Case: State Bank Of India Vs. Ghamandi Ram (Dead) Through Shri Gurbax Rai

1. M/s. Chamandi Ram Gurbax Rai, a joint Hindu Family firm consisting of Chamandi Ram, since deceased, Gurbax Rai, Chaman Lal and Jagan Nath, used to carry on business in Bhawalpur State now forming part of West Pakistan before the partition of India. Shri Ghamandi Ram was the manager and karta of the said joint Hindu family firm during the material period. Before the partition of India, the joint Hindu family firm had a cash credit account in its name in the then Imperial Bank of India, Bhawalpur State now within Pakistansaid firm had pledged goods as security for the repayment of the advances made in the said account. On the partition of India, the joint Hindu family and its members admittedly became evacuees and the then Imperial Bank of India, Bhawalpur State sold the pledged goods in the year 1948 for the realisation of its dues in the said cash credit account and credited a sum of Rs. 2,541/11/- left as surplus balance after the adjustment of the dues of the Imperial Bank of India in the said account. On October 15, 1949, the Pakistan Government promulgated Pakistan, (Administration of Evacuee Property) Ordinance, 1949 (Ordinance No. XV of 1949) whereby all property in Pakistan in which an evacuee had any right or interest vested in the Custodian of of Evacuee Property with retrospective effect from March 1, 1947.The expression evacuee property was defined by Section 2, sub-section (3) of the Ordinance to include any right or interest in joint Hindu family property. Cash deposits in Banks were however excepted from the definition of the term property by Section 2 (5) of the Ordinance. The Ordinance was amended in 1951 by the Pakistan (Administration of Evacuee Property) Amendment Act, 1951 (Act No. VI of 1951) whereby section 2 (5) of the Ordinance was amended so as to bring cash deposits in Banks within the definition of the term property. By notification dated February 19, 1952, the Pakistan Government exempted from the operation of the provisions of the said Ordinance cash deposits made at Banks by persons other than companies or associations or bodies of individuals whether incorporated or not.2. On May 9, 1953, Shri Ghamandi Ram (now deceased) as manager and karta of the joint Hindu family firm filed an application under Section 13 of the Displaced Persons (Debts Adjustment) Act, 1951 (Act No. 70 of 1951) before the Tribunal constituted under the said Act at Delhi claiming Rs. 3,165/11/- including Rs. 2,341/11/- on account of the said principal and interest at 6 per cent per annum on the ground that the said amount had not become evacuee property and the liability of the Imperial Bank of India had not therefore ceased. During the pendency of the proceedings before the Tribunal the appellant Bank, was constituted under the provisions ofthe State Bank of India Act, 1955 (Act No. 23 of 1955) and succeeded to the entire rights and liabilities of the Imperial Bank of India. The appellant was accordingly substituted in the said proceedings for the Imperial Bank of India. By its order dated November 1, 1956, the Tribunal dismissed the application of the respondent on the ground that in terms of the law enforced in Pakistan the deposit in the Bank in the account of the firm had become an evacuee property and would be deemed to have vested in the Custodian with effect from March 1, 1947 and by virtue of the said vesting the liability of the Bank had ceased. The Tribunal further held that the only property in the pledged goods, which belonged to the firm, was the equity of redemption and that had vested in the Custodian being a property within the meaning of the said Ordinance. The respondent took the matter in revision before the Punjab High Court being Civil Revision No. 104-D of 1958. The application was allowed by Mr. Justice D. K. Mahajan by his judgment dated 12th September, 1963 on the ground that the amount claimed by the respondent was cash deposit made by an individual in terms of the notification dated February 19, 1952 and was thus beyond the purview of the provisions of the Ordinance. The learned Judge accordingly set aside the order of the Tribunal and granted a decree in favour of the respondent for the amounts claimed.

