TMI Blog1955 (4) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... he defendant against their purchases. Sometimes these were advance payments and at others the balance was against them. When there was an adverse balance the plaintiffs paid the defendant interest: see the plaintiff Sardari Lal as P. W. 3. On 28-7-1947 the account stood in the plaintiffs' favour. There was a balance of ₹ 79-6-6 lying to their credit plus a deposit of ₹ 1,000 as security. On that day they deposited a further ₹ 55,000 bringing the balance in their favour up to ₹ 56,079-6-6. The defendant company delivered cloth worth ₹ 43,583-0-0 to the plaintiffs against this amount at or about that time. That left a balance of ₹ 11, 496-6-6. The suit is to recover this balance plus interest. The claim was decreed for ₹ 12,496-6-6 and this was upheld on appeal to the High Court. The defendant appeals here. The defendant admits the facts set out above but defends the action on the following ground. It contends that when India was partitioned on 15-8-1947, Lyallpur, where these transactions took place and where the money is situate, was assigned to Pakistan.,. The plaintiffs fled to India at this time and thus became evacuees a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t affected the defendant company, were contained in a letter of the 24th October 1945 from the Secretary, Civil Supplies Department, Punjab. That letter has not been filed and so we do not know its exact contents but reference to it is found in a series of letters written by the defendant company from Delhi to the District Magis- trate at Lyallpur. Those letters range in date from 3-1- 1946 to 19-4-1947: (Exs. P-5 to P-12). They are all in the same form, only the figures and dates differ. It will be enough to quote the first, Ex. P-5. It is dated 3-1-1946 and is from the Central Marketing Organisation of the defendant company, the Delhi Cloth and General Mills Co. Ltd. It is written from Delhi to the District Magistrate, Lyallpur, and is as follows: The District Magistrate, Lyallpur. Re: Cloth Distribution Scheme. Dear Sir Ref:Letter No. 15841-CL-(D)-45/8342 of 24th Oct. 1945 from Secretary, Civil Supplies Deptt. Punjab Govt., Lahore. Kindly note that we have allotted 28 bales for your district for the month of January 1946. Out of this a quantity of 18 bales will be despatched to our Retail stores in your district/State and the balance of 10 bales will be available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 26-3-49 (Ex. P.W. 4/2). The defeddant's attitude is summed up in its letter to the plaintiffs dated 12-2-49 (Ex. P-3). The defendant said that its had received orders from the West Punjab Government, through the Assistant Director of Civil Supplies, not to make any refunds without the orders of the West Punjab Government. On 15-10-1949 the Ordinance of 1948 was replaced by Ordinance No. XV of 1949 (Ex. D-26) but that made no difference to the law about evacuee funds and properties. On 4-7-1950 the plaintiffs served the defendant with a notice of suit (Ex. P-14). This notice was forwarded to the defendant's General Manager at Lyallpur by the defendant's Managing Director in Delhi urging the General Manager to try and obtain the sanction of the West Punjab Government for payment of the money to the plaintiffs; and on 27-7-1950 the defendant wrote to the plaintiffs saying- We confirm that the sum of ₹ 11,496-6-6 and ₹ 1,000 are due to you on account of your advance deposit and security deposit respectively with our Lyallpur Cotton Mills, Lyallpur, and the sum will be refunded to you by the said Mills as soon as the order of prohibition to refund such depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intiffs were, what were called, Government nominees for Lyallpur. In the plaint the plaintiffs also called themselves the reserve dealer . This term has not been explained but the use of these words and the words nominated importer , indicates that the plaintiffs occupied a privileged ]position. The letters (Exs. P-5 to P-12), on which the plaintiffs relied very strongly, also point to that; Ex. P-5, for example, shows that the defendant was obliged to give 10 bales out of a quota of 28 for that area to the plaintiffs under the orders of the Punjab Government and could only keep 18 for its own retail stores in the month of January 1946. In April the defendant was allowed to keep all 28 but in July the distribution was 35: 25 in the plaintiff's favour. In September, November (1946) and April 1947 it was half and half. In February and March 1947 it was 10 : 26 and 29 : 26 for the plaintiffs and the defendant's stores respectively. Now, ordinarily, a privilege has to be paid for and it seems that the price of this privilege was (1) payment of a security deposit of ₹ 1,000 and (2) payment of a second deposit against which cloth was issued from time to time in much ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case we need not speculate because the plaintiffs have themselves explained the sense in which the term Purchasers advance account is used. In their statement of the case which they filed here, they say- The defendants maintained a 'Purchasers advance account' in their books at Delhi. The plaintiffs used to pay the defendants advance amounts against which cloth was supplied and the balance had to be adjusted periodically . But the banking analogy must not be pushed too far. The stress laid by the parties on the terms Government nominees , nominated importer and Preserve dealer , both in the correspondence and in the pleadings and evidence, suggests that the defendant was dealing with the plaintiffs in their capacity of Government nominees and that, in its turn, imports the condition that the dealings would stop the moment the plaintiffs ceased to occupy that pri- vileged position. As we have seen, the import of cloth was controlled by the Punjab Government at all relevant times with the result that the defendant could not sell to anybody it pleased. The sales had to be to the Government nominees. Therefore, if Government withdrew their recognition, the defend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved. That obligation would therefore necessarily arise at Lyallpur. The plaintiffs' learned counsel argued very strongly that the defendant's Lyallpur business was carried on from Delhi and that the accounts were kept there, that there was no branch office at Lyallpur and that Lyalipur had no independent local control of the business. He relied on the letters written by the defendant to the District Magistrate, Lyallpur, about the allotments of quotas (Exs. P-5 to P-12) and also on Ex. D-7, a letter written by the defendant's General Manager at Lyallpur to the Deputy Custodian of Evacuee Property at Lyallpur in which he says that a Complete list showing the list of all non-Muslims falling under item (3) with the amount to be paid has been asked for from our Head Office and will be submitted as soon as received . Counsel contended that the Lyallpur people bad so little to do with the accounts that they were notable to supply even a list of the persons who dealt with them. they had to find that out from Delhi. These matters should have been put to the defendant's witnesses. Ex. D-7 was written in reply to a letter from the Deputy Custodian of Evacuee Property. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l refer later, have to be made at Lyallpur and a demand made elsewhere would be ineffective. On these facts we hold that the elements of this contract, that is to say, the contract out of which the obligation to pay arose, were most densely grouped at Lyallpur and that that was its natural seat and the place with which the transaction had its closest and most real connection. It follows from this that the proper law of the contract , in so far as that is material, was the Lyallpur law. We have next to see when notice 'to close the account and a demand for return of the balance was made and where. The plaintiff Jagat Singh (P.W. 5) says that he made a written demand in October 1947. But the earliest demand we have on record is Ex. P.W. 4/4 dated 3-1-1949. It is understandable that the plaintiffs, who had to flee for their lives, would have no copies of their correspondence, but it is a matter for comment that the demand which is filed (Ex. P.W. 4/4) does not refer to an earlier demand or demands. The defendant was asked to produce all the correspondence because the plaintiffs had lost their own files. The defendant produced all we have on record and no suggestion was made th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctionable claim : sections 3 and 130. But to give it position in space is not easy because it is intangible and so cannot have location except notionally and in order to give it notional position rules have to be framed along arbitrary lines. Cheshire points out in his book on Private International Law, 4th edition, pages 449 to 451 that the situs rule is not logical and leads to practical difficulties when there is a succession of assignments because it is not possible to fix the situation of a debt under the situs rule in one place and only one place. Speaking, of that Cheshire, quoting Foote, where Foote says that the assignment of a chose in action arising out of a contract is governed by the proper law of the contract paraphrases Foote thus at page 450- If we understand him correctly, the appropriate law is not the 'proper law' (using that expression in its contractual sense) of the assignment, but the proper law of the original transaction out of which the chose in action arose. It is reasonable and logical to refer most questions relating to a debt to the transaction in which it has its source and to the legal system which- governs that transaction. One unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Some law must impose the obligation, and the parties have nothing whatsoever to do with that, no more than with whether their acts are torts or crimes . The contract we are considering is silent about these matters. There is no express provision either about the law that is to obtain or about the situs. We have therefore to examine the rules that obtain when that is the case. The most usual way of expressing the law in that class of case is to say that an intention must be implied or imputed. In the Bank of Travancore v. Dhrit )Ram(2), Lord Atkin said that when no intention is expressed in the contract the Courts are left to infer one by reference to considerations where the contract was made and how and where it was to be performed and by the nature of the business or transaction to which it refers. In the Mount Albert Borough Council case(1), Lord Wright put it this way at page 240- The parties may not have thought of the matter at all. Then the Court has to impute an intention, or to determine for the parties what is the proper law which, as just and reasonable persons, they ought or would have intended if they had thought about the question when they made the contract . