Civil Appeal No 200 of 1954
Under Article 133 of the Constitution and section 109 of the Code of Civil Procedure from the Judgment and decree dated the 6th December 1952 of the Circuit Bench of the Punjab High Court at Delhi Weston CJ and Bhandari J in Regular First Appeal No 72 of 1952 arising out of the Judgment and Decree dated the 14th day of April 1952 of the Court of Subordinate Judge Delhi in Suit No 657 of 1950
N C Chatterjee Tarachand Brijmohanlal and B P Maheshwari with him for the Appellant
R section Narula for the Respondent 405 1955
April 21
The Judgment of the Court was delivered by BosE J
The defendant appeals
The plaintiffs were the partners of a firm known as Harnam Singh Jagat Singh
Before the partition of India they carried on the business of cotton cloth dealers at Lyallpur which is now in Pakistan
The defendant is the Delhi Cloth and General Mills Co Ltd It is a registered company carrying on business at Delhi and other places and has its head office at Delhi
One of the places at which it carried on business before the partition was Lyallpur
The plaintiffs  case is that they carried on business with the defendant company for some three or four years before 1947 and purchased cloth from the company from time to time
In the course of their business they used to make lump sum payments to the 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 Rs 79 6 6 lying to their credit plus a deposit of Rs 1000 as security
On that day they deposited a further Rs 55000 bringing the balance in their favour up to Rs 56079 6 6
The defendant company delivered cloth worth Rs 43583 0 0 to the plaintiffs against this amount at or about that time
That left a balance of Rs 11 496 6 6
The suit is to recover this balance plus interest
The claim was decreed for Rs 12496 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 406 became evacuees and the Pakistan Government froze all evacuee assets and later compelled the defendant to hand them over to the Custodian of Evacuee Property in Pakistan
The defendant is ready and willing to pay the money if the Pakistan Government will release it but until it does so the defendant contends that it is unable to pay and is not liable
The only question is what are the rights and liabilities of the parties in those circumstances The amount involved in this suit though substantial is not large when compared with the number of claims by and against persons in similar plight
The defendant itself is involved in many similar transactions
A list of them appears in exhibit D 11
Mohd Bashir Khan DW 1 says that the total comes to Rs 146209 1 9
The defendant has accordingly chosen to defend this action as a test case
The further facts are
as follows
At the relevant period before the partition cloth was rationed and its distribution controlled in among other places the Punjab where Lyallpur is situate
According to the scheme quotas were allotted to different areas and the manufacturers and suppliers of cloth could only distribute their cloth to retailers in accordance with those quotas and dealers in those areas could only import cloth up to and in accordance with the quotas allotted to them
If the suppliers themselves had a retail shop or business in a given area then the quota for that area was divided between the supplier and a Government quota holder or quota holders called the nominated importer or importers
The local agency of the suppliers was permitted to import up to the portion of the quota allotted to it in that area and the suppliers were obliged to give the balance of the quota to the Government quota holder or holders
The plaintiffs were the Government quota holders for Lyallpur and the defendant company also carried on business there through the General Manager of the Lyallpur Mills
It is admitted that the defendant owns these mills but it is a matter of dispute before us whether the mills are a branch of the defendant company but 407 whatever the exact status of the Lyallpur mills may be it is clear from the evidence and the documents that the General Manager of these mills conducted the defendant s cotton business at Lyallpur
It seems that the details of the cloth distribution scheme for Punjab in so far as it 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 exhibit 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 RefLetter No 15841 CL D 458342 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 districtState and the balance of 10 bales will be available for delivery to your nominated importer
We shall be obliged if you kindly issue instructions to your nominated importer to collect these goods from us within 15 days of the two dates for delivery fixed namely by the 20th of January and 5th of February 1946 respectively
It may be noted that the first half quota will lapse in case delivery is 52 408 not taken by you by the former date and the second half will lapse if not taken by the latter date
Yours faithfully DC  Gen Mills Co Ltd In each case a copy was sent to the plaintiffs marked as follows Copy to nominated importer Jagat Singh Harnam Singh Cloth Merchants Lyallpur
The Indian Independence Act 1947 was passed on 18 7 1947 and the district of Lyallpur was assigned to Pakistan subject to the award of the Boundary Commission
Then followed the partition on 15 8 1947 and at or about that time the plaintiffs fled to India
This made them evacuees according to a later Ordinance
