Achhru Ram, J.
1. This order will dispose of also civil Misc. Nos. 6, 7, 8 and 12 of 1948 in Civil Original No. I [1] of 1948. All these petitions are made for the issue of directions to the New Bank of India, Limited, for payment to the petitioners in full of the amounts of their respective claims.
2. In civil Misc. No. 4 of 1948 the petitioner is one Mr. Shiam Lal, originally of Lyallpur, now residing in Qarol Bagh in Delhi. He got a draft for Rs. 32,000 from the Lyallpur Branch of the bank on 11th August 1947, on payment of a sum of Rs. 32,000 in cash besides the amount chargeable by the bank by way of commission for exchange. The allegations contained in his petition supported by two affidavits filed by him on 11th March 1948 and 24th May 1948, are that eommunal disturbances in the Western Punjab, particularly in Lahore, having taken a very serious turn, the petitioner decided to leave Lyallpur and to go over to Delhi for purposes of security of life and property, that he happened to be in possession of a sum of Rs. 32,000 at the time, that instead of carrying the said amount on his person he thought it fit and desirable to get a draft from the New Bank of India, Limited, Lyallpur on the New Bank of India, Delhi and that he obtained such a draft by paying the aforesaid sum into the Lyallpur Branch of the Bank on 11th August 1947. It is further alleged by him that he happened to misplace the draft and was accordingly unable to present the same to the bank immediately after his arrival at Delhi, that he had actually to advertise the loss of the draft in Hindustan Times, that he was eventually able to trace the draft but that by that time moratorium had been declared and the bank refused to pay to him otherwise than in the terms of the said moratorium. The affidavit filed by the petitioner on 24th May 1948 further shows that at the time of getting the draft the petitioner had no kind of account with the bank. The correctness of these statements has not been denied on behalf of the bank although his claim to payment otherwise than in the terms of the scheme is stoutly disputed.
3. In civil Miscellaneous No. 6 of 1948 the petitioner is one Ganga Ram of Khanewal. He alleges that on 17th July 1947, he obtained two drafts of Rs. 15,000 each from the Khanewal Branch of the respondent bank, one of the drafts being drawn on Delhi Branch and the other on New Delhi Branch of the bank. It is further alleged by the petitioner that he took out the drafts for the transfer of his money to Delhi. In the petition it is alleged that the petitioner reached Amritsar about the middle of September 1947 and then proceeded to Delhi in the last week of the aforesaid month, and that on getting to Delhi he presented the drafts when the bank refused to honour them. The petitioner also claims to have deposited with the Khanewal Branch of the Bank torn and mutilated currency notes of the value of Rs. 210. It is claimed that the petitioner is entitled to payment in full of the amount of the two drafts as as well as the sum of Rs. 210 representing the value of the aforesaid currency notes. The respondent bank does not deny that two drafts of the value of Rs. 15,000 each were obtained by the petitioner from the Khanewal Branch on 17th July 1947 or that torn and mutilated currency notes of the value of Rs. 210 were deposited with the aforesaid branch. The right of the petitioner to claim the payment in full of the amount realised or to be realised by the bank in lieu of the aforesaid torn and mutilated currency notes or to have those notes returned in specie is not denied. His claim to the payment in full of the amounts of the two drafts is, however, strenuously resisted. It is also denied that the drafts were ever presented to the bank at any time before the declaration of moratorium.
4. In civil Miscellaneous No. 7 of 1948 the petitioners are Messrs. Hubmi Mal Sham Lal who carry on business in Ludhiana. They allege that on 2nd September 1947 they paid a sum of Rs. 2,000 into the Ludhiana Branch of the respondent bank and obtained a draft for the afore. said sum drawn on the Dehra Dun Branch of the said bank in favour of Mr. Kanwal Dev Mehra and that on the draft being presented by the aforesaid Mr. Kanwal Dev the Dehra Dun Branch of the respondent bank refused to pay the amount. It is further alleged that on 25th September 1947 the petitioners paid a sum of Rs. 19,987-8.0 into the New Delhi Branch of the respondent bank and obtained a pay order for the aforesaid sum in favour of the Imperial Tobacco Company, Limited, that the aforesaid pay order was presented by the said company to the respondent through the Lloyds Bank but was dishonored. The presentment is admitted to have been made after the declaration of the moratorium. It is alleged that the petitioners have settled with Mr. Kanwal Dev and the Imperial Tobacco Company, Limited and have paid them off and that accordingly they are entitled to claim the amounts of the draft and the pay order. They maintain that they are entitled to the payment in full of the amounts of the draft and the pay order. The respondent bank does not deny the payment by the petitioners of the aforesaid two sump of money into its two branches named above and the issue of a draft and a pay order by the said branches in the manner alleged. It, however, does not admit the petitioners' right to the amounts of the draft and the pay order and denies that they are (it is?) in any case liable to pay them the said amounts in full.
5. In civil Miscellaneous No. 8 of 1948 Firm Chhaju Mal Ram Bhaj Mal of Hoshiarpur claim the payment in full of the amount of a draft obtained by them from the Hoshiarpur Branch of the respondent bank on 20th September 1947 for a sum of Rs. 15,000 drawn on the Amritsar Branch of the bank. It is alleged that the draft was presented at Amritsar on 25th September 1947 but was not honoured on the same excuse and that the Amritsar Branch of the bank had deliberately and mala fide withheld the payment of the amount of the draft which was payable on demand. On behalf of the respondent, it is admitted that the petitioners did get a draft for Rs. 15,000 from the Hoshiarpur Branch on 20th September 1947. The presentment of the draft at Amritsar on the dates mentioned above is not denied nor is it denied that the aforesaid branch refused to honour the draft on the ground mentioned. However, it is denied that the withholding of payment was mala fide and the petitioners' claim to the payment in full of the amount of the draft is repudiated.
6. In civil Miscellaneous No. 12 of 1948 Mr. Sham Lai, P.C.S., a Subordinate Judge in East Punjab claims payment in full of the amount of draft for Rs. 1,785 obtained by Messrs. Bal Krishan Jogindar Pal of Sheikhupur from the Sheikhupura Branch of the bank drawn on the Jullundur Branch and in favour of the petitioner. The petitioner admits that he had not presented the draft to the bank before moratorium, but explains this omission by saying that he was unable to do so on account of disturbed conditions in the Province and on account of his being held up in Dharamsala. The claim of the petitioner to the payment in full of the amount of the draft is denied by the respondent.
7. It will be observed from a summary of the pleadings of the parties in the various petitions given above that except in civil Miscellaneous No. 6 of 1948 both the parties are agreed so far as the questions of fact are concerned .In civil Miscellaneous No. 6 of 1948 the allegation of the petitioner as to the drafts having been presented at the Delhi and New Delhi offices of the respondent bank has been very emphatically denied. The only evidence led by the petitioner in support of his allegation is his own and the respondent bank has examined the managers of the two branches in rebuttal. After a careful perusal of this evidence, I have no hesitation at all in rejecting the testimony of the petitioner as wholly untrustworthy. In his examination, in-chief he stated that he had reached Amritsar on about 20th or 22nd September 1947, that from Amritsar he proceeded to Delhi and that; he presented the drafts at the two offices first on 23rd September 1947, then on the following day and a third time four or five days later. In cross-examination he stated that he reached Amritsar on 20th or 21st September 1947 and reached Delhi on the night of 22nd September 1947 leaving Amritsar by a train in the morning on 21st September 1947 after having stayed at Amritsar only for one day. If he left Amritsar on the morning of 2lst September after having stayed there for one day he must have arrived there at some time on 20th September. He was later on constrained to admit that after 5th September 1947, it was for the first time on 19th September 1947 that a train left Khanewal for Amritsar and it was by that train that he had travelled. He also admitted that the train by which he had travelled from Khanewal to Amritsar had taken three days to reach Amritsar. It is inconceivable that this man left Khanewal on 19th September, had to remain in the train bound for Amritsar for three days and yet was able to reach Amritsar on 20th September and to leave that place in the morning on 21st September. The evidence given by the petitioner clearly shows that he has very little regard for truth. In the circumstances, I see no reason not to believe the evidence given by Kailash Chander R.W. 2 who was at the material time the manager of the old Delhi Branch of the respondent bank and of R.W. 1, Jagjit Singh; Malhotra, the manager of the New Delhi Branch of the respondent bank that the drafts were not presented by the petitioner at any time before the moratorium.
