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Sm. Pursottome Devi Bagla Vs. Dwarka Prasad Bajaj and ors. - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtKolkata
Decided On
Reported inAIR1941Cal458
AppellantSm. Pursottome Devi Bagla
RespondentDwarka Prasad Bajaj and ors.
Cases ReferredSecretary of State v. Bank of India Ltd.
Excerpt:
- mcnair, j.1. the plaintiff in suit no. 2154 of 1938 has given notice to the manager, reserve bank of india, to show cause why he should not carry out the orders of this court and renew a government promissory note in the name of the plaintiff and pay to her the accrued interest. the reserve bank of india is admittedly not a party to this suit, and the learned advocate-general has suggested to the court that the reserve bank of india cannot be brought before the court on an application of this nature. he has referred to the third party procedure, known to the courts in england, and has argued that no such procedure is available in this court. it appears, however, that the reserve bank of india have in the course of correspondence with the plaintiff's attorney set out their views with.....
Judgment:

McNair, J.

1. The plaintiff in Suit No. 2154 of 1938 has given notice to the Manager, Reserve Bank of India, to show cause why he should not carry out the orders of this Court and renew a Government promissory note in the name of the plaintiff and pay to her the accrued interest. The Reserve Bank of India is admittedly not a party to this suit, and the learned Advocate-General has suggested to the Court that the Reserve Bank of India cannot be brought before the Court on an application of this nature. He has referred to the third party procedure, known to the Courts in England, and has argued that no such procedure is available in this Court. It appears, however, that the Reserve Bank of India have in the course of correspondence with the plaintiff's attorney set out their views with regard to the controversy, and, after stating that in their opinion the full facts have not been placed before the learned Judges who had made previous orders, they have asked in the event of the plaintiff applying for any directions of the Court, that they might be given notice of such application and that the application should not be made ex parte. In the circumstances the bank cannot object to this application being made in their presence.

2. The question at issue is the renewal of a Government promissory note. That note belonged to a lady named Johor Bibi, who is dead. The plaintiff filed a suit in December 1938 against some of the members of Johor Bibi's family for the recovery of property, which she claimed to be her mother's stridhan. The suit was settled and a consent decree was passed in terms of the settlement. Under the terms of settlement two of the defendants were to hand over to the plaintiff a Government promissory note of the face value of Rs. 2,30,000 in full settlement of all claims of the estate of Johor Bibi against the said defendants, and the plaintiff agreed that she would have no further claim against them. The plaintiff then deposited the Government promissory note with the Reserve Bank of India for the purpose of having it renewed. In the meantime two persons claiming to be reversioners, namely the sons of a deceased daughter of Johor Bibi, wrote to the bank requesting them not to renew the Government promissory note on the ground that the previous suit by the present plaintiff was collusive and ignored their rights, which they intended shortly to establish by means of a suit. They filed the suit in June 1939, and obtained an interim injunction ex parte restraining the petitioner from dealing with the Government promissory note pending the hearing of the application. The application was heard on the following day and the Court confirmed the injunction restraining the applicant from dealing with or disposing of the Government promissory note for Rs. 2,30,000 which she had obtained from the estate of Johor Bibi, but provided that the injunction would not prevent her from having the Government promissory note renewed and transferred into her name, nor from withdrawing any interest or arrears of interest which had accrued due thereon.

3. The petitioner then applied once more to the Reserve Bank for the note to be renewed in her name so as to enable her to draw the interest. The bank, however, wrote to her that they were advised that the decree, under which she claimed title, was declaratory and did not afford protection to the bank against claims by a third party. On 30th August 1939, an application was made to this Court for an order that the Reserve Bank do forthwith renew the said Government promissory note, that the Registrar of this Court do endorse the Government promissory note in favour of the petitioner, and that the Reserve Bank do pay all interest due on the said Government promissory note to the petitioner. The bank were not parties to the application and it is alleged that their point of view was never placed before the Court. The only order made on that application was that the Registrar should endorse the Government promissory note in favour of the petitioner, the order being subject to the previous injunction of the Court. The Registrar, as directed, endorsed the promissory note, and once more an application was made to the bank. On 25th January 1940, this Court decided the reversioner's suit. It was held that the interest acquired by the present petitioner was that of a limited owner. She was heiress to her mother's stridhan but she acquired no absolute right to the property in suit. The Court also issued an in-junction restraining her from alienating the Government promissory note.

