
in the way of the depositor reclaiming his
money."
In the proceeding before the Tribunal, the District Magis-
trate, Montgomery filed no claim. We are of the view, even
if Condition No. 5 of the terms of deposit receipt is a
condition precedent to the enforcement of the obligation of
the Bank in favour of the Syndicate, that the High Court was
right in exercise of its equitable jurisdiction to direct
that the money be paid to the Syndicate without production
of the receipt. It may reasonably be- inferred that the
receipt is lost or destroyed and the, Court’s equitable
jurisdiction may appropriately be exercised in. this case.
Whether the District Magistrate has the receipt is on the
evidence problematic. Again the High Court has fully
protected the Bank against any possible loss by directing
that a indemnity be given by the Syndicate to the Bank for
restitution if the Bank is to pay the amount to the District
Magistrate, Mon gomery, and this eminently reasonable
direction is not liable be set aside.
401
It was urged that the Government of Pakistan have forfeited
the amount standing to the credit of the Syndicate in the
Bank’s books of account at Okara, and the validity of that
act cannot be questioned in the Indian Courts. But there is
no evidence on the record that any order was passed by the
Pakistan Government forfeiting, in exercise of any
authority-statutory or sovereign-, the amount deposited by
the Syndicate with the Bank. The only document on the
record on whic 1 reliance is placed is a sheet of paper
entitled "A list of securities of non-muslims forfeited to
Government of Pakistan deposited in the United Commercial
Bank Ltd." tendered in evidence by Shamim Yazdani an
employee of the Bank in Pakistan. The witness was examined
on interrogatories and he identified the list of securities
of non-muslims which, it was claimed, were forfeited by the
Government of Pakistan and in the list produced by him, Item
No. 14 is the amount of Rs. 40,000/- deposited by the
Syndicate on March 29, 1947 at Okara. The list does not
purport to bear the signature of any officer of the
Government of Pakistan, nor does it purport to specify the
authority in exercise in which it is claimed that the amount
was forfeited. A copy of a letter dated March 4, 1949,
from. N. A. Haroon, Officer on Special Duty, West Pakistan
Government, Finance Department, Lahore, addressed to the
Manager, United Commercial Bank Ltd. was also produced by
Shamim Yazdani. It is recited in the letter that he was
directed to enclose a list of securities of non-muslims
deposited with the Branch Office and forfeited at Lyallpur,
Okara and the, Bank was requested to make arrangements for
early realization of the amount for payment to the District
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Food Controllers concerned. Neither the original letter nor
its authenticated copy has been produced. There is no
reference to the source of the authority of the officer who
purported to forfeit the amount. The letter even does not
recite that the order of forfeiture was made by him acting
on behalf of the Government of Pakistan.
It is common ground that the, money deposited had not been
paid by the Bank to the Governxnent of Pakistan till the
High Court decided the appeal. Counsel for the Bank urged
that once an order was passed forfeiting the amount, the
Bank held the amount on behalf of the Government of
Pakistan’. But underlies that argument the assumption that
such an order was in fact passed by the Government of
Pakistan. In the absence of any evidence to that effect, we
are unable to hold that any such order of forfeiture was
passed. We do not feel called upon in this case to consider
whether an order passed by the Government of a foreign
country forfeiting the property of an Indian national must
be recognized by the Courts in this country as a complete
discharge of the obligation in circumstances similar, to
those in this case, when the question is raised in the
Courts here.
402
It was faintly suggested that the amount of Rs. 40,000/- had
vested in the Custodian, Evacuee Property in Pakistan. But
the question was never mooted at any, stage of this
litigation, and we cannot permit counsel for the Bank to
make out that case for the first time in this Court.
Finally it was contended, relying upon the judgment of this
Court in The Delhi Cloth and Generel Mills Co. Ltd. v.
Harnam Singh and Others(’) that the dispute must be
determined by the law of Pakistan and not by the law in
India. In that case, the plaintiffs were residents of
Lyallpur and were appointed by the Government of undivided
Punjab to administer a scheme for rationing of cloth. The
Cloth Mills through its branch office at Lyallpur supplied
those persons with cloth from time to time, and maintained a
running account of the transactions. On partition in 1947,
Lyal llpur was allotted to Pakistan and the plaintiffs mi-
grated to, India as refugees. The Pakistan Government
issued an Ordinance vesting all evacuee-property in Pakistan
in the Custothan of Evacuee Property in Pakistan, and
prohibited payment of money to evacuees in Pakistan and
ordered that all moneys payable to, or claimable by
evacuees, be paid to the Deputy Custodian of Evacuee
Property in Pakistan. Payments so made were to operate as a
discharge-from further liability to the extent of the
payment. Breach of this law was punishable-as an office.
The Deputy Custodian of Evacuee Property demanded of the
Mills the money payable to the plaintiffs and in
satisfaction of IF, the payment the Mills paid the amount.
In defence to a suit filed by the plaintiffs in the Court of
the Subordinate Judge, Delhi, the Mills pleaded that they
had discharged their liability by payment made to the Deputy
Custodian of Evacuee Property in Pakistan. The Court held
that Lyallpur was the. place of primary obligation, that the
elements out of which the contract to pay arose were most
densely grouped at Lyallpur, and Lyallpr was the natural
seat of the contract and the place with which it had its
closest and most real connection. Accordingly the proper
law of the contract was the law of Pakistan, and that even
under the English doctrine the situs of the debt was
Lyallpur and therefore either way the law of Pakistan
applied.
Assuming that it was the law of Pakistan which applied to
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the repayment of the debt due -under the receipt, the Bank-
has failed to Prove its defence that they are not liable to
pay the money due under the deposit receipt. To
recapitulate the facts, the amount was deposited by the
Synqicate; it was repayable to the Syndicate when demanded;
the notice of repayment of the amount was served at the date
when the deposit was made. The District Magistrate,
Montgomery had no contractual relationship with
(1) [1955] Z S.C.R. 402
403
the Bank, nor was the Bank constituted a trustee for the
District Magistrate. The Bank has failed to prove that in
exercise of any statutory or sovereign authority the
Government of Pakistan have forfeited the amount. Nothing
has been placed which may support the plea that under the
law of Pakistan the Bank is not liable to repay the amount
due under a deposit receipt on the due date, because an
officer of the State is- said to have the custody of the
receipt evidencing the deposit.
The order for payment of interest at a rate exceeding 2% per
annum was also challenged by the Bank. But the rate of
interest was stipulated only for the period of the deposit
receipt. The Syndicate claimed interest at rate of 6% per
annum from the date on which the petition was filed before
the Tribunal under the Displaced Persons (Debt Adjustment)
Act 70 of 1951. Interest from the date of the petition was
within the discretion of the High Court, and the High Court
has awarded interest at the rate claimed. We do not see any
reason to interfere with the rate of interest awarded by the
High Court.
The appeal therefore fails and is dismissed with costs.
Y.P. Appeal dismissed.
404