State Bank of India Vs. Ghamandi Ram
 INSC 40 (13 February 1969)
13/02/1969 RAMASWAMI, V.
CITATION: 1969 AIR 1330 1969 SCR (3) 51 1969
SCC (2) 33
R 1977 SC2069 (8) D 1987 SC 558 (9)
Hindu Law-Joint Hindu family firm-if 'person'
or 'body of individuals not incorporated'.
Private International Law-Priority between
voluntary and involuntary assignments of debts.
The respondent was the karta of a joint Hindu
'family firm carrying on business, before the partition of India, in area now
forming part of Pakistan. The firm had a cash credit account with the Imperial
Bank (now State Bank of India) in that area and had pledged its goods with the
Bank as security for repayment of the advances. After the partition, the family
and its members came away to India and became evacuees in relation to Pakistan.
The Bank sold the pledged goods in 1948 and after adjusting the amounts due to
it credited the surplus amount in the account of the firm.
The Pakistan (Administration of Evacuee
Property) Ordinance, 1949, was promulgated on October 15, 1949 and was amended
by the Pakistan (Administration of Evacuee Property) Amendment Act, 1951. Under
s. 6(1) of the Ordinance all evacuee property shall vest and shall be deemed to
have vested in the Custodian in Pakistan from March 1, 1947. By a notification
dated February 19, 1952 the Pakistan Government exempted, from the operation of
the provision of the Ordinance 'cash deposits made in Banks by persons other
than companies or associations or bodies of individuals whether incorporated or
The respondent applied under s. 13 of the
Displaced Persons (Debts Adjustments) Act, 1951 (Indian Act) before the
Tribunal constituted under the Act, claiming the amount in the Bank credited in
the account of the family. The Tribunal dismissed the application. In revision,
the High Court allowed the claim on the ground that the amount was a 'cash
deposit made by an individual' in terms of the Pakistan Notification dated
February 19, 1952.
In appeal to this Court,
HELD : (1) Having regard to the juristic
nature of the Hindu Joint family under the Mitakshara Law, the family firm
could not be treated as a 'person' within the meaning of the Pakistan
notification. The firm was 'a body of individuals not incorporated' and hence
the amount in the Bank was evacuee property and had become vested in the
Custodian of Evacuee Property, Pakistan, with effect from March 1, 1947.
[687 E-F] Sundarsanam Maistri v. Narasimhulu
Maistri, I.L.R. 15 Mad.
149, 154, referred to.
(2) The rule of Private International Law is
that where an involuntary assignment occurs after a voluntary assignment has
already been made, the question whether the rights of the voluntary assignee
have been postponed or defeated would be governed by the lex situs of the debt.
In the present case, since the involuntary assignment in favour of the
Custodian in Pakistan occurred in 1949, when the Ordinance was promulgated
after the voluntary assignment by the Bank in favour of the firm in 1948 and
the situs of 682 the debt was Pakistan (the Bank having garnishable assets of
the respondent in Pakistan which could be attached by the Custodian in
Pakistan), the question of priority would be governed by the law in Pakistan,
namely, the provisions of the Ordinance; and under the Ordinance, the amount
vested in the Custodian in Pakistan with effect from March 1, 1947.
Therefore, the liability of the Bank to the
firm must be deemed to have been extinguished. [687 H; 688 G; 689 F] Re :
Queensland Mercantile and Agency Co.  1 Ch. 536 and Arab Bank Ltd. v.
Barclays Bank (Dominion, Colonial and Overseas)  AC. 495, applied.
Dicey, Conflict of Laws, 8th Edn. p. 780,
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 449 of 1966.
Appeal by special leave from the judgment and
order dated September 12, 1963 of the Punjab High Court Circuit Bench at Delhi
in Civil Revision No. 104-D of 1958.
Niren De, Attorney-General, S. V. Gupte, H.
L. Anand and K. B. Mehta, for the appellant.
Bishambar Lal, M. R. Garg, H. K. Puri. and
Radha Kishan Makhija, for the respondent.