4. On behalf of the bank the learned Advocate-General has argued that at no time has the Court ordered the bank to renew the Government promissory note, and this contention appears to me to be correct. This Court on 30th August 1939, only ordered the Registrar to endorse the Government promissory note in favour of the petitioner. The relief which had been asked for directing the Reserve Bank to renew the Government promissory note was specifically omitted from the order. Similarly the relief that the Reserve Bank should be directed to pay the interest to the petitioner was refused. Again the previous order granting a temporary injunction made no order on the bank. It merely directed that an injunction should issue restraining the applicants from dealing with the note and stated that this injunction would not prevent the petitioner from having the Government promissory note renewed and transferred in her name, nor from withdrawing any interest or arrears of interest. There was thus no order upon the bank. But the petitioner was empowered to get a renewal from the bank; and it should have been clear to the petitioner that she could only get the renewal provided the proper procedure was followed, and the statutory provisions complied with.

5. It is further argued that the bank is in the position of a debtor, and that the bank cannot be safeguarded unless the petitioner obtains a succession certificate before withdrawing interest. In this connexion reference has been made to Section 281, Succession Act, which provides complete immunity to the grantee of a succession certificate. Reference has also been made to the Securities Act, and certain departmental directions in the Government Securities Manual. The relevant sections of the Act are Sections 12 and 13. Section 12 provides:

Subject to the provisions of Section 13, a person claiming to be entitled to a Government promissory note, may, on applying to the prescribed authority, and on satisfying it of the justice of his claim and delivering the promissory note receipted in the prescribed manner, and paying the prescribed fee, if any, obtain from such authority a renewed promissory note payable to him.

6. Section 13 provides:

Where there is a dispute as to the title to a Government promissory note in respect of which an application for renewal has been made, the prescribed authority may, where any party to the dispute has obtained a final decision from a Court of competent jurisdiction declaring him to be entitled to such note, issue a renewed note in favour of such party.

7. It is argued on behalf of the petitioner that there has been a dispute as to title and that there has been a final decision on that dispute. I am not satisfied that there has been a final decision within the explanation of Section 13, which provides that for the purposes of that section a final decision means a decision which is not appealable or a decision which is appealable but against which no appeal has been filed within the period of limitation allowed by law. The decision in the reversioner's suit was on 25th January 1940, so that the time within which an appeal may be taken has not yet expired. It is immaterial whether an appeal is to be taken or is not to be taken for the construction of 'final decision' under Section 13. The only question which is relevant is whether the time has or has not expired. If it has not expired there is no final decision within the meaning of the section. The main question to be decided in this application is whether the Reserve Bank are justified in insisting that the applicant obtain a succession certificate before renewing the note. Reference has been made to para. 54 of the Government Securities Manual, where it is stated that if a note is endorsed by some person other than the last endorsee, the endorsement is valid only if the signature is that of a person who has a legal right to dispose of the note on behalf of the last endorsee or of the latter's estate, and that documents must be produced to prove that such person has that right.

8. The paragraph then goes on to state that when the claim is to deal with a note in the capacity of an heir a succession certificate is necessary. And on page 66 of the third edition of the Manual there occur the following words:

There are two cases in which Government promissory notes may be disposed of otherwise than by the last endorsee or by his personal representative, viz., promissory notes sometimes form the subject of a civil suit, and a decree is passed by a Court in British India transferring their ownership from one person to another. In such a case, an endorsement signed by the presiding officer of the Court should be recognized. It is necessary, however, that the judgment-debtor should be either the last endorsee of the Government promissory notes if he is living, or his legal representative, if he is dead.

9. It has been suggested in argument that by the decrees of this Court there has been a transfer of ownership. That argument I cannot accept. The Government promissory note still remains in the name of the deceased, and the directions in para. 54 clearly contemplate that the present petitioner, who is applying as heir of the deceased, should apply with a succession certificate. It is true that the Registrar has endorsed the Government promissory note in favour of the petitioner, but it seems to me doubtful whether the Registrar can endorse as the representative of a deceased person, and in any event his endorsement does not purport to be as representative of the deceased. It has been argued that there has been in effect an order on the Bank to renew the Government promissory note. I am satisfied that there has not been any such order, and in fact, as I have already pointed out, the Court has refrained, apparently deliberately, from making that order when it was asked for in the petition with which it dealt on 13th August last. The learned Advocate-General has referred me to the case in Secretary of State v. Bank of India Ltd. ('37) 24 AIR 1937 Bom 145 and to the judgment of the learned Chief Justice of Bombay in that case. The learned Chief Justice points out that:

The Indian Securities Act forms a complete code as to the circumstances in which Government securities can be renewed. Apart from the Act, there is plainly no right of renewal, and the scheme of the Act seems to me to be this. When a request for renewal is made under Section 12, the prescribed officer can consider whether the claim of the person making the request to the note is a valid claim. If he comes to the conclusion that it is, he can renew the note, if he comes to the conclusion that it is not, he can either refuse renewal, or under Section 21(1) can renew the note on obtaining an indemnity in the prescribed form from the claimant.

