1. This special appeal has been filed against the judgment of our brother Nigam, J. in Civil Misc. Appln. No. 897 of 1952 under Section 45-B of the Banking Companies Act X of 194.9.
2. The respondent, Agarwal Bank Ltd., is in liquidation. An application was moved by the liquidator for recovery of a sum of Rs. 2576/15/3 which amount was due to the Bank from the appellant under a pronote executed by him on the 26th August, 1948, for a sum of Rs. 2,000/- carrying interest at 71/2 per cent. per annum. The appellant filed a written statement in which the execution and consideration of the pronote as well as the rate of interest were admitted. What was alleged by the appellant in reply was that he had deposited a sum of Rs. 2,000/- in fixed deposit with the Bank on 1st January, 1946, for a period of two years and when that fixed deposit matured and he wanted to take back that money the Bank instead of paying it to him placed it in fixed deposit for a further period of two years without his consent and when he insisted on taking his money, he was told that the only way he could do it was to take a loan on the security of the fixed deposit receipt by executing a pronote for the amount he wanted to withdraw. It was alleged by the appellant that the pronote was executed by him under these circumstances and he, therefore, wanted that the amount due to him under the fixed deposit receipt and also the money due to him under his savings bank account, amounting to Rs. 120/2/-, be adjusted against the claim of the Bank under the pronote. The Bank filed the fixed deposit receipt dated 5th March, 1958, being in the joint names of the appellant Ram Autar Verma and his wife Smt. Jagdamba Devi.
3. Nigam, J., before whom the application came up for hearing, framed only two issues in addition to the general issue regarding the relief and they were :
1. Whether the defendant is entitled to any. set off for the fixed deposit of Rs. 1,000/- in his name and the alleged balance of Rs. 120/2/- which is said to be the balance in his savings bank deposit account?
2. If so, whether he must pay any court-fee before the question of set off can be considered?
4. Nigam, J. was of opinion that the plea raised by the appellant was that of set off which could not be considered on merits unless court-fee in respect of the same was paid ad valorem by him. As no court-fee was paid by him the plea was not considered and the claim in favour of the Bank was decreed for Rs. 2,000/- plus interest at 71/2 per cent. per annum from the date of the execution of the pronote up to 14th February, 1949, and thereafter at 6 per cent. per annum upto 24th April, 1951, Interest thereafter was directed to be paid at 3 per cent. per annum.
5. The first question which was raised before us in this special appeal was about the question of court-fee on the plea of set off. The only provision in the Court-fees Act for the payment of court-fee on a plea of set off is the one contained in Article 1 of Schedule I, the entry in the first column of which reads :
1. Plaint, written statement, pleading a set off, or counter claim or memorandum of appeal (not otherwise provided for in this Act) presented to any Civil or RevenueCourt except those mentioned in Schedule 3.'
6. The court-fee payable under, this Article is not on a plea of set off but on a written statement pleading a 'set off'. The document in which a plea of set on is raised must, therefore, be a written statement before any court-fee may be said to be payable over it under this article. A written statement is filed under Order VIII, Rule 1 of the First Schedule of the Code of Civil Procedure. This written-statement is filed in answer to a plaint which is filed under Order IV, Rule 1 and which is subsequently registered under Rule 2 of the same Order. Order IV relates to institution of suits and Order VIII to the filing of written-statements in the suits and a plea of set off therein. Normally, therefore, in order that there may be a written-statement, there must be a plaint within the meaning of Order IV, Rule 1 of the Code. The present proceeding, out of which this appeal has arisen, did not originate in a plaint giving rise to a suit, but in an 'application filed under Section 45-B of the Banking Companies Act, X of 1949, as amended by the Banking Companies (Amendment) Act, XX of 1950. Although the official receiver in filing the claim under Section 45-B aforesaid described the Bank as the plaintiff and the present appellant as the defendant, their position in fact, was that of petitioner and opposite-party. The proceeding clearly originated in a petition which was stamped not as a plaint under Schedule 1, Article 1 of Court-fees Act, but under Clause. (5) of Schedule II of Article 1, which provides for the payment of Court-fee on applications and petitions. The proceeding having thus originated only in a petition, the reply which the appellant filed as opposite-party would only be by way of an objection and not a written-statement though for the sake of convenience it may be drafted in the form of a written-statement, just as even the petition may be drafted in the form of a plaint.
