SRI LA SRI SUBRAMANIA DESIGA GNANASAMBANDA A

PANDARA SANNADHI, TRUSTEE OF SRI VAIDYANA

THASWAMI TEMPLE, VAITHEESWARANKOIL

STATE OF MADRAS

February 8, 1965 (K. SUBBA RAo, RAGHUBAR DAYAL, J. R. MUDHOLKAR,

R. S. BACHAWAT AND V. RAMASWAMI, JJ.)

Madras Hindu Religious & Charitable Endowments Act (XIX of 1951 )-High Court framing scheme for administration of temple providing for appointment of Executive Officer-Whether such appointment C can be made where mismanagement not proved-whether CommissioneY1 advice decisive or court•to decide on facts of each case.

By virtue of a scheme framed by the Madras High Court in 1919, the administration of a temple was placed in the hands of the )<:altali Thambiran to be appointed by the appellant in his capacity as the trustee.

In June 1951, the Commissioner, Hindu Religious and Charitable Endowments, Madras, filed a petition under s. 62(3) (a) of the Madras D Hindu Religious and Charitable Endowments Act, 1951, (Act No. XIX of 1951 ( in the court of the Sub-Judge, for the modification of the 1919 scheme.

The petition contained various allegations of mismanagement and of the full income of the temple not having been secured and safeguarded; this was stated to be attributable mainly to defective machinery set up under the 1919 scheme and it was suggested that an executive officer should be apPointed to undertake the administration of the temple.

E The Subordinate Judge found that the petitioner had not substantiated any of the allegations made against the trustees and no case had been made out for amending the 1919 scheme so as to provide for the appointment of an Executive Officer.

In a:meal, although the respondent State did not question the finding of the lower court that there was no proof of mismanagement, the High Court modified the scheme by introducing the suggested provision for the appointment of an Executive Officer and by providing for the appointment of additional trustees, if necessary.

It was contended on behalf of the appellant that the High Court, having agreed with the Subordinate Judge that the Commissioner had failed to establish any of the charges levelled by him aginst <he Trustee. erred in modifying the 1919 scheme as above.

On the other hand, it was urged by the State that under the Act a scheme for administration of a temple could be framed or an earlier scheme amended not only when there was misoJanagement by the Trustee, but also so as to provide for a better administration of the temple. Furthermore the Commissioner was empovvcred to frame a scheme if he considered this desirab1e for the proper administration of a religious inStitution and his opinion in this

regard must be given decisive weight by the court when amending a scheme. In the present case, in view of the fact that the temple owned extensive immovable properties, some of which were required to be sold. and there were many other complicated problems connected with the administration of the temple requiring attention, it was necessary to appoint a trained Executive Officer in the best interest of the temple;

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SUBllAMANIA DESIGA v. STATE (Subba Rao, I.) 93$

HELD: (i) A consideration of the scheme of the Act showed there was no justification for the contention that a court should accept without scrutiny the view of the Deputy Commissioner that the scheme required modification in the manner suggested by him and that the formal impri matur of the court was all that was contemplated by the Act. While a court should have due regard to the views ot the Commissioner wh'O is in close touch with the administration of temples, it could not be held that the court was relieved of its duty of asce:taining the oecessity for framing a scheme or to consider the propriety or advisibility of the various clauses of a scheme. In framing a scheme the Deputy Commissioner and in a suit or application for amendment of a scheme the Court, will mould the relief under s. 58(2) having regard to the circumstances of each case. [939 H-940 A-CJ

(ii) The Deputy Commissioner, the Commissioner, or the Court, as the case may be, is not bound, in framing a scheme, to appoint an exec cutive officer in every case; a case must be made out for such appoint meot. [940 GJ

(iii) In the present case the proposed executive officer would have the entire administration of the temple with hardly any power left to the trustee. Such a drastic provision might be necessary where the temple was mismanaged or there were other compelling circumstances requiring such an appointment. But in view of the concurrent finding of fact that the Commissioner had failed to establish and of the charges against the trustee. it could not be held that a case had been made out for the appointment of an Executive Officer to practically displace the trustee.

Furthermore, there wa~ no material before the court to ascertain the complicated nature of the problems of administration requiring the attention of an executive officer, and in any event the Commisioner had ample powers under the Act to issue orders or give appropriate advice to the trustee. [944 E-G; 945 A-BJ

(iv) The proposed provision in the scheme only conferred a power to appoint additional trustees and did not direct their appointment In presenti or even in future; such a power was a1so available to the Com• missioner under s. 39 and the appellant was not therefore in any way prejudiced by this provision. [945 E-F]

(v) Although the Commissioner was given wider powers in resoect of the appointment of an Eexecutive Officer under the Madras Act XXU of 1959. as the suit in the present case was filed in 1951 i.e. before the coming into force of that Act, the appeal had to be decided on the basis of circumstances prevailing in 1951. [945 HJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 272 of 1963.

Appeal from the , iudgment and decree dated February 7, 1958 of the Madras High Court in Appeal Suit No. 318 of 1954.

A. V. Viswanatha Sastri and Naunit Lal, for the appellant.

A. Ranr?anatham Chetty, A. Vedavalli and A .V. Rangam, for the respondent.

The Judgment of the Court was delivered by

Subba Rao, J.

Sri Vaidyanathaswami Temple at V aitheeswaranlcoil, Sirkali Taluk, Thanjavur District, Madras State, is an

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[1965) 2 S.C.R.

ancient and famous Siva temple.

It owns a large extent of im- A movable property and it is said that its annual income is more than Rs. 2 lakhs. In 1842 the British Government, which was then administering the temple, handed over its management to the Pandarasannadhi of Dharmapuram Adhinam.

Since then the said .Pandarasannadhi has been managing the same through one of his selected disciples, a Kattalai Thambiran. In the year 1919, B the High Court of Madras framed a scheme for the administration of the said temple in A.S. No. 181 of 1917. The said scheme provided, among others, that the administration of the temple shoDI be in the bands of the Kattalai Thambiran appointed by the Pandarasannadhi, and that he should be assisted by a treasurer, C a shroff and an auctioneer who was to be appointed once in 3 years by the Court.

The Madras Legislature passed Act IT of 1927 providing for the good administration of temples and their endowments. The Religious Endowments Board functioning under the said Act, presumably because the administration of the temple in question was satisfactory, did not take any steps to have the scheme D framed by the High Court in 1919 modified under the said Act.

That Act was substituted by The Madras Hindu Religious and Charitable Endowments Act, 1951 (Act No. XIX of 1951), hereinafter called the Act.

On June 16, 1951, the Commissioner, Hindu Religious and Charitable Endowments, Madras, filed a petition in the Court of the Subordinate Judge, Mayuram, under E s. 62(3a) of the Act for modifying the scheme framed by the High Court. In the petition the Commissioner, after alleging various acts of commission and omission by the Trustee and his subordinates in the management of the temple and pointing out the defects in the earlier scheme, averred that the full income of the Devasthanam had not been secured and safeguarded and that F that was attributable mainly to the defective machinery set up under the scheme for the administration of the temple. The most important of the modifications suggested to the scheme was that an Executive Officer should be appointed in the place of the Kattalai Thambiran and the Treasurer, conferring large powers on him for the day-to-day administration of the temple.

The Pandarasan- G nadhi filed a counter-affidavit denying all the allegations made against the management of the temple and asserting that he had functioned in terms of the scheme and had piloted the temple through . difficult tinies successfully.

