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The Dominion of India, New Delhi and anr. Vs. Manindra Land and Building Corporation Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtKolkata High Court
Decided On
Case NumberA.F.O.D. No. 173 of 1949
Judge
Reported inAIR1954Cal174,[1953]23CompCas524(Cal),57CWN898
ActsHigh Denomination Bank Note (Demonitisation) Ordinance, 1946 - Sections 3, 5 and 11; ;Reserve Bank of India Act, 1934 - Section 39; ;Bank Notes (Declaration of Holdings) Ordinance, 1946; ;High Denomination Bank Note (Demonitisation) Rule - Rule 5(1) and 5(2); ;Code of Civil Procedure (CPC) , 1908
AppellantThe Dominion of India, New Delhi and anr.
RespondentManindra Land and Building Corporation Ltd. and ors.
Appellant AdvocateChandra Sekhar Sen, ;A.N. Roy and ;Jagneswar Mazumdar, Advs.
Respondent AdvocateHiralal Chakravarty and ;Anil Kumar Sen, Advs.
DispositionAppeal dismissed
Excerpt:
- .....bank notes of the denomination value of one hundred rupees in exchange for the high denomination banknotes declared by it in the returns under the bank notes (declaration of holdings) ordinance, 1946 (2 of 1946), and tendered for such-exchange, or if it so desires, a credit of that amount with the reserve bank or a scheduled' bank.(2) a scheduled bank or a government treasury may obtain from the reserve bank an equivalent amount in bank notes of the denominational value of one hundred rupees in exchange for any high denomination bank notes tendered for such exchange which have been declared by it in the returns under the aforesaid ordinance or which have been received by it in exchange under this ordinance, or if a scheduled bank so desires, a credit of that amount with the reserve.....
Judgment:

R.P. Mookerjee, J.

1. On the 12th January, 1946 the Governor General of India in Council promulgated two Ordinances demonitising currency notes of the value of Rs. 10,000/-, Rs. 1000/- and Rs. 500/-. Ordinance No. 2 of 1946 (Bank Notes (Declaration of Holdings) Ordinance) required banks and Government Treasuries to furnish information concerning bank notes valued over Rs. 100/- held by them. Ordinance No. 3 of 1946 (High Denomination Bank Notes (Demonitisation) Ordinance) provided for the procedure to be followed for the demonitisa-lion of High Denomination Bank Notes above the value of Rs. 100/-. These two Ordinances were published in the papers the next day, the 13th January, 1946. Under different provisions of these Ordinances, the 13th and the 15th January, 1946 were declared to be Bank Holidays under the Negotiable Instruments Act. January 14th was a Sunday.

2. Under section 4 of the Ordinance 2 of 1946 every Bank and every Government Treasury was required to prepare and send to the Reserve Bank of India--

(1) first return showing separately under each denominational value, the total value of Bank notes held by it at the close of business on the 11th January, 1946.

(2) A second return giving particulars of Bank notes, if any, were received by it by post in the ordinary course of business on or after the 12th of January, provided such notes appeared to have been posted on or before the 11th January, 1946.

3. The first return was to be submitted not later than 3 P.M. on the 12th January, 1946 and the second return not later than the 16th January, 1946. The returns were to be presented either to the Manager of a Branch of the Reserve Bank. of India or to the District Magistrate or Sub-Divisional Magistrate or in their absence to the senior-most Revenue or Police officer available. If such authorities were not available they might be presented to a telegraph office for despatch by express telegram to the Reserve Bank. Section 5 of Ordinance 2 of 1946 vested the authority to hold inspection where Bank failed to file the statement as required under section 4. Section 6 provided for the penalty on the failure of the Banks to make the declaration as required under section 4.

4. Ordinance 3 of 1946 which also was issued on the 12th January, 1946 provided under section 3--

'On the expiry of the 12th day of January, 1946 all High Denomination Bank Notes shall, notwithstanding anything contained in section 26 of the Reserve Bank of India Act 1934 (2 of 1934) cease to be legal tender in payment or on account at any place in British India.'

