1. These are two appeals by S. Pakrashi and Dr. S. K. Banerjee against convictions recorded against them by the Fourth Presidency Magistrate of Calcutta under Sections 409 and 409/114, I.P.C. Under those convictions each of them has been sentenced to rigorous imprisonment for six months and a fine of Rs. 300 in default three months' rigorous imprisonment. No separate sentence has been passed under Section 409/114, Penal Code. It was further ordered that out of the fine, if paid, Rs. 197-14-6 be paid to the complainant.
2. Accused 1 is the managing director of the Ruby Bank Ltd., a concern which carried on business until about the middle of 1940 in Calcutta. Accused 2 is described as the manager of the Ruby Bank Ltd. The complainant is stated to be a ghee merchant who in April 1940 opened an account with the Ruby Bank Ltd., and deposited different sums of money with the bank amounting in all to Rs. 660. The account, it must be noted, was a current account, and the complain. ant previous to 8th May 1940 had withdrawn by cheque on various occasions sums amounting to Rs. 434.8.0. The withdrawals appear to have been made by means of cheques of the usual form issued by the Ruby Bank Ltd., to its customers. On 8th May 1940 the complainant drew a cheque on the Ruby Bank Ltd., for Rs. 197-14-6 in favour of Jaharmull Mathuradas. This cheque was deposited by Jaharmull Mathuradas with the Imperial Bank which presented it for payment to the Ruby Bank Ltd. on 8th May. The complainant at that time had at his credit in the Ruby Bank Limited a sum of Rs. 225-8-0, so that the cheque ought to have been paid. It was not paid, but was returned to those presenting it with a slip attached stating 'returned unpaid for reason 18 ' which was ' please receive payment on Friday 17-5-40,' signed by the manager of the branch concerned.
3. According to the evidence the cheque was presented subsequently on three occasions, but it was not presented on 17th May 1940. On 13th May 1940, these criminal proceedings were begun by the complainant with the result that the convictions mentioned above have been recorded against the accused. The evidence shows that the complainant had paid in the moneys stated above and drawn some out and that Rupees 225-8.0 was in his credit on 8th May 1940, but the bank had no money on that date; when on 9th July 1940, the police officer made an investigation the bank had still no money; it had closed its doors and they have remained closed. We are informed that the bank is a limited company but has not been wound up nor have any winding up proceedings been started. The learned Magistrate, in convicting the accused stated that when the Police Inspector called upon accused 1 in July the accused told him that he had no cash. Then said the Magistrate 'This proves misappropriation.' Section 409, Penal Code, of which the accused have been convicted provides:
Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney, or agent, commits criminal breach of trust in respect of that property shall be punished, etc.
4. Section 405, Penal Code, defines 'criminal breach of trust' as follows:
Whoever, being in any manner entrusted with property, or with any dominion over property dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits 'criminal breach of trust.
5. The relation between banker and his customer where a current account is concerned is stated shortly in vol. 1 of Halsbury's Laws of England, Edn. 2, at p. 796, para. 1305, and is as follows:
Receipt of money on current account : Save as regards the following of trust funds into his hands, the receipt of money by a banker from or on account of his customer constitutes him merely the debtor of the customer although the obligation to repay only arises upon demand and repayment need only be made at the branch at which the account is kept. He is not a trustee for the customer, and the latter has no right to inquire into or question the use made of the money by the banker.
6. The matter is dealt with in more detail by Lord Cottenham, then Lord Chancellor, in his speech in the House of Lords in Foley v. Hill (1844-48) 2 HLC 28 at page 35 as follows:
Money when paid into a bank, ceases altogether to be the money of the principal : see Parkar v. Merchant (1842) 1 Ph 356 at p. 360; it is then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into the banker's is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker's money; he is known to deal with it as his own; he makes what profit out of it he can, which profit he retains to himself, paying back only the principal according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places. The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases, he is guilty of no breach of trust in employing it, he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal but he is of course answerable for the amount because he has contracted having received that money to repay to the principal, when demanded, a sum equivalent to that paid into his hands.
That has been the subject of discussion in various oases and that has been established to be the relative situation of banker and customer. That being established to be the relative situations of banker and customer, the banker is not an agent or factor, but he is a debtor. Then the analogy between that case and those that have been referred to entirely fails; and the ground upon which those cases have, by analogy to the doctrine of trusteeship, been held to be the subject of the jurisdiction of a Court of Equity, has no application here, as it appears to me.
7. This sum of Rs. 660 had been paid into the complainant's current account at the Ruby Bank; it therefore became to all intents and purposes, the money of the banker, the Ruby Bank, subject to the liability of the Ruby Bank to return to the complainant an equal sum of money. Having regard to the legal relationship of banker and customer on a current account set out above, I am of the opinion that the money cannot be said to have been entrusted with the banker in the sense in which the word 'entrust' is used in Sections 405 and 409, Penal Code. There is no evidence before us that the bank dishonestly used or disposed of that property. It appears to me that the only remedy which the complainant had here was to sue the Ruby Bank Ltd., for the balance of his account in the bank, and an action for dishonouring the cheque. I am of the opinion that these convictions cannot stand.
8. I wish to say something which arises out of this case. The Ruby Bank Ltd., is unable to pay its debts, but it has not been wound up and is still entitled to call itself a 'bank.' There are many such institutions in Bengal styling themselves 'banks' and thereby enabled to obtain deposits of money from customers which they cannot hope to repay. Such institutions ought not to exist. I hope the proper legislature will consider whether laws shall not be framed to prevent companies and similar concerns trading as 'banks' when their resources and methods of business do not warrant it. The result is that the appeals are allowed and the convictions and the sentences consequent thereon are quashed. The appellants, if on bail, will be discharged from their bail.
9. I agree.