The learned Subordinate Judge, after considering the entire material placed .before him, came to the conCiusion that the petitioner had not substantiated H

any of the allegations made against the Trustee and that no case had been 11111de out for amending the scheme and for the appoint-

SUBRAMANIA DESIGA v. STATE (Subba Rao, J.) 937

A ment of an Executive Officer.

In the result he dismissed the petition.

The State of Madras, represented b_y the Commissioner of Hindu Religious and Charitable Endowments, Madras, preferred an appeal against the said order to the High Court of Madras.

The said appeal came up before a Division Bench of the High

Court. In the High Court the learned Government pleader appearing for the State did not question the correctness of the finding given by the learned Subordinate Judge that there was no proof of mismanagement of any kind by the Pandarasannadhi or the Kattalai Thambiran.

The learned Counsel for the Pandarasannadhi had no objection for making formal amendments to the scheme, which became necessary due to lapse of time and due to the passing of the Act.

After hearing the parties, the High Court modified the scheme introducing the controversial provision, viz., the appointment of an Executive Officer.

In the result, the order of the Subordinate Judge was set aside and the scheme made by the High Court in 1919 was modified.

This appeal has been D filed, on a certificate issued by the High Court, against the said decree of the High Court.

Mr. A. V. Viswanatha Sastry, learned counsel for the appellant, contends that the High Court, having agreed with the Subordinate Judge that the Commissioner had failed to establish any of the charges levelled by him against the Trustee, erred in modi- 1: fying the scheme framed by the High Court iti the year 1919 introducing drastic changes therein, such as putting the management of the temple under an Executive Officer who could be appointed and removed only by the Hindu Religious and Charitable Endowments Board and also making a provision for the appointment of additional Trustees in future.

He has no objection to F that part of the scheme introducing formal changes in the earlier scheme so a~ to bring it in conformity with the provisions of the Act.

The arguments of Mr. A. Ranganadham Chetty, learned counsel for the State, may be stated thus : Under the Act a scheme G for the administration of a temple may be framed or an earlier scheme may be amended not only when there is mismanagement by the Trustee but also for providing for a better administration of the temple; in the present case, though there is no misman1gemcnt by the Trustee, the extensive immovable properties the temple owns, the existence of large arrears of rents, settlement of disputes ff that may arise between the tenants and the Trustee under the new

tenancy laws and such others call for the a"oointment of a trained Executive Officer by the Commissioner in the best interests of the

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(1965] 2 S.C.R.

Temple.

That apart, as under the Act the Commissioner is A empowered to frame a scheme if he has reason to believe that in the interests of the proper administration of a religious institution a scheme should be settled for the same, his opinion must be given almost a .decisive weight by a Court in the matter of amending a scheme.

To appreciate the contentions of the parties it will be convenient at the outset to notice briefly the scheme of the Act.

The Act was passed to provide for the proper administration and governance of Hindu Religious and Charitable Endowments and institutions in the State of Madras. It provides for the appointment of 4 classes of authorities, namely, Commissioner, Deputy Commis- C sioners, Assistant Commissioners and . Area Committees.

The Commissioner is the highest authority in the hierarchy. Subject to the provisions of the Act, the administration of all religious endowments shall be subject to the general superintendence and control of the Commissioner and for the purpose of such control he can pass any orders which he may deem necessary to ensure D that such endowments are properly administered and that their incomes are duly appropriated for the purposes for which they were founded or exist.

Specific duties have been allotted to the other authorities subject to the overall control of the Commissioner.

There are many effective provisions in the Act to ensure proper administration of temples.

Trustees have to keep registers for all E institutions for the scrutiny of the appropriate authority.

They have to furnish accounts and the accounts have to be audited in the manner prescribed in the Act.

The Trustees cannot alienate immovable properties or lease the same beyond 5 years without the sanction of the appropriate authority. They have to obey all lawful orders of the appropriate authorities.

The service F conditions of the office-holders are duly protected. The scales of expenditure have been standardized and a provision is made fixing the fees for archana and the apportionment of the same.

The Trustees have to prepare budgets and get their accounts audited.

There are provisions even for ordering surcharge against Trustees. G All the temples, whether governed by schemes or not, are subject to the said provisions of the Act.

Thus, there is a fair amount of financial and administrative control over the Trustees.

The general provisions of the Act may be sufficient in the case of temples which are properly administered; but there may be a temple without any scheme of administration or even if it has one, ff it may require to be improved to achieve better results. Section 58 enables a Deputy Commissioner to settle a scheme for an institution

SUBllAMANL\ DESIGA v. STATB (Subba Rao,/.) 939

A if he has reason to believe that in the interests of better administration thereof a scheme should be settled for it.

His order framing a scheme is subject to appeal to the Commissioner. Under s. 62 of the Act a party aggrieved by the order can file a suit in a Court questioning the correctness of the same and against the order of that Court an appeal lies to the High Court. Under s. 103 ( d) of B the Act, "all schemes settled or modified by a Court of law under the said Act (The Madras Hindu Religious Endowments Act,

1926) or under section 92 of the Code of Civil Procedure, 1908, shall be deemed to have been settled or modified by the Court under this Act and shall have effect accordingly." Under s. 62(3) of the Act, any scheme modified by a Court under s. 62(2) C of the Act. or any scheme framed or any scheme deemed under s. 103 ( d) to have been settled or modified by a Court can at any time be modified or cancelled by a Court on an application macle to it by the Commissioner or a Trustee or any person having interest.

Any party aggtjved by any order of the Court under

cl. (a) of s. 62(3) may within 90 days of the order appeal to the High Court.

The effect of these provisions is that though the Deputy Commissioner settles a scheme at the first instance, an aggrieved party can finally go to a civil Court to have the scheme modified. So too, a scheme framed by a Court µnder s. 92 of the Code of Civil Procedure can be modified on an application made I: to a Court by the Commissioner, Trustee or any person having

Uiterest.

Before the Act, there was a conflict whether the scheme framed by a Court under s. 92 of the Code of Civil Procedure could be modified on an application made by an aggrieved party and that conflict is resolved under the Act by an express provision that it can be so done.

Where a temple is so badly mismanaged that r the administration cannot be improved by the exercise of ordinary powers under the Act or by framing a scheme, the Commissioner !s given the power to notify such a temple and put it under the direct control of an Executive Officer directly responsible to him.

This is in the nature of supersession of the ordinary administration of a temple.

It is, therefore, clear that under the Act the adminis- G tration of all temples is subject to the exercise of the powers conferred upon the authorities thereunder. The Deputy Commissioner can settle a scheme for the proper administration of a temple. If the administration of a temple is very bad, it can be superseded and the temple notified for a prescribed period.

From the scheme of the said provisions we do not see any justification for H the argument of the learned counsel for the State that the Court shall accept without scrutiny the view of the Deputy Commissioner that the scheme requires modification in the manner suggested by

940 SUPREME COUll'l' REPORTS

[1965] 2 S.C.R.

him and that the formal imprimatur by the Court is all that is A contemplated thereunder.

While we appreciate the argument that a Court shall have due regard to the views of the Commissioner or the Deputy Commissioner, as the case may be, who is in close . touch with the administration of temples, we cannot persuade ourselves to hold that the Court is relieved of its duty of ascertaining the necessity for framing a scheme or to find out the propriety B or advisability of the various clauses of a scheme. In framing a scheme, the Deputy Commissioner and, in a suit or application for amendment of a scheme, the Coun will mould the relief under s. 58(2) of the Act l.!ltving regard to the circumstances of each case.