The Judgment of the Court was delivered by
Ramaswami, J. M/s. Ghamandi Ram Gurbax Rai, a joint Hindu family firm
consisting of Ghamandi Ram, since deceased, Gurbax Rai, Chainan Lal and Jagan
Nath, used to carry on business in Bhawalpur State now forming part of West
Pakistan, before the partition of India. Shri Ghamandi Ram was the manager and
karta of the said joint Hindu family firm during the material period. Before
the partition of India, the joint Hindu family firm had a cash credit account
in its name in the then Imperial Bank of India, Bhawalpur State now within
Pakistan territory. The said firm had pledged goods as security for the
repayment of the advances made in the said account. On the partition of India,
the joint Hindu family and its members admittedly became evacuees and the then Imperial
Bank of India, Bhawalpur State, sold the pledged goods in the year 1948 for the
realisation of its dues in the said cash credit account and credited a sum of Rs.
2,54,1/11/left as surplus balance after the adjustment of the dues of the Imperial
Bank of India in the said account. On October 15, 1949, the Pakistan Government
promulgated Pakistan (Administration of Evacuee Property) Ordinance, 1949 (Ordinance
No. XV of 1949) whereby all property in Pakistan in which an evacuee had any right
or interest vested in the Custodian of Evacuee Property with retrospective effect
from March 1, 1947. The expression 'evacuee property' was defined by s. 2 sub-s.
(3) of the Ordinance to include any right or interest in joint Hindu family property.
'Cash deposits in Banks' were how683 ever excepted from the definition of the term
'property' by s. 2(5) of the Ordinance. The Ordinance was amended in 1951 by the
Pakistan (Administration of Evacuee Property) Amendment Act, 1951 (Act No. VI of
1951) whereby s. 2(5) of the Ordinance was amended so as to bring cash deposits
in Banks within the definition of the term 'property'. By a notification dated February
19, 1952, the Pakistan Government exempted from the operation of the provisions
of the said Ordinance 'cash deposits made at Banks by persons other than companies
or associations or bodies of individuals whether incorporated or not'.
On May 9, 1953, Shri Ghamandi Ram (now deceased)
as manager and karta of the joint Hindu family, firm filed an application under
s. 13 of the Displaced Persons (Debts Adjustments) Act, 1951 (Act No. 70 of 1951)
before the Tribunal constituted under the said Act at Delhi claiming Rs. 3,165/11/including
Rs. 2,341/11/on account of the said principal and interest at 6% per annum on the
ground that the said amount had got become evacuee property and the liability of
the Imperial Bank of India had not therefore ceased. During the pendency of the
proceedings be-fore the Tribunal the appellant Bank was constituted under the provisions
of the State Bank of India Act, 1955 (Act No. 23 of 1955) and succeeded to the entire
rights and liabilities of the Imperial Bank of India. The appellant was accordingly
substituted in the said proceedings for the Imperial Bank of India. By its order
dated November 1, 1956, the Tribunal dismissed the application of the respondent
on the ground that in terms of the law enforced in Pakistan the deposit in the Bank
in the account of the firm had become an evacuee property and would be deemed to
have vested in the Custodian with effect from March 1, 1947 and by virtue of the
said vesting the liability of the Bank had ceased. The Tribunal further held that
the only property in the pledged goods, which belonged to the firm, was the equity
of redemption and that had vested in the Custodian being a 'property' within the
meaning of the said Ordinance. The respondent took the matter in revision before
the Punjab High Court being Civil Revision No. 104-D of 1958. The application was
allowed by Mr. Justice D. K.
Mahajan by his judgment dated 12th September,
1963 on the ground that the amount claimed by the respondent was cash deposit made
by an individual in terms of the notification dated February 19, 1952 and was thus
beyond the purview of the provisions of the Ordinance. The learned Judge accordingly
set aside the order of the Tribunal and granted a decree in favour of the respondent
for the amount claimed.
This appeal is brought by special leave from the
judgment of the Punjab High Court dated 12th September, 1963 in Civil Revision No.
104-D of 1958.
