BANK OF DACCA, LTD Vs. GOUR GOPAL SAHA

JUDGEMENT

(1.) This appeal has arisen out of an application under Section 47, Civil P. C. made by a person in the position of a judgment-debtor being a share-holder of a Bank, the Bank of Dacca, in liquidation against whom there were orders for recovery of money passed in favour of the Bank in liquidation in respect of unpaid calls for shares allotted to him. The applicant raising objections under Section 47, Civil P. C., respondent in this appeal, had an account with the bank of Dacca and as security against overdraft, had deposited Government Promissory Notes. These notes were deposited by the Bank of Dacca with the Bengal National Bank, and were sold by the Receiver appointed by the Court for the Bengal National Bank, and the sale- proceeds after certain deductions made therefrom on account of dues of the Bank of Dacca to the Bengal National Bank, were sent to the Liquidator of the Bank of Dacca. The amount received by the Liquidator exceeded the sum realisable from the appellant under the balance order put into execution. The objections to execution raised by the appellant related to the position that the Liquidator of the Bank of Dacca seeking to execute the balance order should meet the decretal dues out of the amount recovered from the Receiver of the Bengal National Bank which was the objector's property, being trust money which could not be applied for any purpose other than that for which the Government Promissory Notes were deposited. The contention of the debtor under the balance order was that money in the hand of the liquidator would fully satisfy their liability under the balance order and the execution should not therefore be allowed to proceed.

(2.) The Liquidator of the Bank of Dacca on the other hand, asserted that the applicant under Section 47, Civil P. C. was only a creditor of the Bank, and his objection by way of set off was not maintainable. The learned District Judge in the Court of Appeal below, in affirming the order passed by the Court of execution, held that on the facts and in the circumstances of the case, the Bank of Dacca was trustee in respect of Government Promissory Notes deposited by way of security for advances; that the debt of the Bank could be squared without taking the matter into Court at all, that the case was not one of set off or of a contributory claiming a deduction before a share out among the creditors. The respondent was not, according to the Judge, in the position of a creditor, but was entitled to .enforce his ownership of the Government Promissory Notes deposited with the Bank. It appears that on 13 August 1931, the respondent addressed a letter to the Liquidator of the Bank of Dacca mentioning the Government Promissory Notes deposited by him as security for advances and claiming the amount covered by the same with interest up-to-date. There is a note on the letter showing that Rs. 5,601-7-10 was the amount the respondent was entitled to get from the Bank. It may be noticed that in view of the use of the word trustee in the judgment of the Courts below, which appears to us to have been used in a very general way, a great deal of time was taken by the learned advocates representing the parties to this appeal, for explaining the position created by the deposit of Government Promissory Notes as security for advances or overdrafts. The position was debated before us with a reference to some decisions of Courts in England, practically without reference to the facts of the case before us, and without consideration for a position which may be taken to be well established now. The relationship of banker and customer is generally that of agent and principal, of debtor and creditor or of pledger and pledges; there are however cases where the banker stands in the relation of trustee as well as agent for his customer, as for example in the case of securities lodged for safe custody, the banker is not entitled to sell or pledge them, and must be prepared to hand back the identical securities deposited; should he convert them to his own use, he becomes criminally liable. (See Sykes on Banking, Edn. 6, pp. 126-127). As has been mentioned in Paget's Law of Banking the relation of banker is primarily that of debtor and creditor, and observations of Jessel, M.R. in Re Hallet's Estate (1879) 13 Ch D 696 do not affect the general rule. The banker is not a trustee for the customer in respect of money paid in or responsible for him for the use he makes of it, but the position is not the same where, as in the case before us, the banker uses the securities deposited with him for his own use, and where there is conversion of the securities for the purposes of the Bank and not for the purpose of the customer.

(3.) In the circumstances of the case before us where securities were deposited as cover for advances, and for the purpose of securing overdrafts or advances, the transaction was strictly of the nature of a pledge, (Paget, p. 242), and this rule must be taken to be the rule guiding the relationship of a banker and a customer in the position of the respondent in this appeal in view of the decision of their Lordships of the Judicial Committee in Neikram Dobay V/s. Bank of Bengal (1892) 19 Cal 322. On the principles adopted in Neikram Dobay V/s. Bank of Bengal (1892) 19 Cal 322, and on the facts and circumstances of the case before us, the bank became liable for the value of the G. P. Notes as for conversion. The bank had converted the G. P. Notes to its own use, and was liable for the value of them including interest on them. The customer was of course bound to pay the loans for which the G. P. Notes were security: see Neikram Dobay V/s. Bank of Bengal (1892) 19 Cal 322 at pp. 67-68. The position taken up by the respondent in his letter to the bank in liquidation dated 13 August 1931, mentioned above, was justifiable on principle and authority to which reference has been made, and the Judge in the Court below is right in holding that the respondent was entitled to enforce his ownership to the amount in the hands of the liquidator, after the sale of the G. P. Notes deposited in the Bank of Dacca as security to cover overdrafts or advances after payment of loans from the bank for which they were security.