Section 58(2) of the Act reads :

"A scheme settled under sub-section ( 1 ) for a temple or for a specific endowment other than one attached to a math niay contain provision for-

( a) removing any existing trustee, whether hereditary or non-hereditary;

(b) appointing a new trustee or trustees in the place of or in addition to any existing trustee or trustees; ( c) defining the powers and duties of the trustee or trustees;

( d) appointing, or directing the appointment of, a paid executive officer who shall be a person professing the Hindu religion, on such salary and allowances as may be fixed, to be paid out of the funds of the institution; and defining the powers and duties of such officer :

The Deputy Commissioner, the Commissioner or the Coun, .as the case may be, is not bound, in framing a scheme, to appomt an Executive Officer in every case; but a case will have to be made

out for appointing him : that depends upon the facts established in G each case.

With this background let us look at the scheme framed by the High Court. The scheme is made a part of the judgment of the High Court.

The clauses of the scheme read thus :

1. The temple of Sri Vaithianathaswami at Vaitheeswarankoil, Shiyali Taluk, and the shrines and minor temples attached thereto, and charities and endowments thereof, together comprise the "Velur Devasthanam",

A •

II ,

SUBRAMANIA DESIGA v. STATE (Subba Rao,/.) 941

and it shall be governed by the provisions of Act XIX of 1951 and the rules made thereunder.

2. The properties, movables and immovables, belonging to be Devasthanam and that may hereafter be acquired by the Devasthanam shall vest in the deity of Sri Vaithianathaswami.

3. The administration of the Devasthanam and its properties shall vest in the Pandarasannadhi at the Dharmapuram Adhinam for the time being, who shall be the "trustee" of the Devasthanam.

4. On the application of the Commissioner, the Court shall have the power to add two additional trustees if at some future time it is found that it is necessary to do so in the interest of the Devasthanam on account of the mismanagement by the Pandarasannadhi, the Trustee.

5. All the affairs of the Devasthanam, such as the receipt of income, incurring of expenditure, management of the property, the performance of the worship and the festivals of the temple, bringing and defending suits on behalf of the Devasthanam, shall be conducted by the Executive Officer under the supervision of the trustee, the mamool religious functions of the Kattalai Thambiran being reserved.

6. The Trustee shall in April every year prepare a budget of the income and expenditure and such budget will be governed by the provisions of Madras Act XIX of 1951. The Trustee shall be given a discretion to spend any amount not exceeding Rs. 2,000/- (Rupees two thousand) every year in addition to the budgeted expenditure.

7. (a) The Trustee shall from out of the five names sent to him by the Commissioner choose one of them for appointment as the Executive Officer of the Devasthanam and such person shall be appointed by the Commissioner as Executive Officer and shall be in management of the Devasthanam and its properties in the dayto-day administration including the maintenance of accounts, keeping of records, making collections and disbursements, and shall have the control of the temple servants.

942 SUPllMB COURT :REPORTS

(1965] 28.C.R.

(b) The Executive Officer shall be a first class .l Executive Officer, and shall be paid such salary and employed on such terms as the Commissioner may from time to time prescribe and his powers and duties shall be regulated by Madras Act XIX of 1951 and the rules framed thereunder.

8. The Pandarasannadhi shall select from among the Thambirans of the Dharmapuram Adhinam a Kattalai Thambiran competent to do the religious functions of the Trustee.

The Pandarasannadhi will be responsible for all acts of the Kattalai Thambiran as a master for the acts of the servant

9. The Kattalai Thambiran shall attend to the performance in proper msnner and in proper times of the daily pujas and worship and of the monthly and yearly festivals of the Devasthanam under the supervision and direction of the Executive Officer.

10. (a) The matam building belonging to the Devasthanam in Vaitheeswarankoil shall be set apart for the residence of Kattalai Thambiran, and a sum of Rs. 50/- a month shall be paid to him for his maintennance and personal expenses.

He will also be entitled to the enjoyment of one veli of maniam land, as in the pre-scheme days.

(b) The present treasurer and shroff will continue in office on the present scale of pay, and they shall work under the directions of the Executive Officer and shall do such work as is assigned to them. The future treasurer and shroff will be appointed by the Commissioner.

The old scale of salary of the treasurer is reduced to the present scale of Rs. 100-5-125.

11. The Executive Officer shall, with the permission of the Commissioner, sell in public auction the jewels and ornaments gold and silver coins not in circulation and other metallic objects in the hundials except current coins and any other offerings.

12. The Trustee shall place one or more hundials, as occasions might require, for the deposit of voluntary and compulsory offerings by the worshippers. Each bundial shall be of copper brass or any other materials, and shall have metalic covering with an aperture. l!ach of such hundials shall be under double lock and

SUBRAMANIA DESIGA v. STATE (Subba Rao, /.)

scaled by the Trustee and the Executive Officer. One set of keys shall be with the Executive Officer and other set with the Trustee.

The hundials shall be opened every day or at such intervals as the Trustee may direct in the presence of the Executive Officer and the Kattalai Thambiran and the worshippers of the temple and the collections shall be kept by the Executive Officer.

13. In the matter of accounts, preparing abstracts, and receipts and disbursement of the Devasthanam as also of preparation, publication and audit of accounts, the Executive Officer and the Trustee shall observe the procedure prescribed in Madras Act XIX of 1951 and the rules made thereunder.

14. The accounts of the Devasthanam shall be open to inspection by any person having interest, on his giving one day's previous notice to the Executive Officer and paying a fee of Rs. 5 /- for each day or pan of a day in advance of such inspection.

The person so inspecting may bring to the notice of the Commissioner any irre- gularity and the Commissioner may pass such orders as he may think necessary.

15. All the records of the Devasthanam shall be kept in proper order in the premises of the Devasthanam provided for the purpose in Vaitheeswarankoil, and an accurate list of all records should be maintained. There shall be a record-keeper who shall be in charge of all the

records and he shall not allow any record to be taken out without the written authority of the Executive Officer and without getting proper vouchers.

16. Power is reserved to the Trustee to apply to the Commissioner for permission to use the surplus funds on such religious and charitable and other purposes as may tend. to promote the cause of the institution such as an Agama Patasala or Thevara Patasala or Adhyayana Patasala or such other purposes as are prescribed by the Act.

17. The Trustee shall have the discretion to maKe jewels, vahanams, etc., or to do thiruppani work for the Devasthanam out of the sumlus income of each vear after obtaining the sanction of the Commissioner and in accordance with the provisions of Act XIX of 1951, and the rules made thereunder. The Trustee shall have

a discretion to spend Rs. 2,000/- annually over and A above the sanctioned amount if necessary and if funds are available.

18. The Trustee may with the sanction of the Commissioner invest the surplus funds of the Devasthanam in such manner as is prescribed under Madras Act XIX of 1951 and the rules made thereunder.

19. There sh.all be no money dealings or transactions between the Devasthanam Trustee and the Adhinam or any of the Kattalai charities or trusts managed by the Pandarasannadhi of Dharmapuram or any person under his orders.

20. Save as expressly provided herein, the administration of the temple shall be governed by the provisions of the Madras Act XIX of 1951 and the rules made thereunder.

It will be seen from the aforesaid provisions of the scheme that it D

introduce~ an Executive Officer to be appointed by the Commissioner and removable by him; his salary is fixed by the Commissioner and his powers and duties are regulated by the Act and the rules framed thereunder. In substance, he is a servant of the Commissioner and is under his control. He is to be in charge of the entire administration of the temple.

Nothing can be dorie in E the temple without his permission.

It is true that he functions under the supervision of the Trustee; but there is an essential distinction between supervision and management. If the Executive Officer disobeys him, the Pandarasannadhi cannot do anything, except perhaps to complain to the Commissioner.