7. It was contended that the petition, which was filed, was, in fact, a plaint and the proceeding a suit, and reliance for the purpose was placed upon Mitsui Bussan Kaisha Ltd. v. Totaram Bhagwandas, AIR 1921 Sind 166, and Balram Singh v. Dudh Nath AIR 1949 All 100.
8. In the Sind case it was pointed out that the word 'plaint' has no statutory definition and means nothing more than
'a private memorial tendered to a Court in which a person sets forth his cause of action; the exhibition of an action in writing'
and that a document purporting to be a plaint, setting forth a cause of action and drawn up substantially in accordance with the rules contained in Order 6 and Order 7 of the Code is a plaint though it may contain some imperfections. The observations aforesaid in the Sind case were, however, made in a different context. The question in that case was not whether an application or petition in a miscellaneous or in other proceeding is to be regarded as a plaint, but whether a plaint which is required to be drafted in a particular manner under the different rules in Order 7 of the Code of Civil Procedure could be regarded as a plaint filed on the date on which it was actually presented, even though it was imperfect in several respects and given proper form only at a later stage. The document had, in fact, been filed in a suit and there was, therefore, no question that the provisions of Order IV and Order VII of the Code applied to it. The only question which was required to be answered was whether in spite of certain imperfections in the document, it could be treated as a plaint and the question was answered in the affirmative. The decision in the case does not, therefore, materially help the respondent.
9. In AIR 1949 All 100 (Supra), what was held was that a proceeding arising out of an application under Section 12 of the U. P. Agriculturists' Relief Act, XXVII of 1934, was a suit within the meaning of Section 21 of the Arbitration Act. Section 21 of the Arbitration Act provides for the making of a reference to arbitration in a pending suit, and it was held that such reference may be made even in a proceeding under, Section 12 aforesaid. That decision does not, in any way, support the contention of the respondent and can be no authority for the proposition that the reply, which was filed by the present appellant, is to be regarded as a written-statement filed in a Suit.
10. The respondent filed his claim under Section 45-B of the Banking Companies Act, X of 1949, and paid the court-fee thereon under Article 1(5) of Schedule 11 of the Court-Fees Act and normally, therefore, even the reply, which was filed by the appellant in answer to that claim can only be treated as an application liable to be stamped under the very same provision. It is neither exempt as a written-statement as it is not a written-statement filed in a suit, nor is it liable to be stamped as a written-statement containing a plea of set off under Article 1 of Schedule I for the very same reason. We may also mention that even the present appellant could file his claim under Section 45B aforesaid and if he had done so he would have been required to pay court-fee thereon only under Article 1(5) of Schedule II and not under Article 1 of Schedule I. The view we have taken finds some support from In re, Popular Bank, Ltd. : AIR1959Ker11 , in which case an affidavit, filed in answer to a claim made against the debtor, was regarded only as a petition to the Court in that case the affidavit, which was filed by the debtor, asked for an account being taken and it was held that it did not amount to a written-statement claiming a set off. We are of opinion, therefore, that the appellant was liable to pay a court-fee of Rs. 5/- on his reply under Article 1(5) of Schedule II of the Court-Fees Act of 1870 as amended in this State. As the aforesaid court-fee was paid by the appellant, the appeal was heard on merits.
11. It was urged on behalf of the appellant that the plea, which is being put forward by him, amounts to one of equitable set off not governed by the provisions of Order VIII, Rule 6 of the Code of Civil Procedure. The only difference between a so-called legal set off provided for in Order VIII, Rule 6 and an equitable set off is that while in the former the counter-demand must be of an ascertained sum of money and may be unconnected with the claim of the plaintiff, in the case of an equitable set off the amount of the Counter-claim may not be ascertained, but the cross-demands must arise out of the same transaction. It is not necessary for us to decide in this case whether the counter-claim, made by the appellant, is by way of a legal set off or an equitable set off as, in any case, the amount which is claimed by him is an ascertained sum of money.
12. The facts, in respect of which there is no dispute, briefly stated, are that the appellant deposited Rs. 2,000/- with the Agarwal Bank Ltd. in fixed deposit for a period of two years on 5th March, 1948, and himself borrowed a sum of Rs. 2,000/- on the basis of the pronote on 23rd August, 1948. While he was to get interest only at five per cent per annum, he himself agreed to pay interest at 7 1/2 per cent.
