Case: Kesharichand Jaisukhal Vs. The Shillong Banking Corporation

when paid into a bank, ceases altogether to be the money of the principal; it is then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into the bankers is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the bankers money; he is known to deal with it as his own; he makes himself, by paying back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places. That being established to be the relative situations of banker and customer, the banker is not an agent or factor, but he is a debtor." What would be the position if instead of paying in cash the customer hands in cheques or bills? With regard to this Sheldon has laid as follows:"In Joachimson v. Swiss Bank Corporation, (1921-3 KB l10), Lord Justice Atkin gave an admirable summary of the position. He stated that the banker undertakes to receive money and collect bills for his customers account, and that money so received is not held in trust for the customer but borrowed from him with a promise to repay it or any part of it..... against the customers written order addressed to the bank at such branch", (pp. 201-202). In the appeal before us the two cheques for Rs. 600 and Rs. 8,200 have not been placed on record and so we do not know in whose favour they were drawn and if they were drawn by the appellant in favour of "self" what endorsement he had made on the back of the cheques. The cheques could have been drawn by the appellant either in his own favour or in favour of the bank. Whichever be the position the fact remains that these two cheques were credited by him in his account with the respondent. That is not all. Since the appellant had a mutual open and current account with the respondent it may well be that money was owing by him to the respondent on that date and, therefore, he drew these two cheques on the Bharati Central Bank and credited them in his account with the respondent. Or it may be that the appellant merely credited the money in his own account even though noting may have been owing from him to the respondent on that date. Whether it was one or the other the respondents would, with respect to the amounts for which the cheques were drawn, have become actual recipients of the money from the appellant, upon realisation of the cheques drawn by the appellant. Indeed, as the cheques were returned unpaid by the drawee bank the respondents made a debit entry on December 11, 1960 of Rs. 8,800 against the appellant in his account with them. This would show that the respondent accepted the position that they were acting in this matter not as the appellants agents but as payees. This explains why, as admitted by Dutta, the respondent accepted from the Bharati Central Bank cheques on Nath Bank on their own responsibility instead of insisting upon cash. Indeed, as pointed out at p. 300 in Chalmers on Bills of Exchange (8th Edn.):"consequently an authority to an agent to receive a payment due to his principal is not in itself an authority to receive it by bill or cheque." Therefore, the respondents would not have acted in the way they did had they regarded themselves as merely agents of the appellant for collecting his cheques. Dutta has, in his evidence, stated that no formal note in writing was sent to the appellant by the respondents about the dishonouring of the cheque by the Nath Bank. Nor did they inform him of having debited his account with Rs. 8,800. No doubt, according to him, after a demand draft was issued to them by the Bharati Central Bank the respondents informed the appellant. But after that draft was dishonoured on presentation, no information whatsoever was given to the appellant. This would further strengthen the conclusion that the respondents were acting for themselves at every stage after the cheques for Rs. 600 and Rs. 8,200 were credited in his account with them by the appellant. Therefore, though it is true that the sum of Rs. 8,800 was not received by the respondent in cash they must be deemed to have received the sum either by reason of the fact that they obtained from the Bharati Central Bank a cheque for Rs. 8,800 on the Nath Bank or by the acceptance by them of a demand draft drawn by the Bharati Central Bank, Shillong, on their Calcutta Branch. It is difficult to see how they can hold the appellant, whose account with the Bharati Central Bank has been debited by that Bank to the extent of Rs. 8,800, as being still liable upon those cheques. Whatever rights the respondents have, are against the Bharati Central Bank and not the appellant. Indeed, having claimed as against the Bharati Central Bank to be treated as preferential creditors of that Bank to the tune of Rs. 8,800, particularly when on their own showing what was owing to them from the appellant was something less than Rs. 600, they cannot now be heard to say that they merely acted as the appellants agents. 17. For these reasons, disagreeing with the High Court, I hold that the appellants name cannot be included in the list of the respondents debtors. I would, therefore, allow the appeal and dismiss the application of the Liquidator under Section 45-D of the Banking Companies Act in so far as it relates to the appellant, with costs throughout and would direct further that the respondents pay the appellants costs both here and in the High Court. ORDER

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]7. A banker entrusted by its customer with the collection of a cheque is bound to act according to the directions given by the customer, and in the absence of such directions, according to the usages prevailing at the place where the banker conducts his business and applicable to the matter in hand. The banker is also bound to use reasonable skill and diligence in presenting and securing payment of the cheque and placing the proceeds to his customers accounts and in taking such other steps as may be proper, to secure the customers interests. In the instant case, it is not shown that the respondent acted negligently in breach of its duties or contrary to any instructions given by the appellant or any lawful usages prevailing amongst bankers at Shillong8. There is no substance in the further contention of the appellant that by preferring a claim as creditor in respect of the draft in the liquidation of the Bharati Central Bank, the respondent accepted the draft in satisfaction of its dues from the appellant. The respondent owed a duty to the appellant to take steps in the liquidation proceedings for the realisation of the amount of the draft. By preferring the claim, the respondent preserved all rights in respect of the draft and acted in the best interests of the appellant. In the circumstances the Courts below rightly gave appropriate directions on the respondent for giving credit to the appellant for all sums which may be realised by the respondent from the Official Liquidator of the Bharati Central Bank. The Courts below rightly answered issue No. 1 in the negative11. In the instant case, there were mutual dealings between the parties. The respondent Bank gave loans on overdrafts, and the appellant made deposits. The loans by the respondent created obligations on the appellant to repay them. The respondent was under independent obligations to repay the amount of the cash deposits and to account for the cheques, hundis and drafts deposited for collection. There were thus transactions on each side creating independent obligations on the other, and both sets of transactions were entered in the same account. The deposits made by the appellant were not merely complete or partial discharges of its obligations to the respondent. There were shifting balances; on many occasions the balance was in favour of the appellant and on many other occasions, the balance was in favour of the respondent. There were reciprocal demands between the parties, and the account was mutual. This mutual account was fairly active up to June 25, 1947. It is not shown that the account ceased to be mutual thereafter. The parties contemplated the possibility of mutual dealings in future. The mutual account continued until December 29, 1950 when the last entry in the account was made. It is conceded on behalf of the appellant that if the account was mutual and continued to be so until December 29, 1950, the suit is not barred by limitation, having regard to S. 46(O) of the Banking Companies Act. The Courts below, therefore, rightly answered issue No. 1 in the negative12. The claim by the respondent on account of interest was contested in the Courts below, but that claim is no longer contested before us13. The High Court discussed at length the legal characteristics of a demand draft, as also questions relating to the interpretation of S. 45(O) of the Banking Companies Act. In view of the contentions raised before, as those questions do not arise, and we do not propose to express any opinion thereon.