8. In Civil Miac. No. 7 of 1948 the petitioners have filed the affidavits of Mr. H.L. Makol, Depot Accountant of the Imperial Tobacco Company, Limited, New Delhi, Mr. Kanwal Dev Mehra and Hari Chand son of Sham Lal one of the proprietors of the petitioner firm. The affidavit of Mr. Makol is to the effect that on the pay order having been dishonoured they had returned the same to the petitioners along with their letter dated 30th September 1947 and having realised the sum from the petitioners had no further interest left in the pay order. The affidavit of Mr. Kanwal Dev Mehra is to the effect that he presented the draft at the Dehra Dun Office on 15th September 1947, but was refused payment on the ground that no advice had yet been received from the Ludhiana Branch, that he represented the draft three days later, but was put off with the same reply and that having failed to get payment of the amount of the draft, he had returned the same to the petitioners and having been paid the money by the said petitioners had no further interest left in the draft. The affidavit of Mr. Hari Ghand no further supports the statements contained in the above two affidavits. No counter-affidavits have been filed. In the circumstances, the facts stated in these affidavits may reasonably be accepted as having been established. In view of the affidavits of the representative of the Imperial Tobacco Company, Limited, and Mr. Kanwal Dev Mehra it is obvious that the aforesaid two persons have no further interest left in the pay order and the draft respectively. Accordingly, it must be held that it is the petitioners who are entitled to claim the amounts of the draft and the pay order whether the same are payable in full or in the terms of the scheme.
9. The question that arises for decision in all these petitions is whether the petitioners or any of them are entitled to the payment in full of the amounts claimed by them or they must rank with the general body of creditors and content themselves with receiving only such dividends as are payable under the scheme to such creditors.
10. The main contention of the learned Counsel for the petitioners was that the drafts in these cases were obtained by the respective parties with the object of transmitting money to some other place, in some cases for payment to the transmitting party and in others for payment to some other persons on the transmitter's behalf. It was urged that in these transactions the bank acted merely as an agent employed for transmitting the money and, therefore, held such money in a fiduciary capacity and not as a part of its general assets. It was further urged that the money having in these cases been handed over to the bank for a particular purpose must be deemed to have been specifically appropriated to such purpose and to bank to hold the same in a fiduciary capacity. It was contended that the bank having failed to apply the money to the purpose for which it was entrusted to it, the petitioners were entitled to claim it back in full and could not be compelled to rank with the general body of creditors. In case of the draft drawn in favour of Mr. Kanwal Dev Mehra in Civil Misc. No. 7 of 1948 and in case of the draft forming the subject-matter of Civil Misc. No. 8 of 1948, it was also contended that although the drafts had been presented for acceptance and payment before the moratorium, the officials of the bank had dishonestly refused to honour them and that in respect of all these drafts at least from the dates of the demand and refusal, the bank must be deemed to be holding the money as agents of the petitioners in those cases and, therefore, in a fiduciary capacity. It is maintained that the relationship between the petitioners and the respondent not being that of creditors and debtor, the petitioners can claim payment in full of the amounts of their respective drafts.
11. The contention of Mr. Ved Vyas on behalf of the respondent bank was that a draft is a bill of exchange and that any person who pays money, into a bank in order to get in exchange therefor a draft whether drawn in his own favour or in favour of a third party, and whether the drawee is another branch of the same bank or a different bank or branch of a different bank, the bank or branch drawing the draft can in no sense be regarded as an agent of such person and that the relationship between the drawer and the person who gets the draft cannot be regarded as in any manner different from that existing between an ordinary debtor and his creditor. The learned Counsel maintained that none of the petitioners had made out any claim to a right to preferential payment. He admitted that if the bank could be deemed to be holding, on the date of the moratorium, the amount claimed by any of the petitioners either as an agent or otherwise in a fiduciary capacity, such petitioner would be entitled to' an order for payment in full of the amount of his claim, but he was not prepared to concede that if otherwise the relationship existing between a particular petitioner and the respondent was that of a creditor and a debtor, the nature of the relationship could be altered and the respondent could be deemed to hold the money in a fiduciary capacity merely because, after maturity but before moratorium, the amount of the draft concerned was demanded but not paid.
12. On behalf of the petitioners, reliance was placed on three decisions of the Madras High Court namely: Official Assignee, Madras v. Oriental Government Security Life Assurance Co, Ltd. 33 Mad. 150, Official Assignee, Madras v. D. Rajam Ayyar 36 Mad. 499 and Barkat All and Ors. v. James Voce Pirrie, Cyril Gill A.I.R. 1940 Mad. 139 and a decision of a Bench of the Judicial Commissioners of Sind namely: Mercantile Bank of India, Ltd. v. Rochaldas Gidumal & Co. A.I.R. 1926 Sind 225 while the learned Counsel for the respondent relied on the judgment of the House of Lords in Citizens' Bank of Louisiana and Ors. v. The First National Bank of New Orleans and Ors. (1874) 43 L.J. Ch. 269, the decision of a learned single Judge of the High Court of Madras in Secretary, All India Spinners' Association, Tamil Nad Branch v. James Voce Pirrie, Cyril Gill A.I.R. 1940 Mad. 101 and the judgment of a Division Bench of the Chief Court of the Punjab in Alliance Bank of Simla, Ltd. v. Amritsar Bank A.I.R. 1915 Lab. 214.
13. In Official Assignee, Madras v. Oriental Government Security Life Assurance Co., Ltd. 33 Mad. 150, a sum of Rs. 970 was due to one Mariam Chandy by the Oriental Government Security Life Assurance Co. Ltd. Mariam Chandy asked the said company to remit the money direct to her by a cheque 4rawn on Arbuthnot & Co. By an oversight, the Assurance Company sent to Arbuthnot & Co. a cheque for Rs. 970 drawn on the National Bank of India, and asked them to place the amount to ?the credit of Mariam Chandy. The latter had at the time no account with Arbuthnot & Co. The said bank informed Mariam Chandy that the amount was at her credit. She on 5th October 1906 asked Arbuthnot & Co. to remit the money. The company sent her a form of receipt for signature. This receipt was duly signed and returned. After the receipt had reached them, Arbuthnot & Co. suspended payment. Mariam Chandy assigned her claim to the Oriental Life Assurance Company which lodged a claim for the payment in full of the amount of RS. 970 that had been received by Arbuthnot & Co. for Mariam Chandy but had not been paid to her, alleging that the company in liquidation was not a debtor of the said Mariam Chandy in respect of that amount but held the same in a fiduciary capacity as an agent on her behalf. The claim of the company as assignee of Mariam Chandy was allowed by the learned Chief Judge acting as the Commissioner and his decision was affirmed on appeal by a Division Bench consisting of Munro and Abdul Eahim, JJ. Although there is not much similarity between the facts of this case, and those of any of the present petitions, the following observations in the judgment of Munro, J. do appear to support the claim of the petitioners in civil Miscellaneous No. 7 of 1948 and civil Miscellaneous No. 8 of 1948:
As the receipt and demand (or payment reached Arbuthnot & Co. before they suspended payment, the result was the same as if Mariam Chandy had attended in person at the bank, handed over the receipt and asked for payment. In that case Arbuthnot & Co. would have been bound to pay her at once. Bat as she did not attend in person it was their duty to remit the money at once as requested, and failing to do so they thereafter held the money in a fiduciary capacity: vide my judgments in Official Assignee of Madras v. Ramchandra Aiyar 33 Mad. 134 and Official Assignee of Madras v. Luporian 33 Mad. 145.