13. One contention of the respondent in respect of these transactions was that while the amount due under the fixed deposit receipt is payable to the appellant and his wife (payable to either or survivor), the money has been borrowed under the pronote by the appellant alone, and it was consequently urged that while money was payable under the fixed deposit receipt to one person, it was due under the pronote from another and reliance for the purpose was placed upon A. S. S. R. St. Veerappa Chettiar v. J. Pirrie : AIR1940Mad436 , in which it has been held where there is an amount payable by A in his individual account, and an amount payable to A and B in their joint account, the two accounts cannot be set off. It has, however, been held in that very case that if it could be shown that though the account is in the names of A and B, A is fully entitled to the amount, a set off would be allowed. This case would not help the respondent and that too for more than one reason. As has been just pointed out, the fixed deposit receipt is payable to either the appellant or his wife which means that the appellant can give full discharge in respect of it to the Bank. The appellant can, therefore, urge that money is due to him under the fixed deposit receipt and payable by him under the pronote and it should therefore, be possible for the, two counter-demands being set off.
14. Apart from this the appellant has deposed that it was he, who deposited the money. This was the allegation made by him in paragraph 7 of the written statement and even in his statement on oath he deposed that it was he, who deposited the sum of Rs. 2,000/- in fixed deposit for two years. This statement was not rebutted on behalf of the Bank and, therefore, stands unchallenged. On facts, therefore, the appellant has proved that the money belonged to him, though he deposited the same in the Bank in the joint names of his ownself and his wife.
15. The next question to be considered is whether appellant Ram Autar Verma is entitled to have the amount due to him and his wife under the fixed deposit receipt adjusted against the claim against him under the pronote referred to above. Reference in this connection was made to the two kinds of set off, the legal set off, which is allowed under Order VIII, Rule 6 of the Code of Civil Procedure, and equitable set off, which is permitted by the Courts even apart from the aforesaid provisions. Under Order VIII, Rule 6(i) a defendant can claim to set off against the plaintiffs demand 'any ascertained sum of money legally recoverable by him from the plaintiff'. In order, therefore, that a set off may be allowed under this rule, the amount which the defendant claims to be due to him must' be legally recoverable. The Agarwal Bank Ltd. having gone in liquidation, the amount which may be due to its creditors would be legally recoverable only to the extent dividends are declared by the official liquidator and that too as and when the dividends are declared. Till then the money due against the Bank cannot be claimed by its creditors and such amount cannot, therefore, be said to be legally recoverable. Order VIII, Rule 6(1) of the Code of Civil Procedure would not, therefore, apply to it.
16. So far as the so-called equitable set off Is concerned, the one essential condition for such a set off being allowed is that the two claims must arise out of the same transaction, see Bhupendra Narain Singh v. Bahadur Singh : 1SCR782 . Although the appellant alleged that the loan under the pronote was edvanced to him on the security of the fixed deposit receipt, there is no allegation that the fixed deposit and the advance of the loan arise out of, or relate to, or form, one transaction. All what is stated in the written-statement as also in his statement on oath is that on the period of the previous fixed deposit receipt expiring, he wanted his money back but the Manager of the Bank at first gave evasive replies and then renewed the fixed deposit receipt without his instructions. It is impossible to believe that the Bank would renew the receipt even though the depositor might have liked the money back. Then the appellant further stated that when he wanted his money back, it was suggested to him by the treasurer that he may execute a pronote and obtain a loan at an interest of 71/2 per cent. to which he agreed. It is again difficult to believe that the appellant would agree to his money remaining in fixed deposit against his will, and that he would obtain a loan at 71/2 per cent while he himself were to get 5 per cent over his fixed deposit. What appears to have happened is that the appellant at first allowed the fixed deposit receipt, being renewed, and later when he stood in need of money, he obtained a loan from the Bank at an interest of 7 1/2 per cent. It may be that the fixed deposit receipt was treated by the Bank as a sort of security for the recovery of the loan which was being advanced by it, but that would not mean that the two dealings formed one transaction.
When the appellant was given notice for the recovery of the money due from him under the pronote, he sent a reply under his letter dated 28th May, 1952, Ex. B on record. In this letter the appellant clearly acknowledges having received the loan from the Bank. He did not allege that the loan, which was advanced to him under the pronote, was, in fact, a repayment of the amount due to him under the fixed deposit receipt in another form. The appellant informed the official liquidator that he had a fixed deposit amounting to Rs. 2,000/- and odd and that the money due from him under the pronote might be adjusted against the same. This clearly amounts to the appellant acknowledging the independent existence of the two transactions, one that of fixed deposit, and the other relating to the advance of loan under the pronote. The two transactions being independent of one another, there can be no question of any equitable set-off. If there could be any set off at all, it could be under Order VIII, Rule 6(1) of the Code of Civil Procedure, but that could be only if the money was recoverable by the appellant and not otherwise. As has been pointed out by us earlier, since the Rank has gone in liquidation, the money is not recoverable by the appellant except in accordance with the scheme of liquidation.
