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R.L. Khanna Vs. the Simla Banking and Industrial Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectBanking;Commercial
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Original No. 76 of 1956
Judge
Reported inAIR1959P& H100
ActsContract Act, 1872 - Sections 182 and 191; Banking Companies Act, 1949 - Sections 45B
AppellantR.L. Khanna
RespondentThe Simla Banking and Industrial Co. Ltd.
Appellant Advocate Surinder Singh, Adv.
Respondent Advocate D.N. Awasthy, Adv.
DispositionPetition allowed
Cases ReferredIn Jui Sports Ltd v. New Bank of India Ltd.
Excerpt:
.....the respondent bank, he had been making frequent demands but without success. , whose correspondents actually received it at calcutta, and credited them with the amount five months before their failure. , 53 cal wn 649, where the bank had collected the bills but had failed to remit the proceeds to the petitioners and thereafter it suspended payment and was later on directed to be wound up......(tenth edition) as under: 'every agent who employs a sub-agent is liable to the principal for money received by the sub-agent to the principal's use and is reasonable to the principal for the negligence and other breaches of duty of the sub-agent in the course of his employment..' 4. the facts in the case of mackersy v. ramasay, (1843) 57 r. b. 183, were similar. in that case, one mackersy employed ramsay and co., bankers in edinburgh, to obtain for him payment of a bill drawn on a person resident at calcutta. ramsay and company agreed to do so and wrote to mackersy promising to credit him with the money when it was received. in the usual course of their business. ramsay and company transmitted the bill to coutts and company of london and the latter forwarded to india to alexander.....
Judgment:
ORDER

Tek Chand, J.

1. This is an application made by Shri R. L. Khanna under Section 45B of Banking Companies Act claiming a sum of RS. 3,654/- from the respondent. The facts of this case are that a short time before the partition of the country, the petitioner gave two treasury bills of Rs. 1,908/- and Rs. 1,746/ respectively, to the respondent for collection, These bills were drawn by the Sub-Divisional Officer, Anandpur Sub-Division, in favour of the petitioner for part payment of his dues for some contract work done by him.

The petitioner states that after giving the two bills to the respondent Bank, he had been making frequent demands but without success. It appears that the two bills given for collection to the respondent-Bank were passed on by it to the Federal Bank of India (Punjab) Limited for collection. The Federal Bank went into liquidation on 10-2-1948, but these bills had been claimed in the treasury be-fore that Bank went into liquidation, as stated by P. W. 1, the Liquidator of the Federal Bank of India, and P. W. 2 a clerk of the Sub-treasury Una.

According to P. W. 2 the Sub-treasury, Una, had paid the bill for Rs. 1908/- on 13-6-1947, to the Manager of the Federal Bank of India, Una Branch, and the second bill for Rs. 1,746/- was paid on 80-7-1947. This was several months before the Federal Bank went into liquidation. The respondent in this case claimed the amount from the Official Liquidator of the Federal Bank and on 10-10-1952, the respondent and the Liquidator of the Federal Bank agreed among themselves to reduce this amount by 50 per cent as a preferential claim and the claim of the respondent was registered to the extent of one-half as a preferential claim and the other half as an ordinary debt.

Exhibit Rule 5 is a letter addressed by the Liquidator of the Federal Bank to the Manager of therespondent-Bank, dated 29-9-1954, in which it wasstated

'that the break up of the amount into equal portions one of preferential and one of Ordinary was done only as a compromise between the bank and your representative at the time of disposal of the case in Court. There was no longer basis for the split except that we were treating the entire amount as Ordinary debt while your representative wanted it to be a Preferential one and a via media of splitting it into half and half was eventually agreed.'

2. It is clear from the statement of the petitioner on interrogations in answer to question No. 4, that these two bills (mentioned as cheques) were given to the respondent-Bank for collection only. In reply to a letter received from the petitioner the Manager of the respondent-Bank wrote to him on 7-8-1950, vide annexure B, that the Federal Bank of India had not paid the proceeds of the two cheques so far and that a claim with regard to those two cheques had been lodged with the Liquidator of the Bank and the amount would be remitted as soon as the respondent received the same from the Federal Bank.

3. The statement of the petitioner coupled with what has been stated in annexure B, and in the absence of any evidence in rebuttal, leaves no room for doubt that the relationship between parties was that of principal and agent and not of creditor and debtor so far as these two bills were concerned. The Federal Bank of India was in its turn, the agent of the respondent and there was no privity either in law or in fact between the petitioner add the Federal Bank of India. The principle of law is succinctly stated in the maxim qui per alium-facit per seipsum facere videtur, which means 'he who does an act through another is deemed in law to do it himself.' The principle is illustrated in Article 63 in Bowstead on Agency (tenth edition) as under:

'Every agent who employs a sub-agent is liable to the principal for money received by the sub-agent to the principal's use and is reasonable to the principal for the negligence and other breaches of duty of the sub-agent in the course of his employment..'