Such a drastic F provisiQn may be necessary in a case where the temple is mismanaged or if there are other circumstances which compel such an ap119intment. But there is concurrent finding of fact in this case 1tlj_i1j the Commissioer has failed to establish any of the chargesJevelled by him against the Trustee.

It is not, therefore, possible to hold that any case has been made out for the appoint- G ment of an Executive Officer who practically displaces the Trustee.

Mr. A. Ranganadham Chetty says that the appointment of the Executive Officer is necessary in view of the great things which have to be done in the temple, like sale of 3,000 acres of land to the tenants under the new legislation at agreed prices, H checking cash collections, including the hundial collections, doing away with the ad hoc auctioneers appointed by the Commissioner

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SUBRAMANIA DESIGA v. STATB (Subba Rao,/.) 9'5

A from time to time, and for auctioning leases, and all kinds of pm

perties like jewellery, lands, etc.

We have no material before

111 to find out what is the complicated and difficult action the Trustee has to take in the matter of selling 3,000 acres of land

to the tenants under the new legislation at agreed prices.

H there is any such difficulty, the Commissioner has ample powers B under the Act to issue orders or at any rate advice the Trustee in the matter of disposal of such lands.

Other difficulties are not such as to necessitate the appointment of an Executive Officer practically displacing the Trustee.

Further it appears from the record that the present Kattalai Thambiran is a legally qualified person and he can ordinarily be expected to look after these c things with appropriate expert advice.

We do not think any case has been made out for the appointment of the Executive Officer.

The next objection raised by Mr. Viswanatha Sastry relates to cl. ( 4) of th~ scheme, which reads :

D "On the application of the Commissioner, the Court

shall have the power to add two additional trustees if at some future time it is found that it is necessary to do so in the interest of the Devasthanam on account of the mismanagement by the Pandarasannadhi, the

Trustee."

Clanse 4 of the scheme only confers a power and it does not direct the appointment of additional trustees in presenti or even in future.

Indeed, s. 39 of the Act was amended in 1954 whereunder such a power is conferred even on the Commissioner. We do not think the appellant is in any way prejudiced by the said P clause. Therefore, it may stand. As we are deleting the clause appointing the Executive Officer, there will be consequential amendments in the various clauses of the scheme framed by the High Court.

It is brought to our notice that in 1959 the Madras Hindu G Religious and Charitable Endowments Act (Act XXIl of 1959) was passed by the Madras Legislature. Under s. 45 thereof, the Commissioner is given a plenary power to appoint an Executive Officer to any temple and, therefore, it is argued, this Court shall not interfere with the clause of the scheme providing for the appointment of an Executive Officer to the temple in question.

H The said Act was passed subsequent to the filing of the suit. We are deciding this appeal on the basis of the circumstances obtaining in the year 1951 when the suit was filed.

It may be

SUPUMJI' COURT lll!POllTS [196S] 2 s.c.L

that under the new Act the Commissioner has higher power1 A than he had under the 1951 Act and subsequent events may call for the exercise of those powers.

Our judgment will not preclude the Commissioner to take any action under the new

ict as the circumstances demand.

With these observations we atall proceed to modify the scheme framed by the High Court. ' B ;' :~

In the scheme framed by the High Court, clauses l, 2, 3, 4, 6, 10(a), 16, 17, 18, 19 and 20 will be retained; clause 7 will be deleted; and the other clause will be amended as under:

Clause 5. The words "the Executive Officer under the supervision of' will be omitted.

Clause 8. The word "religious" will be omitted.

Clause 9. The words "under the supervision and direction of the Executive Officer" will be omitted.

Clause lO(b) shall read :

The treasurer and shroff will continue in office on the present scale of pay, and they shall work under the directions of the Trustees.

Clause 11. The words "Executive Officer" shall be replaced by the word ''Trustee".

Clause 12 shall read :

The Trustee shall place one or more hundials, as occasions might require, for the deposit of voluntary and compulsory offerings by the worshippers.

Each hunclial shall be of copper brass or any other materials, and shall have metallic covering with an aperture.

Each of such hundials shall be under double lock and sealed by the Trustee or his nominee and the Kattalai Thambiran.

One set of keys shall be with the Kattalai Thambiran and the other set -with the. Trustee or his nominee.

The hundials shall be opened every day or at such intervals as the Trustee may direct in the presence of the Kattalai Thambiran and the worshippers of the temple and the collections shall be kept by the Trustee.

Clause 13. The words "Executive Officer" will be substituted by the words "Kattalai Thambiran".

SUBRAMANIA DESIGA v. STA.TB (Subba Rao, /.) 947

Clause 14. The words "Executive Officer" will be substituted by the words "Kattalai Thambiran".

Clause 15. The words "Executive Officer" will be substituted by the words "Kattalai Thambiran".

In the result, the decree of the High Court is modified as 8 aforesaid.

The parties will bear their respective costs throughi oat.

Decree modified.

SRI LA SRI SUBRAMANIA DESIGA GNANASAMBANDA PANDARA SANNADHI, TRUSTEE OF SRI VAIDYANATHASWAMI TEMPLE, VAITHEESWARANKOIL

STATE OF MADRAS

1965 (K. SUBBA RAo

RAGHUBAR DAYAL, J.

R. MUDHOLKAR

R. S. BACHAWAT

V. RAMASWAMI, JJ.

Charitable Endowments Act

Madras High Court

altali Thambiran

s. 62(3)

s. 58(2)

s. 39

A. V. Viswanatha Sastri

Naunit Lal

A. Ranr?anatham Chetty

A. Vedavalli

A .V. Rangam

Subba Rao

Dharmapuram Adhinam

.Pandarasannadhi

Kattalai Thambiran

High Court of Madras

Pandarasannadhi

Madras Legislature

June 16, 1951

Subordinate Judge, Mayuram

s. 62(3a)

Pandarasan- G nadhi

State of Madras

Madras

A. V. Viswanatha Sastry

A. Ranganadham Chetty

Section 58

s. 62

s. 103

Madras Hindu Religious Endowments Act

section 92

Code of Civil Procedure, 1908

s. 62(3)

s. 62(2)

s. 103

s. 62(3)

s. 92

the Code of Civil Procedure

s. 92

the Code of Civil Procedure

s. 58(2)

Section 58(2)

Vaithianathaswami

Vaitheeswarankoil

Devasthanam

Madras Act XIX of 1951

Devasthanam

Madras Act XIX of 1951

Pandarasannadhi

Madras Act XIX of 1951

Vaitheeswarankoil

Madras Act XIX of 1951

Devasthanam Trustee

Adhinam

Dharmapuram

Madras Act XIX of 1951

Viswanatha Sastry

s. 39

Charitable Endowments Act

Madras Legislature

s. 45

SUPUMJI' COURT

clause 7

Clause 5

Clause 8

Clause 9

Clause 11

Clause 12

Clause 13

Executive Officer

Kattalai Thambiran

Clause 14

Clause 15


RAMLAL ONKARMAL FIRM v.

MOHANLAL J"OGANI RICE AND ATIA MILLS February 16, 1965

B (RAGHUBAR DAYAL, J. R. MUDHOLKAR, R. S.

BACHAWAT

AND

V. RAMASWAMI. JJ.]

Debt-Discharge of on payment by cheque-acceptance by c~! !ecting bank draft in payment of cheque-Whether debt discharged.