Before proceeding to examine the other cases relied on by the learned Counsel for the petitioners, I wish here to refer to the judgment in the Official Assignee of Madras v. Ramchandra Aiyar 33 Mad. 134 to which reference has been made by Munro, J. in the passage quoted above because that judgment deals at greater length with one of the questions raised in the above-mentioned two petitions. In the said case, the respondent Ramohandra Aiyar was the holder of a fixed deposit receipt for Rs. 1890 for one year from Messrs. Arbuthnot & Co. dated 9th October 1905. The amount of the deposit with interest having fallen due on 9th October 1906 he wrote to Messrs. Arbuthnot & Co. on 18th October 1906 enclosing the deposit receipt duly signed and requesting them to send him the amount due. The letter reached Messrs. Arbuthnot & Co. on 19th or 20th October at the latest. They suspended payment on 22nd October. On these facts, the learned Chief Judge acting as the Commissioner found that Messrs. Arbuthnot & Co. having received a demand for payment before suspension held the money in a fiduciary capacity. On an appeal coming up before a Division Bench consisting of Munro and Abdul Eahim, JJ. the former agreed with the Commissioner while the latter took a contrary view. In the result, the appeal was dismissed and the judgment under appeal was upheld. Munro J. in dealing with the question observed as follows:
Now we have seen that a person at the time of paying money into a bank may give directions which cause the banker to hold the money in a fiduciary capacity. If the money has been paid in without such directions is there anything to prevent directions being given by the customer at a subsequent time with the same result? I think not. The customer, in the case supposed is, if the money was paid into his current account, entitled to go to the banker at any time and demand repayment of his money and the banker is at once bound to repay. The customer having received his money may at once hand it back to the banker with directions such as cause the banker, if he accepts the money, in future to hold the money in a fiduciary capacity. But it would be absurd to say that it is necessary for the customer to go through the process of actually receiving his money across the counter and handing it back. It is manifestly sufficient if he gives his directions. On receipt of those directions the banker, if he retains the money, is bound to act at once upon them and thereafter to deal with the money as if it had actually been repaid to the customer and again paid in with the directions and it need hardly be said that it is not necessary for the customer to give his directions in person. If the money was paid into a fixed deposit account, the same rule would on the same line of reasoning apply after the expiry of the period of the deposit.
From the above it is dear that when Messrs. Arbuthnot and Co., on 19th or 20th October received the respondent's demand for repayment it was their duty to remit the money at once. After this demand, they held the money in the same way as if on the day the demand was made the respondent had received the money, and had then handed it back and asked them to hold the money for him in trust pending remittance to him at a future date.
We have not been referred to any oases in which the affect of demand as between banker and customer has been considered. There is another class of cases, however, in which a principle similar to that I have followed has been laid down. See for instance ex parte Ward; In re Couston (1872) 8 Ch. A. 144, where it was held that certain goods did not pass to the trustee in liquidation inasmuch as prior to the bankruptcy the owner had demanded possession from the bankrupt.
In the judgment of Abdul Rahim, J. who took a contrary view on this subject the following observations made at page 144 of the report may be quoted with advantage:
The argument urged before us on behalf of Ramachandra Aiyar which apparently found favour with the learned Commissioner is that from the moment the letter reached Arbuthnot and Co., the latter must be taken to have held the Rs. 1,890 as trustees or quasi trustees for Ramchandra Aiyar because upon the demand being made Arbuthnot and Co., were bound to hand over the money to their customer. We have hot been referred to any authority in support of this proposition which upon a little reflection would appear to be wholly untenable. The contention really resolves itself into this, that a creditor is competent 'simply by making a demand for his debt to turn his debtor into a trustee with respect to the amount of the debt without the debtor having even at any time accepted such a position. This, if allowed, would go far to obliterate all distinction between a debt and property held in trust and it that be the necessary result of such an argument it at once shows the utter unsoundness of it. Here undisputedly Arbuthnot and Co., were mare debtors of Ramchandra Aiyar in respect of the amount in deposit account and on expiry of the fixed period they became liable to repay the debt and there is nothing to show that they ever assumed any fiduciary position towards Ramchandra Aiyar. The relationship of debtor and creditor must be taken to continue until it is terminated by payment or it may be that if Arbuthnot and Co., at any time agreed at the request of Ramchandra Aiyar to hold the amount in trust for him or to apply it in a particular manner as his agent and did something towards effectuating the trust or applying it for the specified purpose a new and different kind of relationship would be established between the parties in substitution of the old. But here there is no pretence of such a change of relationship having been effected unless it be by the mere fact of demand being made for repayment which to my mind cannot possibly have that effect. And I think it would be quite absurd to say as suggested that on the demand for payment being made Arbuthnot and Co., became agents of Ramohandra Aiyar for the purpose of paying back the amount to him.
In Official Assignee, Madras v. Rajam Ayyar 36 Mad. 499, the Madras Railway Company remitted money to Messrs. Arbuthnot and Co., to the credit of the claimant, Rajam Ayyar. The said Rajam Ayyar had no account with Arbuthnot and Co., up to that time. The said company informed Rajam Ayyar and asked for his instructions. Before, however, the instructions could be received they suspended payment. A learned Single Judge held that Rajam Ayyar was entitled to payment in full of the amount of his claim, holding that the company held the said amount in a fiduciary capacity. On a Letters Patent appeal, the matter came up before a Bench of three Judges namely, Mitter, Munro and Abdul Rahim, JJ. They up. held the decision of the learned Judge in Chambers.
14. In Barhat Ali v. James Voce Pirrie Cyril Gill A.I.R. 1940 Mad. 189, a sum of Rs. 533-1-0 was handed over to the Travancore National and Quilon Bank, Limited, for being remitted by telegraphic transfer to the Great Indian Trading Company at Bombay. Although the party handing over the money had a current account with the bank, the latter did not credit the said sum in his account but debited the said account with a sum of Rs. 1-4-0, the charges for the intended transfer. On the same day, the bank suspended payment without having actually transferred the money to Bombay. On a claim being made for the payment in full of the said amount Yenkataramana Rao, J. held that the money had been received by the bank in the capacity of a mere agent and allowed the claim.
15. In Mercantile Bank of India Ltd, v. Rochaldas Gidumal and Co. A.I.R. 1926 Sind 225, a sum of Rs. 3,500 had been sent to the respondents by a telegraphic transfer by one of their partners through the appellants viz., the Mercantile Bank of India, Limited, Colombo Branch. The appellants claimed a right to retain the money on a two-fold ground, firstly, in the exercise of their general lien as bankers against certain overdue drafts drawn on the plaintiffs and said to have been accepted by them; and secondly as ordinary creditors by way of a statutory set-off under Order 8, Rule 6, Civil P.C., to the extent of Rs. 3,317-6-3 said to be due to them as the balance of the amount due on the overdue accepted bills of exchange drawn on the plaintiffs by a firm of Switzerland which had gone into liquidation and to the extent of Rs. 182-9-9 in part payment of their claim for 3,000 due on similarly accepted bills of exchange drawn by a firm of Manchester. The claim of the appellants under either head was disallowed. Certain observations were made in the judgment as to the nature of the contract between the parties which may have some bearing on the questions that we have to decide in the present case. The observations are to be found at page 226 of the report and are as follows:
It is, therefore, necessary for us to consider what was the contract between the parties when Rs. 3,500 were handed over to the defendant branch at Colombo.
In the present times when a person intends to send money from one place to another he does not send it in specie, bat he resorts to the cheaper, safer and more expeditious method of entering into a contract with the banker by which in consideration of his paying to the banker the money and a certain commission thereon the banker agrees to pay a like amount to the payee at the place where the money is to be remitted. The contract is ordinarily evidenced by a bill of exchange or a demand draft containing an express promise that the amount specified therein will be handed over on payment to the payee or to his order at the place specified for payment. If the banker carries on business at both the places he issues the draft or bill on himself and if he is not carrying on business at the place of payment he issues the bill on another banker who is likely to honour his bill. When he issues the demand draft or bill of exchange, against money paid to him he receives the money as his own, and in fulfilment of his obligation to pay the like amount he or the person on whom he draws the bill of exchange pays a like amount to the payee on surrender of the document.
