9911796707
TMI Blog1956 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank of India. The hundies were endorsed by the Pioneer Bank in favour of the Reserve Bank. The appellant's case is that the Pioneer Bank re-pledged the securities he had given to the Reserve Bank of India and that he was told of the transaction when, on the 13th of September, 1948, he went to the Pioneer Bank and offered to pay up the whole debt at once. On the next day, that is to say, on the 14th of November, 1948, the Pioneer Bank obtained an order for a moratorium. The appellant claims to have gone to the Reserve Bank on the same date and offered to have his goods released on payment of the sum due from him, but in his case that as the hundies were for Rs. 25,000, he was required by the Reserve Bank to pay that amount. He did pay it on the 18th September, 1948, and obtained a release of his goods as also the cancellation of the hundies. On the 25th of June, 1949, the Reserve Bank appears to have intimated to the Pioneer Bank that it had received from the appellant a sum of Rs. 24,825-5-6 and that the Pioneer Bank had been credited with that amount. The period of the moratorium expired on the 10th of July, 1949, but on the next day, a winding up order was made. The Pioneer Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the sum of Rs. 3,112-14-3, which is now lying in the hands of the liquidator of the respondent bank, has come out of the security which the appellant furnished in connection with the overdraft account opened by him. The property out of which it has arisen was, therefore, originally his property. The terms on which that property had been given as security are set out in the appellant's petition and have not been controverted by anything in the affidavit-in-opposition filed on behalf of the bank. It would appear that there was only an overdraft account and that the respondent bank agreed to grant the appellant advances up to the limit of Rs. 25,000 on the security of grains and pulses deposited in the bank's godown and the further security of a hundi for Rs. 25,000. The meaning of the transaction, therefore, was that the respondent bank had been put into possession of the security in order that it might realize its debt out of the security, if necessary, and, conversely, that the only purpose for which security was given was to secure the debt under the overdraft account so that if there was ever any surplus after the security had been realized and applied to the satisfaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Jones v. Peppercorne [1858] Joh. 430; 70 ER 490 . The facts in that case were that the owners of certain Dutch bonds deposited them with a banking company for safe custody and the banking company, in fraud of the depositors, obtained a loan from certain brokers on the security of the bonds. The bank being unable to pay the brokers, the latter sold the bonds and the sale proceeds were found to be larger than the amount of the debt in respect of which the bonds had been given as security. The question which the court had to decide in suit by the owners of the bonds was whether, as between the banking company and the brokers, the latter were entitled to retain the surplus of the sale proceeds on the basis of a general lien in respect of whatever else might be due to them and whether the fact that the real owners of the bonds were the plaintiffs in the suit, made any difference. It appears that before the suit had been brought, the banking company had gone into liquidation. It was held by Vice-Chancellor Wood that the general lien would not be excluded by the special contract under which the bonds had been given as security, unless there was some term in the special c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a larger contract and construe it as conferring a general lien on the bank to apply the security, if necessary, not only to the satisfaction of the particular debt in connection with which it was given, but also to the satisfaction of other debts, if there were any. That principle, to my mind, has no application and no relevance when the question is not whether the bank was entitled to retain the surplus on the basis of a general lien but the question simply is whether the bank having gone into liquidation and there being no evidence or even any case made that the customer owes any other debt to the bank, the surplus should be repaid to the customer or should be distributed among the general body of the creditors of the bank. Indeed, the principles referred to in Paget's Law of Banking, on which Mr. Hazra relied, themselves contained a refutation of his argument. All that the principle amounts to is that the banker may instead of paying over the surplus to the customer hold it at his disposal or retain it in order to cover further indebtedness. It is perfectly clear that if the surplus is to be held at the disposal of the customer, it can only be the customer's money and so again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce there is no evidence of any other debt. The securities, out of which this amount has arisen were given to the bank for a specific purpose and the money into which the securities were converted and now represents them is stamped with the same purpose. Nothing has been shown which affects that character of the money and that being so, it is impossible to see how it could become the property of the bank or a part of its general assets liable to distribution among the general body of ordinary creditors. In my opinion, in the facts of this case, the appellant is entitled to claim that he must be ranked as a preferential creditor in respect of the surplus of Rs. 3,112-14-3. For the reasons given above, this appeal is allowed. We set aside the order of Banerjee J. appealed from and hold that the petitioner must be treated as a preferential creditor in respect of the sum of Rs. 3,112-14-3 and he is entitled to receive the said amount from the liquidator on the aforesaid basis. The petitioner's application will, therefore, be allowed in terms of prayer (a) subject to the modification that instead of Rs. 4,000 it will be Rs. 3,112-14-3 and the appellant will be entitled to be paid his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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