10. In the present case there is no question of indemnity, and in the previous judgments in this suit it has been pointed out that the petitioner is in indigent circumstances, and so no indemnity by her personally would have been of any value. Again with regard to Section 12 the learned Chief Justice says:

Under Section 12 a person claiming to be entitled to a Government promissory note is only entitled to renewal, amongst other things, on satisfying the prescribed officer of the justice of his claim, which means-I take it-satisfying the prescribed officer that he is in fact entitled to the Government promissory note. The prescribed officer, therefore, is entitled to require evidence which satisfies him - not merely evidence which might prove to a Court of law that the title to the note was valid but which satisfies the officer-and it is, I think, true to say that the officer cannot be regarded as exercising a merely ministerial duty. Assuming that he acts honestly and brings his judgment to bear on the case and does not act merely capriciously, I take it that if he says that he is not satisfied of the justice of the claim, no Court could compel him to issue a renewed note.

11. It appears to me perfectly clear that the Manager of the Reserve Bank in this case had a definite doubt as to whether he was justified in renewing the promissory note without such security as could be obtained by the issue of a succession certificate. He might have been (satisfied on the decisions of this Court that the petitioner had established her right. But in view of the judgments which have been given in this matter; in view of the facts from which it appears that the petitioner is in indigent circumstances; seeing that there was originally a suit which has been described as collusive, and that even if the petitioner is entitled to the corpus the Court has restrained her from dealing with it, there appears to be ample justification for the Manager of the Reserve Bank to say that he would not renew the Government promissory note except on the production of a succession certificate. The application is dismissed with costs. Certified for counsel.

[On appeal, the appellate Court delivered the following judgment.]

Derbyshire C.J.

12. This is an appeal from an order of McNair J. made on 18th March 1940, dismissing an application made by the plaintiff in the suit. The application made to McNair J. was for an order that the Manager of the Reserve Bank of India, Calcutta, should show cause

why he should not carry out the order of this Court and renew the 3 per cent. Government promissory note of the face value of Rs. 2,30,000 bearing No. 109681 of 1896-97, in the name of the plaintiff and pay the interest accrued thereon.

13. There was a further prayer with regard to costs. The facts leading up to this application are set out by McNair J. in his judgment.

14. The Government promissory note in question belonged to a lady named Johor Bibi who is dead. The plaintiff filed a suit in December 1938 against some of the members of Johor Bibi's family for the recovery of property which she claimed to be her mother's stridhan. The suit was settled and a consent decree was passed in terms of the settlement. Under the terms of settlement two of the defendants were to hand over to the plaintiff this Government promissory note of the face value of Rs. 2,30,000 in full settlement of all claims of the estate of Johor Bibi against the defendants. The plaintiff agreed that she would have no further claims against those two defendants. The plaintiff deposited the Government promissory note with the Reserve Bank of India for the purpose of having it renewed. In the meantime two persons claiming to be the reversioners, namely the sons of the deceased daughter of Johor Bibi, wrote to the Bank requesting them not to renew the Government promissory note on the ground that the suit by the present plaintiff was collusive and ignored their rights, which they intended shortly to establish by means of a suit. They filed their suit in June 1939, and obtained an interim injunction ex parte restraining the petitioner (the plaintiff in the first suit No. 2154 of 1938) from dealing with the Government promissory note pending the hearing of the application.

15. The application was heard on the following day and the Court confirmed the injunction restraining the plaintiff from dealing with or disposing of the Government promissory note for Rs. 2,30,000 which she had obtained from the estate of Johor Bibi, but provided that the injunction would not prevent her from having the Government promissory note renewed and transferred into her name, nor from withdrawing any interest or arrears of interest which had accrued due thereon. The plaintiff applied once more to the Reserve Bank for the note to be renewed in her name so as to enable her to draw the interest. The Bank however wrote to her that they were advised that the decree under which she claimed title was declaratory and did not afford protection to the bank against claims by third parties. On 30th August 1939, an application was made to this Court for an order that the Reserve Bank should forthwith renew the said Government promissory note, that the Registrar of this Court should endorse the Government promissory note in favour of the petitioner and that the Reserve Bank should pay all interest due on the said Government promissory note to the petitioner. The bank were not parties to the application and it is alleged that their point of view was never placed before the Court. The only order made on that application was that the Registrar should endorse the Government promissory note in favour of the petitioner, the order being subject to the previous injunction of the Court. The Registrar as directed, endorsed the promissory note and once more an application was made to the bank. On 25th January 1940, Sen J. decided the reversioner's suit and held that the interest acquired by the present petitioner was that of a limited owner; that she was heiress to her mother's stridhan, but she acquired no absolute right to the stridhan property in suit. The Court then issued an injunction restraining her from alienating the Government promissory note.

