TMI Blog1960 (5) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ited, Lahore (defendant No. 2), against a call deposit receipt dated the 6th September, 1945. It was alleged that defendant No. 1 had approached the plaintiffs for a loan of ₹ 5,000/- against and on the security of the said call deposit receipt and this money had been advanced by the plaintiffs to defendant No. 1 on the 24th December,, 1946. Defendant No. 1 had authorised the plaintiffs to receive this amount as represented by the receipt from the Bank when it became payable. In July 1947 the name of defendant No. 1 was removed from the list of approved tenderers, and the Punjab Government by its letter No. 6478-A-FA-CDR/47 of July 1947 wrote to the Bank to pay ₹ 5,000/- which was the amount of the receipt dated the 6th September, 1945, to defendant No. 1. A copy of this letter was also sent to defendant No. 1. It was also stated that defendant No. 1, intimated to the plaintiffs, after the 15th August, 1947, that the amount had been released. Defendant No. 1 also wrote to defendant No. 2, the Bank, to pay the amount of ₹ 5,000/- to the plaintiffs and had also authorised the plaintiffs to receive the amount from the Bank. As the Bank had not paid the amount to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should write to the bank to adjust the amount of the call deposit receipt in that account. It was also said that the bank had a legal to appropriate the amount in question towards the dues from defendant No. 1 even without their consent and the plaintiff had no locus standi to question this. In additional pleas it was stated on behalf of the bank that it had a lien according to law, banking practice and equity and this amount had consequently been appropriated and the bank was, therefore, under no obligation to pay this amount. The above pleadings gave rise to the following issues: (i) Does not the suit lie in the present form? If so, how and to what effects? (ii) Did the plaintiff advance ₹ 5,000/- to the defendant firm No. 1 on date 24th December,, 1946? If so, on what terms and to what effect? (iii) Whether the defendant Bank No. 2 is not liable to repay ₹ 5,000/- deposited with it by the defendant firm No. 1; if so, how and what effect? (iv) Is the plaintiff's suit not within time? (v) Is the plaintiff entitled to recover the amount in suit from the defendant Bank No. 2? If so how? (vi) Is the plaintiff entitled to any interest? If so, what and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h on behalf of firm Kaka Singh Gurmukh Singh dated 22nd of March 1948, to the Manager, Punjab National Bank, Amristar. In this letter the plaintiff-firm was authorised to collect the proceeds and the call deposit receipt No. 14/45 dated the 6th September, 1945. The bank was asked to receive the authority letter of Controller of Food Accounts and to make payments to the plaintiff. Exhibit P-3 is another latter without a date from Jai Ram Singh partner of firm Kaka Singh Gurmukh Singh to the Manager of Punjab National Bank Ltd., Lahore, to the same effect. With respect to these letters it was objected on behalf of the bank that there was no proof on the record that they were in fact received by the bank. There is, however, no gainsaying the fact that the bank did receive the notice from plaintiff's counsel dated 3rd September 1948 Exhibit P.C. 5. The bank is required by this notice to pay ₹ 5,000/- to the plaintiff as Messrs. Kaka Singh Gurmukh Singh had intimated to the bank to pay the amount to the plaintiff. (9) The date of assignment is not relevant if the bank could not in law exercise its lien. In other words if it can be shown that the bank had no lien and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from the said partnership business on the 26th March 1938. Thus the said business remained in the partnership of the first party and Harnam Singh aforesaid. But he, too, separated from the said partnership business, vide award dated and registered on the 2nd December,, 1940. Thus since the date the said Harnam Singh separated the first party exclusively continue to run the said business till the 6th Asuj Sambat 1999 and the second party, went on working as the Manager under the first party in the said shop. (11) The question which arises is, whether the Bank can claim to exercise the Banker's lien in these circumstances. Section 170 of the Indian Contract ac refers to general lien of Bankers and others in respect of goods bailed to them which runs as under: Where the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them. The language of this section limits its scope to goods bailed. There are othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the nature of the Banker's lien, it is stated: The general lien of bankers is part of the law merchant as judicially recognised, and attaches to all securities deposited with them as bankers by a customer, or by a third person on a customer's account, and to money paid in by, or to the account of, a customer unless there is a contract, express or implied, inconsistent with the lien. There is also a foot note below the above observation which reads: Money is however not usually the subject of lien not being coupled or being ear-marked and the banker's claim in such cases is probably more rightly referred to as set-off and it ahs been held that a Bank has no lien to individual's right to set off in respect of a customer's account. (14) The rule of English law that the Bank has a lien or more appropriately, a right to set off against all monies of his customers in his hands has been accepted as the rule in India. According to this rule when monies are held by the Bank in one account and the depositor owes the Bank on another account, the Banker by virtue of his lien has a charge on all monies of the depositor in his hands and is at liberty to tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be set off against a joint debt either at law, in equity, or under the mutual credit clause of the Bankruptcy Act. There is no authority for the bankers having a general lien in such a cases as the present. In the same case Lord Esher, M. R. observed: The bank said, 'we shall not account to Wing's trustees for the surplus, although the lease was his private property, because we have a right to keep it to satisfy the general account of his firm'. That was tantamount to saying 'we are now claiming your surplus to pay the debt of somebody else'. The claim in effect was that, in virtue of the bank's general lien, they were entitled to retain the property of one man to pay the debt of another. That claim was based, not upon agreement, but on a supposed custom that bankers should in such a case have a general line. There never was or could be a custom, however, by which you could take the property of one man to pay the debt of another. No such proposition was put forward in the cases cited, and no such proposition has ever been laid down in any of the cases respecting a banker's lien. The proposition, therefore, admits of no doubt that a bank has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e due by one of the partners . It has to be remembered that bank's right to apply a deposit to an indebtedness due from the depositor, results from the right of set off obtaining between persons occupying creditor and debtor relationship with mutual demand existing between them. (21) A generally accepted rule respecting a bank's right of set off was stated in 3 Ruling Case Law, 591, in the following words: The right of a Bank to apply a deposit to an indebtedness due from the depositor, results from the right of set-off, which obtains between persons occupying the relation of debtor and creditor and between whom there exist mutual demands, and it is familiar law that mutuality is essential to the validity of a set off, and that, in order that one demand may be set off against another, both must mutually exist between the same parties . See also City National Bank of Beaumont v. American Surety Co., of New York, 52 South Western Reporter 2nd series 259 (261-262). (22) Applying the above principles to the fats of this case the Bank has failed to establish its claim to set off the sum of ₹ 5,000/- against the account in its Sheikhupura branch of the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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