JULIO MASCARENHAS Vs. MERCANTILE BANK OF INDIA, LTD

JUDGEMENT

(1.) The questions for decision in these appeals arise out of a fraud committed by one Fernandes. In the year 1914 he was entrusted by the appellants, who were residents of Goa, with certain securities for the purpose of collecting on their behalf the interest as it fell due. Among these securities were 41 ''debentures" issued by the Trustees for the Improvement of the City of Bombay under powers contained in their Act (Bombay Act 4 of 1898) and also one "municipal debenture," being presumably a debenture issued by the Municipal Corporation of Bombay under Bombay Act 3 of 1888. All of these securities were transferable by endorsement.

(2.) Fernandes seems to have remitted the interest to the appellants regularly till the middle of 1923, when he defaulted, and it was then discovered that he had, in 1918, by means of forged endorsements in his own favour, pledged all the debentures in question (together with others not the subject of these appeals) with the Alliance Bank of Simla, endorsing them over to that Bank to secure his own indebtedness. Had no further complications occurred there would probably have been little difficulty in deciding on the rights of the parties; but in 1921 the Alliance Bank surrendered the 41 Improvement Trust debentures to the trustees, who exchanged them for 22 new debentures, the face value of which differed in many cases from those of the originals, though the totals were the same. This transaction is described in the record as a "renewal" of the debentures, and seems to have been in accordance with the usual practice, but it has an important bearing on the rights of the parties. All these new instruments were issued directly to, and in the name of, the Alliance Bank, clear of all previous endorsements. The original securities were cancelled by the trustees and retained by them. The same process, mutatis mutandis, was gone through in the case of the Municipal debenture.

(3.) Thereafter, in 1921, Fernandes transferred his loan account to the Mercantile Bank of India, the respondents in these appeals, and on his instructions the Alliance Bank endorsed the new instruments over to the respondents. The appellants now claim the delivery and transfer to them of these instruments by the respondents. They succeeded in the first Court in India, but failed to hold their decree on appeal and the questions involved come before this Board for final determination. There is no dispute as to the facts set out above. The securities entrusted to Fernandes were the property of the two sets of appellants, and suits were instituted by them separately on the original side of the Bombay High Court. The defendants in each case were Fernandes, the Alliance Bank, and the respondents, but the suits were defended only by the respondents. They were tried and heard in appeal separately, but are consolidated before the Board, and in their Lordships' opinion the same considerations apply in each.