16. This is an application, as I have stated, for an order that the Manager of the Reserve Bank of India should show cause why he should not carry out the order of this Court and renew the 3 per cent. Government promissory note of the face value of Rs. 2,30,000 bearing No. 109681 of 1896-97 in the name of the plaintiff. It is not clear under what provision of the law that order was asked for. But assuming that it was properly made one is struck by the fact that the Court never made an order to the effect alleged at all. That part of the application must obviously fail. The Court had in fact, when an application was made on 30th August; refused to make an order that the Reserve Bank should renew the promissory note. It had also refused to make an order which was asked for, that the Reserve Bank should pay all interest on the Government promissory note to the petitioner. There is, however, this endorsement on the promissory note:

Pay to Sm. Pursottome Devi Bagla or order.

A.L. Collet,

Registrar, High Court, O.S.

(Pursuant and subject to the order dated 30th August 1939 in suit No. 2154 of 1938).

17. The Court made an order upon the Registrar to make that endorsement, and the Registrar did it. I am not clear why that order was made: the Court at the same time refused to make an order in favour of the applicant upon the bank to renew the promissory note and to pay her the interest on. it. It is usual, as far as my knowledge of the practice goes, only to direct the Registrar to write his name on a document in place of another person where that person has refused to carry out an order of the Court to put his name on the document or is unable for some reason to do so. The endorsement does not say on behalf of whom it was made. The promissory note was made in favour of Johor Bibi, her executors or administrators or her or their order. The original promisee under the promissory note is Johor Bibi; she is dead, and the Registrar cannot purport to act on her behalf. There is no will as far as we know; no letters of administration have been taken out; no endorsements have been made either by Johor Bibi or anyone else on her behalf. Hence the Registrar cannot be acting on behalf of any of the parties mentioned in the promissory note-either Johor Bibi, her executors, administrators or indorsees. Section 5, Securities Act of 1920, provides:

Notwithstanding anything in Section 15, Negotiable Instruments Act, 1881, no endorsement of a Government promissory note shall be valid unless made by the signature of the holder inscribed on the back of the security itself.

18. It is clear that the signature of the Registrar is not that of the holder and it is not even made on behalf of the holder or anyone else mentioned in the promissory note or entitled to the promissory note. It seems to me that the order ought never to have been made and the endorsement is invalid under Section 5, Securities Act. There was a certain amount of argument both before McNair J., and before this Court upon the correctness of the attitude taken up by the bank. As indeed, in my opinion, there was no foundation for this particular application, it would be enough to say that the application should be dismissed as indeed it was dismissed. It may be that what the learned Judge said and what I propose to say is not necessary for the purposes of the decision in this case, but as it may be a matter of some public importance and as so much time and argument have been spent on it, I do not think we can leave the matter where, as I have indicated, it might be left.

19. The argument of the applicant is that the Reserve Bank ought to have renewed this Government promissory note upon the application of the plaintiff because she had shown that she was at any rate entitled to it for life. It is true that in a certain suit in which the decree declared that she was entitled to it for life she is appealing (I understand that she has since appealed) on the ground that she is entitled to the full interest in the note. But at the time when McNair J.'s decision was given the plaintiff was in the position of a qualified owner of the note entitled to it for life, and it was open to her to appeal, as she has done since and contend that she was entitled to the whole of it. It has been contended on her behalf in the present appeal that under Sections 12 and 13, Securities Act, she was entitled to a renewal of it. Now, the original promissory note was made in 1896 and by it the Governor-General in Council had promised to repay a loan of Rs. 2,30,000 to Johor Bibi, her executors or administrators or her or their order. He made a similar promise with regard to the interest payable half yearly on that sum at 3 per cent. That was the original contract between the parties. The Reserve Bank is now by statute made the prescribed authority for carrying out the obligations of the Governor-General in Council in these matters. According to the strict terms of the contract, only those promisees designated in the promissory note have rights under it. But it may happen that a promissory note like this may come into the possession of a person who was not a party to it originally and that person may become entitled to the rights under it. Under these circumstances the natural thing is to have the contract, that is the promissory note, renewed in favour of the person who is so entitled. It is with a view to facilitating the substitution of such person in the promissory note in place of those mentioned in it that Sections 12 and 13, Securities Act, are provided. Section 12 reads:

Subject to the provisions of Section 13, a person claiming to be entitled to a Government promissory note, may, on applying to the prescribed authority, and on satisfying it of the justice of his claim and delivering the promissory note receipted in the prescribed manner, and paying the prescribed fee, if any, obtain from such authority a. renewed promissory note payable to him.

