SRINIVAS GUPTA Vs. HINDUSTAN COMMERCIAL BANK LIMITED

JUDGEMENT

(1.) This is an appeal by special leave against the judgment and decree of the Allahabad High Court, and arises in the following circumstances. The respondent is the Hindustan Commercial Bank Limited (hereinafter referred to as " the bank ") with its head office at Kanpur. It opened a branch in Jhansi in the year 1944. The appellant was appointed treasurer under an agreement dated October 30, 1944, and had deposited a security of Rs. 10,000 in that behalf. Clause 13 of the agreement was that the treasurer would be incharge of and look after all commodities and goods that might be accepted by the bank as securities for advances and he would also be liable to see that the goods and articles given to the bank as security were not only genuine but of the same kind and quality which they were said to be when the advance was made. It was also provided that if the bank was put to any loss in this matter, the treasurer would be held responsible and would make good the loss himself to the bank. Further, in order that the treasurer might be able to discharge the responsibility thus placed on him, the godown-keepers and assistant godown-keepers were to be employed by the treasurer to look after the goods given in security to the bank subject to the final sanction of the bank. Clause 24 of the agreement, inter alia, provided that the amount of Rs. 10,000 would be deposited as security for the due performance by the treasurer of his obligations under the agreement and for the discharge of all the liabilities which he might incur to the bank, either under or by virtue of the agreement or by reason of the non-performance on his part of any of his obligations thereunder. Finally, Clause 26, inter alia, provided that the security deposited would be under the absolute control and dominion of the bank and would at all times be available for appropriation by the bank towards reimbursing or making good any loss, damage, costs, charges or expenses to which the bank was entitled under any of the provisions of the agreement, and, subject to any such claim by the bank, the money would be returned six months after termination of his services.

(2.) The facts which have led to the present dispute may now be briefly stated. Messrs. Tailong Brothers had a cash credit account with the bank. They obtained advances off and on against the security of 1,164 tins of ghee and linseed, and the total amount thus advanced was somewhere about Rs. 80,000. The appellant as the treasurer had to look after all commodities and goods accepted by the bank as security, and it was his responsibility to see that the goods given to the bank as security were of the same kind and quality which they were said to be at the time of the advance. The appellant appears to have certified the security given by Messrs. Tailong Brothers as sufficient. In March, 1947, while the checking of securities deposited with the bank was going on, it was discovered that ghee in some of the tins, given in security by Messrs. Tailong Brothers, was rotten and some of the tins only contained water. The bank held the appellant responsible for this state of affairs and in consequence the services of the appellant were dispensed with by the bank from June 30, 1947. It appears that before that the appellant had exerted himself to obtain for the bank two mortgages as security for the advance made to Messrs. Tailong Brothers, and this was done on April 1, 1947. It may be mentioned that Messrs. Tailong Brothers was a firm carried on by four brothers. One Vankat Rao Tailong was their father. On April 1, 1947 two mortgage deeds were executed, one by the father for Rs. 35,000 and the other by the four brothers for Rs. 28,497-13-8. It may be added that on that day Rs. 63,497-13-8 were due to the bank from the four brothers on the basis of the cash credit account. Further, the mortgage deed executed by the four brothers provided that the joint and several personal liability of the four brothers for the sum of Rs. 35,000 for which their father had executed the mortgage deed was in no way limited or extinguished or otherwise affected by the bank accepting the mortgage of Rs. 35,000 from the father, but would remain intact till the entire debit balance in the account, i.e., Rs. 63,497-13-8, was fully paid up. It may also be added that in the mortgage by the brothers it was provided that four months time had been given to them to pay up the dues of the bank in full.

(3.) To resume the narrative, the bank terminated the services of the appellant from June 30, 1947, after giving necessary notice provided under the agreement. The bank, however, did not return the security money after the expiry of six months from June 30, 1947, as provided in the agreement. Thereupon the appellant served a notice on the bank for the return of the security money, and the banks contention in reply was that the money could not be returned as long as the account of Messrs. Tailong Brothers had not been adjusted, as the appellant was responsible for the loss that might accrue to the bank on that account in terms of Clause 13 of the agreement. The appellant, therefore, filed the suit out of which the present appeal has arisen in July, 1950. His case was that as he had arranged the two mortgages in favour of the bank on April 1, 1947, from the four brothers who formed the firm of Messrs. Tailong Brothers and from their father, his responsibility, if any, under the terms of the agreement had come to an end. Therefore, he sued for the return of the security money along with interest. The bank resisted the suit and its case was that the responsibility of the appellant did not come to an end merely with the execution of the two mortgage-deeds and that he was responsible so long as the entire money due to the bank had not been fully recovered from Messrs. Tailong Brothers, and the mere execution of the mortgage deeds did not absolve the appellant of his responsibility under Clause 13 of the agreement.