Section 4 prohibited transfer and receipt of High. Denomination Bank Notes after the 12th of January, 1946 'save as provided by or under Ordinance.' Section 5 laid down the procedure to be followed by Banks and Government Treasuries and section 6 by other persons.

5. As the question in issue is about such bank notes offered by a bank the provisions contained in section 5 may be quoted in extenso-

'(1) A bank, other than a scheduled bank, may obtain from the Reserve Bank or a scheduled bank, an equivalent amount in bank notes of the denomination value of one hundred rupees in exchange for the high denomination banknotes declared by it in the returns under the Bank Notes (Declaration of Holdings) Ordinance, 1946 (2 of 1946), and tendered for such-exchange, or if it so desires, a credit of that amount with the Reserve Bank or a scheduled' Bank.

(2) A scheduled bank or a Government Treasury may obtain from the Reserve Bank an equivalent amount in bank notes of the denominational value of one hundred rupees in exchange for any high denomination bank notes tendered for such exchange which have been declared by it in the returns under the aforesaid Ordinance or which have been received by it in exchange under this Ordinance, or if a scheduled bank so desires, a credit of that amount with the Reserve Bank.

(3) Notwithstanding anything to the contrary in the foregoing provisions of this section, where the first return referred to in section 4 of the Bank Notes (Declaration of Holdings) Ordinance, 1946 (2 of 1946) is presented in the manner provided in the proviso to Subsection (2) of that section, the exchange referred to in this section may be effected only with the Reserve Bank of Bombay.

(4) The copies of the returns given back under Sub-section (4) of section 4 of the aforesaid Ordinance shall accompany the first application for the exchange of high denomination bank notes under this section.'

6. Section 11 authorises the Central Govern-ment to make rules to provide for any matter for which it deems provision necessary or expedient in order to give effect to the purposes and provisions of these Ordinances and without prejudice to the generality of the powers given under those Ordinances. Such rules might provide for the manner in which and the conditions subject to which High Denomination Bank Notes brought into British India after the commencement of the Ordinance or which are held outside the British India might be exchanged.

7. The plaintiff respondent Manindra Banking Corporation Ltd. is a limited company having its registered office at Berhampore in the district of Murshidabad in Bengal carrying on banking business through its head office and other branches. Two such branches with which we are concerned in the present litigation were at two villages Aurangabad and Dhuliyan in the district of Murshidabad.

8. The plaintiff's case in short is that the officers in charge of the Aurangabad and Dhuliyan Branches of the Bank came to know of the Ordinances on the 15th and 14th January, 1946 respectively. The thousand rupee notes in the Dhuliyan Branch were taken to the Berhampore Office on the 15th January and were tendered in the Murshidabad Treasury on the same day. All the notes so tendered except one described in schedule B to the plaint were exchanged and the plaintiff Bank has received notes of smaller denomination for all those notes. The one particular note not cashed was due to a discrepancy between the number appearing on the note and the number given in the statement accompanying the note. It is alleged that this was due to an accidental typing mistake of one of the figures of the numbers on the note.

So far as the thousand rupee notes which had been in the Aurangabad Branch (described in schedule C to the plaint) they were alleged to have been taken to the Jangipore Sub-Divisional Treasury on the 16th January following. This sub-treasury transacts business on alternate days. The Treasury Officer could not do anything on the 16th January. In the absence of necessary information or instruction from higher authorities and of any forms in that Treasury the Treasury Officer asked the men of the Aurangabad Branch to come on the next working day, namely, the 18th January. The Branch Officer sent the notes on the 18th January direct to Berhampore and on that day a statement was filed before the Magistrate of Murshidabad. Eighteen one-thousand rupee notes brought from the. Aurangabad Branch and one. one-thousand rupee note which' had been brought from the Dhuliyan Branch and had been returned as mentioned above owing to an accidental mistake, were tendered before the Treasury Officer of Murshidabad on the 19th January. The Treasury Officer however returned the notes.