In oayment of an amount due from them to the respondents. the aopellants sent to the respondents on August 31, 1948 a cheque which had been drawn on the Sibsagar branch of a Tripura Bank in favour of the appellants by a third party and thereafter endorsed by the appellants to the respondents. On September, 4, 1948, the respondents forwarded the cheque to their bankers, a Gauhati Bankwho, in turn, sent the cheque to the Tripura Bank at Sibsagar for encashment. That bank debited the amount of the cheque to the account of the third party and sent to the respondent's Gauhati Bank a draft which was payable at its own Head Office at Calcutta. Thereafter the respondents' Gauhati Bank forwarded the draft to their Head Office at Calcutta for collection but the latter never presented the draft and made no a !tempt to collect the amount of the draft.

In the meantime, the respondents bank closed its business on

Septmber 17, 1948 and was ordered to be wound up. About a month later, the Tripura Bank also closed its business and was compelled to enter into a scheme of arrangement with its creditors.

Upon the failure of their attempts to obtain payment of the draft amount from the Tripura B•nk, the respondents instituted a suit against the appellants claiming payment of their dues on the ground that the cheque dated August 31, 1948 was received by the respondents as a conditional payment, and as the cheque had not been cashed, the respondents were entitled to enforce their original claim. The sub-Judge dismissed the suit but the High Court in appeal reversed the decision and decree the suit.

On appeal to the Supreme Court, HELD: (per Raghubar D•yal, Bachawat and Ramaswami, JJ)- Although the respondents originally received the cheque as -a condi- -6 tional payment of their dues, and if nothing else had happened, the ori!\inal debt would have revived on non-payment of the cheque, havmg regard to the !aches of the respondents in the collection of the draft and the consequential prejudice to the appellants, the respondents must be deemed to have retained the draft as. absolute payment of the cheque and on the payment of the cheque, the original debt stood discharged. rl05 E-Fl B Chetty on Contracts, 22nd Edn. Art. 1079; Addison's Treating on the Law of Contracts, 11th Edn. p. 156;

flobkins v. Ware, L.R. (1869) 4 Ex. 268; Chamber.!yn v. Delarive, 2 Wils. K.B. 353, referred to. (per Mudholkar. , J.) : There was evidence to show that respondents' bank, instead of collecting cash from the Tripu"a Bank at Sibsagar, sought, for reasons of their own, to collect th; amount by draft. Furthermore, after the resrxmdent bank went into J:quidation, the respondents wrote to the Tripura Bank stating that the

lOJ

SUPREME

COURT

REPORTS (1965] 3 s.o.R.

amount of the demand draft belonged to them and not to their A bankers who were only acting as their agents for collection purposes and that accordingly the draft amount should be paid to them. Thus, though the cheque endorsed by the appellants in favour of the r.espondonts was only a conditional payment of the amount for which tne cheue was drawn, the respondents, by accepting the demand draft drawn by the Tripura Bank must be deemed to have accepted the draft as a legal tender or. as absolute payment of the amount payable under the cheque endorsed in their favour by the appel- B !ant. Their rights thereafter would rest only upon the demand draft

~!'d not upon the original debt which the appellant owed to them. 1 he remedy of the respondents, therefore, could be against their own bank, or against the Tripura Bank, but not against the appellants. fl08 E, 109 CJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 638 of 0 1962.

Appeal by special leave from the judgment and decree dated May 21, 1957 of the Assam High Court in First Appeal No.']., of 1962. ;

N.C. Chatterjee and D.N. Mukherjee. for the appellants.

D S.C. Nath, P.K. Chatterjee for R. Gopa/akrishnan, for the respondent.

The Judgment of RAGHUBAR DAYAL, BACHAWAT and RAMA- SWAMJ JJ. was delivered by BACH~WAT J. MUDHOLKAR J. delivered a separate Judgment.

Bachawat J. The appellants carrying on business at Raha in Now gong District had dealings with the respondents, carrying on business at Gatihati. As a result of the said dealings, the appel )ants were indebted to t, he respondents in a sum of Rs. 9,447-4-9.

In order to satisfy the dues of the respondents, the appellants sent

to the respondents a cheque for Rs. 9,461-4·0 dated August 31, F

1948. The cheque was drawn by a third party, Messrs. Nathuram Ja:dayal of Sibsagar on the Tripura Mo::!ern Bank, Sibsagar Branch, in favour of the appellants, who endorsed it to the respondents. On September 4, 1948, the respondents sent the clieque to

their bankers, the Calcutta Commercial Bank, Gauhati for collection. On the same day, the Calcutta Commercial Bank, Gauhati sent the cheque to the Tripura Modern Bank, Sibsagar

for encashment. The Tripura Modern Bank, Sibsagar debited the accounts of their constituents. Messrs Nahuram Jaidayal with the sum of Rs. 9,461-4-0, and after deducting Rs. 6·4-0 on account of commission charges, sent to the Calcutta Commerci3l Bank, Gauhati a draft for Rs. 9,435/- dated September 14, 1948 towards II payment of the cheque. The draft was drawn by the Tripura Modern Bank, Sibsagar on its Calcutta Head Office .. and was marked current for three months from the date of the issue. On receipt of the draft, the Calcutta Commercial Bank, Gauhati sent it to the'r Head Office at Calcutta for colh; ction.. But the Calcutta Commercial Bank never presented the draft to the Tripura Modern Bank, and made no attempts to collect the amount of the draft.

RAMLAL v. MUHANLAL (Bach.iwat, J.) 105

A In the meantime, the respondents wrote to the appellants informing them that cash payment for the cheque has not been recdved, and on September 18, 1948 the appellants replied asking the respondents to get back the cheque. But the cheque was never returned to the respondents. On September 17, 1948, the Calcutta Commercial Bank closed its business, and subsequently, it was B ordered to be wound up. On October 16, 1948, the Tripura Modern

Bank also closed its bus'ness, and in view of its inability to pay its dues, was compelled to enter into a scheme of arrangement with its creditors.

On November 19, 1948, the respondents requested the Tr, ipura Modern Bank to pay the amount of the draft to them and not to C the Calcutta Commercial Bank. But no payment was made by the Tripura Modern Bank either to the respondents or to the Calcutta Commercial Bank. On March 8, 1949, the respondents instituted the suit, out of which the appeal arises, claiming payment of their dues from the appellants on the footing that the cheque dated D August 31, 1948 was received by the respondents as a conditional payment, and as the cheque was not cashed, the respondents were entitled to enforce their original claim. The Subordinate Judge, Lower Assam District, dismissed the suit. On appeal, the High Court reversed the judgment appealed from, and decreed the suit.

The appellants now appeal to this Court by special leave.

E The High Court rightly held that the respondents originally received the cheque dated August 3], 1948 as a conditional payment of their dues, and if nothing else happened, the original debt would have revived on non-payment of the cheque. But we think that having regard to the laches of the respondents in the collection of the draft and the consequential prejudice to the appellants, the F respondents must be deemed to have retained the draft as absolute payment of the cheque, and on the payment of the cheque, the original debt stood discharged.

