United Commercial Bank Ltd. Vs. Okara
Grain Buyers Syndicate Ltd. & ANR  INSC 54 (4 March 1968)
04/03/1968 SHAH, J.C.
CITATION: 1968 AIR 1115 1968 SCR (3) 396
Banking-Deposit Receipt-Syndicate opening
account in BankDeposit receipt in the name of Syndicate account District
Magistrate if constitutes him owner of deposit-Condition of deposit that on due
date deposit receipt should be discharged by depositor-Non production of
deposit receiptEquitable jurisdiction of High Court.
The respondent a syndicate with its
registered office in Montgomery in undivided Punjab, had deposited certain
amount with the appellant-Bank and obtained a Fixed Deposit Receipt. The
deposit was required to be made for due performance of the conditions of a
scheme for Procurement devised by the Government of Punjab in 1946. The receipt
was made out in the name of the, Syndicate Account District Magistrate,
Montgomery. No account was opened in the bank's books in the name of the
District Magistrate and under the conditions of deposit it was repayable to the
respondent on demand on due date. The respondent served a notice of withdrawal
upon the Bank. An endorsement in that behalf was made on the receipt which was
handed over to the District Magistrate, Montgomery. Following the communal
riots in 1947 the staff of the respondent migrated to India and the respondent
set UP a new business at Amritsar. The respondent demanded the money to which
the appellant replied that the amount could not be returned until the
respondent obtains a discharge from the District Magistrate, Montgomery (in
Pakistan) of his lien on the fixed deposit receipt. The respondent filed a
Petition before the Debt Adjustment Tribunal, Amritsar, for an order directing
the appellant to pay the amount with interest, and impleaded the District
Magistrate, Montgomery as a respondent. The District Magistrate filed no claim
before the Tribunal. The Tribunal dismissed the petition holding that the
amount stood forfeited by order of the District Magistrate, Montgomery.
In appeal, the High Court made an order in
terms of the prayers in the petition, subject to the condition that the
respondent shall give an indemnity for restitution of the amount in case the
bank had to pay the amount to the District Magistrate, Montgomery.
In appeal to this Court.
HELD : The deposit receipt gave rise to no
contractual obligation in favour of the District Magistrate, Montgomery nor was
the bank a trustee for that officer. By an express condition the receipt was
not transferable. The name in which the receipt was made out was by itself not
sufficient to create an interest in the amount in favour of the District
Magistrate. The District Magistrate was not in law constituted owner of the
money deposited by the respond-ant with the appellant by virtue of the delivery
of the receipt.
In the books of the appellant the fund stood
to the credit of the respondent : the respondent was the owner thereof and it
was the respondent alone which was entitled to demand payment of the fund. In
the absence of any obligationcontractual or fiduciary-undertaken by the
appellant in favour of the District Magistrate, the appellant could not
withhold payment of money deposited after the expiry of the period of notice.
[399 D-H] 397 Even if the condition in the terms of deposit that on due date
the deposit receipt should be discharged by the depositors was to be considered
a condition precedent to the enforcement of the obligation of the Banking
favour of the respondent, the High Court was right in the exercise of its
equitable jurisdiction to direct that the money be paid to the respondent
without production of the receipt. It might reasonably be inferred that the
receipt was lost or was destroyed and in such cases the court's equitable
jurisdiction could appropriately be exercised. the direction of the High Court
that an indemnity be given by the respondent to the Bank for restitution if the
Bank was to, pay the amount to the District Magistrate, MOntgomery has fully
protected the Bank against any possible loss and this eminently reasonable
direction was not liable to be set side. [400 F-H]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 449 of 1965.
Appeal from the judgment and order dated
August 29, 1960 of the Punjab High Court in F.A.0. No. 14 of 1954.
Bishan Narain and Hans Rai Dhawan, for the
S. V. Glipte, B. K. Maheshwari and B. P.
Maheshwari, for respondent No. 1.
The Judgment of the Court was delivered by
Shah, J. This appeal is filed with certificate granted by the High Court of
The Okara Grain Buyers Syndicate
Ltd.-hereinafter called 'the Syndicate was incorporated under the Indian
Companies Act, 1913, with its registered office at Okara, District Montgomery
in the undivided Punjab. In 1946 the Government of undivided Punjab devised a
scheme for procurement of food grains and appointed the Syndicate to buy food
grains on its behalf." For due performance of the conditions of the
scheme, the Syndicate was required to make a deposit with a recognized Bank.
