BANK OF BARODA JAIPUR Vs. KRISHNA BALLABH

JUDGEMENT

(1.) THIS is a first appeal by the defendant Bank of Baroda against the judgment and decree of the Additional District Judge No. 2, Jaipur City, dated 11-9-69 in a suit for recovery of Rs. 10. 40. 63 P. instituted by the plaintiff-respondent Krishna Ballabh. The other respondents Nos. 2 to 5 are the heirs of the deceased N. V. Vakhariya.

(2.) THE undisputed facts of the case are these: N. V. Vakhariya, the husband of respondent-defendant Nos. 2 and father of respondent-defendants Nos. 3 to 5 carried on business in the name and style of Messrs Jem Chemical and Pharmaceutical Works in the City of Jaipur upto 28-6-61 on which date N. V. Vakhariya expired. During the relevant period he was the sole proprietor of the said business. On 19-7-60 he opened a Cash Credit Account with the Bank of Baroda Ltd. , hereinafter referred to as the Bank, in the name of Messrs. Jem Chemical and Pharmaceutical Works and executed an agreement Ex. A/14 in favour of the Bank. By this agreement N. V. Vakhariya was to be given cash credit facilities by the Bank against the security of goods to be pledged with the Bank. On 11-3-61 the value of the goods pledged with the Bank was Rs. 40,812/- and the amount drawn from the Bank by N. V. Vakhariya against the goods pledged was Rs. 24,028/66 P. Almost the same position continued in the Cash Credit Account on 14-3-61, on which date N. V. Vakhariya and Krishna Ballabh plaintiff applied to the Bank for opening a Loan Account in the name of Messrs Jem Chemical & Pharmaceutical Works on the security of F. D. R. No. 142576 dated 13-3-61 for Rs. 9,315/- standing in the name of Krishna Ballabh. THE case of the Bank is that on the same day, that is, 14-3-61, a sum of Rs. 8,400/- was advanced to N. V. Vakhariya in the Loan Account. This fact is, however, denied by plaintiff Krishna Ballabh. A prohibitory order dated 2-5-61 was received by the Bank on 3-5-61. This order was issued by the Court of Civil Judge, Jaipur City, in the execution case Jugalkishore and others v. N. V. Vakhariya prohibiting the Bank until further orders from making payment to N. V. Vakhariya of the balance of the Current Account and whatever amount remains after appropriation of the Bank loans to the Cash Credit Account from the proceeds of the goods kept in the Bank custody in security of the loans. " N. V. Vakhariya thereafter deposited Rs. 14,500/- and Rs. 9,000/- on 19-5-61 and 24. 5. 61 respectively in the Cash Credit Account and thereby paid off the entire amount due to the Bank in the said account. On 24-5-61 he also got released all the goods pledged with the Bank. On 2-6-61 N. V. Vakhariya deposited Rs. 5,012/- which were credited in the Cash Credit Account. On 3-6-61 Rs. 5,000/- were transferred from the Cash Credit Account to the Sundry Deposit Account in pursuance of the prohibitory order dated 2-5-61. THE Cash Credit Account was squared up and closed on 3-6-61. On 13-3-62 the Bank issued a warrant in the form of a receipt for Rs. 773. 10 P. showing adjustment of Rs. 8891. 22 (Rs. 8400/-plus interest thereon) to the Account of N. V. Vakhariya out of the amount of the F. D. R. and showing a surplus of Rs. 773. 10 to be received by the plaintiff. THE plaintiff signed the said warrant and received the amount of Rs. 773. 10 on 13-3-62. After a period of more than a year on 26-8-63 plaintiff Krishna Ballabh addressed a letter calling upon the Bank to pay him Rs. 5300/- approximately held by the Bank towards the prohibitory order dated 2. 5. 61. Again, on 30-8-63, plaintiff Krishna Ballabh wrote another letter to the Bank bringing to its notice that it wrongly represented to the court that a sum of Rs. 23255. 74 P. only was outstanding against Messrs Jem Chemical & Pharmaceutical Works on 2-5-61 when in fact the dues of the Bank against the said firm amounted to Rs. 31,635-74 P. (i. e. Rs. 23,255. 