MERCHANTS BANK Vs. M DHARMASAMBARTHANI AMMAL

JUDGEMENT

(1.) THIS appeal by the second plaintiff turns on the maintainability of the suit originally brought by the first plaintiff. The suit was for recovery from the several defendants of a sum of Rs. 60,000 with subsequent interest, the basis of the claim being that, as employees of the first plaintiff, defendants 2 to 8 and the husband of the first defendant were guilty of various acts of misfeasance and malfeasance in respect of the funds of the first plaintiff, and misappropriated the same to a tune of Rs. 1,16,000. The first plaintiff also prayed for a mortgage decree on the foot of a security which the second defendant had executed in his favour in relation to the same mishandling of the funds. The first defendant's husband was the secretary of the first plaintiff from 1926 till 18-3-1957, when he died, leaving his widow, the first defendant. Though the articles of association vested the management of the first bank in a Board of Directors, the Board would appear to have confided and entrusted to the secretary the actual transactions and control of the affairs of the first plaintiff. But between 1945 and 1957 a number of fraudulent misappropriations were committed by the first defendant's husband with the help of the rest of the defendants, who were the first plaintiff's employees like, cashier, accountant, bill collector, confidential clerk and peon. On inspection by the Reserve Bank and as per its report in August 1957, and the audit report dated 29-4-1957, it was discovered that there was a heavy shortage of Rs. 1,16,510-7-7. The first plaintiff charged the husband of the first defendant and the rest of the defendants with misappropriation, misfeasance, acts of gross and fraudulent negligence and misconduct, and, though the amount misappropriated was much larger, limited its claim in the plaint to the amount we have already mentioned. The fourth defendant had already executed a promissory note for a sum of Rs. 2000 in favour of the first plaintiff to cover his portion of the responsibility in regard to the acts of misfeasance. While the suit was pending, on the intervention of the Reserve Bank, the first plaintiff was amalgamated with the second plaintiff bank on and from 4-91961, by orders of the Central Government published in the Gazette of India, extraordinary, dated 29-8-1961. On the application of the second plaintiff it was impleaded in that capacity on the ground that the interests of the first plaintiff had developed on the second. Thereupon an additional issue was framed, namely, "whether the Tanjore permanent Bank, the newly constituted plaintiff, is entitled to continue the suit and get the reliefs prayed for in the suit". The parties went to trial on this preliminary issue, with the result the learned Subordinate Judge took the view that the second plaintiff had no locus standi to continue the suit and that, in fact, the suit was not a proper remedy, and dismissed the suit.

(2.) THE Court below formed that view as, in its opinion, the suit was in substance one for damages for misfeasance, which could not survive the amalgation of the first plaintiff with the second plaintiff bank. The court below was of the further view that the relative provisions in the Banking Companies Act 1949, for continuance of suits and proceedings in cases of amalgamation of banks, did not help the second plaintiff, as there was a lacuna in S. 45 (5) (e) of the Act, and the scheme of amalgamation could not be read as filling up the lacuna or having an overriding effect. The court below also thought that the remedy of the second plaintiff was to file an application before the proper forum under S. 543 of the companies Act 1956, read with S. 45-H of the Banking Companies Act 1949. We have come to the conclusion that the court below is not right on any or these matters.

(3.) IT is not a matter or doubt a cause of action based on a act like negligence or misfeasance or malfeasance is in the nature of a personal claim which abates or terminates with the death of the tort-feasor. That a mere right to sue is not transferable and cannot be assigned does not also require authority, S. 6 (e) of the transfer of Property Act is expressly to that effect. Even apart from statute, the position is the same even under the general law. But it should be noted that this limitation to transferability or assignability is confined to contractual transactions and does not in any way affect a transfer or assignment by operation of law, by statute or otherwise. In the present context, New Central Jute Mills Co. Ltd. v. Rivers Steam Navigation Co. Ltd. , appears to be directly in point. That was a case of sanction by court of a scheme of amalgamation of two companies. The scheme ordered by the court provided that any suit or other legal proceeding, if pending in any court by or against the company which was amalgamated, be continued by or against the company with which the latter was amalgamated. On that basis an application was made for bringing the companye after amalgamation, on record, but, it was dismissed on the view that the transfer to the applicant was no more than a mere right to sue for damages for breach of contract. Das Gupta C. J. as he then was, and Bachawat J. held that the transfer being by order of court of competent jurisdiction, S. 6 (e) of the Transfer of Property Act had no application, having regard to S. 2 (d) of the same Act, and that even independent of that, an accrued right to sue for damages was not a right which by its very nature was incapable of being transferred. Such right might be transferred with property to which it was incidental without infringing any rule of law. In taking the view, the learned Judges distinguished Nokes v. Doncaster amalgamated Collieries Ltd. , 1939-2 KB 578. This Calcutta case clearly decided that where transfer of such a right to sue is by operation of law, as in that case, by order of court, S. 6 (e) of the Transfer of Property Act would have no application thereto. The position in the instant case is practically analogous to that in the calcutta case with this difference, that here the scheme of amalgamation was brought about by the Government of India and not by an order of court. But that makes no difference to the legal position, because a scheme of amalgamation settled by Central Government has the force of law, as we shall point out in due course. The scheme with which we are concerned transferred the first plaintiff's assets, liabilities and other rights and interests to the second plaintiff, including all rights of action. Apart from the generality, the scheme also specifically provided that if, on the prescribed date, any suit, appeal or other legal proceeding of whatever nature by or against the transferor-bank is pending, the same shall not abate, or be discontinued or be in any way prejudicially affected but shall, subject to the other provisions of the scheme, be prosecuted and enforced by or against the transferee bank. It is, therefore, clear as was the case in the Calcutta decision, that the right to continue the suit was something which was attached to the property to which it was incidental and which was under the scheme of amalgamation transferred from the first plaintiff to the second plaintiff.