New Bank of India Ltd. v. Pearey Lal

l!Hil. December 20. The Judgment of tho Court was delh'ered by .. 2S.C.R. SUPREME COURT REPORTS 219 SHAH, J.-Mr. Justice Bachawat c.f the High Court of Judicature at Calcutta <lecrebd Suit No. 1039 of 1948 filed by one Pearey Lal-hereinafter called the plaintiff-for a decree for lts. l,35,0UO/­ with interest against the New Bank of India Ltd. The appeal of the Bank against the decree was dis­ missed by a Divi~ion Bench of the High Cvurt. With special leave the Bank has appealed to thie Court. The Bank had its registered office originally at Lahore but after the partition of India the office was transferred to Amritsar. The plaintiff who was a resident of Lahore had accounts ·with several banks including the New Bank of India Ltd. Ia view of the impending partition, the plaintiff was anxious to transfer his moveable property outside the territory it was apprehended would be included in Pakistan, and he gave instructions for transfer­ ring his accounts with the Bank to its other branches in India. He also paid an amount of Rs. 1,25,()00/- on July 18, 1947, into tbe Bank at Lahore with instructions to transmit the samethe to Bank's branch at Calcutta which it then proposed to open in the near future. An amount of Rs. 10,000/- was also paid into the Bank at Lahore on July 19, 1947, with similar instructions. In respect of these two transactions the Bank executed receipts which are set out below : ''Received the sum of Rs. l,25,000/­ (Rs. One Lac & twenty five thousand) only from Mr. Pearey Lal on account of amount to be remitted to Calcutta branch for preparing various F.D. Receipts subject to his instruc­ tions on or after the opening date when he would call upon them personally. Lahore for the New Bank of India Ltd. The 18th day of Sd. Illegible July, 1947. Manager." 1961 New Bonk of lndit Ltd: v Pearey Lal Shah J. 1961 N11tJ LJ,uik of India Ltd. v. PeaitJ Lal .\hoh J. 220 SCJPHEME COURT REPORTS [1962) SUPP. ............................................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . "l{eceived the sum of Rs. 10,000/-(Rupces ten thousa.nd) only through Mr. Pearcy Lal for transmission to our Calcutta. Office for making up various F.D. Rec<·ipts at his instance when he calls upon them poc•onally on or after the opening date of the Brnncb. Lahore for the New Bonk of India Ltd. 19-i-4i. Sd. Illegible Manager." Tho two amounts were transmitted by the Bank to Calcutta. A branch of tho Bank was opened at Calcutta on September 24, 1947, but within a few days thereafter the Bank ceased making payments. It appears that a moratorium for a limited period was declared under an Ordinance issued by the Governer-Genera.l restraining the Bank from ma.king payments to its depositors. In December, 1\147, after the expiry of the period of the mora­ torium tho plaintiff applied to the Bank's bran~h at Calcutt.a for facility to withdraw tho whole a.mount but th~ Calcutta Branch raised certain technical objections against such a course. On March 2i, 19!8 tho plaintiff commenced an action against the Bank int,er alia for a. decree of Rs. 1,35,000/- in the Calcutta High Court on its original side. During the pcndency of the suit the High Court of East Punjab sanctioned a scheme for arrangement under ss. 153 and l53A of tho Indian Companies Act, 1913, for sottlement of tho liability of the Bank. By the first clause of thti scbeme the expreBBion "deposit" was to include "Fixed Deposit.s, Bank's mm Gash Certificates, Current Accounts, Deposits at Call, Savings Fune! Accounts A'Uounts lying in Sundries or in any other kind of Credit Accounts, Bank Drafts, Ca.sh Order~, and documents of the like nature and amounts due to Bankers over and above the value of Government Securities lying .,.. ith them against I 2 S.C.R. SUPREME COURT REPORTS 221 such depositors". It was directed by the scheme, as it finally emerged, that the depositors were to be paid 70!