The notes were next tendered to the Berhampore Branch of Bengal Central Bank Ltd. a Scheduled Bank authorised under the Ordinance to exchange such notes. The Bengal Central Bank could not get these notes exchanged as the Treasury Officer could not change these notes. The notes were thereafter sent to the Calcutta Office and were taken to the Reserve Bank of India on the 1st February. An application was, thereafter, made before the District Magistrate of Murshidabad. Thereafter letters were exchanged between the plaintiff Bank and the Reserve Bank of India as also with the Secretary of the Central Government in the Department of Finance but as the Central Government and the Reserve Bank failed to exchange the said nineteen one-thousand rupee notes the plaintiff brought the present suit after service of a notice under section 80 of the Civil Procedure Code on the 3rd October, 1947 claiming Rs. 19,000/- as the exchange value of the nineteen currency notes and damages were assessed at Rs. 2,375/-.

9. The plaintiff impleaded the Dominion of India as it was then constituted as also the Reserve Bank of India. 'Pro forma' defendants 3 to 8 were the different parties, who had deposited different thousand rupee notes at different times, and had according to the allegations of the plaintiff been paid full value of the respective currency notes.

10. The suit was contested by defendants 1 and 2 the Central Government and the Reserve Bank of India. The principal defence was that the plaintiff Bank had not complied with the provisions of Ordinances 2 and 3 of 1946 and certain statements by the plaintiff Bank were also untrue. The defendant denied the allegations made in the plaint that the officers of the two Branches at Aurangabad and Dhuliyan had come to know of the Ordinance on the 15th and the 14th January, 1946 respectively. The provisions contained in Ordinances 2 and 3 of 1946 not having been complied with the plaintiff is not entitled, to payment. Further, all acts done by. and on behalf of the defendants were done in good faith and as such the present suit is barred under section 9 of Ordinance 3 of 1946.

11. Various issues were raised and the learned Subordinate Judge has decreed the plaintiff's claim allowing Rs. 19,000/- with costs. The Government, defendant No. 1 is now required to pay the decretal amount.

12. The present appeal is directed against this decree and is on behalf of defendants 1 and 2. It is contended on behalf of the appellant that under Sub-rule (1) of Rule 5, the plaintiff Bank is required to prove--

I. In respect of notes held at the close of the business on the 11th January, 1946 how much is held of each separate value.

II. In respect of notes received after the llth and before the close of the business of the 15th February, 1946--

(a) that such notes were accepted --

(i) in good faith and

(ii) without the knowledge of the said Ordinance, and

(iii) in the course of the transaction of its business

(b) indicating the full particulars of the persons from whom such notes had been received. The plaintiff Bank contends that it is entitled as a matter of right to get the exchange value of the notes.

13. First, under the Reserve Bank of India Act (Act 2 of 1934), section 26 makes the Bank notes legal tender. Section 3 of Ordinance 3 of 1946 demonitises the Bank notes 'Notwithstanding anything contained in section 26 of the Reserve Bank of India Act.' Section 39 of the Reserve Bank of India Act imposes an obligation on the Reserve Bank of India to supply for notes produced, coins and notes of other denominations and this is irrespective of the fact whether the Bank Notes produced continue to be legal tender or not.

14. Section 3 of Ordinance 3 of 1946 has repeated the provisions contained in section 26 of the Reserve Bank of India Act so far as Bank Notes of the value of Rs. 500/- and upwards are I concerned. Neither in Section 3 nor in Section 5 of Ordinance 3 of 1946 is there any reference made to the provisions contained in Section 39 of the Reserve Bank of India Act.

15. Section 6, of Ordinance 3 of 1946 generally deals with exchange of High Denominational Notes 'held by persons other than Banks' and Government Treasury and definitely modifies the application of the provisions contained in the Reserve Bank of India Act other than the rights and liabilities of private persons who are holders of High Denominational Notes are concerned. Section 5 of Ordinance 3 of 1946 on the other hand which deals with the exchange of High Denominational 'Notes held by Banks' and Government Treasury does not open with the words 'notwithstanding anything to the contrary in the Reserve Bank of India Act, 1934.'

16. It can, therefore, be rightly contended that section 5 of Ordinance 3 does not directly or indirectly modify or affect the provision contained in section 39 of the Reserve Bank of India Act. The obligation of the Reserve Bank of India to supply coins or other notes in exchange of Bank notes is not affected either by Section 3 or Section 5 of Ordinance 3 of 1946 and the right of the plaintiff Bank to such exchanged notes remains unaffected even after the promulgation of the above two Ordinances.