But before that Ordinance was promulgated the Assistant Director of Civil Supplies who was also an Under Secretary to the West Punjab Government wrote to the defendant s General Manager at Lyallpur the General Manager of the Lyallpur Cloth Mills on 17 2 1948 and told him that The amount deposited by the non Muslim dealers should not be refunded to them till further orders
exhibit D 1
The defendant did all it could short of litigation to protest this order and to try and get it set aside
Its General Manager at Lyallpur wrote letters to the Assistant Director of Civil Supplies on 14 4 48 9 8 48 Exs
D 2 and D 4  23 4 49 exhibit D 7 and 6 6 49 exhibit D 8 but the replies were unfavourable
On 30 4 48 the Assistant Director said that in no case should the sums be refunded exhibit D 3 and on 1 1 1 48 directed that these amounts should be deposited with the Custodian of Evacuee Property exhibit D 5
This was in accordance with an Ordinance which was then in force
Later on 8 11 48 the General Manager received orders from the Deputy Custodian that the moneys should be deposited with the Deputy CustodianEx
D 6 and on 23 6 49 these orders were repeated by the Custodian EXD 9
Meanwhile the plaintiffs who by then had shifted 409 to Delhi made a series of demands on the defendant in Delhi for payment
These are dated 3 1 49 exhibit PW 44 27 1 49 exhibit PW 41 11 3 49 exhibit PW 43 and 26 3 49 exhibit PW 42
The defeddant s attitude is summed up in its letter to the plaintiffs dated 12 2 49 exhibit 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 exhibit 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 exhibit 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 Rs 11496 6 6 and Rs 1000 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 deposits issued by the West Punjab Government and served upon the said Mills is withdrawn or cancelled and that your claim shall not be prejudiced by the usual time limit of three years having been exceeded  exhibit P 4
The defendant s reply did not satisfy the plaintiffs so they instituted the present suit on 16 12 1950
After the suit the defendant s Managing Director wrote personally to the Joint Secretary to the Government of Pakistan on 2 4 1951 but was told on 21 4 1951 that the matter had been carefully examine and that the money must be deposited with the Custodian exhibit D 25
A second attempt was made 30 4 1951 exhibit D 24 and the Joint Secretary was again approached
Soon after an Extraordine 410 Ordinance was promulgated on 9 5 1951 exhibit D 27 exempting cash deposits of individuals in banks from the operation of the main Ordinance
But the Joint Secretary wrote on 2 6 1951 that this did not apply to private debts and deposits and again asked the defendant to deposit the Money with the Custodian exhibit D 23
Finally the Custodian issued an order on 6 11 1951 directing that the deposits be made by the 15th of that month failing which legal action will have to be taken against you
exhibit D 10
The money was deposited on 15 11 1951 on the last day of grace exhibit D 12
The first question that we must determine is the exact nature of the contract from which the obligation which the plaintiffs seek to enforce arises
The sum claimed in the suit aside from the interest is made up of three items 1Rs
79 6 6 outstanding from a previous account 2Rs
11496 6 6 being the balance of a sum of Rs 55000 deposited on 28 7 1947 and 3 Rs 1000 as security
The three items appear to be linked up but we  will for the moment concentrate on the largest the deposit of Rs 55000
Both sides have spoken of it as a deposit throughout but we will have to examine its exact nature because deposits are of various kinds and it will be necessary to know which sort this was before we can apply the law
Unfortunately the evidence is meagre and scrappy so we have been obliged to piece much disjointed material together to form an intelligible pattern
It is admitted that the distribution of cloth in this area was controlled by the Government of Punjab in undivided India at all material times
It is also admitted that the plaintiffs 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 411 which the plaintiffs relied very strongly also point to that exhibit 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 Rs 1000 and 2 payment of a second deposit against which cloth was issued from time to time in much the same way as a banker hands out money to a customer against deposits of money in a current account only here the payments were issues of cloth instead of sums of money
We draw this inference from what we have said above and from the following facts 1 Both sides have called the payment a deposit in their pleadings 2 The plaintiffs speak of receiving goods against this deposit paragraph 3 of the plaint and Mohd Bashir Khan DW 1 of delivery being made against this advance 3 The plaintiff Sardari Lal PW 3 says that the parties have been carrying on dealings for 3 or 4 years and that advances used to be made to the mills from time to time
Sometimes our balance stood at credit 4 Sardari Lal says that when their balance was on the debit side they paid the defendant s interest but the defendant paid no interest when the balance was in the plaintiffs  favour
This is the position when there is an overdraft in a bank 5 There was a balance of Rs 79 6 6 standing in the plaintiffs  favour when the deposit of Rs 55000 was made 6 The plaintiffs said in their letter exhibit PW 41 412 to the defendant that they had a current account with the defendant in which a sum of Rs 11496 6 6 was in reserve account