% of the deposits held by them and to he allotted shares of the face value of 5% of the deposits. The plaintiff claimed by his suit that he had entrusted to the Bank at its registered office at Lahore Rs. 1,35,000/· on July 18 and 19, 1947, with instructions to transmit the same to the branch of the Bank which it proposed to open at Calcutta and to hold th~ amount sub-ject to further instructions to be given by him when he would .call personally at the branch at Calcutta on or after the opening date, that prior to the opening of the said Calcutta Branch the plaintiff countermanded his instructions on or about September 13, 194 7 and demanded at Lahore that it be returned, but the Bank wrong­ fully claimed to have remitted the two sums to its Calcutta Branch and to have kept the same in a fixed C:eposit account in the name of the plaintiff, even though the plaintiff, had opened no such account at the Calcutta Branch and had given no instructions to put t~e same into any account by way of fixed deposit or otherwise. The plaintiff, accordingly, claimed that the Bank was a trustee for transmission of the amount and in the absence of any instructions given by him for opening a fixed deposit account; in· respect of the amount trans­ mitted the Bank stood qua the plaintiff in a fidu- ·•ciary relation and was liable to refund the full amount. Jn substance, it was claimed by the plaintiff that the amount lying with the Bank at Calcutta was not a deposit within the meaning of the sch~me and was not liable to any reduction. The Bank submitted that the amount of Rs. l,35,000/- was deposited by the plaintiff at its head office at Lahore for the purpose of opening a fixed deposit account in the name of the plaintiff upon the terms that the fixed deposit would carry New Bank of India Ltd. •• P1arey Lal Shah J. JP81 Jl1w Bonk of lrt-fia lid. v. l"tPl:J lat S'cli J. interest a.a on the reepeotive dates of the deposits, that it was agreed that the plaintiff would be allowl'd to take Joana upto 90% of the deposit at a rate of interest of half peroent. above the current fi:x:cd doposit rates and that the amount would be transmitted to the Calcutta Branch of the Bank for the purpose of orediting the i;ame to the fixed deposit account of the plain­ tiff. The Bank denied the alleged instructions in 8optember, l\147, countermanding the original arrangement and contended that the plaintiff was bound by the sch~me of arrangement sanctioned by the High Court of Enst l unjab. The Bank offered to pay the amount due to the plaintiff umkr the scheme uf arrangement 8lld also to allot shares of the value of 5% in accordance with the scheme. A decree on admiselon was pa.s~d against the Bank for Rs. 81,000/- and tho suit was contested bv tho Bank for the balance uf the olaim. · The trial Court held that oven though the plaintiff failed to prove the instructions in .the month of September, 1947, s0 t up by him counter­ manding tran.smission, it was established on the evidt-noe, that the plaintiff had entrusted to the Bank Rs.1,35,00'l/- fortraDBmission auu the plainti!f having given no further instructions, the Bank held the amount a.s trustee for the plaintiff and that the plaintiff'a claim waa not liable to bo reducl'd under the scheme sanotioned by the High C11urt of Eallt Punjab. The Court also neg..tived the pica of the Bank tba.t tit" amount of Ra.1,35,000/-was depo­ Rited with thA · Bank at Lahnro for oprning a ft:x:ed depolrit account subject to the conditions which the Bank set up. The findii:1g of the trial Court were confirmed, in app"&l, by a Division Bencm of the ·:H'igh Court .llot Calcutta. . The facts found proved, according to the findinga .of the trial Court and confirmed by the .. , 2 S.C.R· SUPREME COURT REPORTS 223 High Court are therefore that the plaintiff delivered an amount of Rs. 1,25,000/- on July 18, 194 I, and Rs. 10,000/- on July 19, 1947,. to the Bank at Lahore for transmission to Calcutta, with instruc­ tions to await the directions of the plaintiff regard­ ing the opening of accounts for keeping the same in fixed deposit or othenyis~ in the Calcutta .Branch of the Bank, and the plamt1ff never gave mstruc­ tions for opening any account, fix<·d depo~it or otherwise, in regard to· the amounts after they reached Calcutta. Delivery of the amount for transmission to the Bank created e.x facie a relationship of a fiduciary <:haraeter. But counsel for the Bank contends. that when the amount was handed over at Lahore to the Bank by the plaintiff who was an old . constituent of the Bank it must be pre­ sumed that a relationship of debtor and creditor arose and by the addition of instructions for transmission of the amou.nt to another branch the relationship of trustee and cestuique'trust did not arise. He submitted that the contention that the relation between the plaintiff -and the Bank was of creditor and debtor was supporteq by three