684 Section 2 sub-section (3) of the Pakistan
(Administration of Evacuee Property) Ordinance, 1949 (Ordinance No. 15 of 1949)
defines the term 'evacuee property' as meaning any property in which an evacuee
has any right or interest, or which is held by or for him in trust, and includes(a)
any right or interest in joint Hindu family property which would accrue to the evacuee
upon the partition of the same, or (b) property obtained from an evacuee after the
twenty eighth day of February, 1947, until confirmed by the Custodian, but does
not include(i) any movable property in the immediate physical possession of any
evacuee, or (ii) any property belonging to a joint stock company the head office
of which was situated, before the fifteenth day of August, 1947, in any place in
the territories now comprising India and continues to be so situated after the said
Section 2 sub-section (5) defines the term 'property'
as follows:" property' means property of any kind, and includes any right or
interest in such property and any debt or actionable claim, but does not include
a mere right to sue or a cash deposit in a bank".
Section 2(5) of the Ordinance was amended by Pakistan
(Administration of Evacuee Property) Amendment Act, 1951 (Act No. VI of 1951) in
the following manner:
"2(b) in clause (5) the words 'or a cash
deposit in Bank' shall be omitted".
Section 6 of the Ordinance states "6(1) All
evacuee property shall vest and shall be deemed always to have vested in the Custodian
with effect from the first day of March, 1947.
The notification of February 19, 1952 issued by
the Pakistan Government in exercise of the powers conferred by section 45 of the
Ordinance is in the following terms :
"In exercise of the powers conferred by section
45 of the Pakistan (Administration of Evacuee Property) Ordinance XV of 1949, the
Central Government in 685 supersession of its Ministry's notification F.
22(1)51-P dated the 9th May, 1951 is pleased to
exempt from the operation of the provisions of the said Ordinance cash deposits
made at Banks by persons other than companies or associations or bodies of individuals
whether incorporated or not".
Section 7 of the Ordinance states "7. (1)
Every person who is, or has at any time after the twenty-eighth day of February,
1947, 'Men in possession, supervision or management of any evacuee property, shall
be deemed to hold or to I have held, as the case may be, such property on behalf
of the Custodian (2) Every person who is in possession, supervision or management
of any evacuee property or property which he knows or has reason to believe is evacuee
property shall, as soon as may be but not later than sixty days from the commencement
of this Ordinance, intimate to the Custodian in writing his willingness to surrender
such property to the Custodian or to any person authorised by the Custodian in this
behalf upon receipt of a notice from the Custodian that the property is evacuee
property, and shall surrender the same if called upon by the Custodian or any person
authorised as aforesaid.
(3) The provisions of sub-section (2) shall not
apply to any person who is in possession, supervision or management of any evacuee
property by virtue of an allotment made by a Rehabilitation Authority".
Section 7 of the Ordinance was amended in 1951
in the following terms :"5. In sub-section (2) of section 7 of the Ordinance,
for the words 'sixty days from the commencement of this Ordinance' the words 'such
date as may be notified by the Central Government in the Official Gazette, shall
be substituted, and the words 'upon receipt of a notice from the Custodian that
the property is evacuee property' shall be omitted".
Section 11 of the Ordinance states "11. (1)
Any amount due to any evacuee, or payable in respect of any evacuee property, shall
be paid to the Custodian by the person liable to pay the same.
(2) Any person who makes a payment under subsection
(1) shall be discharged from further liability to pay to the extent of the payment
Sup/69-9 686 (3) Without prejudice to any penalty
to which he may be liable under section 29, any person who makes or has made any
payment otherwise than in accordance with sub-section (1) or any law for the time
being in force requiring payment of any such amount as is mentioned in sub-section
(1) to be made to the Custodian shall not be discharged from his obligation to pay
the amount due, and the right of the Custodian to enforce such obligation against
such person shall remain unaffected".