This figure of Rs 11 496 6 6 is made up by including the old balance of Rs 79 6 6 in this account 7 In their letter exhibit P 14 the plaintiffs said that they had deposited money in the plaintiffs  account at Lyallpur as reserve dealers against that they received goods leaving a balance of Rs 11496 6 6
Again this figure includes Rs 79 6 6
All this shows that the payment of Rs 55000 was not just an advance payment for a specified quantity of goods but was a running account very like a customer s current account in a bank
The only matter that can be said to indicate the contrary is the fact that the defendant has listed this money in exhibit D 11 under the head Purchaser s advance
But the mere use of this term cannot alter the substance of the transactions any more than the mere use of the word deposit
The fact that the parties choose to call it this or that is of course relevant but is not conclusive and in order to determine the true nature of a transaction it is necessary to view it as a whole and to consider other factors
But in this 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 413 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 defendant would not have been able to sell to the plaintiffs any longer and it is fair to assume that the parties did not contemplate a continuance of their relationship in such an eventuality
But as this was not a definite contract for the supply of a given quantity of goods which were to be delivered in instalments but a course of dealings with a running account it is also reasonable to infer that the parties were at liberty to put an end to their business relationship at anytime they pleased by giving due notice to the other side and in that event whichever side owed money to the other would have to pay
But either way the place of performance would in these circumstances be Lyalipur
We say this because all the known factors were situate in Lyallpur
The plaintiffs were the Government nominees for Lyallpur and they were resident there
The defendant carried on business there and the goods had to be delivered at Lyallpur and could not be deliverer elsewhere and so performance was to be there
The accounts were kept at Lyallpur and though copies appear to have been forwarded to Delhi from time to time the books were situate there and the Lyallpur office would be the only place to know the up to the minute state of the accounts
In the circumstances it is reasonable to assume as in the case of banking and insurance matters we shall deal with presently that on the termination of the contract the balance was to be paid at Lyallpur and not elsewhere
That localises the place of primary obligation
This also in our opinion imports another factor
The defendant in Delhi would not necessarily know of any change of recognition by the Lyallpur authorities
The correspondence with the Collector indicates that the Government nominee cleared the goods from the defendant s Lyallpur godowns under the orders of the District Magistrate
If therefore the 414 nominee was suddenly changed intimation of this fact would have to be given to the defendant at Lyallpur and not at Delhi otherwise there would be a time lag in which the defendant  Lyallpur office might easily deliver the goods to the plaintiffs as usual despite withdrawal of the recognition
Everything therefore points to the fact that the notice of termination would have to be given at Lyallpur and the obligation to return the balance would not arise until this notice of termination was received
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 exhibit 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
exhibit D 7 was written in reply to a letter from the Deputy Custodian of Evacuee Property
That letter is exhibit D 6 and in it the Deputy Custodian refers to some earlier correspondence with the Under Secretary to the West Punjab Government Lahore which has not been filed
When we turn to the list that was eventually supplied from Delhi exhibit D 1 1 we find that it relates to accounts from allover Pakistan such as Multan Peshawar Lahore Sialkot Rawalpindi and even Karachi and Sukkar
Obviously a local office like the Lyallpur office would not be in 415 a position to supply that sort of information
The defendant s accountant at Lyallpur Sewa Ram PW 4 says that Purchasers  deposits at Lyallpur were not recorded in the books of the defendant at Delhi but statements used to be despatched from there to Delhi
An account book was prepared from statements received from Lyallpur
That book is known as Reference Book  
Presumably that would also be the practice of the other branch offices so the head office would be the only place from where a general overall picture which appears to be what was asked for could be obtained
Now the plaintiffs resided at Lyallpur at all relevant times and the defendant carried on business there through a local General Manager
We do not know where the contract was made but we do know that the plaintiffs contracted in a special capacity that was localised at Lyallpur namely as the Government nominees for Lyallpur
We know that the goods were to be delivered at Lyallpur and could not be delivered anywhere else
We know that there was a running account and that that account was kept at Lyallpur and we have held that the debt did not become due till the defendant was given notice at Lyallpur that the business relationship between the parties had terminated