Under the circumstances, it is difficult to see how the banker or the person who is to make the payment can claim to be in possession of any money as belonging to his customer to enable him to exercise his lien. Moreover, it would appear that even if it be assumed to be money in his hands qua bankers it is subject to the express obligation that it will be paid on demand in exchange of the demand draft or the bill of exchange and therefore, in the words of the Lord Chancellor in the leading case of Brandao v. Barnett (1846) 12 Cl. & Fin. 787 there can be no implied right inconsistent with the positive obligation. The telegraphic transfer is only a substitute for a demand draft or bill of exchange when money is required at once at the place of payment and it is considered inexpedient that the payee should await the transmission by post of the relative document, the issue of the document is dispensed with and intimation is sent by telegram to pay on demand the sum specified to the payee. The contract between the parties is generally reduced to a writing similar to Ex. 16. The telegraphic transfer is subject to the same obligations as a demand draft, and ipso facto the lien if any of the banker is thereby excluded if not expressly then at any rate by necessary implication by the very nature of the transaction.
16. Before proceeding to examine the cases relied on by the learned Counsel for the respondent, I wish to refer to the leading English case defining the jural relationship existing between a bank and a customer who hands over to such bank a sum of money for transmission to another place namely: Farley v. Turner (1857) 112 R.R. 442. In this case one Goodwin had to pay a bill which he had accepted payable at Roberts & Co. He had an account with a firm of bankers carrying on-business in the name and style of Messrs. Farley, Turner and Jones. In this account there was a credit balance of 942-in his favour. He handed over a sum of 707 in addition to the balance then standing to his credit and told the clerk of the said firm of bankers that 500 out of the said sum were to be applied for the specific purpose of meeting the acceptances payable at Roberts & Co.'s to become due on 14th December. The whole amount of 707 was placed to Goodwin's, general banking account. The bankers had other bills more or less under similar circumstances which they wanted paid at Roberts's Bank and they sent up-a batch of bills to Messrs. Overend and Gurney for them to discount directing them to pay the-amount into Roberts & Co.'s Bank for the purpose of meeting other bills, as well as that for 500 accepted by Goodwin and to become due on 14th December, It may be noted that the sum of 707 had been paid by Goodwin into the bank on 9th December 1856. The advice was sent at the firm of bankers to Messrs. Overend and Gurney on 11th December 1856. Mr. Turner, one of the partners in the said firm died in the evening on the same day with the result that the-firm ceased to carry on business before the bill accepted by Goodwin could fall due. That bill not having been paid, in the suit instituted for the administration of the estate of Turner, question arose whether the aforesaid sum of 50O belonged to Goodwin or to the general creditors of the bank. Kindersley, V.C., held that the aforesaid sum in the hands of Messrs. Roberts and Co. belonged to Goodwin and not to the general creditors of the bank. It was held that although the money was not earmarked as if it had been locked up in a box, but it was a portion of the money that had been paid in expressly for the purpose of meeting the bills for 500 and although it was not a particular deposit with-the bankers, it was certainly money placed in their hands to be applied in a particular way.
17. In Citizens Bank of Louisiana and others v. First National Bank of New Orleans and Ors. (1874) 43 L.J. Ch. 269, the First National Bank of New Orleans had dealings with the Bank of Liverpool which had its registered office in Liverpool. The modus operandi of these dealings was that the former employed the latter as their agent in England for collection of bills and other funds on their be-half while the latter in order to furnish to the former a credit on which they could draw for their own general purposes undertook to honour the bills which might be drawn on them, provided always that they were covered by the balance from time to time in their hands in order to secure accommodation for themselves as and when needed. The New Orleans Bank sold in the market Bills drawn on the Liverpool Bank. One such billdrawn for a sum of 5000 was purchased by the Citizens' Bank of Louisiana and another drawn for a sum of 8000 was purchased by the New Orleans Canal and Banking Company. The broker employed by the New Orleans Bank for negotiating the sale of the bills had to do some amount of canvassing before he was able to induce the aforesaid two purchasers to purchase the bills. He told them that he had been authorised by the President of the bank to say that the bills had been drawn expressly against funds to a much larger amount already remitted to the Bank of Liverpool. Before these bills could be presented to the Liverpool Bank for acceptance, the New Orleans Bank suspended payment, notice of such suspension and of receiving order having been made being duly telegraphed to the Liverpool Bank. Both acceptance and payment having been refused by the latter on the bills being presented to them, on the ground that though they had ample funds in their hands, the proper, ties of the New Orleans Bank, none of them were specifically appropriated to the payment of these particular bills, and that they were bound to hand over all those funds to the receiver for distribution by him amongst the general creditors of the bank, both the holders of the bills brought an action to establish their claim to payment in full of the amounts of the bills out of the aforesaid funds. Their claim having been disallowed by V.C. Stuart they took an appeal to the House of Lords but without success. They had rested their claim to preferential payment on two grounds: (1) There was an equitable assignment to them of the funds of the New Orleans Bank to the extent of the amounts of the bills purchased by them; and (2) the New Orleans Bank were estopped from denying that there was such an assignment or at least a specific appropriation of the funds for payment to them. Their Lordships held, on the evidence, both these pleas not to have been substantiated.
18. In Alliance Bank of Simla v. Amritsar Bank A.I.R. 1915 Lah. 214, the Delhi Branch of the Alliance Bank of Simla, Limited, sent two bills for collection to the Gwalior Branch of the Amritsar Bank with directions to the latter to send their drafts on realisation after deducting the usual charges. The Amritsar Bank (Gwalior) realised the money, made a slight deduction for exchange and remitted the balance by two drafts on the Delhi Branch of the People's Bank, Limited. However, before the bills could be cashed, both the People's Bank and the Amritsar Bank went into liquidation. The Alliance Bank claimed payment in full of the amount due on the drafts from the liquidator of the Amritsar Bank, contending that the aforesaid bank was a trustee and not a debtor qua that money. The contention was overruled by the Additional Judge of Lahore whose decision was upheld on appeal by the Chief Court. It was held that up to the stage of collecting the bills and realising the proceeds thereof, the Amritsar Bank did act in a fiduciary capacity because it had been employed by the Alliance Bank as an agent for collection, but that the business of the agency being complete as soon as the drafts were despatched in accordance with its directions, that capacity ceased and the relationship between the parties became that of an ordinary creditor and debtor. Shadi Lal, J. observed as follows in dealing with this part of the case:
As stated supra, the appellant Bank distinctly asked the Amritsar Bank to send drafts on Delhi and this direction was fully carried out. We consider that as soon as the drafts in accordance with the instructions were despatched, the special business, for which the agency had been created, was completed. The agency then ispo facto terminated (vide Section 201, Contract Act) and the fiduciary relationship came to an end. Hence-forward the appellant Bank was simply a creditor of the Amritsar Bank and if the drafts were dishonored, the remedy was for the recovery of the debt due on those drafts. It seems to us clear that if a suit had been filed, it would have been one for money due by a debtor to a creditor and the ordinary rule of limitation applicable to such cases would have governed the action.
19. In Secy., All India Spinners' Association, Tamil Nad Branch v. James Voce Pirrie, Cyril Gill A.I.R. 1940 Mad. 101, the All India Spinners Association, Tamil Nad Branch paid. a sum of Rs. 5000 into the Tiruppur Branch of the Travancore National and Qailon Bank, Limited, and got a draft in exchange drawn by the Bank on its Rajapalayam Branch in favour of Sankararaja. The bank seems to have closed its doors before the drafts could be cashed and eventually an order for its winding up and the appointment of a liquidator was made. The Secretary of the Association claimed payment in full of the aforesaid sum of Rs. 5000 on the ground that the amount bad been specifically entrusted to the bank for the specific purpose of being transmitted to Sankararaja through the bank's branch at Rajapalayam. In repelling this contention and holding that qua the amount of the draft, the Association could claim no right to preferential payment and had to rank with other claimants, Yenkataramana Rao, J. observed:
The official Liquidators deny this fact and submit in their counter affidavit that the Spinners' Association purchased a draft for Rs. 5000 on payment of that sum and it was nothing more than an ordinary banking transaction done in the usual course of business. The facts bear out the contention of the official Liquidators. The money was not entrusted to the Bank for any specific purpose and the Bank did not receive the money in the capacity of an agent for applying the said moneys for a specific purpose. The transaction was nothing more than a purchase by the Spinners' Association of the draft. I, therefore, disallow the claim to preferential payment in regard to this amount.
