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Central Bank of India Ltd. Vs. Ram Sarup Khanna and anr. - Court Judgment

LegalCrystal Citation
SubjectBanking;Commercial
CourtPunjab and Haryana High Court
Decided On
Case NumberSecond Appeal No. 64-D of 1953
Judge
Reported inAIR1956P& H78
ActsEvidence Act, 1872 - Sections 115; Contract Act, 1872 - Sections 237; Negotiable Instruments Act, 1881 - Sections 82
AppellantCentral Bank of India Ltd.
RespondentRam Sarup Khanna and anr.
Appellant Advocate Bishan Narain and; Hunuman Parshad, Advs.
Respondent Advocate H.S. Bindra,; Harnam Dass and; Krishan Parshad, Advs
DispositionAppeal allowed
Cases ReferredR. Ezekle v. Province of Bengal
Excerpt:
.....against a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - he endorsed it in favour of the central bank and delivered it to them. the plaintiff in his letter had clearly, stated that he thereafter held no right, title or interest in the promissory-note and he therefore was transferring or assigning all rights held by him in the note to the bank for a certain purpose. 1, clearly amounts to assignment of(sic) promissory-note in favour of the central ba(sic) this assignment was irrevocable. in these circumstances, i would like to rest any judgment on the principle of estoppel......there is no other special reason for non-realization of interest.' this letter was taken to the bank by srikishan parshad himself. on the 19th of september 1946 srikishan parshad wrote to the bank asking for the money due upon the promissory-note or an advance against the note. on the same date the bank advanced a sum of rs. 2,000/- to srikishan parshad and debited him with the amount in an account opened on that day. acopy of this account (exhibit d. 6) has been placed on the record. on the 27th of september 1946 bam sarup wrote to the bank cancelling the previous instructions which he had issued on the 9th of september. the terms of this letter are as follows:'with reference to my letter dated 5th instant, i am sorry to say that as mr. srikishan parshad has not fulfilled his part of.....
Judgment:

Khosla, J.

1. This second appeal has arisen out of a suit brought by Bam Sarup for the recovery of a sum of Rs. 2,800/- due on the basis of a Government promissory-note of the face value of Rs. 2,000/-. The defendants in the case were the Central Bank of India and Srikishan Parshad. The trial Court passed a decree for Rs. 721/6/- in favour of the plaintiff against defendant No. 1. Against this decree an appeal was taken - to the Court of the District Judge by the plaintiff. Defendant No. 1 filed cross-objections with regard to the amount decreed.

The District Judge allowed the plaintiffs appeal and granted a decree for the entire sum of Rs. 2,784/11/- which was the amount due upon the promissory-note including interest. The Central Bank has come up in second appeal to this Court.

2. The facts of the case briefly are that a Government promissory-note for Rs. 2,000/- was held by Ram Sarup plaintiff. He endorsed it in favour of the Central Bank and delivered it to them. On the 9th of September 1946 Ram Sarup wrote the following letter to the Bank-

'Dear Sir,Re:3 1/2 % G. P. note of 1865 No. 387997 for Rs. 2,000/-.

As desired by Mr. Srikishan Parshad, I request you to kindly submit the above note to the Reserve Bank of India for encashment, and hand over the sum of RS. 2,000/- with, Interest to L. Srikishan Parshad.

I have no right, title, or interest in the above note.

The interest could not be recovered for many years because this note was lying as security in the High Court at Lahore. The aforesaid Court released it in 1946, but as half portion of the note had been mislaid about which I also reported to the Public Debt Office, Delhi, some time ago. Eventually the said half portion was found. There is no other special reason for non-realization of Interest.'

This letter was taken to the Bank by Srikishan Parshad himself. On the 19th of September 1946 Srikishan Parshad wrote to the Bank asking for the money due upon the promissory-note or an advance against the note. On the same date the Bank advanced a sum of Rs. 2,000/- to Srikishan Parshad and debited him with the amount in an account opened on that day. Acopy of this account (Exhibit D. 6) has been placed on the record. On the 27th of September 1946 Bam Sarup wrote to the Bank cancelling the previous instructions which he had issued on the 9th of September. The terms of this letter are as follows:

'With reference to my letter dated 5th instant, I am sorry to say that as Mr. Srikishan Parshad has not fulfilled his part of the agreement, the instructions given by me in the aforesaid letter should not be acted upon, and further action should be stopped.'

Thereafter the Bank realised the sum due upon the promissory-note and adjusted it in the account of Srikishan Parshad.

3. The plaintiff brought a suit against the Bank claiming that since he had cancelled the instructions given to the Bank, he was entitled to recover the money due upon the Government promissory-note. The Bank's defence was that the instructions were not revocable and that the amount due on the note had been paid in full to Srikishan Parshad.

4. The matter may be viewed in two ways. The plaintiff by issuing these instructions to the Bank gave the Bank authority to realize the sum due on the promissory-note and pay it to Srikishan Parshad. Srikishan Parshad and the Bank agreed among themselves and privity of contract between the Bank and Srikishan Parshad was thus established. The plaintiff in his letter had clearly, stated that he thereafter held no right, title or interest in the promissory-note and he therefore was transferring or assigning all rights held by him in the note to the Bank for a certain purpose.