The termination came about because of acts that arose at Lyallpur namely the assignment of Lyallpur to the newly created State of Pakistan and the flight of the plaintiffs from Lyallpur which made further performance of the primary contract impossible
The only factors that do not concern Lyallpur are the defendant s residence in India and the demands for payment made in Delhi
The fact of demand is not material because the obligation to pay arose at the date of termination and arose at Lyallpur but if a demand for payment is essential then it would along the lines of the banking and insurance cases to which we shall 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 53 416 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 PW 5 says that he made a written demand in October 1947
But the earliest demand we have on record is exhibit PW 44 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 exhibit PW 44 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 that anything had been suppressed
Consequently we are not prepared to accept the plaintiffs  statement and we hold that there was no demand before 3 1 1949
Another point is that the earlier demand even if made could not have been made at Lyallpur
The plaintiff Jagat Singh says he made the demand to the defendant s Managing Director
He resides in Delhi and the plaintiffs had by then fled from Pakistan
Therefore the demand could not have been made at Lyallpur and apart from those demands there is no other notice of termination so technically the defendant would have been justified in declining to pay on the strength of a demand made in Delhi
The same defect attaches to exhibit P W 44
However we are fortunately absolved from the need to base on so technical a ground
Now at the date of the demand the Pakistan Ordinance exhibit D 26 was in force and under it the defendant was prohibited from paying the money to the plaintiffs who were evacuees according to Pakistan laws
The defendant was directed instead to deposit the money with the Deputy Custodian of Evacuee 417 Property
This was done on 15 11 1951 exhibit D 12 and the deposit was made along with other similar deposits
We now have to determine the legal liabilities which arise out of these facts
This raises complex questions of private international law and two distinct lines of thought emerge
One is that applied by the English Courts namely the lex situs the other is the one favoured by Cheshire in his book on Private International Law namely the proper law of the contract
The English approach is to treat the debt as property and determine its situs and then in general to apply the law that obtains there at the date when payment is due
But the difficulty of the English view is that they have different sets of rules for ascertaining the situs with the result that the situs shifts from place to place for different purposes also that it is determined by intention
Thus it can be in one place for purposes of jurisdiction and in others for those of banking insurance death duties and probate
The situs also varies in the cases of simple contract debts and those of speciality
That a debt is property is we think clear
It is a chose in action and is heritable and assignable and it is treated as property in India under the Transfer of Property Act which calls it an actionable 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 450 418 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 undeniable merit of this is that where there have been assignments in different countries no confusion can arise from a conflict of laws since all questions are referred to a single legal system
The expression the proper law of the contract has been carefully analysed by Cheshire in Chapter VIII of his  book
In Mount Albert Borough Council vs Australasian Temperance and General Mutual Life Assurance Society1 Lord Wright defined it at page 240 as that law which the English or other Court is to apply in determining the obligations under the contract that is to say obligation as contrasted with performance
Lord Wright drew the distinction between obligation and performance at page 240
In a later case Lord Simonds described it as the system of law by reference to which the contract was made or that with which the transaction has its closest and most real connexion
Bonython vs Commonwealth of Australia2
Cheshire sets out the definition given by some American Courts at page 203 and adopts it It is submitted that at any rate with regard to the question of valid creation the proper law is the law of the country in which the contract is localized
Its localization will be indicated by what may be called the grouping of its elements as reflected in its formation and in its terms
The country in which its elements are most densely grouped will represent its natural seat the country with which the contract is in fact most substantially associated and in which lies its natural seat or centre of gravity
1   2  219
419 This involves two considerations
The first is whether the proper law is to be ascertained objectively or whether parties are free to fix it subjectively by ranging over the world and picking out whatever laws they like from any part of the globe and agreeing that those laws shall govern their contract
Cheshire points out at page 202 that the subjective theory may produce strangly unrealistic results
