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TMI Blog1955 (3) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... hem a draft of ₹ 22,600 in the name of Podar Trading Company. These instructions of the appellants were carried out by the bank and the bank sent to the appellants a pay order in favour of the Podar Trading Company. The Podar Trading Company presented this pay order through their bank, the Chartered Bank, on April 30, 1949. The pay order was not honoured and it was returned to the Chartered Bank with the endorsement : No advice, present again. It was again presented on May 2, 1949, and it was dishonoured. On that very day the bank suspended payment. On June 14, 1949, the bank as wound up by an order of the court and the appellants made a claim that they were preferential creditors on two grounds : (1) as the customer of the bank, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent point of view. If a certain amount of a customer is lying with the bank, the safe test which may be applied in order to determine whether that amount is impressed with any trust is to find out whether the bank is entitled to use that amount in the ordinary course of its business, whether it belongs to its general funds, or whether it is specially appropriated for a particular purpose and cannot be utilised by the bank for its normal ordinary business. 4. If these principles are clearly borne in mind then there is no difficulty in deciding this case. When we turn to the direction given by the customer on April 29, 1949, the instructions are clear and specific and the instructions are that the bank should deliver to them a cheque, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Mr. Jethmalani says that that is clear conduct on the part of the bank which shows that it removed this amount from the general fund and appropriated it to a specific purpose. In our opinion, far from this method of book-keeping supporting the contention of the appellants, it negatives the contention put forward by them. The matter would have been different if a specific account with regard to this pay order had been opened. The account in which this amount is credited is a general account in which all entries are made with regard to all pay orders issued by the bank. The account is maintained for the convenience of the bank and the account shows to the bank what pay orders they have to meet and when and for what amount. The account does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tartling one, that if a draft is presented to the bank before it suspends payment, and the bank wrongfully refuses to honour the draft, then the person entitled to the draft becomes a preferential creditor, and the effect of this contention is that if a debtor dishonestly refuses to pay a creditor the amount due to him on the due date, on the insolvency of the debtor the creditor becomes his preferential creditor. One has only to state the proposition to realise how untenable it is. Mr. Jethmalani in despair had to find some authority for this proposition and the only authority he could find, with respect, is a statement made by Mr. Justice MUNRO in Official Assignee of Madras v. Ramachandra Iyer I.L.R. [1910] 33 Mad : 134 where his colleag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no application to the facts of this case. Equity would not permit the bank to deny the debt, nor would it permit the court when it is winding up the bank to deny to the creditor his claim against the bank. But nobody is denying the appellants the claim to this amount, nor is anybody suggesting that he is not a creditor. But what the appellants are claiming is not that they are creditors, but that they are preferential creditors, and in deciding whether the appellants should be paid in preference to other creditors the principles that have got to be applied are not the principles of equity but legal principles. Equity is not concerned with whether a creditor should be paid in preference to another creditor. These questions are governed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on a judgment of Mr. Justice ACHHRU RAM in In the matter of the New Bank of India ([1949] 19 Comp. Cas. A.I.R. 1949 E.P. 373. It is true that Mr. Justice ACHHRU RAM does enunciate the equitable principle on which Mr. Jethmalani is relying, but with respect the learned Judge clearly realises the difficulty of applying such a principle to a case where a company or a bank is being compulsorily wound up and where the claims and the interest of the ordinary creditors have to be considered as much as of those who claim a preferential treatment, and Mr. Justice ACHHRU RAM is at pains to point out that he was dealing with a case where a bank was not being wound up but was working under a scheme of management sanctioned by the court and he a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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