The Syndicate deposited an amount of Rs.
40,000/on March 29, 1947, with the United
Commercial Bank Ltd.-hereinafter called 'the Bank'-and obtained a Fixed Deposit
Receipt dated March 29, 1947. The terms of the receipt were these :
"The United Commercial Bank Limited.
No. Misc. 9872-4/18 Okara (Punjab) 29th
Received from the Okara Grain Buyers
Syndicate Limited, Okara A/c District Magistrate, Montgomery Rs. Forty thousand
only as a deposit at the rate of 2 per cent per annum to remain till notice of
twelve months for its withdrawal by either side expires.
For the United Commercial Bank Ltd.
Rs. 40,000/398 Terms for the Deposit Receipt
This deposit receipt is issued subject to the following terms and conditions.
1 . This receipt is not transferable.
2. This deposit cannot 'be withdrawn before
3. Interest on this deposit ceases on the due
4. The amount of this deposit cannot be
withdrawn in part or by cheque or draft.
5. On due date this deposit receipt should be
discharged by the depositors on one anna stamp if it is required to be repaid,
otherwise an endorsement as to its renewal should be made in the space provided
6. Receipts will when so required, be issued
in the names of two or more persons and will be made payable to any one or more
of them or to the survivors." The Syndicate served a notice of withdrawal
on March 29, 1947 upon the Bank and an endorsement in that behalf was made on
the receipt. The receipt was then handed over to the District Magistrate,
Montgomery. On account of widespread communal riots in the month of August
1947, nonmuslim residents of the area found it unsafe to continue to reside at
Okara, and the staff and Managing Director of the Syndicate migrated to India
leaving all the property, goods etc. of the Syndicate at Okara. The Syndicate
set up a new place of business at Amritsar and registered itself in the State
In reply to a demand made on October 26, 195
1, by the Syndicate the Bank replied that the amount deposited will not be
returned until the Syndicate obtains a discharge from the District Magistrate,
Montgomery, of his lien on the fixed deposit receipt and an intimation in that
behalf was given by the District Magistrate relinquishing his lien' on the
fixed deposit receipt. The Syndicate then filed a petition before the Debt
Adjustment Tribunal, Amritsar, under s. 13 of the Displaced Persons (Debt
Adjustment) Act 70 of 195 1, for an order against the Bank for payment of Rs.
40,000/as principal and Rs. 3,200/as interest @ 2% per annum upto March 3,
1952, and future interest at 6% per annum till realization. To this petition,
the District Magistrate, Montgomery, was also impleaded as partyrespondent. The
Tribunal dismissed. the petition holding that the amount of Rs. 40,000/deposited
by the Syndicate stood forfeited by order of the District Magistrate,
Montgomery, and the petition was 399 on that account not maintainable. In
appeal, the High Court of Punjab made an order in terms of the prayer in the
petition, subject to the condition that the respondent shall give an indemnity
for restitution of the amount in the event of the Bank having to pay the amount
to the District Magistrate, Montgomery. The High Court held that the deposit
was subject to conditions expressly mentioned in the receipt and no others and
that the District Magistrate was not given any dominion over the amount of Rs.
40,000/deposited by the Syndicate.
In this appeal, counsel for the Bank urged
that the terms of the receipt created no obligation enforceable against the
Bank at the instance of the syndicate, and that in any event the liability
could be enforced only if the District Magistrate discharged the receipt and
handed it over to the Bank acknowledging that he had no claim against the
The deposit receipt is made out in the name
of the Syndicate. It is acknowledged by the receipt that an amount of Rs,
40,000/was received from the Syndicate and the amount was to remain with the
Bank till notice of twelve months for its withdrawal by either side expired.
The deposit receipt gave rise to no contractual obligation in favour of the
District Magistrate, Montgomery, nor was the Bank a trustee for that officer.
