Case: Kesharichand Jaisukhal Vs. The Shillong Banking Corporation

1. The respondent is a banking company now in liquidation. The appellant had a combined overdraft and deposit account with the Shillong branch of the respondent. On December 9, 1946, the appellant gave the respondent for collection two cheques for Rs. 8,200 and Rs. 600, respectively, drawn on the Bharati Central Bank, Shillong. On receipt of the cheques, the respondent credited the appellant with the sum of Rs. 8,800 in the accounts. The respondent then sent the cheques to the Bharati Central Bank Shillong for collection. Instead of paying cash, the Bharati Central Bank sent to the respondent a cheque dated December 9, 1946 for Rs. 8,800 drawn by the Bharati Central Bank on the Nath Bank, Shillong in favour of the respondent. The respondent accepted this cheque on its own responsibility without consulting the appellant. On December 10, 1946, the respondent presented the cheque to the Nath Bank for payment. The Nath Bank returned the cheque with the remark "full cover not received". The respondent orally informed the appellant of the nonpayment of the cheque on the Nath Bank, and on December 11, 1946 under oral instructions from the appellant, represented the cheque to Nath Bank for payment. The Nath Bank again returned the cheque with the remark "full cover not received", and the respondent thereupon debited the appellant with the sum of Rs. 8,800 in the accounts. On the same day, the respondent wrote to the Bharati Central Bank demanding cash payment of the two cheques drawn on them and dated December 9, 1946. The respondent also contacted the appellant. Under instructions from the appellant, the respondent accepted from the Bharati Central Bank a demand draft for Rs. 8,800, dated December 13, 1946 drawn by its Shillong Branch on its Calcutta Head Office towards payment of the two cheques. The respondent presented the draft to the Bharati Central Bank Calcutta, for payment, but instead of making payment, the Bharati Central Bank wrote on December 16, 1946 requesting the respondent to obtain payment from its Shillong Branch. The respondent orally communicated this advice to the appellant. On several dates thereafter, the respondent presented the draft to the Bharati Central Bank for payment, but the draft was not paid. On January 2, 1947, the Bharati Central Bank closed its business.        2. On January 11, 1947, the respondent wrote to the appellant stating that it was holding the demand draft as also the cheque on the Nath Bank and would be glad to receive further instructions in the matter for necessary action. As the appellant refused to give any instructions, respondent continued to hold the securities on account of the appellant. In respect of the draft, the respondent duly preferred a claim in the liquidation of the Bharati Central Bank, and was admitted as a preferential creditor for the amount of the draft. On January 28, 1947, the appellant wrote to the respondent alleging that the respondent had accepted the demand draft at its own risk and responsibility and was bound to give credit to the appellant for the sum of Rs. 8,800. The dealings between the appellant and the respondent continued, and the last entry in the combined overdraft and deposit account is dated December 29, 1950.        3. On February 26, 1953, a petition was presented in the Assam High Court for the winding up of the respondent. By order dated May 24, 1953, the respondent was ordered to be wound up. On June 28, 1954 the liquidator of the respondent Bank presented an application to the Assam High Court under S. 45(D) ofthe Banking Companies Act, 1949 for settlement of the list of debtors, claiming a decree for Rs. 5,965-8-9 and interest against the appellant. The appellant resisted the claim. The two issues, which are now material are:        (1) Is the suit barred by limitation, and        (4). Whether the respondent is bound to give credit to the appellant for the sum of Rs. 8,800?        A learned single Judge of the Assam High Court answered both the issues in the negative, and decreed the claim. An appeal preferred to a Division Bench of the High Court was dismissed. The appellant now appeals to this Court by special leave.

Reasoning:
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.