20. In Barkat Ali v. Imperial Bank of India, Calcutta A.I.R. 1945 Lah. 218, Malik Nawazish Ali son of Malik Barkat Ali, an Advocate of Lahore, was selected by the Crown Brand Tea Company of Dacca for appointment as one of their Provincial Managers on condition of putting down a, sum of Rs. 5000 as security against, the stocks of tea with which he was to be provided. This was to be done by means of a draft of the Imperial Bank of India on its Dacca Branch. Malik Barkat Ali accordingly instructed the Lahore Branch of the Imperial Bank of India to send a draft for Rs. 5000 drawn on its Dacca Branch to the company and to debit the same to his current account. Soon after this Malik Nawazish Ali came to suspect that the company was a bogus concern and asked his father telegraphically to stop payment of the draft. Malik Barkat Ali sent a telegram to the Dacca Branch of the Imperial Bank asking them to stop payment of the draft and later was also able to persuade the Manager of the Lahore Branch to wire to the Manager of the Dacca Branch to the same effect. Before the receipt of the latter telegram, however, the draft had been cleared by the Commilla Banking Corporation in whose favour it had been endorsed by the drown Brand Tea Company. The endorsement had been properly guaranteed. The Dacva Branch did not consider that the telegram received from Malik Barkat Ali could justify them in stopping payment. A suit was brought by Malik Barkat Ali against the Imperial Bank of India for recovery of the sum of Rs. 5000 on the ground that they had acted negligently in refusing to stop payment of the draft on being asked to do so. The claim was negetived and it was held that a bank could not stop payment of a draft unless there was some doubt as to the identity of the person presenting it as being or properly representing the person in whose favour it was drawn and that it was not open to the purchaser of a draft to ask the issuing bank to stop payment on other grounds such as matters relating to the consideration in respect of which the draft had been issued at his instance. In delivering the judgment of the Bench, Beckett, J. observed as follows regarding the position of a person at whose instance a draft is issued by a bank:
The issue of the draft is regarded in banking practice as a matter of purchase, the person at whose instance the draft is issued being regarded as the purchaser.
21. A banker's draft is a bill drawn either Jon demand or otherwise by one bank on another in favour of a third party or by one branch o a bank on another branch of the same bank or, by the head office on a branch or vice versa. All the drafts which form the subject-matter of the present petitions were drawn by one branch-of the respondent bank on another branch of the same bank. It is indisputable that a draft is a bill of exchange. Section 5, Negotiable Instruments Act defines a bill of exchange as follows:
A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.
It cannot be gainsaid that a bank draft fulfils' all these requirements. It will not be regarded as a draft if it does not. The matter is indeed placed beyond the pale of controversy by the express reference to a draft as a bill of exchange in Section 85A, of the aforesaid Act, It necessarily follows that a draft is a negotiable instrument. In Section 13 (1) of the said Act, a negotiable instrument is said to mean a promissory note, bill of exchange or cheque payable either to order or to bearer. On the face of it, therefore, the relationship between the holder of a draft and any prior party is that of a creditor and a debtor. That seems to be the obvious effect of Section 36 of the said Act which provides:
Every prior party to a negotiable Instrument is liable thereon to a holder in due course until the instrument is duly satisfied.
The only prior party in the case of the drafts we are now dealing with is the respondent bank and therefore, prima facie, the contention of its learned Counsel that the petitioners must be regarded as its creditors and must content themselves with receiving payment in the-terms of the scheme will seem to be correct and sound. I am, however, inclined to think that if any of them can show that although he had at the time he paid the money into one branch of the bank been given and had accepted a draft for the amount paid by him drawn on another branch, the sole object of making the payment as understood by both the parties to the transaction was the transmission of the money from one place to another for the express purpose of being paid to himself or some nominee of his, the bank being intended to be used merely as a transmitting agent, the parties may none the less be held to stand to each other in the relation of a principal and an agent, the money paid being specifically appropriated for transmission according to the instructions of the principal. As pointed out in the Bind case referred to above, the cheaper,, safer and more expeditious method of remitting money from one place to another in these days-is to enter into a contract with a banker at the former place by which in consideration of the payment to him of the money sought to be remitted and a certain commission thereon, he agrees to pay a like amount to the payee at the place where the money is to be remitted. Although, as pointed out in Farley v. Turner (1857) 112 R.R. 442, the banker in such a case does not transmit the money received by him in specie, the exact coins and notes, to the place of destination for payment to the payee it has never been doubted that he stands to the customer from whom he has received the money for transmission in the relation of an agent, and that till he has actually remitted the sum, which he may do, where he has got a branch at the place to which remittance has to be made, by crediting it to such branch and advising that branch to pay an equivalent sum to the party to whom the money was to be transmitted, he holds it in a fiduciary capacity. There is clear authority for the view, in the Madras cases noticed above, that from the time of the receipt of such advice, the branch must be (deemed to hold the money as the agent of the payee, unless of course, the payee has an account with such branch and the money is, under his general or special instructions, credited to that account. If the banker has no branch at the place to which money is to be transmitted, he will have to make use of the services of some other banker at that place and to remit the money to him in some form. If he has a running account with such banker, he may remit the money by Crediting his account with the sum and advising him to debit his own account with a similar sum. If he has no account he will have to adopt some other method for making the remittance. It cannot be disputed that such other banker also will hold the money, as from the time of the receipt of the remittance, as an agent of the payee. It will not, I think, be seriously contended that if in either of the two cases the banker employed for the purpose of transmitting the money, instead of sending the letter of advice to his branch or to the other, banker by means of post, hands it over to the party concerned, or, in addition to sending the advice direct, gives such party a letter or note addressed to the manager of his branch or the other banker directing him to pay such party the sum remitted by him, that will alter the nature of the jural relationship that is otherwise to exist between the branch of the other banker and the payee. I do not see any reasonable ground for holding that a different result must follow if the original banker instead of giving such party a letter of the above description gives him a demand draft as evidence of the contract entered into between the two. I fail to see why money which has been received by the branch of the banker for payment to a particular person, and which the branch of the banker must otherwise in law be deemed to hold as an agent; for that person, should become a debt merely because the instrument that has been handed; over to such person as evidence of his title to the money and containing a directive for the payment of such money to him has been given the: form of a bill of exchange or a negotiable instrument. The position may be different if the instrument has been negotiated and the question to be decided is one not arising between the original parties to it, but one between a subsequent holder and a prior party. It may also be different if in a given case the instrument has been presented for acceptance to the drawee and has been accepted by such drawee. Different; considerations may possibly govern such cases., For example, in the latter case it may be possible to urge that by securing the acceptance of the bill from the drawee, the party in whose favour the bill was drawn has finally decided to treat the drawee merely as an ordinary debtor, and that he must thereby be deemed to have impliedly released him from all other obligations in respect of the transaction.
22. Luckily, however, none of these positions exists in the present case and, accordingly, it is not necessary for me to speculate as to their effect and implications. That the mere taking of a bill of exchange does not disentitle the party in whose favour the bill is drawn to prove other circumstances giving him against the drawer or the drawee a right not possessed by an ordinary creditor seems to, be implicit in two of the decisions cited by the learned Counsel for the respondent, namely, Citizens' Bank of Louisiana v. First National Bank of New Orleans (1874) 43 L.J. Ch. 269 and Secy. All India Spinners' Association, Tamil Nadu Branch v. James Voce Pirrie, Cyril Gill A.I.R. 1940 Mad. 101. In both of them claims of the holders of the bills to priority were negatived on the ground that they had failed, to establish that, there had been any specific appropriation of the funds in the hands of the drawees for meeting their demands. Prom the trend of the judgments in both cases it seems to follow that if the special circumstances alleged by the claimants had been proved to exist, the drawees would have been held to hold the money involved in the two oases in a fiduciary capacity.