The first question involved in this appeal is
whether upon a correct interpretation of the notification of the Pakistan Government
dated February 19, 1952, the joint Hindu family firm " Ghamandi Ram Gurbax
Rai" was 'a body of individuals' within the meaning of the notification and
whether the amount in dispute had accordingly become vested in the Custodian of
Evacuee Property, Pakistan with effect from March 1, 1947 by virtue of the provisions
of the Ordinance thereby divesting the said joint Hindu family firm of its interest
According to the Mitakshara School of Hindu Law
all the property of a Hindu joint family is held in collective ownership by all
the coparceners in a quasi-corporate capacity. The textual authority of the Mitakshara
lays down in express terms that the joint family property is held in trust for the
joint family members then living and thereafter to be born (See Mitakshara, Ch.
11-27). The incidents of co-parcenership under the Mitakshara law are : first, the
lineal male descendants of a person up to the third generation, acquire on birth
ownership in the ancestral properties.is common; fifthly, that no alienation of
the property any tune work out their rights by asking for partition thirdly that
till partition each member has got ownership extending over the entire property,
conjointly with the rest; fourthly, that as a result of such co ownership the possession
and enjoyment of the properties is common; fifthly, that no alienation of the property
is possible unless it be for necessity, without the concurrence of the coparceners,
and sixthly, that the interest of a deceased member lapses on his death to the survivors.
A coparcenary under the Mitakshara School is a creature of law and cannot arise
by act of parties except in so far that on adoption the adopted son becomes a coparcener
with his adoptive father as regards the ancestral properties of the latter. In Sundarsanam
Maistri v. Narasimhulu Maistri and Anr. (1) Mr. Justice Bhashyam Ayyangar stated
the legal position thus :"The Mitakshara doctrine of joint family property
is founded upon the existence of an undivided family, as (1) I.L.R. 25 Ma 149,'154.
687 a corporate body [Gan Savant Bal Savant v.
Narayan Dhond Savant(1) and Mayne's 'Hindu Law and Usage', 6th edition, paragraph
270] and the possession of property by such corporate body. The first requisite
therefore is the family unit; and the possession by it of property is the second
requisite. For the present purpose, female members of the family may be left out
of consideration and the conception of a Hindu family is a common male ancestor
with his lineal descendants in the male line, and so long as that family is in its
normal condition viz., the undivided state--its forms a corporate body. Such corporate
body, with its heritage, is purely a creature of law and cannot be created by act
of parties, save in so far that, by adoption, a stranger may be affiliated as a
member of that corporate family".
Adverting to the nature of the property owned,
by such a family the learned Judge proceeded to state " As regards the property
of such family, the 'unobstructed heritage' devolving on such family, with its accretions,
is, owned by the family as 'a corporate body and one or more branches of that family,
each forming a corporate body within a larger corporate body, may possess separate
'unobstructed heritage' which, with its accretions, may be exclusively owned by
such branch as a corporate body".
Having regard to the juristic nature of the Hindu
joint family, according to the doctrine of Mitakshara, we are of the opinion that
the Hindu joint family firm of Ghamandi Ram Gurbax Rai cannot be treated as an 'individual'
within the meaning of the notification of the Pakistan Government dated 19th February,
1952, but the said firm must be treated as 'a body of individuals whether incorporated
or not' within the meaning of that notification.
We proceed to consider the next question arising
in this appeal viz., whether the liability of the appellant to the respondent in
India would be deemed to be extinguished in view of the operation of the Pakistan
Evacuee Property Ordinance and in view of our finding that the amount in dispute
had become vested in the Custodian of Evacuee Property, Pakistan with effect from
March 1, 1947 by virtue of the provisions of the Ordinance. It is not disputed that
the appellant had got garnishable assets in Pakistan out of which the Pakistan Government
could realise the amount by attachment of the property of the appellant. The question
is : what is the rule of Private International Law in, such a case of involuntary
assignment of debts ? The question has 'arisen in (1) I.L.R. 7 Bom. 467.
688 English Courts with regard to the legislation
passed during or after a war by which the contractual rights of the enemies vested
in the public authorities, such as custodians or administrators of enemy property.