Reasoning:
Having regard to the juristic nature of the Hindu joint family, according to the doctrine of Mitakshara, we are of the opinion that the Hindu joint family firm of Ghamandi Ram Gurbax Rai cannot be treated as an individual within the meaning of the notification of the Pakistan Government dated 19th February, 1952, but the said firm must be treated as a body of individuals whether incorporated or not within the meaning of that notification.According to the Mitakshara School of Hindu Law all the property of a Hindu joint family is held in collective ownership by all the coparceners in a quasicorporate capacity. The textual authority of the Mitakshara lays down in express terms that the joint family property is held in trust for the joint family members then living and thereafter to be born (See Mitakshara, Chapter I, 1-27).The incidents of co-parcenership under the Mitakshara law are: first, the lineal male descendants of a person up to the third generation, acquire on birth ownership in the ancestral properties of such person; secondly that such descendants can at any time work out their rights by asking for partition; thirdly, that till partition each member has got ownership extending over the entire property conjointly with the rest; fourthly, that as a result of such co-ownership the possession and enjoyment of the properties is common; fifthly that no alienation of the property is possible unless it be for necessity, without the concurrence of the coparceners, and sixthly, that the interest of a deceased member lapses on his death to the survivors.A coparcenery under the Mitakshara School is a creature of law and cannot arise by act of parties except in so far that on adoption the adopted son becomes a co-parcener with his adoptive father as regards the ancestral properties of thequestion has arisen in English Courts with regard to the legislation passed during or after a war by which the contractual rights of the enemies vested in the public authorities such as custodians or administrators of enemy property.It was held in English Courts that in such a case the question whether a given contractual right, e. g. a debt, is transferred under such legislation and whether therefore payment to a custodian or administrator has the effect of discharging the debtor, depends on the situs of that right and not so much on the proper law of the contract from which the right arises.(See Dicey Conflict of Laws, 8th Ed. p. 780), For example inArab Bank Ltd. v. Barclays Bank .(Dominion, Colonial and Overseas), 1954 ACthe appellant Bank had a credit balance on the current account with the respondent banks branch in Jerusalem. The British Mandate over Palestine expired at midnight on May 14, 1948, and thereupon the Provisional Council of State and the Provisional Government of the State of Israel were constituted. War broke out between Israel and the Arab States, which rendered the further performance of the contract of current account impossible. From the date of the termination of the Mandate the appellant Banks premises were situate in Arab-controlled territory and the respondent Banks premises were situated in Israel territory. By legislation the State of Israel vested in an official called the Custodian of the Property of Absentees; the property in the State of Israel belonging to a class of persons and corporations which included the Arab Bank. The respondents paid the appellants credit balances, amounting to some ? 583000 to the Custodian. In 1950 the appellant sued the respondents for this sum. It was held that the right to be paid the credit balance survived the outbreak of war, remaining in existence subject to the suspension of the appellant banks right to recover it. Being locally situate in Israel, it became subject to the legislation of that State and vested in the custodian, and was not recoverable by the appellant bank from the respondent bank.The key to the problem lies in distinguishing between . (1) questions of assignability, which are governed by the proper law of the debt, and (2) question of attachment or garnishment (involuntary assignment) governed by the situs of the debt. If, for example an involuntary assignment occurs after a voluntary assignment has already been made, the lex situs determines whether the rights of the voluntary assignee have been postponed or defeated. If the voluntary assignment occurs first, the lex situs determines what rights, if any, the voluntary assignee has acquired. A question of priorities arose in the case of Re Queensland Mercantile and Agency Co., 1891-1 Ch 536, the fact of which were asUnion Bank of Australia held debentures issued by the Queensland Company charging the shares in that company that were not fully paid up. The Bank was domiciled in England and the company in Queensland. After the capital had been called up, but before it was paid by the shareholders, who thus became debtors of the company, the X Company domiciled in Scotland, began an action for negligence in Scotland against the Queensland Company, and immediately issued the Scotish process of arrestment against numerous shareholders who were domiciled in Scotland. The effect of this process according to Scottish law was to prevent the shareholders, pending a decision in the action of negligence, from paying the calls to the company".The question that fell to be decided was whether the Union Bank, as debenture- holders, were entitled to be paid first out of the unpaid shares, according to the law of England and of Queensland; or whether the X Company in accordance with the law of Scotland, had , prior right over the shares to the extent of the damages that they might be awarded in the action of negligence. A question of priorities between two assignees was thus raised. The Union Bank contended that the question fell to be decided by the law of Queensland, since the Queens and company was a creditor in respect of the unpaid shares and any assignment by it must be tested by the law of its domicil. North, J., however, applied Scottish law. His reasoning was that since the debtors were resident in Scotland and therefore the unpaid calls which formed the subject-matter of the assignments were situated in that country, the assignments must rank in the order prescribed by Scottish Law. He assimilated choses in action to tangible movables, asserting that an assignment of the latter class of property was governed by the lex situs.In our opinion the same legal position prevails in India and therefore the liability of the appellant in this case to the respondent in India must be deemed to have been extinguished.