17. It is contended by the appellants that such an interpretation should run counter to the general principles underlying Ordinances 2 and 3 of 1946. The sections ought to be liberally construed so as to give full effect of the purpose underlying Ordinance 3 of 1946.

18. The provisions contained in the Reserve Bank of India Act are to be enforced unless there is some definite provision in a subsequent Statute amending or modifying the provisions contained in the earlier Statute. The rules of interpretation are well settled. No doubt the Legislature may by direct or clear intendment amend the provisions contained in an earlier Statute. The difference in the phraseology adopted in sections 3, 5 and 6 of Ordinance 3 of 1946 leaves no room for doubt. The scheme of the Ordinance itself gives a clear indication that individuals holding High Denomination Notes are differently treated from Banks and Government Treasuries holding such notes. Greater latitude is given to and certain special exceptions are made in the case of Banks which are not to be found in the case of private individuals. The provisions contained in Ordinance 3 of 1946 as affecting private individuals are different in material particulars from those contained in section 5 in that Ordinance which deals with Banks. The fact that in section 6 of the Ordinance clear words are used indicating that the new provisions are put in modification of and notwithstanding anything to the contrary contained in the Reserve Bank of India Act, rules out in the case of individuals such of the provisions of the Reserve Bank of India as are inconsistent with the provisions made in Ordinance 3 of 1946.

19. As section 26 of the Reserve Bank of India Act is amended by specific provisions contained In section 3 of Ordinance 3 of 1946 High Denomination Notes have been denominated. Section 5 of the Ordinance, however, makes no reference to the Reserve Bank of India Act. By clear intendment, therefore, and by the use of different phraseologies in the different sections it is only reasonable to hold that so far as Banks are concerned, they as holders of High Denominational Notes were entitled to get the exchange values for such notes.

20. In this view the plaintiff Bank is entitled to a decree for the value of the Notes in suit.

21. We have also been invited to consider whether the plaintiff Bank was bound to follow the procedure laid down in Ordinance 3 of 1946, read with Rules framed under section 11 of that Ordinance, before the plaintiff was entitled to claim the value of the notes. In view of the fact that we agree with the conclusions reached by the learned Subordinate Judge that there had been a substantial compliance of the directions contained in the Rules it is not necessary for us to consider whether compliance with the Rule Is an essential condition before a claimant can get the exchange value of the Notes under the provisions contained in section 39 of the Reserve Bank of India Act. It may also be pointed out that as we have held that the claim of the plain-tiff Bank so far as it is supported by the provisions of the Reserve Bank of India have remained unaffected by Ordinance 3 of 1946, there is no escape from that conclusion that the Rules framed under the Ordinance would not be attracted.

22. We would, however, all the same proceed to consider whether the Rules even if they applied, stand in the way of this Court giving relief to the plaintiff.

23. It will be convenient to refer at this stage to such of the Rules, as are relevant for the present purpose. These Rules were framed under section 11 of Ordinance 3 of 1946 and were published on the 26th January, 1946. The Ordinances were promulgated on the 12th January, 1946.

24. Rule 2 lays down the procedure to be followed where a Bank has already submitted on the 12th January, 1946 returns in conformity with section 4(1) of Ordinance 2 of 1946 with the Reserve Bank or a scheduled Bank. Sub-rule (2) of Rule 2 gives an option to the Reserve Bank --'if it is not satisfied that the said returns are genuine or that they were not submitted on the said date viz. the 12th January' to refuse to allow an exchange of the Bank Notes tendered and refer the case to the Central Government whose orders shall be final.

25. Rule 5 makes provision for costs where Banks had failed to submit the requisite returns under ordinance 2 of 1946. Under Sub-rule (1) a Bank is to make a declaration on oath before a salaried Magistrate.

'Showing separately under each denominational value of Bank Notes x x x held by it at the close of business on the 11th day of January 1946, and if such Bank has in good faith and without knowledge of the said Ordinance accepted any High Denomination Notes in course of transaction of its business after the 11th January, 1946 but before the close of business on the 15th January, 1946.'