Ram Sarup therefore could not be said to have any interest in the money due on the promissory note. On the other hand the Bank undertook to ray the money to Srikishan Parshad and Srikishan Parshad accepted this undertaking. This contract between defendants Nos. 1 and 2 could not be revoked by the plaintiff.

5. Viewed from another angle it may be said that the plaintiff is estopped from claiming any interest in the promissory-note because upon his instructions and representations the Bank acted to its detriment and made payment in full to defendant No. 2 or undertook an obligation which could be legally enforced. The plaintiff cannot now revoke his instructions and cannot be allowed to deny the position which he himself brought about.

6. From whichever angle the matter is viewed the plaintiff's claim must fall.

'A principal gives his agent authority to pay money to A, a third person. The agent promises A that he will pay him when the amount is ascertained. The agent is liable to A for the amount when it is ascertained, though in the meantime the principal * * * has countermanded his authority.'

These remarks appear in Bowstead's Digest of the Law of Agency, Eleventh Edition, at page 270, where reference is made to -- 'Robertson v. Fauntleroy', (1823) 8 Moore PC 10 (A). Another Instance given in the same book is Instance No. 3 at page 270 which is as follows:

'A principal writes a letter authorising his agent to pay to A the amounts of certain acceptances, as they become due, out of the proceeds of certain assignments. A shows the letter to the agent, who assents to the term of it. Before the acceptances fall due, the principal becomes bankrupt, and the agent pays the proceeds of the assignments to the trustee in bankruptcy. The agent is personally liable to A for the amounts of the acceptances as they become due.'

From these instances it is clear, that when a tripartite agreement of this type takes place there is a complete assignment of the liability from the principal creditor to the debtor and the creditor can claim no further rights in the liability assigned. I may also refer to the observations on page 98 of Chitty on Contracts, Twentieths Edition-

'A person cannot review an authority to his debtor to pay a debt to a third party, the creditor of the former, after the debtor has agreed with such third party to pay the money to him according to the authority. This agreement is said to be necessary in order to establish privity between them.'

The passage appears to be quoted from an English case -- 'Hodgson v. Anderson', (1825)(sic) B & C 842 (B), a case we could not trace in(sic)

7. The endorsement on the back (sic) promissory-note in favour of the Central (sic) taken together with, the plaintiff's letter,(sic)hibit D. 1, clearly amounts to assignment of(sic) promissory-note in favour of the Central Ba(sic) This assignment was irrevocable. It has been argued that the endorsement did not amount to an assignment because it was made merely in order to give the Bank authority to realize money on behalf of the plaintiff. The endorsement by itself would no doubt have that effect, but when it is taken together with the letter, Exhibit D. 1, the allegation of assignment receives support from the fact that the plaintiff made a complete surrender. The plaintiff thereafter could not claim any rights in the promissory-note.

Mr. Bindra drew our attention to--'R. Ezekle v. Province of Bengal', AIR 1939 Cal 746 (C) as supporting the argument that the assignment off a negotiable instrument can only be made in a certain way, namely by an endorsement. It is no doubt correct to say that a promissory note can only be transferred by means of an endorsement, but we find in the present case that there was such an endorsement and it cannot be argued that the purpose of the endorsement was not to convey the interest in the promissory-note but merely to confer authority for realization. The plaintiff made his position quite clear by sending Exhibit D. 1 to the Bank whereby he surrendered all his rights in the promissory-note to that Bank.

8. With regard to the principle of estoppelit is scarcely necessary to call it into assistancealthough the Bank has pleaded successfully thatpayment of the entire money due on the promissory-note was made to Srikishan Parshad. Eventhough the realization of the promissory-notewas made after the Instructions of the 27-9-1949cancelling the previous instructions the Bank hadacted to its detriment by giving an undertakingto Srikishan Parshad and by advancing him aloan in furtherance of this undertaking. Theplaintiff is thus estopped from claiming any interest in the promissory-note which he himselftransferred.

9. From this it is clear that the plaintifff has no right in the pronote and his suit was liable to be dismissed. I would accordingly allow this appeal, set aside the decree of the Courts below and dismiss the plaintiffs suit with costs throughout.

Kapur, J.

10. The facts of this case show that on 9-9-1946 the plaintiff Ram Sarup wrote a letterwhich indicated that the right, title and Interest in the promissory-note really was of Srikishan Parshad and he went further in saying that he had no right, title or Interest In the note. In pursuance of this on 19-9-1946 Srikishan Parshad asked the Bank either to pay, the proceeds of the promissory-note to him or to lend him some money. The Bank did the latter.

In these circumstances, I would like to rest any Judgment on the principle of estoppel. On 19-9-1945 the Bank had, acting on the instructions of Ram Sarup, acted to its detriment and advanced money. In these circumstances, in my opinion, the plaintiff is estopped from going back,on his instructions and claiming the money fromthe Bank. I agree therefore that this appeal should be allowed and the suit of the plaintiff dismissed with costs throughout.


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