(Then follows a proviso relating to Mitakshara families with which we are not concerned).

20. Section 13 (1) reads:

Where there is a dispute as to the title to a Government promissory note in respect of which an application for renewal has been made, the prescribed authority may, (a) where any party to the dispute has obtained a final decision from a Court of competent jurisdiction declaring him to be entitled to such note, issue a renewed note in favour of such party, or (b) refuse to renew the note until such a decision has been obtained, or (c) after such enquiry as is hereinafter provided and consideration of the result thereof, declare by order in writing which of the parties is in its opinion entitled to such note and may, after the expiration of three months from the date of such declaration, issue a renewed note in favour of such party in accordance with the provisions of Section 12 unless within that period it has received notice that proceedings have been instituted by any person in a Court of competent jurisdiction for the purpose of establishing a title to such note.

Explanation. - For the purposes of this subsection the expression 'final decision' means a decision which is not appealable or a decision which is appealable but against which no appeal has been filed within the period of limitation allowed by law.

21. Although, as I have said, the application in my opinion fails, I wish to consider the position which has been put forward on the supposition that the application is properly founded. The circumstances which obtain here are that there has been and still is a dispute with regard to the full ownership of that note. That dispute was going on within the meaning of this section and had not been finally decided (it was going to appeal) at the time this application was before McNair J. Under those circumstances it appears to me that if either of these two sections are applicable, Section 13 (1) (b) deals with these particular circumstances. Here a Court of first instance had declared that the applicant was entitled to the note for her life only which is not the same as 'entitled to' the note; the applicant was appealing claiming the absolute ownership of the note; there might have been (although it does not appear that there was) a cross-objection by the respondents in the appeal that she was not entitled even to that ownership and there might have been an appellate decision that she was not even entitled to life ownership of the note. Whatever might have happened it is clear that there was no 'final decision' that the appellant was 'entitled to' the note. Therefore the Reserve Bank of India was entitled to refuse to renew the note in the appellant's favour when application for renewal was made and considered. For these reasons I agree with McNair J.'s decision. This appeal must in my opinion be dismissed with costs. Certified for two counsel.

Panckridge, J.

22. I agree. In my opinion the summons and the petition on which it is founded seriously misrepresent the events which preceded the application. As my Lord has pointed out the plaintiff had specifically asked for an order from Ameer Ali J. that the Bank should renew the promissory note and should pay all interest due on the promissory note to her. Ameer Ali J. had declined to make an order in those terms, and merely confined himself to a direction on the Registrar to endorse the note. Plainly there was no order upon the Manager of the Reserve Bank, and I do not believe that this fact was not appreciated by those advising the plaintiff. For Attorneys of the Court to attempt to misrepresent the substance of orders already made is most reprehensible, even when the attempt is as childishly inept as the present one.

23. With regard to Sections 12 and 13, Securities Act, in my opinion they must be read together. I do not think that the mere fact that there has been a dispute to which Section 13 applies, deprives Section 12 of its operation. It would be absurd to suppose that the existence of a dispute relieves the applicant from the obligation to deliver the promissory note and pay the prescribed fee. The effect of Section 13 I consider to be this: it relieves the prescribed authority (in this case the bank) of deciding on the merits of the dispute inter partes in a case to which the section applies. But the prescribed authority is still entitled to call upon the applicant to satisfy it of the justice of his claim from other points of view. In a case where the applicant claims renewal as representing the estate of a deceased person, it is only reasonable for the prescribed authority to call upon him to satisfy it that he holds the character he claims by production of evidence of his representative capacity.

24. It is significant that section 19 of the Act seems to assume that ordinarily the prescribed authority will call for probate or letters of administration or a succession certificate as a matter of course, because that section purports to give it, subject to certain safeguards, a discretion to pay the amount due on the security if the security is below Rs. 5000 in value, without insisting on the production of these documents. I have no doubt that the Manager of the Reserve Bank was entitled to call upon the plaintiff to furnish him with satisfactory evidence of her representative capacity; and both on the ground that the summons is defective in that it seeks to enforce the performance of an alleged order where there is no order, and on the merits, the appeal must fail and be dismissed with costs.


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