74 in the Cash Credit Account and Rs. 8,310/- in the Loan Account of Messrs Jem Chemical & Pharmaceutical Works) Krishna Ballabh further warned the Bank that "if any amount is released by the Bank on account of such mis-information by the Bank to the court or to any body, it will be the sole responsibility and at the risk of the Bank. " THE Bank, however, on 3-9-63, withdrew a sum of Rs. 5,000/- from the Sundry Deposit Account and paid it to the court towards its prohibitory order dated 2-5-61. THE plaintiff Krishna Ballabh then instituted the present suit out of which this appeal has arisen on 13-3-65 for the recovery of Rs. 8891. 22 P. deducted from the Fixed Deposit Receipt for Rs. 9,315/- and Rs. 1,600,41 by way of interest at the rate of 6% per annum total Rs. 10,491. 63 P. on the grounds which are mentioned in para No. 9 of the plaint and are reproduced below: (a) Because in pursuance of the terms of the letter of 14. 3. 61 of the plaintiff for granting loan over-draft facility to said Shri N. V. Vakharia, Proprietor of M/s. Jem Chemical & Pharmaceutical Works, Jaipur, defendant No. 1 the Bank of Baroda Ltd. , Jaipur, did not grant any loan actually to said Shri N. V. Vakhariya and therefore the Bank of Baroda Ltd. , Jaipur, defendant No 1 could not deduct any amount whatsoever from the proceeds of the said Fixed Deposit Receipt No. 142576 for Rs. 9315/ -. (b) Because on 2-6-1961 the defendant No. 1 the Bank of Baroda Ltd. , Jaipur, owed a sum of Rs. 31,645. 74 P. plus interest etc. that may have accrued thereon uptil that date; but the Bank of Baroda Ltd. , Jaipur, defendant No. 1 released the total goods on the security of which the said defendant No. 1 the Bank of Baroda Ltd. , had advanced the sum of Rs. 31645. 74 P. on accepting a lesser payment of Rs. 28,512/- only without any reference to the plaintiff and thereby by its act and omission the security of the Fixed Deposit Receipt No. 142576 for Rs. 9315/- was discharged under law. More so, because the plaintiff was entitled to the benefit of every security which the creditor viz. defendant No. 1 the Bank of Baroda Ltd. , Jaipur had against the principal debtor Mr. N. V. Vakharia at the time the contract of surety was entered into with the said Bank of Baroda Ltd, Jaipur, defendant No. 1. (c) Because in case the plaintiff's contentions mentioned in sub-paras A and B above may not be held to be tenable in law, the plaintiff's said Fixed Deposit Receipt No. 142576 far Rs. 9315/can only be held liable for payment to the extent of the difference of the loan received from said Shri N. V. Vakhariya. " THE plaintiff, in the alternative, prayed for a decree of Rs. 5,156. 50 P. against the Bank on the ground that although this amount was lying in deposit with the Bank, the same was not paid to him nor it was credited in the Loan Account outstanding against M/s. Jem Chemical & Pharmaceutical Works. THE plaintiff further prayed in the alternative that in case the decree is not passed against the Bank, the suit be decreed against defendants Nos. 2 to 5. In the plaint, the plaintiff, besides impleading the Bank and the heirs of deceased N. V. Venkhariya, arrayed as defendants the decree-holders in the execution case in which the prohibitory order dated 2-5-61 was passed. THE suit was contested by all the defendants who traversed the allegations made in the plaint. THE important findings arrived at by the learned Additional District Judge and which are relevant for the disposal of this appeal may now be stated as under - (i) No loan whatsoever was advanced to N. V. Vakhariya against the plaintiff's Fixed Deposit Receipt for Rs. 9315/ -. THE transfer of Rs. 8891. 22 P. out of the plaintiff's F. D. R. for Rs. 9315/- was therefore unwarranted. (ii) THE Cash Credit Account and the Loan Account were two separate accounts in the name of M/s Jem Chemical & Pharmaceutical Works but that did not mean that it was not open to the Bank to recover its dues outstanding against its debtor under some particular account from his other account if the Bank in its wisdom thought proper to do so. (iii) When the prohibitory order dated 2-5-61 was received by the Bank on 3-5-61 the amount due to the Bank in the Cash Credit Account and the Loan Account was Rs. 31,530/-, and the goods pledged with the Bank were of the value of Rs. 39,000/-against which the drawing power ot N. V. Vakhariya was about Rs. 29,000/ -. THE Bank therefore should have