4. The facts in the case of Mackersy v. Ramasay, (1843) 57 R. B. 183, were similar. In that case, one Mackersy employed Ramsay and Co., bankers in Edinburgh, to obtain for him payment of a bill drawn on a person resident at Calcutta. Ramsay and Company agreed to do so and wrote to Mackersy promising to credit him with the money when it was received. In the usual course of their business. Ramsay and Company transmitted the bill to Coutts and Company of London and the latter forwarded to India to Alexander and Company where the amount was duly paid.

A few months latter, Alexander and Company became bankrupt. It was held that Ramsay and Company were agents of Mackersy for obtaining payment of the bill, and that payment having been actually made, they became ipso facto liable to him for the amount received; and that Mackersy could not be called on to suffer any loss occasioned by the conduct of their sub-agents; as between whom and himself no privity existed. Lord Campbell observed;

'The general rule of law that an agent is liable for a sub-agent employed by him, is not confined to cases where the principal has reason to suppose that the act may be done by the agent himself without employing a sub-agent; and here I conceive that the money is to be considered as received by Coutts and Co., whose correspondents actually received it at Calcutta, and credited them with the amount five months before their failure.Mackersy could not have interfered with the money either in the hands of Alexander and Co. or of Coutts and Co. There was no privity between him and either of those houses but payment to Alexan. der and Co. was payment to Coutts and Co., and payment to Coutts and Co. was payment to Ramsay and Co., the respondents. I approve of the expression of the Lord Ordinary, when speaking of the receipt of the money by Coutts' correspondents at Calcutta, that 'at that moment the law placed it to the credit of the defender'.'

Lord Cottenham observed -

Ramsay and Co. agreed, for consideration, to apply for payment of the bill; they necessarily employed agents for that purpose, who received the amount, their receipt was in law a receipt by them, and subjected them to all the consequences. The appellant, with whom they so agreed, cannot have anything to do with the conduct of those whom they so employed, or with the state of the account between different parties engaged in this agency.'

5. In Meyerstein v. Eastern Agency Co. Ltd., (1885) 1 TLR 595, it was held that where A employed B as his agent and B employed C as his sub-agent, there being no privity of contract between A and C so as to make C liable to A, and that therefore B, the agent, was liable to A by reason of C's, the sub-agent's, default.

6. Both these authorities were approved by their Lordships of the Privy Council in Hugh Francis Hoole v. Royal Trust Co., AIR 1930 PC 274, and the above doctrine was, according to the Lord Chancellor, 'one of the first and most settled principles of the law of agency.'

7. In Jui Sports Ltd v. New Bank of India Ltd., 50 Pun LR 173 : (AIR 1949 EP 88), Achhru Ram J. held that where a cheque or a bill or any other document is entrusted by a customer to a banker for collection, the former received the cheque or the bill or the other document and collects its amount, as no agent for the latter, and in such a case the banker holds the money as trustee for the customer, irrespective altogether of the consideration whether or not the latter had an account with him on the date of the receipt of the money and whether or not the money had been credited in that account.

8. There is nothing on the record of this case to show that on receipt of the amount by the respondent and by putting it to the credit of the petitioner under the latter's express or implied authority, the agency had been discharged and the relationship of debtor and creditor had come into existence between the banker and the customer. Support for this view is also found in a judgment of a Single Judge, reported in re: Continental Bank of Asia Ltd., 53 Cal WN 649, where the bank had collected the bills but had failed to remit the proceeds to the petitioners and thereafter it suspended payment and was later on directed to be wound up.

The contention raised on behalf of the Official Liquidator in that case, to the effect, that collections having been effected before the bank suspended payment, the relationship between the parties was that of a debtor and creditor, was not accepted; and it was held that the relationship between the parties was that of a principal and agent and the money was held by the Bank as a trust money in a fiduciary capacity and as such was payable to the petitioners in priority to the general body of creditors.

9. In view of what has been discussed above, I am of the view that the petitioner is entitled to be paid in priority to the extent of the entireamount of the two bills, namely, Rs. 3,654/-, and the petitioner cannot be compelled to receive half the amount in priority simply because a similar arrangement had been arrived at between the respondent and the Liquidator of the Federal Bank.

10. In the result, the petition is allowed. In the circumstances of the case, I leave the parties to bear their own costs.


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