MADHOLAL SINDHU Vs. OFFICIAL ASSIGNEE OF BOMBAY

JUDGEMENT

(1.) THIS is an appeal from a judgment of a division bench of the High Court at Bombay setting aside a decree of a single Judge of that Court. The material facts are these :

(2.) BY January 1940 Mr. Meyer Nissim (hereafter referred to as Nissim), defendant No.4, had borrowed from defendant No.2 bank Rs. 75,000 on the security of 26,000 shares of the first defendant company and passed two letters of hypothecation in the same terms in favour of the bank. The letter of hypothecation provided that all securities which may from time to time be held by the bank of Nissim's account shall be security for repayment of the outstanding general balance of all and every loan or account of his with the bank, including interest. It further provided as follows :-" With power to you (the bank) at your discretion to sell or a sufficient portion of such securities in the event of my not maintaining a margin of 40 per cent, on the market value of the securities for the time being or on my failing to repay the amount of any loan made by you to me on the due date of such loan," On these shares the company claimed a lien for Rs. 1,10,000. When Nissim pledged the shares with the bank, he had signed five transfer forms (Ex. A-S) in blank and had given them to the bank. Barring Nissim's signature as transferor, which was witnessed, the forms were blank. The name of the company, viz. the Assian Assurance Company Ltd. was however filled in.

(3.) THE evidence shows that Jamnadas had the complete controlling voice in the management of the bank and the managing director was practically under his thumb. Late in June 1940, when Nissim's very involved financial condition became known, it appears that there was some talk between Jamnadas representing himself, Jamnadas and some officers of the bank representing the bank, and Nissim, and it was then suggested that Jamnadas should take over, so far as the bank was concerned, all the liabilities and securities of Nissim. On July 6, 1940, Jamnadas wrote to Deshpande, the managing director of the bank, a letter in the following terms:-"with reference to our conversation last week about the disposal of Mr. Nissim's share in the Asian Assurance Company, Ltd. , I shall be glad to buy them myself for Rs. 73,000 only. Please place this offer of mine before our next Committee meeting. " THEre is no evidence to show that this letter was written with the knowledge or consent of Nissim. On July 10, 1940, Jamnadas wrote another letter to Deshpande in the following terms:- "i have consulted Dr. T. N. Kajiji and he has agreed to allow his name as the purchaser of Mr. Nissim's shares. In case of any difficulty arising you may take my assurance that I shall remain ultimately responsible, as already personally stated to you. " THE shares there referred to were the shares of the bank itself. Later in the day, on July 10, 1940, a meeting of the executive committee of the bank was held at which Mr. Jamnadas presided. Resolution No.7 was in these terms :-" Resolved that the offer of Mr. J. M. Mehta for buying the shares numbering 26,000 in all of the Asian Assurance Company Ltd. standing in the name of Meyer Nissim for a sum of Rs. 73,000 or thereabouts, as contained in his letter of the 6th instant, be and is hereby accepted and Mr. J. M. Mehta's account be debited with the purchase price. " Another resolution in respect of the bank shares was passed at the same meeting and was in these terms:-'"resolved that the transfer of the following shares as stated in a separte statement signed by the Chairman be and is hereby sanctioned. (ii) Transfer from underwriter Mr. Meyer Nissim 4373 shares. . . transferee Dr. T. M, Kajiji, Bar-at Law. and it is further resolved that Dr. T. M. Kajiji should be debited with the purchase price of the shares at par. " On the same day Jamnadas executed in favour of the a bank pro-note for Rs. 75,000 and also a letter of hypothecation in terms similar to those passed by Nissim. Deshpande made the following endorsement in red pencil on the overdraft account of Nissim with the bank : 1. Ledger clerk to note.