intimated to the court in answer to the prohibitory order dated 2-5-61 that no amount was due to N. V. Vakhariya from the Bank. THE Bank was not legally justified in sending Rs. 5,000/- to the court in pursuance of the prohibitory order dated 2-5-61. (iv) THE act of the Bank in releasing the goods on 24-5-61 on the deposit of the amount due under the Cash Credit Account without taking the care that Rs. 8400/-along with interest thereon were also outstanding against N. V. Vakhariya was a wrong, negligent and imprudent act on the part of the Bank and it discharged the surety under sec. 141 of the Contract Act, to the extent of the value of the security lost or parted with. (v) THE Bank should not have credited Rs. 5000/- deposited by N. V. Vakhariya on 2. 6. 61 in the Cash Credit Account when nothing was due from N. V. Vakhariya under that account. This sum of Rs. 5000/- should have been credited by the Bank in the Loan Account. (vi) THE contention of the Bank that the plaintiff accepted Rs. 773. 10 P. on 13-3-62 in full and final settlement of his Fixed Deposit Receipt for Rs, 9815/- and that acceptance of Rs. 773. 10 P. debarred him from claiming the suit amount, was rejected by the Court on the ground inter alia that the plaintiff received the amount of Rs. 773. 10 P. under protest.

(3.) THE learned counsel for the plaintiff-respondent has drawn my attention to sec. 140 of the Indian Contract Act. His argument is that on 13. 3. 62 when the entire liability as surety was paid off by the plaintiff, the latter became entitled to Rs. 5012/-which lay in deposit with the Bank in the Cash Credit Account of Messrs Jem Chemical and Pharmaceutical Works and which were later on forwarded to the court in pursuance of the prohibitory order dated 2-5-61. Sec. 140 reads as under: "sec. 140 Rights of surety on payment or performance - Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place. THE surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor. " This section embodies the general rule of equity expounded by Sir Samuel Romilly as counsel and accepted by the Court of Chancery in Crythorne vs. Swinburne (1807,14 Ves. 160 namely. "the surety will be entitled to every remedy which the creditor has against the principal debtor, to enforce every security and all means of payment; to stand in the place of the creditor; not only through the medium of contract, but even by means of securities entered into without the knowledge of the surety having a right to have those securities transferred to him, though there was no stipulation for that; and to avail himself of all those securities against the debtor. This right of a surety also stands, not upon contract but upon a principle of natural justice. " THEir lordships of the Supreme Court had the occasion to interpret sec. 140 as well as sec. 141 of the Contract Act in State of Madhya Pradesh vs. Kaluram (l ). With reference to sec. 140, it was observed as follows: "the surety is entitled on payment of the debt or performance of all that he is liable for, to the benefits of the rights of the creditors against the principal debtor which arise out of the transaction which gives rise to the right or liability: he is therefore on payment of the amount due by the principal debtor entitled to be put in the same position in which the creditor stood in relation to the principal debtor, (italic is mine ). THE above observation makes it plain that the plaintiff in the present case was entitled to those benefits only which arose out of the transaction which gave rise to the right or liability As already noticed above, the sum of Rs. 5012/- was deposited by the debtor in the Cash Credit Account which was an account separate from the Loan Account guaranteed by the plaintiff. Since the right or liability of the plaintiff arose out of the Loan Account he was not entitled to claim or demand the amount which lay in deposit in all together separate account, that is, Cash Credit Account. Sec. 140 is thus also of no assistance to the plaintiff and on the basis of that section he cannot claim the amount of Rs. 5012/- lying in deposit in the Cash Credit Account or the Sundry Deposit Account.