C.C. Ghose, J.
1. This Is an application on behalf of the Chartered Bank of India, Australia and China for an order that the liquidators of the Alliance Bank of Simla, Limited, be directed to pay the Chartered Bank the amount of three debit clearing vouchers referred to in the petition in full and that the costs of the application be paid out of the assets of the Alliance Bank of Simla, Ltd.
2. The facts are as follows: The Imperial Bank of India perform in Calcutta the functions of a clearing house to the various banks. The Chartered Bank and the Alliance Bank are members of the said clearing house.
3. The practice of the clearing house in April was as follows:-Clearing took place twice daily, once in the morning at 12 and once in the afternoon at 3, except on Saturdays when the hours ware 12 noon and 1 p. m. The various banks sent clerks to the clearing house to whom were handed over all cheques drawn upon their respective banks. Those cheques were then according to the applicant bank, provisionally debited against the respective banks in the accounts kept by the Imperial Bank of India and provisionally credited in favour of the banks producing them. The cheques were then taken by the various clerks to their respective banks for verification and approval. In case of non-payment of any documents they were to be returned to the bank which had originally put them through the clearing before the fixed hours-first clearing cheques, 2 o'clock; second clearing cheques, 5 o'clock; and they were to be exchanged for debit notes to go in at the next clearing. If the return was made after the second clearing, then a cheque on the Imperial Bank of India might be given in exchange.
4. On Saturdays unpaid cheques were to be returned, so as to reach the bank that sent them by 2.30 p. m., when the debit notes were handed in. The account of the Imperial Bank of India was then adjusted accordingly.
5. The Imperial Bank of India deputed one of the clerks to arrange settlement of the balances due to or by the different banks, receiving from the banks which were debtors on general balances, vouchers in approved form authorising the transfer of the balance due from respective accounts current to credit of clearing banker's account and granting to those which were creditors, vouchers authorising the transfer of the balance due from the clearing banker's account to credit of their accounts.
6. On April 27, 1923, certain cheques of which particulars are mentioned below, drawn on the Chartered Bank and delivered to the Alliance Bank by certain of the latter's customers for credit of their accounts, were in accordance with the usual practice, handed by the Alliance Bank's clearing clerk to the Chartered Bank's clearing clerk, and credits and debits were, according to the applicant bank, provisionally made by the Imperial Bank of India in the accounts of the said two banks with the Imperial Bank of India. The Alliance Bank received provisional credit for the cheques delivered and the Chartered Bank was provisionally debited with the amount of the said cheques. The cheques were then brought away by the Chartered Bank's clearing clerk to the Chartered Bank for examination.
7. On examination, however, it was found that the said cheques were not in order; at any rate, they were not such as the Chartered Bank was prepared to accept, and they were accordingly dishonoured by the Chartered Bank and returned the same day to the Alliance Bank with a memo attached giving the reason for dishonour. In exchange for the cheques, the Alliance Bank handed to the Chartered Bank vouchers described as debit vouchers.
8. According to the applicant bank, these vouchers would, in the ordinary course of business, have been sent in by the Chartered Bank to the clearing house the following morning in order that the provisional entries relating thereto might be readjusted. At the close of business on April 27, 1923, the Chartered Bank held three debit clearing vouchers on the Alliance Bank for Rs. 64, Rs. 112.8, and Rs. 8,537-8 amounting in all to Rs. 8.714. The Alliance Bank of Simla, Ltd., closed its doors and suspended payment at the close of business on April 27, 1923. Owing to this event the Imperial Bank of India refused to put the three debit clearing vouchers through the clearing on the morning of April 28, 1923 and to readjust the entries accordingly. The result was that the Alliance Bank received credit in the clearing for the said three debit clearing notes amounting to Rs. 8,714 and consequently, it is alleged, that they held funds to which they had no claim whatsoever, but to which the Chartered Bank was entitled. The Chartered Bank requested the Alliance Bank to pay the amount of the said three debit clearing vouchers in full, but the Alliance Bank failed and refused to do so, but offered to pay 50 per cent. of the amount in question on application.
9. The question now for decision is whether the Chartered Bank are entitled to receive payment in full of the three debit clearing vouchers and to demand that credit entries should be made in their account in the clearing with regard to the said throe debit clearing vouchers received by thorn on April 27, 1923, that being the last day on which the Alliance Bank did business.