It is also obvious that difficulties will arise if the contract is illegal or against public policy according to the laws of the country in which it is sought to be enforced though lawful according to the laws of the country which the parties choose see Lord Wright in Mount Albert Borough Council vs Australasian Temperance etc
Society1 at page 240
Cheshire prefers the view of an American Judge which he quotes at page 203 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 vs Dhrit Ram2 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 case1 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
1 2 69 IA 1 8
420 But  to us it seems unnecessarily artificial to impute an intention when we know there was none especially in a type of case where the parties would never have contracted at all if they bad contemplated the possibility of events turning out as they did
In our opinion what the Courts really do when there is no express provision is to apply an objective test though they appear to regard the intention subjec tively and that is also Cheshire s conclusion at page 201 where after reviewing the English decisions he says In other words the truth may be that the judges though emphasising in unrestricted terms the omnipotence of intention in fact do nothing more than impute to the parties an intention to submit their contract to the law of the country with which factually it is most closely connected
If driven to a choice we would prefer this way of stating the law but we need not decide this because so far as the present case is concerned the result is the same whether we apply the proper law of the contract or the English rules about the lex situs
It may be that in some future case this Court will have to choose between these two views but the question bristles with difficulties and it is not necessary for us to make the choice here
All we wish to do here is to indicate that we have considered both and have envisaged cases where perhaps a choice will have to be made
We gather that English judges fall back on the lex situs and make rules for determining the position of a debt for historical reasons
Atkin L J said in New York Life Insurance Company vs Public Trustee1 that the rules laid down in England are derived from the practice of ecclesiastical authorities in granting administration because their jurisdiction was limited territorially
The ordinary had only a jurisdiction within a particular territory and the question whether he should issue letters of administration  depended upon whether or not assets were to be found within his 1  119
421 jurisdiction and the test in respect of simple contracts was Where was the debtor residing  the reason why the residence of the debtor was adopted as that which determined where the debt was situate was because it was in that place where the debtor was that the creditor could in fact enforce payment of the debt
See also Dicey s Conflict of Laws 6th edition page 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 vs
Public Trustee2 at page 120 where he saystherefore 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 case1 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 instance where the stipulated performance is illegal by the law of the place of performance
And so also Lord Robson in Rex vs Lovitt3 at page 220 It cannot mean that for all purposes the actual situation of the property of a deceased owner is to be 1  2  119
31912 AC 212
422 ignored and regard had only to the testator s domicil for executors find themselves obliged in order to get the property at all to take out ancillary probate according to the locality where such property is properly recoverable and no legal fiction as to its following the owner  so as to be theoretically situate elsewhere will avail them
And he says at page 221 that these rules are only for certain limited purposes
In banking transactions the following rules are now settled 1 the obligation of a bank to pay the cheques of a customer rests primarily on the branch at which he keeps his account and the bank can rightly refuse to cash a cheque at any other branch Rex vs Lovitt1 at 219 Bank of Travancore vs Dhrit Ram2 and New York Life Insurance Company vs Public Trustee3 at page 117 2 a customer must make a demand for payment at the branch where his current account is kept before he has a cause of action against the bank Joachimson vs Swiss Bank Corporation4 quoted with approval by Lord Reid in Arab Bank Ltd vs Barclays Bank5
The rule is the same whether the account is a current account or whether it is a case of deposit
The last two cases refer to a current account the Privy Council
case Bank of Travancore vs Dhrit Ram2 was a case of deposit
Either way there must be a demand by the customer at the branch where the current account is kept or where the deposit is made and kept before the bank need pay and for these reasons the English Courts hold that the situs of the debt is at the place where the current account is kept and where the demand must be made
This class of case forms an exception to the rule that a debtor must seek his creditor because though that is the general rule there is nothing to prevent the parties from agreeing if they wish that that shall not be the duty of the debtor and as Lord Reid explains in the Arab Bank case5 at page 531 a contract of current account necessarily implies an 1 2 69 IA 1 8 and 9
3  119
4 51951 AC 495 531
423 agreement that that shall not be the bank s duty otherwise the whole object of the contract would be frustrated
