NEIKKRAM DOBAY Vs. BANK OF BENGAL

JUDGEMENT

(1.) THE action which is the subject of this appeal was brought in the High Court at Calcutta by the Plaintiff, a dealer in Government securities, against the Bank of Bengal, which carries on business in Calcutta. The plaint alleged that on or about the 19th of July, 1883, the Plaintiff entered into an arrangement with the bank as to his future dealings, it being agreed that in all future loans taken by him the bank should charge 1 per cent, less than the usual bank rate of interest, and should not call for prompt or heavy margins in respect of Government promissory notes deposited for the purpose of securing loans; that under this agreement the Plaintiff took extensive loans from the bank, giving promissory notes, and depositing Government paper as security; that, notwithstanding the agreement, the bank called for prompt and heavy margins, and between the 3rd of October, 1883, and the 31st of January, 1884, notwithstanding a tender of seven lakhs of rupees and an offer of four lakhs more, wrongfully and without due and reasonable notice to the Plaintiff, sold off at a great loss to him all the Government promissory notes in their possession deposited by the Plaintiff as security for the loans, and from the proceeds paid off the loans. The questions raised at the trial were, first, what were the terms of the arrangement, and, secondly, had they been broken by the bank?

(2.) THE following are the facts proved: The bank, through Mr. Gordon, its chief accountant and deputy secretary in Calcutta, agreed to grant the Plaintiff loans at the special loan rate on their usual conditions of business, one of which was "The bank reserves to itself the option of selling securities that have been deposited against loans at any time after the issue of notice of demand," and another, "Interest on securities in deposit against loans or overdrawn accounts will be realized by the bank on receipt of written instruction from the borrower." Immediately upon the making of the agreement the Plaintiff began to take loans to large amounts from the bank upon the security of the deposit of Government notes. Some of these loans were consolidated and renewed, the last renewal being under the date of the 21st of December, 1883.

(3.) PREVIOUS to the trial it appeared, by the answer of the bank to interrogatories, that of the securities stated in the account to have been sold Rs. 455,500 had not been in fact sold, but were taken over by the bank in their books at the market price of the day, Rs. 400,000 to the bank itself and Rs. 55,000 to the depositors' department. It appeared at the trial that the bank had resold nearly all, if not all, of these Government notes, and when the case came before the High Court on appeal further evidence was taken before it as to the dealings of the bank with the Plaintiff's securities. It was then proved that the whole of the securities taken over by the bank were disposed of by them between the 17th of January and the 8th of February, 1884, either by sale or in exchange for other securities, and that the amounts realized were in every instance less than the prices for which credit had been given for them to the Plaintiff.