1960 (4) TMI 38 - HC - Companies Law

Summary

Issues Involved:
1. Whether the suit is within time.
2. Whether the amount in dispute was lying with the defendant in the nature of trust money.
3. Is the plaintiff entitled to the declaratory decree prayed for?
4. Whether the secretary of the plaintiff is authorized to file this suit.
5. Relief.

Issue-wise Detailed Analysis:

1. Whether the suit is within time:
The trial judge found that the suit was within time and maintainable as the claim was amended to convert it to one for recovery of the amount of Rs. 5,000. This finding was not contested by the parties during the appeal.

2. Whether the amount in dispute was lying with the defendant in the nature of trust money:
The plaintiff bank argued that the amount of Rs. 5,000 was obtained by the manager of the defendant bank's Rupar branch on his own request due to an urgent need for cash. The plaintiff bank claimed that a special contract was made for the transmission of this amount to the defendant's head office at Lahore for payment to the Punjab Provincial Co-operative Bank Limited, Lahore. The trial judge originally found no fiduciary relationship, concluding that the plaintiff bank merely took an ordinary demand draft.

However, upon appeal, it was established that a special contract existed, supported by documents (exhibits P.1, P.2, P.3, P.4, and D.2) and the testimonies of Jagir Singh (P.W. 1) and Ram Singh (P.W. 2). The court found that the defendant bank's Rupar branch manager anticipated financial difficulties and sought help from the plaintiff bank, leading to a fiduciary relationship and a contract of agency. The defendant bank's argument of novation of contract by issuing three new drafts was dismissed as it was not pleaded in the written statement and lacked merit.

3. Is the plaintiff entitled to the declaratory decree prayed for?
Given the established fiduciary relationship and the special contract for the transmission of funds, the plaintiff bank was entitled to the declaratory decree. The court reversed the trial judge's finding, declaring that the sum of Rs. 5,000 was in trust with the defendant bank for the plaintiff bank, did not form part of the assets of the defendant bank, and was to be paid in full with priority to the plaintiff bank.

4. Whether the secretary of the plaintiff is authorized to file this suit:
The trial judge found that the secretary of the plaintiff was duly authorized to institute the suit. This finding was not contested during the appeal.

5. Relief:
The appeal was accepted, and a decree was made in favor of the plaintiff bank. The defendant bank was ordered to pay the amount of Rs. 5,000 in full with priority to the plaintiff bank, and to bear the costs of the plaintiff bank in both the appeal and the court below.

Conclusion:
The court concluded that the plaintiff bank had established a fiduciary relationship and a contract of agency with the defendant bank, entitling it to the declaratory decree and recovery of the amount in dispute. The defendant bank was ordered to pay the amount in trust with priority and bear the costs of the litigation.