10. According to the liquidators of the Alliance Bank of Simla, Ltd., there were no provisional credits or debits as suggested by the Chartered Bank and that the position was as follows: Each bank was entitled to receive from the Imperial Bank in accordance with the said rules a voucher authorising transfer, from its clearing banker's account with the Imperial Bank, such amount as might be found to its credit on striking a balance in respect of the aggregate credit and debit entries in such clearing banker's account, on completion of each clearing, without regard to the dishonour by it or by the drawee bank of any cheque or other document included in such aggregate debit or credit entries in such account.
11. In like manner each bank was required by the said rules to deliver to the Imperial Bank a voucher authorizing the transfer, from its account current with the Imperial Bank to the credit of its clearing banker's account with the Imperial Bank, of such amount as might be found to its debit upon such balance as aforesaid, without regard to the such clearing banker's account.
12. In other words, it is suggested that the credits and debits referred to above were irrevocable and the three debit clearing vouchers referred to above were and must be treated in the same manner as cheques drawn on the bank signing the same in favour of the bank to which the same wore delivered and to be included in the cheques and vouchers handed over at the next clearance by the bank holding the same, to the bank on which they were drawn or by which they were payable.
13. Now what is a clearing house? The clearing house is a place of meeting of the representatives of the members of the Calcutta Bankers' Clearing House where an exchange of cheques, etc., takes place in lieu of direct presentation at the offices of the bank where such drafts are made payable. Balances are struck between each of the clearing banks in manner provided for by Rules 7 and 9 of dishonour by it or by the drawee bank of any cheque or other document included in the said aggregate debit or credit entry in the regulations for the Calcutta Bankers Clearing House. The object of the arrangement is really to dispense with the use of coin or bank notes in the settlement of large transactions that necessarily take place there.
14. The next question is, on the facts presented before me, what was the position of the Alliance Bank of Simla, Ltd., when they received the cheques in question from their customers for credit of their accounts? Did they receive as agents for collection or as holders for value of the cheques?
15. The character in which the Alliance Bank received the cheques in question is a pure question of fact: Maclean v. Clydesdale Banking Co. (1883) 9 A.C. 95, but it is of importance in determining the question raised therein. I incline to the opinion that they received the said cheques as agents for collection, because of the fact that after the dishonour of the cheques in question by the Chartered Bank, the Alliance Bank of Simla, Ltd., reversed their original credit to their constituent's accounts in respect of these very cheques. This is expressly stated in paragraph 7 of the petition of the Chartered Bank and not denied in the affidavit of Mr. Clarence Ashworth, who is one of the liquidators of the Alliance Bank of Simla, Ltd.
16. The action of the Alliance Bank of Simla, Ltd., in reversing the credit to their constituent's account in respect of these very cheques was consistent only with their having received the cheques as agents for collection and with the fact that they never placed any money to their customer's credit to draw upon.
17. If, as a matter of fact, the proceeds of these cheques had been actually collected and the relationship of banker and customer established, it would not have been open to the Alliance Bank to reverse their original credit to their constituents ac-counts. This strengthens the conclusion that the cheques in question were not 'finally cleared. It would, therefore, follow that the moneys represented by these cheques were never in fact collected by the Alliance Bank of Simla, Ltd., at a time when they were entitled to claim thorn as part of their assets: Farrows Bank (1921) 1 Ch. 41.
18. There was in fact no relationship of debtor and creditor as between the Alliance Bank and their customers and, there-fore, my opinion on the facts presented before me is that the liquidators of the Alliance Bank of Simla, Ltd., must pay out of the assets in their hands the full amount claimed by the Chartered Bank in their application.
19. I am not unmindful of Mr. Page's vigorous argument based on the words of the regulations of the Calcutta Bankers' Clearing House and on the words used in the three debit notes signed by the Alliance Bank of Simla Ltd., but I must look at the substance of the transaction and resist being led by mere forms or words; and looking at the substance of the transaction, my opinion is as indicated above, and further, that the credits and debits in the books of the Imperial Bank of India were not irrevocable. The liquidators of the Alliance Bank must pay the costs of this application. The liquidators will retain their own costs.