It is common ground that no account was opened in the Bank's books in the name
of he District Magistrate, Montgomery. Condition No. 5 of the Conditions of
Deposit also clearly indicates that payment of the amount on the due date was
to be made to the Syndicate, for t expressly provides that on due date the
deposit receipt shall be discharged by the depositors if it is required to be
repaid, otherwise an endorsement as to its renewal shall be made in the space
provided in that behalf. It is not the case of the Bank that the receipt was
transferred to the District Magistrate, Montgomery. By an express condition the
receipt is , not transferable. The name which the receipt was made out is by
itself hot sufficient to create an interest in the amount in favour of the
District Magisrate. The District Magistrate was not in law constituted an owner
of the money deposited by the Syndicate with the Bank by virtue if the delivery
of the receipt. In the books of the Bank the fund stood to the credit of the
Syndicate : the Syndicate was the owner thereof and it was the Syndicate alone
which was entitled to demand payment of the fund. In the absence of any
obligation, contractual or fiduciary undertaken by the Bank in favour of the
District Magistrate, the Bank could not withhold payment money deposited after
the expiry of the period of notice.
It was urged by counsel for the Bank that
unless the receipt is produced duly discharged, the Bank was not under an
ligation to repay the money. Reliance, was placed upon the 400 following
observations in Sheldon's Practice and Law of Banking, 8th Edn., at p. 163 :
"If the deposit receipt merely
acknowledges the deposit of the money, the banker cannot demand its production
before paying. over the money. But if the form of the receipt is such that the
signing of, the receipt is a condition precedent to the withdrawal of the
money, then the deposit receipt must be returned when the money is handed over.
But the banker is not entitled to withhold payment of the money should the receipt
be lost or destroyed. All that he can do is to ask the depositor for an
indemnity. Whether he is legally entitled to demand such an indemnity, the
receipt not being a negotiable instrument, is another question.", and upon
the statement at p. 174, Art. 327 Vol. 2 of Halsbury's Laws of England, 3rd
"The receipt of money on deposit account
constitutes the banker a debtor to the depositor, but not a trustee thereof for
The debt is repayable either on demand or on
condition agreed with the depositor. Specified notice may be stipulated for,
and the return of the deposit book (or receipt) made a condition of repayment,
or the deposit may be for a fixed period. If the return of the deposit book is
a condition precedent, no actual debt arises until its return. In case of the
loss of the book, however, a court would exercise its equitable jurisdiction,
and not allow the absence of the receipt to stand in the way of the depositor
reclaiming his money." In the proceeding before the Tribunal, the District
Magistrate, Montgomery filed no claim. We are of the view, even if Condition
No. 5 of the terms of deposit receipt is a condition precedent to the
enforcement of the obligation of the Bank in favour of the Syndicate, that the
High Court was right in exercise of its equitable jurisdiction to direct that
the money be paid to the Syndicate without production of the receipt. It may
reasonably be inferred that the receipt is lost or destroyed and the, Court's
equitable jurisdiction may appropriately be exercised in. this case.
Whether the District Magistrate has the
receipt is on the evidence problematic. Again the High Court has fully
protected the Bank against any possible loss by directing that a indemnity be
given by the Syndicate to the Bank for restitution if the Bank is to pay the
amount to the District Magistrate, Mon gomery, and this eminently reasonable
direction is not liable be set aside.
401 It was urged that the Government of
Pakistan have forfeited the amount standing to the credit of the Syndicate in
the Bank's books of account at Okara, and the validity of that act cannot be
questioned in the Indian Courts. But there is no evidence on the record that
any order was passed by the Pakistan Government forfeiting, in exercise of any
authority-statutory or sovereign-, the amount deposited by the Syndicate with
the Bank. The only document on the record on whic 1 reliance is placed is a
sheet of paper entitled "A list of securities of non-muslims forfeited to
Government of Pakistan deposited in the United Commercial Bank Ltd."
tendered in evidence by Shamim Yazdani an employee of the Bank in Pakistan. The
witness was examined on interrogatories and he identified the list of
securities of non-muslims which, it was claimed, were forfeited by the Government
of Pakistan and in the list produced by him, Item No. 14 is the amount of Rs.
40,000/deposited by the Syndicate on March 29, 1947 at Okara. The list does not
purport to bear the signature of any officer of the Government of Pakistan, nor
does it purport to specify the authority in exercise in which it is claimed
that the amount was forfeited. A copy of a letter dated March 4, 1949, from. N.
A. Haroon, Officer on Special Duty, West Pakistan Government, Finance
Department, Lahore, addressed to the Manager, United Commercial Bank Ltd. was
also produced by Shamim Yazdani. It is recited in the letter that he was
directed to enclose a list of securities of non-muslims deposited with the
Branch Office and forfeited at Lyallpur, Okara and the, Bank was requested to
make arrangements for early realization of the amount for payment to the
District Food Controllers concerned. Neither the original letter nor its
authenticated copy has been produced. There is no reference to the source of
the authority of the officer who purported to forfeit the amount. The letter
even does not recite that the order of forfeiture was made by him acting on
behalf of the Government of Pakistan.