23. A draft or other bills may be given by way of security for the accommodation secured by the drawer. Such was the case in Citizens' Bank of Louisiana v. First National Bank of New Orleans (1874) 43 L.J. Ch. 269. Or it may be given in discharge of a pre-existing obligation as was the case in Alliance Bank of Simla Ltd. v. Amritsar Bank A.I.R. 1915 Lah. 214. Or it may be given for the purpose of accommodating the party in whose favour it is drawn by enabling him to secure credit in the market. These three are very simple cases in which there can be no room for doubt as to the transaction being purely a banking transaction and the relationship created between the parties being merely of a debtor and a creditor. However, a draft may come to be drawn and given in a variety of circumstances and for a variety of reasons, and the transaction which has been the occasion for its being drawn and delivered may not always be so simple. In every -case it confers on the holder the right to claim the amount for which it is drawn from the prior party, and after acceptance, from the drawee. Very generally, the party in whose favour it is drawn and the subsequent holders get it either for cash or in lieu of some other claim and, therefore, as observed by Beckett, J. in Barkat Ali v. Imperial Bank of India, Calcutta, A.I.R. 1945 Lah. 213 every holder thereof is in general commercial parlance described as a purchaser. There may, however, be cases in which the holder of such a bill, while having the right to claim the amount for which it is drawn, may also have an additional right or privilege to get the amount of the draft in preference to the general body of creditors in case of the insolvency of the drawer or the drawee. Such right may arise out of the special terms of the contract under which he has got the bill contemplated by the House of Lords in Citizens' Bank of Louisiana v. First National Bankof New Orleans (1874) 43 L.J. Ch. 269 and by the Madras High Court in Secy. All India Spinners' Association, Tamil Nad Branch v. James Voce Pirrie, Cyril Gill A.I.R. 1940 Mad. 101. As such will be the case if he has been given an equitable charge on certain funds or there is specific appropriation of any funds or part of any funds for the claim. Such right may also, in my view, arise on account of the circumstances under which or the particular nature of the claim in respect of which the bill has been given. Suppose, such a bill was given to one of the persons having a statutory right of preferential payment, in case of the winding up of a company, as an additional security or otherwise, before the company went into liquidation, can such person be held to have lost his right to preferential payment by reason of his having accepted the bill? Why should a person using the good offices of a bank, of course on payment, for the purpose of transmitting money to another place for payment either to himself or to a specified person lose his well recognized right of receiving payment in full of the amount paid by him into the bank out of the assets of such bank if it closes business without remitting the money to the place to which it was intended to be transmitted, or from the assets of the bank to which it was remitted by the first bank for the specific purpose of payment to a named person, in case that other bank suspends payment before applying the money to the purpose for which it was sent to it, merely because the bank to which the money in the first instance was handed over had given to the person concerned a draft drawn on the other bank for the amount? The question of priorities must be determined with reference to the nature of the legal relationship proved to exist between the parties concerned.
24. After giving the matter my most careful thought, I feel no hesitation in taking the view that where a banker remits a certain sum of money, either to his own branch at another place, or to some other bank doing business at that place, whether by means of book entries, made in the case of another banker with the express or implied consent of such banker, or according to some other usual method of transmitting money, for the express purpose of such sum being paid to a named individual or his nominee, the sum must be deemed to have been specifically appropriated for the purpose of such payment. In case the bank charged with the duty of paying the said sum closes business before discharging the obligation, the payee will have the right to be paid that sum in full and cannot be obliged to rank with the general body of creditors, his having accepted a draft for the amount drawn on the branch or the bank notwithstanding.
25. However, the rule I have stated above will apply only to a case where it is proved beyond the possibility of reasonable doubt that the holder of the draft, or the person who secured the draft in his name, had paid the money to a banker only and expressly for the purpose of being transmitted to another place for being paid to a specified person or for being otherwise spent in a specified manner and that the draft was obtained merely with the object of facilitating realisation of the money at the place of destination by the party to whom it was intended to be transmitted. The rule will have no application where the draft was obtained by the party concerned either for gain in the shape of exchange commission or under a contract for giving accommodation to the prior or any other party or otherwise for commercial purposes generally.
26. Before concluding this part of my judgment, I have to notice the decision of Bigham, J. In re Watson & Co.; Ex parte Lloyd (1905) 91 3 L.T. 665, which is evidently opposed to the view taken by me. In that case one Captain Lloyd, the applicant, had instructed his bankers to pay to Messrs. Watson & Co., in London a certain mm of money to be placed to the credit of a Mrs. Brooke at Bombay. The said bankers sent to Messrs. Watson & Co., the same day a cheque for the amount which was duly paid. Messrs. Watson & Co. sent to their branch at Bombay a draft for the amount with instructions to either credit account or pay the same to Mrs. Brooke. The draft arrived at Bombay before 7th January 1904 on which day a receiving order in respect of Messrs. Watson & Co., was made. Mrs. Brooke arrived at Bombay on 7th February 1904, and by reason of the receiving order having already been made could not draw the money. Captain Lloyd moved the Court for a declaration that he was entitled to be paid in full the amount paid to the bankrupts as his agents for the special purpose of being remitted to Mrs. Brooke who was about to proceed to Bombay. Mrs. Brooke had, prior to the payment by the applicant, no dealing with the bankrupts and never had an account with them. It was contended on behalf of the applicant that the money was held by the bankrupts in a fiduciary capacity and could be followed. Bigham J. overruled this contention in a very brief order which ran as follows:
I think that it is quite cleat that this claim fails. Captain Lloyd decided to remit money to India to the credit of Mrs. Brooke. In the ordinary course of business, he instructed his bankers to pay the money to Watson & Co, to the credit of Mrs. Brooke. No trust was constituted. Watson & Co having received the money were bound to pay its equivalent to Mrs. Brooke in India when she required them to do so, and the ordinary relation of debtor and creditor was established between Mrs. Brooke and Watson & Co. The only remedy is proof in the bankruptcy.
The view taken by the learned Judge seems to me to run counter to the decision in Farley v. Turner (1857) 112 R.R. 442 and, if I may say so with all respect, is not quite sound. The money was handed over by Captain Lloyd to Watson & Co., for the express purpose of an equivalent sum of money being paid to Mrs. Brooke on her arrival in Bombay. Neither Captain Lloyd nor Mrs. Brooke had any account with the company and the latter's position in the transaction was, and throughout remained, merely that of an agent. The draft sent by them to their Bombay Branch could not be regarded as anything more than an order or directive to them to pay the sum named' therein to Mr. Brooke on demand. The draft' having never been delivered to Mr. Brooke, it could not even be contended that she bad accepted the draft in discharge of the company's obligation to pay the money to her. Watson & Co., having received the money from their principal Captain Lloyd for the express purpose of paying the same to Mrs. Brooke in Bombay and having failed to disburse the same according to the instructions of the principal before the receiving order was made could not but be deemed to be holding the same in a fiduciary capacity. The decision of the learned Judge to the contrary does not seem to be supported either by principle or by authority and I find myself unable to follow it.
27. I will now consider the cases of the several drafts forming the subject matter of the various petitions in the light of the above observations.