In Chitty on Contracts, 22nd &In., Art. 1079, the law is stated thus:

"Where a negotiable instrument, upon which the debtor is not primarily liable, is accepted by the creditor as conditional payment, he is bound to do all that a holder of such an instrument may do in order to get payment; thus it is his duty to present a cheque within a reasonable time, and if he fails to do so, and the debtor is thereby prejudiced, the creditor is guilty of !aches and makes the cheque his own, so that it amounts to payment of the debt." In Addison's Treatise on the Law of Contrac.ts, I Ith Edn., p. 156, it is stated:-

"If the debtor makes an order upon hs banker for payment of the amount of the debt, and the creditor accepts it, and keeps it in his hands an unreasonable time before

8'UPREME

COURT REPOltTS

[1965] 3 S.C.R.

presenting it for payment, and the banker becomes in- A solvent, the debtor is discharged on account of the !aches of the. creditor." In Ii ob kins v. Ware('), it was held that a creditor who takes from his debtx's agent on account of the debt the cheque of the agent, is bound to present it for payment within a reasonable time; and if he fails to do so and by his delay alters for the worse the posi- B tion of the debtor, the debtor is d'scharged, although he was not a party to the cheque. In the old case of Chamblerlyn v. Delarive('), it was held that if a creditor accepting a note or draft of his debtor upon a third person holds it an unreasonable time before he demands the money, and the person upon whom. it is drawn becomes insolvent, it is the creditor's own loss, though the draft be C not a bill of exchange or negotiable.

Now, in the instant case, the respondents accepted from their debtors, the appellants, a cheque drawn by a third party on the Tripura Modern Bank and endorsed by the appellants. The respondents through their collecting agents, the Calcutta Commercial D Bank, presented the cheque for collection to the Tripura Modern Bank, and instead of obtaining cash payment, received. a draft drawn by the Sibsagar Branch of the Tripura Modern Bank on its Head Office .. Having accepted this draft in course of collection of the cheque, the respondents vis-a-vis the appellants were in no better position than they would have been,· if they had accepted E the draft from the appellants d'rectly as conditional payment of the cheque. In the circumstances, the respondents owed a duty to the appellants to present the draft for payment within a reasonable time. The draft could be presented for payment at any time during the period of three months from the date of its issue. Instead of presenting the draft for payment, the respondents' collecting agents F kept it in their hands, and made no attempts to cash it. P.W. 3, an emPJoyee of the Calcutta Commercial Bank, said that the draft, was sent by the Gauhati Office of the Bank to its head office by registered post, but the head office had closed its business and the draft came back to the Gauhati office undelivered. The closure of the business of the collecting agents was not a lawful excuse for not G obtaining delivery of the draft and not presenting it for payment within a reasonable time. P.W. 3 admitted that had the draft been presented for payment to the Tripura Modern Bank before October 16, 194R, it would have been paid on presentation, and the money . could not be realised only because the Calcutta Commercial Bank had closed in the meantime. The Tripura Modern Bank closed its R business on October 16, 1948. Because of its inability to pay its debts, the Tripura Modern Bank is now working under a scheme of arrangement. The failiure of the respondents and their agents to cash the draft within a reasonable time altered the position of the appellants for the worse, and caused prejudice to them. In the circumstances, the respondents must be regarded as having kept the

I') L. R. [1869] 4 Ex. 268.

(1) 2 Wils. K. B. 353; 95 E.R. 854.

RA}!LAL V. McHANLAL (Mudh.otkar, J.) 107

A draft in absolute payment of the cheque. The cheque must be treated as duly paid and consequently, the original debt stood discharged.

The High Court was 'n error in holding that the failure to obtain payment of the draft was not due to the !aches of the respondents' collecting agents. In one part of the judgment, the High B Court wrongly assumed. contrary to fact, that the TriJYura Modem Bank had stopped business on September 16, 1948 and therefore the draft could not be cashed on oresentation, whereas, in fact. the Tripura Modern Bank had stopped business a month later on October 16, 1948. Moreover, the High Court wrongly assumed that the appellants did not suffer any loss on account of the delay in the C presentation of the draft. There 's clear evidence on the record that

the draft would have been cashed, if it had been presented for payment before October 16, 1948.

Mr. Chatterjee also contended that the respondents' collecting agents must be deemed to have accepted the demand draft on D September 14, 1948 as absolute payment of the cheque, and that the cheque was. in the eye of law, paid and discharged on that date. There is a lengthy discussion on this point in the j'udgment of the H; gh Court. but we do not think it necessary to decide this question.

In the result. the appeal is allowed, the judgment and decree E passed by the High Court are set aside, and those of the trial Court are restored. The respondents shall pay to the appellants the costs in this Court. The parties will pay and bear the'r own costs in the Courts below.

Mudbolkar, J. I agree with my brother Bachawat that this F appeal should be allowed; but I would prefer to rest my decision upon a different ground.

It is not necessary to repeat here the facts which have been set out in my learned brother's j, udgment. Mr. N. C. Chatter.iee, appearing for the defendants-appellants, urged two grounds, the first of which was that the plaintiffs-respondents had accepted the G draft for Rs. 9,455/- dated September 14, 1948 drawn by the Tnpura Modern Bank, S1bsagar on its Head Office at Calcutta in payment of the cheque for _Rs. 9,461-4-0 drawn on the Tripura Modern .Bank, S1bsagar wh•ch .the appellants had endorsed in favour of the respondents in satisfaction of the amount due upon that cheque and that, therefore, the subsequent dishonour of the H draft would not revive the appellants' liability to pay Rs. 9,455/- to the respondents. The other ground was 'that the appellants were

ischarged fro.m liability because of the !aches of the respondents m not presentmg the draft for encashment within reasonable time of the drawing of that draft. My learned brother has'rested his decision on the second ground. In my view, however, it is not necessary to express any opinin upon the second ground as the first ground urged by Mr. Chattef)ee 1s a good answer to the respondent's claim.

SUPREME

COUR1' n.EPOR'fS [J 965] 3 il.C.R.

It is a well accepted rule of English law, wh'ch has been ap- A -plied in this country also, that when a debt becomes due the debtor must tender to the creditor the exact amount of the debt in cash or other legal tender and that where a cheque is tendered by the debtor to the creditor the payment may be absolute or conditional, the strong presumption being in favom of conditional payment. (see Chalmers on Bills of Exchange, p. 301, 12th ed.). There- B fore, when the respondents accepted the cheque drawn by Messrs Nathuram Jaidayal of Sibsagar in favour of the appellants and endorsed by the appellants in their favour and sent it to the Calcutta Commercial Bank Ltd., Gauhati Branch for collection they must nave accepted ; t as conditional payment. The respondents' bank, instead of collecting cash from the Tripura Modern Bank Ltd., C_ Sibsagar, sought to collect the amount by draft. The reason for this given by Debendra Chandra Mazumdar, P.W. 3. who was A'-

sistant Accountant at the Gauhati Branch of the Calcutta Commercial Bank Ltd. at the relevant time was that the Bank 'usuallv collected money from other banks by draft. There is nothing to ind'cate in his evidence that this was the prevailing practice in the D Banks carrying on business in Assam. According to him, the respondents' bank asked for a draft payable at Gauhati but the Tri- -pura Modern Bank Ltd. sent one payable at Calcutta. The respondents' bank, however, accepted the draft and sent it by registered post to Calcutta for collection. Some time thereafter the respondents' bank closed business and the demand draft was returned E undelivered. The respondents' Bank made over the draft to the respondents. It may be mentioned thatthough the Tripura Modern Bank Ltd., had branch at Gauhati the respondents' Bank did not object to a draft payable at Calcutta thinking that the money due thereunder cauld be collected earlier from the Calcutta branch of F the Tripura Modern Bank. The matter, however, did not rest there.