important cir­ cumstances : ( l) that the Bank agreed .to pay interest on· the amount delivered by the plaintiff; (2) that the'Bank cha.rged no commission or remu­ neration. for transmission of the a.mount and (3) that.even on the plaintiff's ·case the amount was to be utilized · .for. opening fixed deposit accounts at Calcutta .. It is true. that in the ·absence of nther evld~w.i• a peiiaon J:l~Yillg . monl)y into a ·Bank, whether. he· .. i;e· a cq~iwent of the Bank or not, may he pret'Qme4.t~ 'have _paid the money to be held ~ bankers ordinarUy hold the money1 of their constituents. Jfno specific.instruction• are · giv('n at the time of payment or thereaftei:, and even if the money ie•luild iJ1 a su•pense account .the bank doea. not thereby become a trustee for . the a.mount paid. In other words, when a person dealing with 1961 New Bank ef India Ltd . .. P'earey Lal Shah J, 1961 Ntw Bani nJ lndi1 /./J. v, r 111·~1 1,.,1 Sho.~ J. 221 SUPREME COURT REPORTS [1962) SUPP. a. bank deliverR monoy to the Bank an intention to ert>1it.,.. a. relation of creditor a.nd debtor botween him 11.n1! the Bank is presumed, it being the normal cour"" of the b11sinPss of the Bank to accept depo­ sit!! from its customers. But thia presumption is one of fact arising from the nature of the business carried nn by the B11.nk and is rebutted by proof of sp<'cial in~tmctions, or circumstances attending the transaction. Whero the money is pa.id to a bank with,special instructions to retain the same pending further instruct.ions (The Official Asaignee, Madral! v. Nale.wm PiUai (') ). or to pay over the same to · anothn p~rson who has no banking &ccount wit.h tho bank and the b11.nk accepts the instru~tions Rnd h"lds the money pending instruo­ tiorni from t.hat other person (Arbuthnot & Co. v. D. Ra,jam Ayyar (')), or where instructions are given by a customer to his banker that a part of tho amount lying in his account ho forwarded to another hank to meot a. bill to become due and na.vable ll\· him and the amount is sent by the bank,ir as dir<'cted (Fc"IR.y v. Turner(')), a trust re~ultH a1.d the presumption which ordinarily arises by rca.~on of paymont of the money to the bank is rebuttt·d. It i~ not nOCl'ssary in this appeal to consider whether hrcauso of an agreemrnt to pay intcrPst the rPlationship ma:v be deemed to be of debt.or and creditor, beoa.us' it was held by both the courts brlow t.hat no such agrooment i• provP<l, anrl 11.coording to the Rettle<l prRotice uf this rourt the finding is r!'garded as binding. The Bank char1wd no commiBSion or remune· ration fot trsn~mitting the amount to Calcntts, but that, in our judgment, ill a ciroumAtance which permit!! of no inference agRinet the pla.intiff. Undoubtedly, when thn amount was de'.ivered to the Bank bv the plaintiff it wa.8 his intention to open fixed deposit aooount in Calcutta with the (1) I L. R. tl940) Mad. 845. (2) I. L. R. (1913) 36 Mad. 499. {') {18S7] 26 L. J. Ch. 710, 2 S.C.R. SUPREME COURT REPORTS 225 Bank's branch but the fixed. deposit accounts were to be opened after instructions were received. The transaction, '\S evidenced by the two receipt.s, was primarily one of cntrustment of the amount to the B;ink for transmission to Calcutta. After the purpose for which the moneys were entrusted was carried out, in the absenoe of further instructions the defendant did not cease to be a trm;tee. So long as instructions were not given by the p!P.intiff for appropriation of the amounts the Bank continued to hold the amounts transmitted for 'ind on Lehalf of the plaintiff and thne is no evidence that the plaintiff gave instructions or acquiesced in the opening of a fixed deposit account after the same reached Calcutta. It is immaterial that the Bank purported to open .fixed deposit account in the name of the plaintiff with the amounts received at its head office at Lahore. That course of action was adopted without the ~onsent of the plaintiff and it could not bind the plaintiff. The High Court was, therefore, right in holding that the amount delivered by the plaintiff to the Bank at Lahore remained in trust even after it reached Calcutta, and it was not held by tho Bank, in deposit for the plaintiff within the meaning of the scheme sanctioned by the High Court of East Punjab. In that view of the case the appeal fails and is dismissed with oosts. Appeal dismissed. lHl J\'tw Banlr. of lndta Ltd. v, Pearey Lat Shall J,