28. Taking first the petition of Shiam Lal of Lyallpur in civil Miscellaneous No. 4 of 1948, from the two affidavits filed by the petitioner, to which no counter affidavit was filed on the respondent's behalf and the correctness of the statements contained wherein has never been denied, it appears that he had no previous dealings with the respondent bank. On nth August 1947 after the massacre of non-muslims on a large scale had started in Lahore and other Districts of the Western Punjab he made up his mind to leave Lyallpur in order to seek a safe asylum in Delhi. He had with him a sum of Rs. 32,000 in cash which he was naturally anxious to carry with himself to Delhi. In view of what was happening in different parts of the Western Punjab, and in view of what Muslim Officials and Muslim Police were doing in order to prevent non-mulsims from removing any part of their belongings from the Western Punjab, he as a reasonable and normal man, could not reasonably be expected to carry this money on his own person. To do so, would have involved danger to his personal safety, apart altogether from the enormous difficulties that he would have otherwise had to experience in removing the money. He, therefore, decided to make use of the good offices of the local branch of the respondent bank for transmitting the money to Delhi for payment to himself on his arrival at that place. This was, therefore, Clearly a case in which the Lyallpur Branch of the respondent bank was employed by the petitioner as an agent for the purpose of transmitting a sum of Rs. 32,000 to their Delhi Branch for the express purpose of the same being paid to him on demand. The respondent has led no evidence to show on which date the money was credited in the books of the Lyallpur Branch to the Delhi Branch and on which date the Delhi Branch received advice as to the money having been so credited and asking it to pay an equivalent sum of money to the petitioner on demand. In the absence of any evidence to the contrary, it may reasonably be presumed that this was done within a reasonable time of the payment of the money by the petitioner into the Lyallpur Branch on 11th August 1947 and a considerable time before 27th September 1947 on which date the respondent bank suspended payment. It was not even suggested that the Lyallpur Branch had not credited the money to the Delhi Branch or that the latter had not received the necessary advice by the time of the declaration of moratorium. These facts being specially within the knowledge of the respondent, under Section 106, Evidence Act, it was for them to allege and prove them. In the circumstances, I feel justified in presuming that the Delhi Branch of the, respondent bank was holding the sum of Rs. 32,000 for the express purpose of payment to the petitioner and as an agent on his behalf then the moratorium was declared. In case the Lyallpur Branch failed to emit the money to the Delhi Branch before the moratorium, the former must be deemed to hold the money in a fiduciary capacity. In either case, the petitioner is entitled to the re-payment in full of the amount paid by him.
29. I come now to the petition of Ganga Ram in civil Miscellaneous No. 6 of 1948. His case seems to be almost identical with the case of Shiam Lal and I am of the opinion that he is also entitled to the payment in full of the sum of Rs. 30,000 which he handed over to the Khanewal Branch of the respondent on 17th July 1947 for being transmitted to Delhi and New Delhi through their branches in the said two places. There are stronger reasons for presuming in this case that the two sums reached their places of destination and were held by the two branches concerned as agents on behalf of the petitioner long before the declaration of moratorium. In any event it can make no difference to the rights of the petitioner whether the money remained with the Khanewal Branch or was remitted to Delhi.
30. I come next to the petition of Messrs. Hukmi Mal Sham Lal in civil Miscellaneous No. 7 of 1948. In this case the petitioners have led no evidence at all to show whether the drafts had been obtained by them on payment of cash or out of money standing to their credit in their account. It is true that in Para. 4 of the petition it was stated that the petitioners had paid into the Ludbiana Branch of the respondent bank a sum of Rs. 2,000 on 2nd September 1947 for getting a draft of the said amount on their Dehra Dun Branch and that they had paid a sum of Rs. 9,987-8-0 on 25th September 1947 into the New Delhi Branch of the respondent bank for getting a pay order for the aforesaid amount in favour of the Imperial Tobacoo Co., Ltd. The petition, however, was neither signed nor verified by any member of the petitioner firm and was signed only by Mr. Mela Ram their counsel. The petition was not accompanied by any affidavit. Hari Chand, son of Sham Lal one of the proprietors of the firm filed an affidavit on 24th May 1947, but in that affidavit this matter was not even adverted to and all that was said was that the petitioner had settled with the parties in whose favour the draft and the pay order had been secured by them. Be that as its may, the case of these petitioners stands on a wholly different footing and bears no analogy at all to the two cases just dealt with. They purchased the drafts, whether on payment of the-consideration in cash or by adjustment in the account, for being utilised in the ordinary course of their business. It cannot be held that the-money was paid by them into the Ludhiana audi New Delhi Branches of the bank for any specific-purpose. The said branches cannot be deemed to have received the money as agents on there behalf nor can they be deemed to have transmitted such money to Dehra Dun or any other place for being held by the branches of the Bank at those places as agents on behalf of the payees named in the drafts.
31. The draft for Rs. 2,000 bearing date 2nd September 1947 was indisputably presented by Mr. Kanwal Dev Mehra in whose favour it was drawn to the Dehra Dun Branch of the respondent bank on 13th September 1947 i.e., about a fortnight before the declaration of the moratorium. Whether this by itself can give the petitioners any right to claim payment in full of the amount of this draft will be considered in a., later part of this judgment.
32. I come next to the petition of Messrs-Chhajju Mal Ram Bhaj Mal of Hoshiarpur in Civil Miscellaneous No. 8 of 1948. The petitioners in this case obtained a draft on 20fch September 1947 from the Hoshiarpur branch of the respondent bank on their Amritsar branch for a sum Rs. 15,000 There is no evidence at all as to the circumstances under which and the purposes for which the draft was obtained. There is no allegation that the money was handed over to the Hoshiarpur Branch as agents for a specific purpose. The purchase of the draft by the petitioners in this case seems to be obviously an ordinary commercial transaction and I can discover no reason why the petitioners should be placed on a looting higher than that of the general body of creditors.
33. These petitioners undoubtedly presented the draft to the Amritsar branch for payment on 25th September 1947 and 27th September 1947 but were refused payment on the ground that advice had not yet been received from the Hoshiarour branch. In the affidavit of Ram Kishan one of the proprietors of the petitioner firm it has been stated that the refusal was mala fide and there is no counter affidavit to explain why on presentation of a demand draft payment was not made. What should be the effect of the respondent's refusal to pay the money on the draft being presented before the declaration of moratorium is a question with which I propose to deal in a later part of this judgment.
34. Next I come to the petition of Mr. Shamlal P.C.S. Subordinate Judge in Civil Miscellaneous No. 12 of 1948. The petitioner in this case is the holder of a draft obtained by Messrs. Balkrishen Jogindar Pal, presumably from the Sheikhupura branch of the respondent bank on 9th August 1947 for a sum of Rs. 1,735 favouring the petitioner and drawn on the Jullundur City Branch of the bank. No evidence has been led by the petitioner on the strength of which it may be possible to hold that any money was paid by Messrs. Balkrishen Jogindar Pal for transmission to Jullundur City for the specific purpose of the same being paid to the petitioner. There is nothing to indicate that the draft was not purchased by the said firm in the ordinary course of their business to facilitate payment which they had to make to the petitioner. There are no materials on which it can possibly be held that the respondent bank held the amount of the draft in a fiduciary capacity on behalf of the petitioner. I am accordingly clearly of the view that this petitioner has not succeeded in making out any right to preferential payment.
35. Now I come to the question whether the petitioners in Civil Miscellaneous No. 7 of 1948 can claim any right to preferential payment in respect of the draft of Rs. 2,000 drawn on the Dehra Dun branch of the respondent bank on the ground that the same was presented for payment to the drawee about a fortnight before the declaration of the moratorium, but payment was refused without any lawful excuse, and whether the petitioners in Civil Miscellaneous No. 8 of 1948 are entitled to preferential payment of the amount of their draft for Rs. 15,000 because the same was presented for payment first on 25th September 1947 and a second time on 27th September 1947, but payment was withheld not only without any lawful excuse but, as sworn to by the petitioner, mala fide. I have already quoted at length from the judgments of Munroe and Abdul Kahim, JJ. in Official Assignee of Madras v. Ramchandra Aiyar 33 Mad. 134. Munroe, J. was clearly of the opinion that even in case of a fixed deposit, if a demand for payment is made after maturity and the payment is refused, the bank as from the date of the demand and the refusal should be deemed to hold the amount of the fixed deposit in a fiduciary capacity and as an agent on behalf of the depositor. The learned Chief Judge acting as the-Commissioner having also taken the same view, the ultimate decision of the appeal was' according to the opinion expressed by Munroe, J. although the other member of the branch namely, Abdul Rahim J, disagreed with the above view.
36. If the view of law expressed by Munroe, J. is accepted as correct, the answer to the question stated in the penultimate paragraph must obviously be in the affirmative and in favour of the petitioners. After a very careful consideration of the subject, however, I with all respect. I do not feel inclined to agree with that view. I consider the reasons given by Abdul Rahim, J. in support of his contrary view to be far more weighty and almost unanswerable and with that view I find myself in respectful agreement. I must confess my utter inability to understand how a debtor, who on a demand being made after the debt has become due, refuses to make payment can be deemed to hold the amount of the debt in a fiduciary capacity after such, refusal. If he could be deemed to hold the overdue debt which he has refused to pay on demand as an agent and in a fiduciary capacity no question of limitation should ever arise in any suit brought by a creditor for the recovery of any debt, provided a demand for payment has preceded the institution of the suit. Presumably, it was by reason of his having visualized this and similar awkward results, that Munroe J. seems to be inclined to the view that the case where bank is a debtor stands on a footing different from that where an ordinary individual is the debtor. I, however, cannot see how y distinction can on principle be made between the two classes of debtors.