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 303). The rules, therefore, appear to have been arbitrarily selected for practical purposes and because they were found to be convenient. But despite that the English Courts have never treated them as rigid. They have only regarded them as primafacie presumptions in the absence of anything express in the contract itself: see Lord Wright's speech in Mount Albert Borough Council case (1) at page 240. Also, many exceptions have been engrafted to meet modern conditions. Atkin, L. J. draws attention to one in New York Life Insurance Company v.Public Trustee(2) at page 120 where he says therefore, cases do arise where a debt may be enforced in one jurisdiction, and the debtor, being an ordinary living person, resides elsewhere . So also Lord Wright in Mount Albert -Borough Council case(1) at page 240- It is true that, when stating this general rule, there are qualifications to be borne in mind, as for instance, that the law of the place of performance will prima facie govern the incidents or mode of performance, that is, performance as contrasted with obligation . and at page 241 he says- Again, different considerations may arise in particular cases, as, for insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimarily because the rules we have set out relate to the primary obligation. If the bank wrongly refuses to pay when a demand is made at the proper place and time, then it could be sued at its head office as well as at its branch office and, possibly, wherever it could be found, though we do not decide that. But the reason is that the action is then, not on the debt, but on the breach of the contract to pay at the place specified in the agreement: see Warrington, L. J. at page 116 and Atk in, L. J. at page 121 of New York Life Insurance Co. V. Public Trustee(1). Now the rules set out above are not confined to the business of banking. They are of wider application and have also been applied in insurance cases: Fouad Bishara Jabbour v. State of Israel(2) and New York Life Insurance Co. v. Public Trustee(1). Similar considerations obtain in England when an involuntary assignment of a debt is effected by garnishment. Cheshire has collected a list of English cases at pages 460 to 463 of his Private International Law from which we have quoted above. He sums up the position at page 461 thus- It is difficult to state the rule with exactitude but it is probably true to say that a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the debtor to the Custodian was regarded as a good discharge of the debt. The position in those two cases was just what it is here. Counsel argued that as Lyallpur was part of India, when the contract was made, the Indian law must be applied and that no different intention can be imputed to the parties. But that is not the law, as we understand it, whether we apply the proper law or the situs rules. The proper law will be the law at Lyallpur applied as a living and changing whole, and this would have been the case even if India had not been divided, because each State had the right to make different local laws even in undivided India, as witness the different money lending laws and the cloth and grain control orders: indeed this very case is an illustration of that, for the controls which gave rise to this very contract were not uniform throughout India. But even apart from the proper law the decision of the Privy Council in Arab Bank Ld. v. Barclays Bank(1) and of the Queens Bench Division in Fouad Bishara Jabbour v. State of Israel (2 ) negatives this contention when ail intention has to be imputed or a clause in the contract implied. It is necessary, however, to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiffs-respondents argued that even if the law is what we have said, the Pakistan Ordinance does not apply to this case because a cash deposit in a bank is excluded. The argument was based on the definition of property in section 2(5) of the Ordinance. But this is not a cash deposit in a bank as between the plaintiffs and the defendant. It is a debt which the defendant owes, or owed, to the plaintiffs, and the same definition states that property means, among other things, any debt or actionable claim The portion of the definition which speaks of a cash deposit in a bank means that such a deposit is not to be treated as property for the purposes of the Ordinance as between the bank and the customer who owns or controls the deposit. We hold, therefore, that whether the proper law of the contract applies or the English law of situs in a case of this kind, the defendant is exonerated because, the debt being property ,- the Ordinance divested the plaintiffs of ownership in it and vested the debt in the Custodian and at the same time interfered with the obligation for performance by providing that payment to the Custodian shall operate as a discharge of the obligation. But ..... X X X X Extracts X X X X X X X X Extracts X X X X
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