PALAI CENTRAL BANK Vs. STATE OF KERALA

JUDGEMENT

(1.) The Palai Central Bank Limited (in liquidation) stopped business on the evening of the 8th August 1960 on the appointment of a provisional Liquidator. Before that, the various offices of the bank had, in the ordinary course, is sued demand drafts, most of them on other offices of the bank, but a few on other bankst with whom it had agency arrangements. These applications are by the holders of such drafts who were unable to present them and obtain payment before the bank closed down and who therefore submitted proofs to the liquidator claiming payment in full on the ground that the bank was only an agency employed by them for the transmission of money from one place to another and payable at the other end to their nominee or his order. Therefore, their relationship with the bank was not that of an ordinary debtor and creditor, but something more; and the bank held the money paid by them for obtaining the draft in a fiduciary capacity. The liquidator however held that the relationship was that of an ordinary debtor and creditor and nothing more, and, denying the applicants the preferential payment they claimed, ranked them with the ordinary creditors Hence, these application's under Section 460(6) of the Companies Act read with Rule 164 of the? Companies (Court) Rules by way of appeal from the decision of the liquidator.

(2.) A demand draft is an order to pay money drawn by one office of a bank upon another office of the same bank or upon an office of a different bank for a sum of money payable to order on demand. (See Section 85A of tne Negotiable Instrument.; Act. In the latter case, namely, where the order is on another bank, in is really a cheque but is nevertheless Ordinarily called a draft). And the drafts in these cases, two of which have been marked as Exts. C5 and C6 by way of illustration, conform to this definition. When a draft is is sued on another bank it is undoubtedly a bill of exchange as defied by Section 5 of the Negotiable Instruments Act. Even if it be drawn upon another office of the same bank, I should think it is a bill of exchange whether with Rankin, C. J., with whom the four other Judges constituting the Special Bench agreed (in Demand Drafts of the Imperial Rank of India. In re, ILR56 Cal 233 : (AIR 1928 Cal 566) (SB)) we hold that, unlike as in the English law which requires that the order must be addressed by one person, to another, the "certain person" of Section 5 of the Negotiable Instruments Act may be the same person as the maker, or whether preferring the view that a man does not is sue an order to himself but only makes promise (in which case such a draft may well be regarded as a promissory note but for the complication of stamp duty), we consider that Section 85-A of the Negotiable Instruments Act contemplates a fiction by which one office of a bank is for this purpose to be regarded as a different person from another office of the same bank.

(3.) A large number of cases (In the matter of, New Bank of India Ltd. Amritsar, AIR 1949 EP 373; In re Noakhalt Union Bank Ltd., 54 Cal WN 744; Suganchand and Co. v.. Prahmayya and Co., AIR 1951 Mad 910(2); Traders Bank Ltd. v. Kalyan Singh, AIR 1953 Punj 194; Bir-bhum Central Co-operative Bank Ltd. v. Pioneer Bank Ltd., (S) AIR 1956 Cal 615; In re Girish Bank Ltd., AIR 1959 Cal 762 and Gulzarilal Devi Dayal v. Punjab and Kashmir Bank Ltd. Delhi, AIR .1960 Punj 281 (to mention only a few of those directly in point) have been cited at the bar. But, so far as I can see, all of them with one exception to which I shall presently refer, from AIR 1949 Ep 373 which may be regarded as the most favourable to the applicants down to AIR 1960 Punj 281 which may be regarded as the least favourable, lay down the same principles, the differences lying only in the application of these principles to the particular facts.