37. In fairness to the learned Counsel who argued the cases of the several petitioners, I must note that they did not rely on the decision of Munroe, J. mentioned above although the same had been expressly referred to in his judgment in Official Assignee, Madras v. Oriental Government Security Life Assurance Co., Ltd. 33 Mad. 150, on which reliance was placed by Mr. Gosain the learned Counsel for the petitioners in Civil Miscellaneous No. 4 of 1948.
38. While I am not prepared to hold, agreeing with Munroe, J. that whenever a bank refuses; to pay an overdue debt after demand having been made for the same, it must be demed to hold the money thereafter in a fiduciary capacity and 'as an agent on behalf of the payee. I do feel inclined to the view that the above-mentioned two petitioners, in view of the circumstances of the particular cases, are entitled to preferential payment.
39. Mr. Ved Vyas the learned Counsel for the respondent had to concede that ordinarily on the presentment of a demand draft, particularly where the drawer and the drawee are branches of the same bank, it is the duty of the drawee to pay the amount of the draft to the payee named therein if he is able to give adequate satisfaction as to his identity. It is not even alleged on the respondent's behalf that the holders of the drafts in the two eases were not able to give satisfaction to the branches of the respondent bank on which the drafts were drawn as to their respective identities. Nor was the payment refused on that ground. The payment was admittedly refused in both the cases on the ground that advice had not yet been received from the office of origin. The drafts having been issued in both cases by two branches of the respondent bank on two other branches of the same bank and being apparently quite in order, I consider that there was no justification in either case, for refusal to pay as I have stated above, in the affidavit filed by one of the proprietors of the petitioning firm to civil Miscellaneous No. 8 of 1948, it has been definitely stated that the refusal was deliberate and mala fide. The circumstances under which the refusal was made appear to make this assertion in the affidavit highly probable. The partition of the province of the Punjab took place on 15th August 1947. The respondent bank admittedly had a considerable part of its assets in the Western Punjab. In view of the communal situation then existing in Lahore and other parts of the Western Punjab, the bank could have no reasonable prospect of realising those assets. On 26th September 1947, the Government issued a notification declaring moratorium in respect of the bank with effect from the following day. It may quite reasonably be presumed that sometime before the aforesaid date, the bank had begun to find itself in difficulties and was unable to meet the demands that were being made on it. By 25th September 1947 its position may reasonably be expected to have become quite desperate. It, therefore, seems to me that payment was refused to the petitioners in this case on the draft being presented on 25th September 1947 not really because of the advice not having been received from Hoshiarpur, but because the bank authorities were anxious to put off payments as far as possible. It is not altogether improbable that payment was refused on 25th September 1947 in anticipation of the moratorium.
40. The refusal to pay the amount of the draft for Rs. 2,000 drawn in favour of Mr. Kanwal Dev Mehra on presentment of the said draft to Dehra Dun Branch of the respondent bank on 13th September 1947 was also obviously without any justification. It is true that the position of the bank cannot be assumed to have become as desperate oh that date as it may reasonably be supposed to have become due day before the declaration of the moratorium. It may, however, quite reasonably be assumed to be fairly pre-carious. In the circumstances, in all probability the refusal to pay in this case was due not to the reason officially given, but to the anxiety of the bank officials to put off the demands made on the bank to the utmost extent possible.
41. No blame necessarily attaches to the management of the bank or to its officials for having attempted to put off the pressing demands that were being made on them. Their anxiety to ward off the evil day was quite natural and at least on 13th September 1947 they may have had a sincere belief that they would be able to tide over the difficulties if only they could get breathing time. The fact, however, remains that in these two cases demand drafts were presented for payment at the proper places when the bank was still functioning and before the moratorium, but payment was refused without any lawful excuse and on a ground which seems to me to be quite fictitious. Without holding, as Munroe, J. did in the case just adverted to, that after such refusal the bank held the amounts of the two drafts in a fiduciary capacity, I am of the opinion that on grounds of equity and justice, the amounts of these drafts should be paid in full. I am prepared to concede that if the bank had suspended payment on 27th September 1947 and eventually an order for its winding up had been made, the liquidator could not and would not have admitted the claims of these two petitioners to preferential payment. It is also true that in working out and giving effect to a scheme of management which has been accepted by the creditors and the shareholders in preference to compulsory winding up, questions relating to priorities and preferential payments should generally be decided on the same principles as govern the decisions of similar questions in case of a compulsory winding up. However, I am of the opinion that in adjudicating upon such questions when they arise during the course of the administration of a scheme of management, a Court is not always bound to act in precisely the same manner as the liquidator of a bank being compulsorily wound up would have done, but may, in exceptional cases, grant relief on considerations of equity, justice and good conscience if it can do so without doing any injustice to the body of the creditors. I am quite clear in my mind that by allowing full payments to be made of the amounts of these drafts no real injustice is being done to the general body of creditors. If the officials of the bank had done their duty and had not acted in a. supercilious manner the amounts of these drafts would have been paid before the moratorium and the assets available for distribution amongst the general body of creditors would have been less by the amount of these drafts. The only effect of the order that I propose to make with reference to these drafts will be that the general body of creditors will not get the benefit of a wrong and improper action of some of the officials of the bank. In foot note K at page 300 in Vol. 3 of the English and Empire Digest, a case decided by the Supreme Court of Canada has been referred to in which a deposit received by a bank towards the close of the day preceding that on which it suspended payment, and after the 'adoption by the Board of Directors of a resolution for seeking outside assistance and for suspending payment if such assistance was not forthcoming, it, was held that depositors were entitled to be repaid the amount of their deposit as obtained from them by fraud. It is quite true that there is a good deal of difference between the facts of the present case and those of the case decided by the Supreme Court of Canada. However, the fact remains that even in cases of a compulsory winding up, a depositor from whom deposit had been received by keeping him in ignorance of the true financial position of the bank was held entitled to the full payment of the amount of his deposit. Ordinarily perhaps, unless there was some special provision of a different character in the Bankruptcy Laws of Canada in circumstances like those mentioned in the Digest, the depositors could not claim any right to preferential payment although they might have had a right of action against the persons who had induced them to make the deposit by wilful suppression of the financial position of the bank from them. The decision of the Canada Court, in all probability, proceeded only on considerations of the equities of the case. Be that as it may, in a case like the present where the bank is not being wound up and is working under a scheme of management sanctioned by the Court, I do not consider that considerations of equity and justice can be wholly eliminated and that the decision of all questions of priorities and preferential payments has to be given in strict accordance with the rules governing winding up proceedings.
42. For the reasons given above, I direct the bank to pay in full the amounts of the drafts forming the subject-matter of the petitions of Shiam Lal and Ganga Ram in Civil Miscellaneous Nos. 4 and 6 of 1948. I also direct the respondent bank to pay to Ganga Ram petitioner in Civil Miscellaneous No. 6 of 1948 the proceeds of the torn currency notes of Rs. 210 entrusted to its Khanewal Branch which it may receive from the ourrenoy office, or to return the said torn notes in original in case the currency office does not accept them and pay for them. I also direct the respondent bank to pay in full the amount of the draft of RS. 2,000 out of the two drafts forming the subject: matter of the petition of Messrs. Hukmi Mal Sham Lal of Ludhiana in civil Miscellaneous No. 7 of 1948. I further direct the respondent bank to pay in full the amount of the drafts forming the subject-matter of the petition of Messrs. Chhajju Mai Rain Bhaj Mal in civil Miscellaneous No. 8 of 1948.1 dismiss the petition of the petitioners in civil Miscellaneous. No. 7 of 1948 in respect of the pay order and also the petition in civil Miscellaneous No. 12 of 1948. In the circumstances of the case I make no order as to the costs of all these petitions.