We have stressed the word primarily 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 Trustee1
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 vs State of Israel2 and New York Life Insurance Co vs Public Trustee1
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 debt is properly garnishable in the country where according to the ordinary usages of business it would normally be regarded as payable
But when all is said and done we find that in every one of these cases the proper law of the contract was applied that is to say the law of the country in which its elements were most densely grouped and with which factually the contract was most closely connected
It is true the judges purport to apply the leX Situs but in determining the situs they apply rules and modify them where necessary to suit changing modern conditions which in fact are the very rules 1 2  424 which in practice would be used to determine the proper law of the contract
The English Judges say that when the intention is not express one must be inferred and the rules they have made come to this that as reasonable men they must be taken to have intended that the proper law of the contract should obtain
The other view is that the intention does not govern even when express and that the proper law must be applied objectively
But either way the result is the same when there is no express term
The proper law is in fact applied and for present purposes it does not matter whether that is done for the reasons given by Cheshire or because the fluid English rules that centre round the lex situs lead to the same conclusion in this class of case
That however raises a further question
Which is the proper law The law that obtains when the contract was made and the obligation fashioned or the law in force at the time when performance is due Here again we think the answer is correctly given by Cheshire at page 210 quoting Wolff s Private International Law page 424 and Be
Chesterman s Trusts1 A proper law intended as a whole to govern a contract is administered as a living and changing body of law  and effect is given to any changes occur
ring in it before performance falls due
This is what the English Courts did in New York Insurance Co vs Public Trustee2 Re
Banque Des Marchands De Moscou3 Fouad Bishara Jabbour vs State of Israel4 and Arab Bank Ld
vs Barclays Bank5
They were all cases in which the law changed because of the outbreak of war and where performance became impossible because of local legislation
In the last two cases the debts vested in the Custodian because of local legislation and payment 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
11923 2 Ch
466 478
2 3 4 51954 AC 495 529
425 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
vs Barclays Bank1 and of the Queens Bench Division in Fouad Bishara Jabbour vs 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 bear in mind that under modern conditions choses in action arising out of contract have two aspects 1 as property and 2 as involving a contractual obligation for performance
The property aspect is relevant for purposes of assignment administration taxation and the like the contractual aspect for performance
In the present case we are primarily concerned with the property aspect because the Pakistan Ordinance regards debts as property and vests all evacuee property in the Custodian and requires every person holding such property to surrender it to the Custodian on pain of penalties prescribed by the Ordinance and section 112 states that Any person who makes a payment under subsection  shall be discharged from further liability to pay to the extent of the payment made
The payment was made and that in our opinion exonerated the defendant from further liability
Such payment would operate as a good discharge even under the English rules see Fouad Bishara Jabbour vs 1  529
2 426 State of Israel1 at page 154 where a number of English authorities are cited including a decision of the Privy Council in Odwin vs Forbes2
That was also the result of the decisions in the following English cases which are similar to this though the basis of the decisions was the situs of the debt and the multiple residence of corporations Fouad Bishara Jabbour vs State of Israel1 Be Banque Des Marchands De Moscou3 and Arab Bank Ld
vs Barclays Bank 4
The same result follows from the decision of the Judicial Committee in the Bank of Travancore Ltd vs Dhrit Ram5 where Lord Atkin said When consideration is being given to the question what law did the parties intend to govern the contract it seems proper to bear in mind that the promisor is a bank incorporated under Travancore law with apparently some connection with the State of Travancore and governed as to its business by any law of Travancore that may affect banking 
The only difference between that case and this is that at the date of the deposit in this case there was no difference between the laws of Punjab and Delhi on the present point
But they could have differed even if India had not been divided as we have just pointed out
The English cases are however in point and we can see little in principle to distinguish them from this case
The learned counsel for the plaintiffs 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 25 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 1 2 3 4  529 569 I A 1 9 427 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 we wish to emphasize that we decide this because payment was in fact made to the Custodian and that we express no opinion about what would happen in a case where there is no payment and the defendant has no garnishable assets in Pakistan out of which the West Punjab Government could realise the debt by attachment of the defendant s property