In such declaration shall be shown separately under each denominational value the total value of the Bank Notes of denominational value of Rs. 500/-, 1000/- and 10,000/- so accepted by it with full particulars of the persons from whom such notes had been received. Sub-rule (2) of Rule 5 provides that the Central Government may authorise the Reserve Bank of India to exchange any High Denomination Bank Notes included in the declaration referred to in Sub-rule (1) of Rule 5 and the provisions of Rule 2 shall thereupon apply.

26. On behalf of the State it is contended that Sub-rule (2) of Rule 5 makes it abundantly clear that when a declaration is made as provided in Sub-rule (1) of Rule 5 it is left to the discretion of the Central Government to authorise the Reserve Bank to exchange the High Denomination Notes as shown in the declaration under Sub-rule (1) or not to do so.

27. It is, however, conceded that the discretion which the Central Government has got must be properly and judicially exercised. If the requirements and the conditions imposed in Sub-rule (1) of Rule 5 are satisfied, the Central Government is bound to authorise the Reserve Bank to exchange the Notes in question in conformity with the provisions contained in Rule 2 with the necessary modifications. The use of the word 'may' does not indicate that it is left to the absolute and uncontrolled discretion of the Central Government as to whether after a declaration is made under Sub-rule (1) of Rule 5, such notes are to be exchanged. The conditions imposed in Rule 5 are more stringent than in cases where the Banks submit the returns as required under Ordinance 2 of 1946. We cannot accept the contention as put forward on behalf of the State. It is necessary to examine the facts of the case as to whether the conditions laid down in Rule 5(1) have been satisfied or not.

28. We have to consider at this stage another argument advanced on behalf of the State that the claim as put forward on behalf of the Bank cannot be entertained by the Court inasmuch as--(i) a definite procedure was laid down in the provisions contained in Ordinance 3 of 1946 read with rules and (ii) in any view the claim as made is a premature one. No doubt a new procedure was introduced by Ordinance 3 of 1946 under which the procedure to be followed for getting ex-change value of High Denomination Notes was laid down. Rules 2 and 3 read together no doubt show that the Central. Government had been given the right to authorise the Reserve Bank to allow exchange value to be given to holders of High Denomination Notes. Correspondence had been going on between the plaintiff Bank on the one hand and the Reserve Bank and the Central Government on the other. In spite of repeated requests no final order was given and there was no indication that any final order might be expected in view of the attitude adopted by the Reserve Bank and the Central Government. A deadlock had been created making it impossible for the plaintiff Bank to get any final decision from the Reserve Bank and the Central Government.

29. In this view the plaintiff Bank becomes entitled to come to the Civil Court for vindication of its rights, if any, and for obtaining a. final decision from the Court. The present suit cannot, therefore, be deemed to be a premature one.

30. We agree with the learned Subordinate Judge that with regard to the Bank note of the Dhuliyan Branch having been returned simply because of an accidental mistake in typing'the notes must be deemed to have been presented for exchange on the due date when the note was received on the 14th January, 1946 and duly presented. The plaintiff bank was entitled to the exchange even under the Rules. The decree passed by the learned Subordinate Judge with respect to this particular note must be upheld.

31. As regards the 18 notes of the Aurangabad Branch Office six were received on the 14th. January, one on the 15th January 1946 and the remaining pieces had been received long before between November and December 1945.

32. under Rule 5 of the Rules promulgated under Ordinance 3 of 1946 notes received up to the 15th January, 1946 would be exchanged provided the bank received such notes in good faith and without any knowledge of the Ordinance. We may note in passing that although the Ordinances were passed on the 12th January, 1946 the Rules were not published until the 26th January, 1946. Ordinances are no doubt issued because of emergencies but reasonable construction must al- . ways be applied when the question arises as to whether provisions contained in the Rules subsequently issued have been followed or not. Parties concerned had no idea of the rules which were going to be framed and which were actually framed about two weeks after the promulgation of the Ordinance laying down the procedure or the tests to be applied as between the 12th and ' the 15th January 1946.

