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Allahabad Trading and Banking Corporation Limited Vs. Ghulam Muhammad and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad
Decided On
Judge
Reported inAIR1915All279; (1915)ILR37All383
AppellantAllahabad Trading and Banking Corporation Limited
RespondentGhulam Muhammad and ors.
Excerpt:
act no. iii of 1907 (provincial insolvency act), section 31 - 'secured creditor'--insolvency--agreement appointing creditor agent for sale of debtor's goods--proceeds to be paid to creditor. - - according to the agreement the bank had a right not only to retain when handed over the books of the debtor and his wife and well them, as provided in the agreement, but a right to call upon the debtor and his wife to deliver all books, as they were published, for the purpose of being sold by the bank......more than a contract of agency, and it is argued that the parties cannot have intended to make the books security for any particular loan, seeing that it is expressly provided that the agreement is to last so long as the two businesses owned by ghulam muhammad and his wife exist, and so long as the appellant bank continues to do business; it is said that if the intention had been to make the books security for the benefit of the appellant bank, some express provisions would have been made regarding the proceeds of sale after the loan was paid off. stress is also laid on the fact that the agreement does not in express terms confer either a lien or a charge on the bank.3. the learned district judge says that the claim of the bank based upon the agreement of the 18th october, 1910, is.....
Judgment:

Chamier and Piggott, JJ.

1. The only question for decision in this appeal is whether the appellant, the Allahabad Trading and Banking Corporation, Limited, is entitled to be regarded as a secured creditor of the respondent Ghulam Muhammad, who has been declared an insolvent. The appellant bank rests its claim to be regarded as a secured creditor (1) upon an agreement, dated the 18th of October, 1910, (2) upon Section 171 of the Indian Contract Act, and (3) upon Section 221 of the same Act. The learned District Judge has held that all three grounds are untenable. As regards the second and third grounds we may content ourselves with saying that we agree with the court below that neither Section 171 nor Section 221 of the Contract Act gives the appellant any lien on the property in question.

2. The first ground requires careful examination The agreement above mentioned was entered into between Ghulam Muhammad and his wife Musammat Shahzadi on the one hand and the appellant bank on the other. It bagins by appointing the bank sole agent for the sale of all books already published or to be published thereafter by the City Press and Messrs. G.A. Asghar and Company. It appears that Ghulam Muhammad and his wife were owners of the City Press and carried on business also under the name of Messrs. G.A., Asghar and Company. The appointment of the bank as the sole agent of Ghulam Muhammad and his wife for the sale of the books is declared to be subject to several terms or conditions. The first condition is, shortly, that all books then in stock and all books to be published thereafter are to be made over at once to the appellant bank and the liability of the bank in respect of the books made over to them is specified. The second condition is that a commission of eight per cent, will be allowed to the bank on the net value of all books sold by it except school and college books on which a commission of 10 per cent, will be allowed. The third condition is that the sale proceeds of the books realized by the bank shall be placed to the credit of Ghulam Muhammad and Musammat Shahzadi's joint loan account every month after deducting the commission due to the bank. The fourth clause deals with discounts. The fifth with the giving of credit to purchasers. The sixth with the question of advertising books for sale. The seventh clause provides that the agreement shall continue as long as Ghulam Muhammad and Musammat Shahzadi remain owners of the City Press and the firm of Messrs. G.A. Asghar and Company and as long as the appellant bank continues. The eighth condition so called is an undertaking by one Ram Charan Shukul, on behalf of the appellant bank, to act as the sole agent of the City Press and of Asghar and Company on the terms and conditions set out in the agreement. The appellant bank relies principally upon the third clause of the agreement, namely, that which provides that the sale proceeds shall be credited to the joint loan account of Ghulam Muhammad and Musammat Shahzadi.

2. On behalf of the general body of creditors it is contended that the agreement of the 18th of October, 1910, evidences no more than a contract of agency, and it is argued that the parties cannot have intended to make the books security for any particular loan, seeing that it is expressly provided that the agreement is to last so long as the two businesses owned by Ghulam Muhammad and his wife exist, and so long as the appellant bank continues to do business; it is said that if the intention had been to make the books security for the benefit of the appellant bank, some express provisions would have been made regarding the proceeds of sale after the loan was paid off. Stress is also laid on the fact that the agreement does not in express terms confer either a lien or a charge on the bank.

3. The learned District Judge says that the claim of the bank based upon the agreement of the 18th October, 1910, is obviously untenable, for the agreement does not provide that the books shall be regarded as security for the debt or that the creditors shall have a lien on them, and that the third clause on which the bank relies so much prescribes merely the way in which the Halo proceeds shall be applied. On behalf of the bank it is contended that the agreement should be construed as a whole, and that the test is whether the parties to the agreement intended that the bank should, under it, have special facilities for recovering the advances which it had made. The expression 'secured creditor' is not defined in the Provincial Insolvency Act. For the purposes of this case both sides are content to accept the definition contained in the English Bankruptcy Act, according to which secured creditor means a person holding a mortgage, charge, or lien upon property of the debtor or any part thereof as security for the debt due to him from the debtor. The word security is not defined in the Indian Act or in the English Act. On behalf of the bank it is contended that the word means and includes anything that makes payment of the money more secure or the money more readily recoverable. There can be no doubt that the agreement was intended to give the appellant bank the exclusive right to sell all the books published by the debtor and his wife and to appropriate the whole of the proceeds, after payment of the commission, towards the discharge of the joint loan account. According to the agreement the bank had a right not only to retain when handed over the books of the debtor and his wife and well them, as provided in the agreement, but a right to call upon the debtor and his wife to deliver all books, as they were published, for the purpose of being sold by the bank. It seems to us impossible to avoid the conclusion that the intention was to confer a security upon the bank. A question might arise as to whether the general body of creditors would not be entitled to any surplus proceeds available after discharge of the bank's claim. We are informed, however, that there is no prospect of there being any balance after the discharge of the bank's claim and that we need not consider the question any further. We hold that the agreement was intended to give the appellant bank a lien or charge on the books and that therefore, the bank is entitled to be regarded as a secured creditor. We allow this appeal and set aside the order of the District Judge. Costs of this appeal and of the proceedings in the court below will be paid out of the estate. In the circumstances this means that the appellant bank will be entitled to add its costs to the amount due to it under the agreement.


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