17. Mani Bhusan Malik v. Pioneer Bank Ltd. : AIR1959Cal746 , is not on all fours, but has some bearing on the facts of the instant case. In that case B held a fixed deposit receipt in the Bank and on the security of that fixed deposit receipt an overdraft was granted by the Bank to A to the extent of the amount of the fixed deposit. Subsequently the Bank went in liquidation and when the official liquidator wanted to recover the money in the overdraft account from A, it was pleaded that the fixed deposit receipt in favour of B should be adjusted in A's account. It was, however, held that both were independent transactions and the one account could not be adjusted against the other.
18. Reliance was placed upon Official Assignee v. Harikrishna and Sons, AIR 1935 Rang 201. In that case, however, the facts were little different. One Chagganlal had a sum of Rs. 5,000/- and odd in deposit with S. A. R. M. Chettyar Firm. The defendant also had an account with that firm and was allowed to overdraw on the security of the amount standing in favour of Chagganlal, it was also agreed that Chagganlal's money was, if necessary, to be utilised for the adjustment of the defendant firm's overdraft. When the S. A. R. M. Chettyar Firm was adjudicated insolvent, the Official Assignas wanted to recover the money from the defendant and it was held that under the agreement between the parties the firm was bound to adjust the amount standing due in the two accounts and thus square up the amount due from the defendant. The decision in the case rests upon the specific agreement between the parties to the effect that Chagganlal's money, if necessary, be utilised for the adjustment of the defendant's overdraft. In the instant case there is no allegation even that the Bank had agreed to adjust the amount due under the overdraft against the money due to the Bank under the pro note.
19. Another case to which reference was made is In the matter of, Travancore National and Quilon Bank Ltd., AIR 1941 Mad 622. In that case S had a sum of Rs. 4,300/- in fixed deposit with the Bank covered by a fixed deposit receipt. On the security of this fixed deposit receipt the Bank lent a sum of Rs. 2,000/- to G. S. gave it in writing to the Bank :
'I beg to hand you herewith fixed deposit amount receipt for Rs. 4300/- as security for the pronote loan of Rs. 2000/- you have granted to Mr. G., I hereby authorise you to set off at anytime the whole or any portion of the said deposit and interest accrued thereon towards the said loan whenever you deem it necessary.'
When the Bank went in liquidation and wanted to recover the sum of Rs. 2,000/- from G, it was urged that the amount due from G should be adjusted from the amount due under the fixed deposit receipt. It was held that no set off could be allowed since by reason of the liquidation of the Bank S could not claim the full amount from the Bank and there could be no cause of action against the Bank for any diminution in the value of the security. It was further held that the bank could give up the security if it so chose and claim the money dus from the debtor as an unsecured debt.
The principle behind this decision is the one indicated to by us earlier, namely, that on account of the Bank having gone in liquidation the money due to a creditor ceases to be recoverable by him except to the extent dividends may be declared by the official receiver or may be payable under the liquidation scheme. It was, therefore, held that the equity of the case demanded that the Bank should adjust the dividend payable under the fixed deposit towards the amount due, and recover only the balance.
20. The appellant should have filed his claim before the official receiver on the basis of the fixed deposit receipt. Some dividends, we understand, have already been declared by the official liquidator, but none has been declared payable to the appellant as no claim was preferred by him. Even the amount corresponding to the dividend, which might have been payable to the appellant, cannot be allowed to be adjusted against the bank's claim against the appellant as no such dividend-is payable on account of his own negligence in not getting his claim registered. Some remedy might still be open to him. But so long as that remedy is not availed of the position would be that the amount due under the fixed deposit receipt cannot be adjusted against it and since no dividend has been declared in favour of We appellant in respect of his fixed deposit, even the corresponding amount of the dividend cannot be adjusted against the claim under the pronote.
21. The result, therefore, is that the claim preferred by the defendant-appellant cannot be entertained.The Bank is clearly entitled to a decree against him forthe amount claimed. The appeal has thus no force andis consequently dismissed with costs to the respondent.