After the respondents' Bank went into liquidation the respondents wrote a letter on November 19, 1948 to the Agent of the Tripura Modern 'Bank Ltd., Calcutta saying that tlie demand draft belonged to them and not to the Calcutta Commercial Bank Ltd., who were only acting as their agents for collection purposes and that G the amount for which the draft was drawn should be paid to them and not to the Calcutta Commercial Bank or any one on its behalf. This letter clearly shows that the respondents accepted the 'draft in full payment of the amount due to them under the cheque which the appellants had endorsed in their favour. Thus, though the cheque endorsed by the appellants in favour of the respondents H was only a conditional payment of the amount for which the cheque was drawn the respondents by accepting the demand draft drawn by the Tripura Modern Bank, Sibsagar on its Calcutta Branch must be deemed to have accepted that draft as a legal tender or as absolute payment of the amount payable under the cheqite endorsed in their favour by the appellant. Their rights thereafter would rest only upon the demand draft and not upon thl'. original debt which the appellant owed to them. It may be mentioned that the

ltAMLAL v. MOllANLAL (Mudholkar, J.) 109

A Trioura Modem Bank harl not gone into liquidation till a month

later and would, as stated by Debendra Chandra Mazumdar, P.W. 3 have been able to meet the draft had it been presented to its Calcutta Branch within reasonable time from the date on which it was drawn. It is because tbe respondents' Bank went into liquidation just about the time the registered letter containing the draft B was sent to Calcutta and no one took delivery of it that the draft could not be presented to the Calcutta Branch of the Tripura Modern Bank. The remedy of the respondents, therefore, could be against their own bank, that is, the Calcutta Commercial Bank or against the Tripura Modern Bank but certainly not against the appellants. Reliance, however, was placed by Mr. S. C. Nath for the C respondents upon the letter dated September JO, 1949 written by the appellant to the respondents in which the appellant wrote as follows.

" ............ and received your letter. You wrote that the payment of Rs. 9 ,461-4-0 had not been received. Please get the cheque D back. We have written to the drawer, which please note."

According to learned counsel, therefore, the appellant must be deemed to have accepted its liability upon the cheque which it had endorsed in favour of the respondents. There is no reference in this letter to the demand draft and it is quite clear therefore what the appellant said was in ignorance of the fact that the respondents' bank had accepted a demand draft in payment of the E cheque. It may be mentioned that the Tripura Modern Bank, Sibsagar had actually debited the account of the drawer of the cheque .. with the amount for which the cheque had been drawn. The cheque " had thus been honoured by them. But instead of paying cash they issued a demand draft at the instance of the respondents' bank.

This letter, therefore, does not improve matters for the respon- F dents. •

. For these reasons the appeal is allowed, the decree. of the High Court is set aside and that of the trial court restored. The respondents will pay. the appellants' costs in this Court and in the Courts below and bear their own costs.

Appeal allowed.

L/B(D)2SCI-9

RAMLAL ONKARMAL FIRM

MOHANLAL J"OGANI RICE AND ATIA MILLS

B (RAGHUBAR DAYAL, J.

R. MUDHOLKAR

BACHAWAT

V. RAMASWAMI

Tripura Bank

Sibsagar

Calcutta

Septmber 17, 1948

Tripura B•nk

August 31, 1948

Supreme Court

Raghubar D•yal

Bachawat

Ramaswami

Art. 1079

Mudholkar

Tripura Bank

N.C. Chatterjee

D.N. Mukherjee

D S.C. Nath

P.K. Chatterjee

R. Gopa

BACHAWAT

RAMA- SWAMJ

BACH~WAT J. MUDHOLKAR

Nathuram Ja:dayal of Sibsagar

September 4, 1948

Calcutta Commercial Bank, Gauhati

Tripura Modern Bank, Sibsagar

Nahuram Jaidayal

Calcutta Commerci3l Bank, Gauhati

September 14, 1948

Calcutta Commercial Bank

Tripura Modern Bank

September 18, 1948

September 17, 1948

October 16, 1948

Tripura Modern

Bank

November 19, 1948

ipura Modern Bank

March 8, 1949

Subordinate Judge, Lower Assam District

August 3], 1948

Chitty

Art. 1079

Calcutta Commercial D Bank

Gauhati

October 16, 194R

V. McHANLAL

Mudh.otkar

TriJYura Modem Bank

September 16, 1948

Chatterjee

Mudbolkar

Bachawat

N. C. Chatter.iee

Tnpura Modern Bank

Chattef)ee

Nathuram Jaidayal

Calcutta Commercial Bank Ltd., Gauhati

Tripura Modern Bank Ltd., C_ Sibsagar

Debendra Chandra Mazumdar

Calcutta Commercial Bank Ltd.

Assam

Tri- -pura Modern Bank Ltd.

Tripura Modern Bank Ltd.

Tripura Modern 'Bank Ltd., Calcutta

Trioura Modem Bank

S. C. Nath

September JO, 1949


llO

KESHARit':BAND IAISUKBAL

THE SHILLONG BANKING CORPORATION

February 16, 1965

(RAGHUBAR DAYAL, J. R.

MUDHOLKAR,

R. S. BACHAWAT AND B

V. RAMASWAMI, JJ.] Banker and Customer-Nature of relationship between.

Indian Limitation Act (9 of 1908), Art. 81>--Mutual dealings between Banker and Customer-If article applicable.

The appellant had a combined overdraft and deposit account, C also described as a mutual open and current account, with the respondent bank. In December 1946, the respondent credited two chegues 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 D 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 inform ing him.

On the instructions of the appellant, who was informed about the dishonouring of the cheque, the respoJldent accepted a demand draft from the Bharati Central Bank drawn on its Calcutta B 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 h€ treated as a preferential .F 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.

G 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 negli!iently or in H 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. r114 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

KESliARICl!AND V. S.B. CO.RP. 111

and applicable to the matter in hand. The banker is also J?ound to use reasonable skill and diligence in presenting and securmg 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 iristant case. received the two cheques for coJlection in the usual way as agent of the appel-. !ant 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 1-iquidation

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 bes~ interests. fl14 A, F-H; 115 A-Bl

(ii) The respondent gave loans on overdrafts and the appellanl 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. f121 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 that the respondel).t 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 whir.h the cheques were drawn, have become upon realisation of tl1e cheques drawn by the appellant an actual recipient of the money from the appellant. Therefoe. though it is true that the amount was not received by the respondent in cash it must be deemed to have 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 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. f118 H; 120 A, C, F-Hl

CIVIL APPELLATE JurusmcnoN: 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.

SUPREME

COURT REPORtS

(1965] 3 S.C.R.

The Judgment of RAGHUBAR DAYAL, R. S.

BACHAWAT and A

v. RAMASWAMI, JJ. was delivered by BACHAWAT, J. MUDHOLKAR, J. delivered a separate Opinion.

Bachawat, J. The respondent is a banking company now in liquidation. The appellant had a combiµed overdraft and deposit account with the Shillong branch of the respondent. On December B 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 Cenc tral 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 I 0, 1946, the respondent presented the cheque to the Nath Bank for payment. The Nath Bank returned D the cheque w'th the remark "f:ull cover not received". The respondent orally informed the appellant of the non-payment of the cheque on the Nath Bank, and on December 11, 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 "ful.l cover not received", and the respondent E 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 refpondent accepted from the Bharati Central Bank a demand F 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 G 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 H 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 appellant refused to give any instructions, 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 liquidati.on of the Bharati Central Bank, and was admitted as a preferential creditor for the amount

KESHARICHAND v. s.n. CORP. (Bachr>wat, J.) 1!3

A 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 :he appellant and the respondent continued, and the last entry in the combined overdraft and deposit account is dated December B 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 applicat'on 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:-

(J) Is the suit barred by l'mitation, and

14) 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 E 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 tht the respondent accepted the draft w'th the cor..rnt and sanction of the appellant. This finding is no longer challenged. But the appellant before us contends that F the respondent having credited the appellant's a; count 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 ac count of and as agent of the appellant, and that in any event the G respondent acted negl'gently 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 th~ 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 witnes>" called on behalf of the respondent, the two cheques on !he Bhara,.