Different conclusions might possibly arise in such a case
Lastly it was urged that the Pakistan Ordinance is a penal law and is confiscatory in character therefore no domestic tribunal will recognise it or give effect to it
That proposition is in any event too widely stated but we are unable to condemn this law as opposed to the public policy of this country because we have exactly the same kind of laws here as do other civilised countries which find themselves in similar predicament or at the outbreak of war see Arab Bank Ltd vs Barclays Bank1 and also Fouad Bishara Jabbour vs State of Israel2 and Re
Munster3 where a like argument was repelled
We hold that this legislation is not confiscatory
The same rules apply to the item of Rs 79 6 6 and to the deposit of Rs 1000 as security
The appeal succeeds
The decrees of the lower Courts are set aside
A decree will now be passed dismissing the plaintiffs  claim but in the special circumstanoes of this case the parties will bear their own costs throughout
1 2  157 3 1920 1 ch268


Summary:
During the years in question cloth was rationed at Lyallpur then a part
of the Punjab in undivided India and sales could only be made to government nominees and other authorised persons
The plaintiffs resident in Lyallpur were the government nominees The 403 defendant company with its head office at Delhi had a branch office and mills at Lyallpur and supplied the plaintiffs with cloth from time to time in accordance with the government quota through its branch manager at Lyallpur
Their dealings lasted some 4 or 5 years prior to 1947
In accordance with their contract the plaintiffs left a security deposit of Rs 1000 with the defendant s branch manager at Lyallpur and deposited further sums of money with him from time to time at Lyallpur
The defendant supplied the plaintiffs with their quota of cloth against those deposits
There was thus a running account between the parties in which the balance was sometimes in the plaintiffs  favour and sometimes against them when against they paid the defendant interest on the overdraft
The goods had to be supplied at Lyallpur and all moneys were paid there
The accounts were kept at Lyallpur though copies were sent to the defendant s head office at Delhi
In 1947 when India was partitioned Lyallpur was assigned to Pakistan
The plaintiffs thereupon fled the country and entered India as refugees
They settled in Delhi and thus became evacuees according to a Pakistan ordinance
At that time there was a balance of Rs 11496 6 6 in the plaintiffs  favour
They accordingly made a demand at Delhi for payment of this sum and for return of their security deposit
In the meanwhile the Pakistan Government issued an ordinance 1 vesting all evacuee property in the Custodian of Evacuee Property in Pakistan 2 prohibiting the payment of money to evacuees and 3 requiring all moneys payable to or claimable by evacuees to 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 offence
The Deputy Custodian demanded payment from the defendant of the moneys owing to the plaintiff
After some correspondence and demur the payment was made as required
The defendant pleaded this as a defence to the action
Held 1 Lyallpur was the place of primary obligation because under the contract the balance remaining at its termination was to be paid there and not elsewhere accordingly the demand for payment made at Delhi before a demand and refusal at Lyallpur was ineffective 2 That the elements out of which the contract to pay arose were most densely grouped at Lyallpur so Lyallpur 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 Lyallpur Law 3 Under the English doctrine also the situs of the debt was Lyallpur and so 404 4 either way the Lyallpur law applied 5 as it obtained at Lyallpur at the time when performance was due because a  proper law intended as a whole to govern a contract is administered as a living and changing body of law accordingly effect is given to any changes occurring in it before performance is due 6 a debt being a chose in action is property within the meaning of the Pakistan Ordinance and so 7 the money was rightly paid to the Deputy Custodian and that operated as a good discharge and exonerated the defendant from further liability
But quaere whether different conditions would not arise in a case where no payment is made and the defendant has no garnishable assets in Pakistan out of which the West Punjab Government could realise the debt out of the defendant s property there
8The provisions of the Pakistan ordinance relevant to the case are not opposed to the public policy of India and so can be relied on as a defence to an action of this nature
Appeal allowed
Mount Albert Borough Council vs Australasian Temperance etc
  Bonython vs Commonwealth of Australia at 219 Bank of Travancore vs Dhirt Ram 69 IA I at 8 New York Life Insurance vs Public Trustee 1924 2 Ch
101 at 119 Rex vs Lovitt  Joachinsons vs Swiss Bank Corporation 1921 3 KB 110 Arab Bank vs Barclays Bank at 531 Fouad Bishara vs State of Israel 1954 1 AER 145
Chesterman s Trusts 1923 2 Ch
466 at 478 Be
Banque Des Marchands De Moscou 1954 2 AER 746 Odwin vs Forbes and Re Munster 1920 1 Ch
268 referred to