It was held in English courts that in such a case the question whether a given contractual
right, e.g., a debt, is transferred under such legislation and whether therefore
payment to a custodian or administrator has the effect of discharging the, debtor,
depends on the situs of that right and not so much on the proper law of the contract
from which the right arises. (See Dicey Conflict of Laws, 8th Fd. p. 780). For example
in Arab Bank Ltd. v. Barclays Bank (Dominion, Colonial and Overseas) (1), the appellant
Bank had a credit balance on the current account with the respondent bank's branch
in Jerusalem. The British Mandate over Palestine expired at midnight on May 14,
1948, and thereupon the Provisional Council of State and the Provisional Government
of the State of Israel were constituted. War broke out between Israel and the Arab
States, which rendered the further performance of the contract of current account
impossible. From the date of the termination of the Mandate the appellant Bank's
premises were situate in Arab controlled territory and the respondent Bank's premises
were situate in Israel territory. By legislation the State of Israel vested in an
official called the 'Custodian of the Property of Absentees', the property in the
State of Israel belonging to a class of persons and corporations which included
the Arab Bank. The respondents paid the appellants' credit balances, amounting to
some pound 5,83,000 to the custodian. In 1950 the appellants sued the respondents
for this sum. It was held that the right to be paid the credit balance survived
the outbreak of war, remaining in existence. subject to the suspension of the appellant
bank's right to recover it. Being locally situate in Israel, it became subject to
the legislation of that State and vested in the custodian, and was not recoverable
by the appellant bank from the respondent bank. The key to the problem lies in distinguishing
between (1) questions of assign ability, which are governed by the proper law of
the debt, and (2) questions of attachment or garnishment (involuntary 'assignment)
governed by the lex situs of the debt. If, for example, an involuntary assignment
occurs after a voluntary assignment has already beep made, the lex situs determines
whether the rights of the voluntary assignee have been postponed or defeated. If
the voluntary assignment occurs first, the lex situs determines what rights, if
any, the voluntary assignee has acquired. A question of priorities arose in the
case of Re : Queensland Mercantile and Agency Co. (2), the facts of which were as
follows :"The Union Bank of Australia held debentures issued by the Queensland
Company charging the shares (1)  A.C. 495.
(2)  1 Ch. 536.
689 in that company that were not fully paid up.
The Bank was domiciled in England and the company
in Queens land. After the capital had been called up, but before it was paid by
the shareholders, who thus became debtors of the company, the X Company domiciled
in Scotland, began an action for negligence in Scotland against the Queensland.
Company, and immediately issued the Scottish process of arrestment against numerous
shareholders who were domiciled in Scotland. The effect of this process according
to Scottish law was to prevent the shareholders, pending a decision in the action
of negligence, from paying the calls to the 'company".
The question that fell to be decided was 'whether
the Union Bank, is debenture-holders, were entitled to be paid first out of the
unpaid shares, according to the, law of England and of Qeensland; or whether the
X Company in accordance with the law of Scotand, had a prior right over the shares
to the extent of the damages :hat they might be awarded in the action of negligence.
A question of priorities between two assignees was thus raised. The Union Bank contended
that the question fell to be decided by the law of Queensland, since the Oueensl
and Company was a creditor in respect of the unpaid shares and any assignment by
it must be ested by the law of its domicile North, J., however, applied Scottish
law. His reasoning was that since the debtors were resident in Scotland and therefore
the unpaid calls which formed the subject-matter of the assignments were situated
in that country, the assignment must rank in the order prescribed by Scottish law.
He assimilated choses in action to tangible movables, assertine that 'an assignment
of the' latter class of property was Governed by the lex situs. In our opinion the
same legal position prevails in India and therefore the liability of the appellant
in this case to the respondent in India must be deemed to have been extinguished.
For these reasons we hold that this appeal
should be allowed, the judgment of the Punjab High Court dated 12th September,
1963 in Civil Revision No. 104-D of 1958should be set aside and the judgment of
the Tribunal under the Displaced Pe-sons (Debt Adjustment) Act in case No.
74/11/13 of 1956/1952 should be restored dismissing the claim of the
respondent. There will be no order with regard to costs in the High Court. But
as directed by this Court on 30th October 1964, while granting special leave,
appellant will pay the cost of respondents in this' Court.