1. This is an applicants' appeal against an order of the Tribunal at Panipat dismissing their application under Section 13, Debts Adjustment Act No. 70 of 1951. There were two firms at Chichawatni Jai Kishan Das--Hans Raj and Jai Kishan Das-Jinda Rain. The partners of both the firms were the same persons, they were Sant Lal, Hans Raj and Chaman Lal, though it is asserted that the shares of the individual partners in the two firms were different. The Bank has produced a copy of accounts of the firm Jai Kishan Das-Hans Raj which shows that at the relevant time this firm was indebted to the Bank to the extent of Rs. 26,193/-.
As a matter of fact on 1st July the debit balance was Rs. 43, 537/- and by subsequent credits, on the 30th of December the amount had been reduced to Rs. 26,193/-. This amount was in the cash credit account in which there was a limit of Rs. 2,25,000/- and this firm had executed in favour of the Bank a promissory-note and certain other documents and some goods had been pledged with the Bank. Jai Kishan Das-Jinda Ram also had a cash credit account with the Bank and had executed similar documents for a limit of Rs. 2,25,000/-. There was also an agreement in case of both the firms of pledge of goods to secure a demand cash credit.
The 14th and 16th clauses of this agreement gave to the Bank a right of lien over other monies. The relevant portions of these clauses are:
'14th-- Provided always that nothing hereinobtained shall be deemed to negative, qualifyotherwise prejudicially affect the right of thebank (which it is hereby expressly agreed theBank shall have) to recover from the Borrowersthe balance for the time being remaining duefrom the Borrowers to the Bank upon the said'Cash Credit Account notwithstanding that allor any of the said securities may not have beenrealised.
16th-- That in the event of there being a surplus available of the net proceeds of such sale after payment in full of balance due to the Bank it shall be lawful for the Bank to retain and apply the said surplus together with any other money or moneys belonging to the Borrowers or any one or more of them for the time being in the hands of the Bank in or 'under whatever account as far as the same shall extend against (sic)or towards Payment or Liquidation of anyand all other moneys which shall be or may become due from the Borrowers or any one or any more of them whether solely or jointly with, any other person or persons, firms or company to the Bank by way of Loans, Discounted Bills, Letters of Credit, Guarantees, Charges or of any other debt or liability including Bills.'
2. On 7-8-1947 firm Jai Kishan Das-Jinda Ram paid Rs. 15,000/- to the Bank at Chichawatni to remit to the Upper Doab, Sugar Mills Samli in U.P. When the money was offered to this Sugar Mills they informed the Bank that they had no claim over the monies and the monies were therefore returned to the remitting office at Chichawatni to be dealt with. On 15-9-1948 this sum was credited in the account of the partners Sant Lal, Hans Raj and Chaman Lal trading under the firm named Jai Kishan Das-Hans Raj and was thus appropriated towards, that debt.
3. On 9-12-1952 the applicant made an application under Section 13, Debts Adjustment Act claiming Rs. 15,000/-. The Bank pleaded that this amount had been lawfully appropriated towards the debt due from the partners of the firm and the matter could not be reopened. Under Section 49, Debts Adjustment Act past transactions discharging the debts are not to be affected by the coming into force of the Act. That section provides:
'49 (1) If before the commencement of this Act a displaced debtor has satisfied or discharged any of his liabilities in any manner whatsoever, such transactions shall 'not be affected by anything contained in this Act.' and therefore if the money was rightly appropriated the Act is not applicable to that transaction.
4. The law in regard to different accounts' is that a banker is entitled to combine the accounts. Thus, if money is due from the customer on loan account and there is a balance in the customer's favour on the current account, the banker must treat the two accounts as one. (See Grant's Law of Banking, Edn. 7 PL 294). In 'Greenwood Teale v. W. Williams Brown and Co,' (1894) 11 TLR 56 (A),' the lien was asserted against a trust account, the bankers having no notice that it would be a fraud for the customer to draw against it.
5. The law in regard to lien of bankers in India is, contained in S. 171, Contract Act which provides:
'171 Bankers, ............ may, in the absence of a contract to the contrary retain, as a security for a general balance of account, any goods bailed to them; ........'
and according to statement of the law in Mulla on Contracts given at page 511 a banker's lien extends to all bills, cheques, and monies entrusted or paid to him, in his character as a banker, (see Misa v. Currie.' (1876) 1 AC 554 (B), and London Chartered Bank v. White', (1879) 4 AC 413 (C). See also Roxburghe v. Cox,' (1881) 17 Ch. D 520 (D). This lien is not prejudiced by any defect in the title of the customer or equities of third parties, provided the banker acts honestly and without notice of any defect of title. There-is no such allegation. Besides, the Bank in the present case has acted in accordance with the contract between the parties.
6. The case of the appellants appears to be that where money is given to a banker for a specific purpose, it is inconsistent with the no-tions of a banker's lien which does not attach to the money in the hands of a banker. In the present case the agreement which was entered into between the parties, extracts from which I have given above, shows that the Bank had a general lien over all monies, which came into the hands of the Bank. The Bank had been making demands from the applicants for payment of a sum of Rs. 26,000/- which is clear from a letter dated 24-6-1948 and another one dated 9-2-1948.
The applicants rely on 'Farley v. Turner,' (1857) 112 RR 442 (E). There a customer of a country Bank paid a certain sum of money into his account with a written direction that 500/-out erf that should be forwarded to another Bank to meet a bill. The money was sent as directed, but before the bill became due the country Bank ceased to carry on business, and it was held that 50Q/- was specifically appropriated, and belonged to the customer of the Bank, and not to the general creditors.
But that case has no application to the facts of the present case because the person for whom the money 'was intended did not receive the money as according to the evidence the Mills had told the Bank that no money was due from the firm Jai Kishan Das-Jinda Ram and the money was returned to the Bank at Chichawatni. I do not think that any incident of trust continues after the money is returned, the specific object having failed.
Counsel then relied on 'W. P. Greenhalgh and Sons v. Union Bank of Manchester, (1924) 2 KB 153 (F), which again has no applicability to the facts of the present case. There it was held that a banker who has agreed with a customer to open two accounts in his name, and who holds bills which the customer has specifically appropriated to one account is not entitled, without the customer's consent, to transfer the proceeds of such bills to the other account.
This case also in my opinion has no applicability because the partners of the applicant firm had specifically agreed with the Bank that any sums standing in the name of the partners would be subject to the lien of the Bank. In the present case as I have said the object of the trust, had come to an end and the relationship between the banker and the customer was that of debtor and creditor, and in the absence of any special instructions to the contrary the lien of the Bank would attach to the monies.
7. In my opinion the Tribunal has rightly held that the provisions of the Debts Adjustment Act are not applicable and I would therefore dismiss this appeal with costs.