33. On the evidence we are satisfied that the officers of the plaintiff bank at Dhuliyan came to know about the Ordinance on the 14th January and those at Aurangabad not before the 15th January 1946.

34. On behalf of the defendants it had been argued that all the books and papers produced by the plaintiff bank were suspicious one and the plaintiff bank had not acted bona fide in the matter of the receipts of high denomination notes. We do not however find any cogent reason to disbelieve the evidence of plaintiff's witnesses Nos. 3, 4, 5, 6 and 7 to the effect that the notes had been received by the bank in course of ordinary business transactions. No doubt that in the declarations which were filed some of the details were wanting but such details were supplied and we are satisfied that the bank had acted bona fide and complied substantially with the directions issued as contained in the rules. The story of the Aurangabad Notes being first presented at sub-treasury at Jangipur on ttie 16th January is quite probable and on behalf of the defendant it has not been contradicted that the Treasury business at outgoing stations is transacted on alternate days. The necessary forms and directions as under the Ordinance were not available except in the Gazette which had been issued and the Treasury Officer at Jangipore had not the necessary instructions as to how to deal with applications for exchange of notes under the Ordinance. That the notes were presented to the Berhampore Treasury on the 19th January is fully sub tantiated. The inability of the sub-treasury officer on the 16th January to receive the notes -- a story accepted by the trial court and by us -- justified the plaintiff bank to present them to the Berhampore Treasury on the 19th January. These were, however, returned by the Treasury Officer.

In the letter which was addressed to the District Magistrate on the 15th January a statement was included referring to the notes from the Dhuliyan Branch, including the one which is now the subject-matter of the present suit. On the 18th January 1946 the District Magistrate was intimated of the notes from the Aurangabad Branch referring to 36 pieces of high denomination notes. Six notes were again sent to the Bengal Central Bank Limited, Berhampore Branch on the 24th January 1946 as the plaintiff bank had accounts with those other banks. A declaration was made on the 27th January, 1946. Out of the 36 Notes 17 were exchanged but 19 of them were returned by the Treasury Officer to the Bengal Central Bank Ltd. on the 28th January. No reasons were assigned at that time for this discrimination and no attempt has been made in the present suit as to any reasonable ground justifying exchange of 17 only out of the 36 notes presented, it is not necessary to refer to the subsequent declarations which were called for and made. Some discrepancies or mistakes in some or other declaration, corrected and rectified in a later declaration do not detract from the effect of the original declarations made.

The Bank's accounts were checked (as would appear from Exhibit C) and that in course of the long correspondence which was carried on between the plaintiff and the Reserve Bank. The correspondence between the plaintiff, the Reserve Bank of India and the Central Government referred to in details by the learned Subordinate Judge lead to the irresistible conclusion that the Reserve Bank of India, Calcutta Branch was satisfied about the bona fides of the transactions of the plaintiff bank and called upon the bank to deposit the notes with the Currency Officer, Calcutta. What had happened subsequently and the attitude of reticence adopted by the Central Government has remained unexplained.

35. AS we have held already that in view of the attitude taken up by the authorities the plaintiff bank was justified in filing the present suit, all that requires our consideration now is whether the terms and rules under Ordinance 3 of 1946 have been substantially complied with. Though there may be slight deviations, if the rules be strictly interpreted, but if the different statements filed by the plaintiff be taken into consideration we have no doubt that there was a sufficient compliance with the rules. The subsequent provision as contained in the Ordinance and the subsequent rules framed thereunder were to detect fraudulent transactions so as to make it impossible for parties to pass through banks high denomination notes after the 14th January, 1946. It is, however, significant that under the rules the discretion was reserved for the Central Government to allow the Reserve Bank to exchange notes which had been filed even after that date. That discretion also has to be exercised fairly and judicially.

36. The plaintiff bank is entitled not only under section 39 of the Reserve Bank of India Act but even on a substantial compliance of the rules framed under Ordinance 3 of 1946 read with the provisions of that ordinance to get the value of the notes in suit. This appeal is accordingly dismissed with costs. The cross-objection is not pressed and is dismissed without costs.

Lahiri, J.

37. I agree,


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