It is common ground that the, money deposited
had not been paid by the Bank to the Governxnent of Pakistan till the High
Court decided the appeal. Counsel for the Bank urged that once an order was
passed forfeiting the amount, the Bank held the amount on behalf of the
Government of Pakistan'. But underlies that argument the assumption that such
an order was in fact passed by the Government of Pakistan. In the absence of
any evidence to that effect, we are unable to hold that any such order of
forfeiture was passed. We do not feel called upon in this case to consider
whether an order passed by the Government of a foreign country forfeiting the
property of an Indian national must be recognized by the Courts in this country
as a complete discharge of the obligation in circumstances similar, to those in
this case, when the question is raised in the Courts here.
402 It was faintly suggested that the amount
of Rs. 40,000/had vested in the Custodian, Evacuee Property in Pakistan. But
the question was never mooted at any, stage of this litigation, and we cannot
permit counsel for the Bank to make out that case for the first time in this
Finally it was contended, relying upon the
judgment of this Court in The Delhi Cloth and Generel Mills Co. Ltd. v.
Harnam Singh and Others(') that the dispute
must be determined by the law of Pakistan and not by the law in India. In that
case, the plaintiffs were residents of Lyallpur and were appointed by the
Government of undivided Punjab to administer a scheme for rationing of cloth.
The Cloth Mills through its branch office at Lyallpur supplied those persons with
cloth from time to time, and maintained a running account of the transactions.
On partition in 1947, Lyal llpur was allotted to Pakistan and the plaintiffs migrated
to, India as refugees. The Pakistan Government issued an Ordinance vesting all
evacuee-property in Pakistan in the Custothan of Evacuee Property in Pakistan,
and prohibited payment of money to evacuees in Pakistan and ordered that all
moneys payable to, or claimable by evacuees, be paid to the Deputy Custodian of
Evacuee Property in Pakistan. Payments so made were to operate as a
discharge-from further liability to the extent of the payment. Breach of this
law was punishable-as an office.
The Deputy Custodian of Evacuee Property
demanded of the Mills the money payable to the plaintiffs and in satisfaction
of IF, the payment the Mills paid the amount.
In defence to a suit filed by the plaintiffs
in the Court of the Subordinate Judge, Delhi, the Mills pleaded that they had
discharged their liability by payment made to the Deputy Custodian of Evacuee
Property in Pakistan. The Court held that Lyallpur was the. place of primary
obligation, that the elements out of which the contract to pay arose were most
densely grouped at Lyallpur, and Lyallpr was the natural seat of the contract
and the place with which it had its closest and most real connection.
Accordingly the proper law of the contract was the law of Pakistan, and that
even under the English doctrine the situs of the debt was Lyallpur and
therefore either way the law of Pakistan applied.
Assuming that it was the law of Pakistan
which applied to the repayment of the debt due -under the receipt, the Bankhas
failed to Prove its defence that they are not liable to pay the money due under
the deposit receipt. To recapitulate the facts, the amount was deposited by the
Synqicate; it was repayable to the Syndicate when demanded;
the notice of repayment of the amount was
served at the date when the deposit was made. The District Magistrate,
Montgomery had no contractual relationship with (1)  Z S.C.R. 402 403 the
Bank, nor was the Bank constituted a trustee for the District Magistrate. The
Bank has failed to prove that in exercise of any statutory or sovereign
authority the Government of Pakistan have forfeited the amount. Nothing has been
placed which may support the plea that under the law of Pakistan the Bank is
not liable to repay the amount due under a deposit receipt on the due date,
because an officer of the State issaid to have the custody of the receipt
evidencing the deposit.
The order for payment of interest at a rate
exceeding 2% per annum was also challenged by the Bank. But the rate of
interest was stipulated only for the period of the deposit receipt. The
Syndicate claimed interest at rate of 6% per annum from the date on which the
petition was filed before the Tribunal under the Displaced Persons (Debt
Adjustment) Act 70 of 1951. Interest from the date of the petition was within
the discretion of the High Court, and the High Court has awarded interest at
the rate claimed. We do not see any reason to interfere with the rate of
interest awarded by the High Court.
The appeal therefore fails and is dismissed
Y.P. Appeal dismissed.