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 entruste:I to the respondent for realis1tion. Bevond doubt. on Dec::mber 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.

A 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 II, 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 dishonoured, the respondent debited the appellant's account with the like amount. It does not B 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 C 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 D on behalf of the respondent, it was not the usual practice of the banks at ShillO!!g to collect cash in all .ses in respect of cheques entrusted for collection. When the respondent found that the drawee Bank instead of paying cash offered to pay by a cheque, the respondent acting in good faith in the int~'.'ests of the appellant, accepted the cheque on its own responsibility. On being in- E formed 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 11 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 F steps taken by the respondent in the matter of coUection 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 G 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 i~ also bound B 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 acred negligently of in breach of its duties or contrary to any instructions given by the appellant or any lawful • usages prevailing amongst bankers at Shillong.

KESIU.RICllAND V. 8.B, CLRP. (Bachalliat, J.) 115

l 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 B 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 Liqu; dator of the Bharati Central Bank. The Courts below C rightly answered issue No. 4 in the negative.

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(0) of the D 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(0). 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 E 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 dis

1 pute is whether it was mutual during the relevant period.

Now in the leading case of Hirada Basappa v. Gadigi Muddappa('). 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(') and Monotosh B K. Chatterjee v. Central Calcutta Bank Ltd.('), and the first mentioned Calcutta case was approved by this Court in Hindustan Forest Company v. Lal Chand('). 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

(') [1871) VI Modraa High Court Reports. 142, 144.

(1) [1931) l.L.R. !\80.I. 60

(1) (1953] 91 C.L.J. 16.

(') (1960) I $.C.R. 563.

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have been reciprocal demands, between the parties". The addition of A those words in the corresponding Art. 87 of Act IX of 187l, 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 B obligations on the appellant to repay them. The respondent was under independent obligations to repay the amourit 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 c 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 part'es. and the account was mutual. This mutual account was fairly active up to D

une 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 cont'nued until 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 E is not barred by limitation, having regard to s. 45 (0) 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(0) 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 dism'ssed 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 (] 0 of 1949) by 'the Liquidator of the respondent, the Shillong Ban~- ing Corporation for inclusion of the name of the appellant in the H 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 underthe Banking Companies Act. The fourth item in the Annexure is "Description of

KESHARHHAND V. 8.B. CORP. (Murlho/br. J.)

11 T

A papers, writings and documents, if any, relating to each debt". In respect of this item the following particulars ha vc been set out:

"A cheque for Rs. 8.800 on Bharati Central Bank Ltd., Shillong was realised by the Bank 'on behalf "of the pcuty' by a Demand Draft on Calcutta Branch of the Bharati Central Bank Limited. but the said Demand-D; aft 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 adm; tted." A notice of this claim having been served on the appellant he preferred an objection before the Court. There, the appellant bad C contendd 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 ; n 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 reafaed 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 ; ntimation 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 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 ; s 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." G 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?" H The only oral evidence tendered was that of Narendra Nath Dutta, Assistant of the respondent Bank. Upon a cons; deration 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. inter1!61 on the decretal amount till realisation.

An appeal was preferred by the appellant under the Letters Patent

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and that having been dismissed he has come up before this court A 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 B to the Bharati Central Bank Ltd., Shillong Branch upon which they were drawn. Instead of obtaining cash from the Bharati Cen tral Bank the respondent obtained and accepted from that Bank a cheque on the Nath Bank Limited. This the respondent did, as ad- ' mitted by Dutta, without consulting the appellant. Dutta has further admitted that the respondent Bank obtained the cheque on C 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 pro- D ceeds, the respondent contected 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 and have been so treated. lt is contended on behalf of the appellant that the respondent having accepted the demand draft on their own responsibilicy and having sought to be treated as preferential creditors of the Bharati Central Bank and having in fact been so treated cannot now G 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 myse1f 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 H 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

KESllARICBAND v. s. B. CORP. (Mudholk1r, J.) 119

A 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 Practke and Law of Bank- B ing by H.P. Sheldon, 8th edn. p. 20 I). 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 d; scharge the debt by paying over an equal amount when called upon." Sheldon has quoted the following ob- C servations 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 princ; pal 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 paying 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 custo- F mer 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 bills for his customer's account, and G 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 s 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 favour of "self" what endorsement he had made on the hack 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

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with the respondent it may well be that money was owing by him A to the respondent on that date and, therefore, he drew these two cheq'ues on the Bharati Central Bank and credited them in his account with the rei; pondent. 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 res- B peel to the amounts for which the cheques were drawn, have become actual recepients 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 C would show that the respondent accepted the position that they were acting in this matter not as the appellant's agents but as payees. This explains why, as admitted by Dutta. the respondent accepted from the Bharati Central Bank cheques on Nath Bank r>n their own responsibility instead of insisting upon cash. Indeed. as pointed out at p. 300 in Chalmers on Bills of Exchange (8th edl D "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 writin_g was sent to the appellant by E 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. B'ut after that-draft was dishonoured on presentation. no information whatsoever was given to the appel- F !ant. 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 G 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, Shillong, 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 H upon those cheques. 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 t'une 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 he Reard to say that they merely acted as the appellant's agents.

KESHARICHAND V. s. B. CORP. (Mudholkar, J.) 121

A 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 B the appellants costs both here and in the High Court.

ORDER BY COURT

In accordance with the opinion of the majority, this apcal is dismissed with costs.

THE SHILLONG BANKING CORPORATION

February 16, 1965

RAGHUBAR DAYAL, J.

MUDHOLKAR

R. S. BACHAWAT

V. RAMASWAMI, JJ.

Indian Limitation Act

Art. 81

Shillong

Bharati Central Bank

Nath Bank

Calcutta

Shillong\

s. 45D

Banking Companies Act, 1949

Supreme Court

Raghubar Dayal

Bachawat

Ramaswami

s. 45

Companies Act

Mudholkar

Assam High Court

P. K. Chatterjee

R. S.

BACHAWAT

A

v. RAMASWAMI

BACHAWAT

MUDHOLKAR

Bharati Central Bank, Shillong

Bharati Cenc tral Bank

December 9, 1946

Nath Bank, Shillong

December I 0, 1946

December 11, 1946

December 13, 1946

Bharati Central Bank, Calcutta

December 16, 1946

January 2, 1947

January 11, 1947

January 28. 1947

December B 29, 1950

February 26. 1953

May 24. 1953

June 28, 1954

s. 45(D)

Banking Companies Act, 1949

December 9, 1945

Art. 85

Indian Limitation Act, 1908

s. 45(0)

Limitation Act

s. 45(0)

Art. 85

Indian Limitation Act, 1908

s. 8

Art. 87

Art. 85

Art. 85

Madras

D

une 25, 1947

December 29, 1950

s. 45

Companies Act

s. 45(0)

Companies Act

Bachawat

s. 45

Banking Companies Act, 1949

Shillong Ban~- ing Corporation

Companies Act

Bharati Central Bank Ltd.

Bharati Central Bank Ltd., Shillong

Bharati Central Bank Limited

G Deka

Narendra Nath Dutta

Dutta

Deka

Bharati Cen tral Bank

Nath Bank Limited

Dutta

December 10, 1946

H.P. Sheldon

Sheldon

Cottenham

Atkin

December 11, 1960

Chalmers

Bharati Central BanK

KESHARICHAND

s. 45

Companies Act