SUGANCHAND AND CO Vs. BRAHMAYYA AND CO

JUDGEMENT

(1.) These are three connected appeals against the orders of Rajago-palan J. passed on the Original Side & raise an important & interesting question regarding the rights of a person who has entrusted a bank with collecting his dues & remitting them to him by demand drafts where the bank has gone into liquidation & the drafts are, therefore, left uncashed. The question is whether a person in such a case will be entitled to get his full dues as a preferential creditor or must rank only with the other creditors & be content to receive the dividends given in liquidations; in other words, whether the fiduciary relationship of principal & agent or the jural relationship of creditor & debtor will obtain, & in what circumstances each of these relationships will obtain.

(2.) The facts are briefly these O. S. A. No. 85 of 1949 is an appeal against the order in Appln. No. 454 of 1949. There the claimants were Suganchand & Co. They made a claim against the Hanuman Bank in liquidation, praying that they be treated as persons to be paid in full in preference to the ordinary creditors of the bank. Hanuman Bank had its head-quarters in Tanjore, & branches in several places in the Madras State, like Madras, Kumbakonam, Thiruthuraipundi, Madurai, etc. It crashed, & the headquarters suspended payment on 15-7-1947. The Madurai, Kumbako-nam, Thiruthuraipundi & other branches of the Bank suspended payment only on 16-7-1947. Suganchatd & Oo. sold some gooda to Messrs. Swami Foundry, Madurai for Rs. 3235-2-6 in April 1947, & as directed by the vendees, sent the railway receipt with the bill for the above amount through the Madurai branch of the Hanuman Bank Ltd. for collection of the said amount from Swami Foundry, Madurai & for remitting to them the amount so collected through a demand draft. The entire amount of Rs. 3235-2-6 was paid to the Madurai branch of the Hanuman Bank by Messrs. Swami Foundry on 10-7-1947, & the Madurai branch issued a demand draft for the entire amount of Rs. 3235-2-6 on their Madras branch for payment at Madras. This demand draft reached Suganchand & Co. & it was presented to the Hanuman Bank, Madras, on 14-7-1947 through their bankers, the Bharat Bank, for collection. The Hanuman Bank was then about to close its doors, & the draft was returned unpaid with the endorsement, "Awaiting funds; present again". On 15-7-1947, the Hanuman Bank, Madras, closed its doors, & most of its branches followed suit on 16-7-1947. Suganchand & Co. thereupon filed a claim for the payment of the full amount to the Official Liquidator, but were refused. Thereupon they filed Appln. No. 454 of 1949 on the original side for full payment of the amount as preferential creditors, with 9 per cent. interest per annum, alleged to be the usual trade rate, from 10-7-1947 till date of payment. Rajagopalan J. held that as they had asked the Hanuman Bank to collect the amount & remit it by a demand drafb payable at Madras, the position was if they had received money in cash at Madurai from the Hanuman Bank & had then purchased the draft over counter, as the bank was made their agent for the purchase of the draft, & so, as the law stood, they had got what they had bargained for, namely, a draft of the bank, the payment of which depended on the solvency of the head office at the time of their presentation, as held in In re Oriental Bank Corporation; Ex parte Guillemin, (1884) 28 ch. 634 at p. 641 & that they were entitled only to rank as ordinary creditors & not as preferential creditors & dismissed the application with costs. Hence this appeal.

(3.) O. S. A. No. 89 of 1949 was filed by the Canara Bank Ltd. Mangalore, against a similar order of Rajagopalan J. in Appln. No. 1008 of 1949. The facts there were briefly these. The Canara Bank sent to the Kumbakonam branch of the Hanuman Bank a bill for Rs. 1000 drawn by one Periyasami Mudaliar on Shanmugasundaram Pillai & sons, Kumbakonam. The Canara Bank's request ran as follows: