Case: United Commercial Bank Ltd Vs. Okara Grain Buyers Syndicate Ltd. &amp; Anr

2. The Okara Grain Buyers Syndicate Ltd. -hereinafter called the Syndicate - was incorporated under the Indian Companies Act. 1913, with its registered office at Okara, District Montgomery in the undivided Punjab. In 1946 the Government of undivided Punjab devised a scheme for procurement of foodgrains and appointed the Syndicate to buy foodgrains on its behalf. For due performance of the conditions of the scheme, the Syndicate was required to make a deposit with a recognized Bank. The Syndicate deposited an amount of Rs 40,000 on March 29, 1947 with the United Commercial Bank Ltd - hereinafter called the Bank - and obtained a Fixed Deposit Receipt dated March 29, 1947. The terms of the receipt were theseUnited Commercial Bank Limited. No Misc. 9872-4/18 Okara (Punjab) 29th March, 1947.Received from the Okara Grains Buyers Syndicate Limited, Okara A/c District Magistrate, Montgomery Rupees Forty thousand only as a deposit at the rate of 2 per cent per annum to remain till notice of twelve months for its withdrawal by either side expires.For the United Commercial Bank Ltd.(Sd.) . . . ....Accountant.Manager.Rs. 40,000/-.Terms for the Deposit ReceiptThis deposit receipt is issued subject to the following terms and conditions:-1. This receipt is not transferable.2. This deposit cannot be withdrawn before due date.3. Interest on this deposit ceases on the due date.4. The amount of this deposit cannot be withdrawn in part or by cheque or draft.5. On due date this deposit receipt should be discharged by the depositors on one anna stamp if it is required to be repaid, otherwise an endorsement as to its renewal should be made in the space provided thereof.6. Receipts will when so required, be issued in the names of two or more persons and will be made payable to any one or more of them or to theSyndicate served a notice of withdrawal on March 29, 1947 upon the Bank and an endorsement in that behalf was made on the receipt. The receipt was then handed over to the District Magistrate. Montgomery. On account of widespread communal riots in the month of August 1947, non-Muslim residents of the area found it unsafe to continue to reside at Okara, and the staff and Managing Director of the Syndicate migrated to India leaving all the property, goods, etc. of the Syndicate at Okara. The Syndicate set up a new place of business at Amritsar and registered itself in the State of Punjab.3. In reply to a demand made on October, 26, 1951 by the Syndicate the Bank replied that the amount deposited will not be returned until the Syndicate obtains a discharge from the District Magistrate. Montgomery, of his lien on the fixed deposit receipt and an intimation in that behalf was given by the District Magistrate relinquishing his lien on the fixed deposit receipt. The Syndicate then filed a petition before the Debt Adjustment Tribunal, Amritsar, under, S. 13 of, the Displaced Persons (Debts Adjustment) Act 70 of 1951, for an order against the Bank for payment of Rs. 40,000 as principal and Rs. 3,200 as interest @ 2 per cent per annum upto March 3, 1952, and future interest at 6 per cent per annum till realization. To this petition, the District Magistrate, Montgomery was also impleaded as party-respondent. The Tribunal dismissed the petition holding that the amount of Rs. 40,000 deposited by the Syndicate stood forfeited by order of the District Magistrate, Montgomery, and the petition was on that account not maintainable. In appeal, the High Court of Punjab made an order in terms of the prayer in the petition, subject to the condition that the respondent shall give an indemnity for restitution of the amount in the event of the Bank having to pay the amount to the District Magistrate, Montgomery. The High Court held that the deposit was subject to conditions expressly mentioned in the receipt and no others and that the District Magistrate was not giver any dominion over the amount of Rs. 40,000 deposited by the Syndicate.

Court's reasoning:
We are of the view, even if Condition No. 5 of the terms of deposit receipt is a condition precedent to the enforcement of the obligation of the Bank in favour of the Syndicate, that the High Court was right in exercise of its equitable jurisdiction to direct that the money be paid to the Syndicate without production of the receipt. It may reasonably be inferred that the receipt is lost or destroyed and the Courts equitable jurisdiction may appropriately be exercised in this case. Whether the District Magistrate has the receipt is on the evidence problematic. Again the High Court has fully protected the Bank against any possible loss by directing that an indemnity be given by the Syndicate to the Bank for restitution if the Bank is made to pay the amount to the District Magistrate, Montgomery, and this eminently reasonable direction is not liable to be set aside.Finally it was contended, relying upon the judgment of this Court in Delhi Cloth and General Mills Co. Ltd. v. Harnam Singh, (1955) 2 SCR 402  = (AIR 1955 SC 590 ) that the dispute must be determined by the law of Pakistan and not by the law of India. In that case, the plaintiffs were residents of Lyallpur and were appointed by the Government of undivided Punjab to administer a scheme for rationing of cloth. The Cloth Mills through its branch office at Lyallpur supplied those persons with cloth from time to time and maintained a running account of the transactions. On partition in 1947, Lyallpur was allotted to Pakistan and the plaintiffs migrated to India as refugees. The Pakistan Government issued an Ordinance vesting all evacuee property in Pakistan in the Custodian of Evacuee Property in Pakistan, and prohibited payment of money to evacuees in Pakistan and ordered that all moneys payable to, or claimable by evacuees, be paid to the Deputy Custodian of Evacuee Property in Pakistan. Payments so made were to operate as a discharge charge from further liability to the extent of the payment. Breach of this law was punishable as an offence The Deputy Custodian of Evacuee Property demanded of the Mills the money payable to the plaintiffs and in satisfaction of the payment the Mills paid the amount. In defence to a suit filed by the plaintiffs in the Court of the Subordinate Judge, Delhi, the Mills pleaded that they had discharged their liability by payment made to the Deputy Custodian of Evacuee Property in Pakistan. This Court held that Lyallpur was the place of primary obligation, that the elements out of which the contract to day arose were most densely grouped at Lyallpur, and Lyallpur was the natural seat of the contract and the place with which it had its closets and most real connection. Accordingly the proper law of the contract was the law of Pakistan, and that even under the English doctrine the situs of the debt was Lyallpur and therefore either way the law of Pakistan applied.11-A. Assuming that it was the law of Pakistan which applied to the repayment of the debt due under the receipt, the Bank has failed to prove its defence that they are not liable to pay the money due under the deposit receipt. To recapitulate the facts, the amount was deposited by the Syndicate it was repayable to the Syndicate when demanded; the notice of repayment of the amount was served at the date when the deposit was made. The District Magistrate, Montgomery had no contractual relationship with the Bank, nor was the Bank constituted a trustee for the District Magistrate.The Bank has failed to prove that in exercise of any statutory or sovereign authority the Government of Pakistan have forfeited the amount. Nothing has been placed which may support the plea that under the law of Pakistan the Bank is not liable to repay the amount due under a deposit receipt on the due date, because an officer of the State is said to have the custody of the receipt evidencing the deposit.12. The order for payment of interest at a rate exceeding 2 per cent per annum was also challenged by the Bank. But the rate of interest was stipulated only for the period of the deposit receipt. The Syndicate claimed interest at the rate of 6 per cent per annum from the date on which the petition was filed before the Tribunal under the Displaced Persons (Debts Adjustment) Act, 70 of 1951. Interest from the date of the petition was within the discretion of the High Court, and the High Court has awarded interest at the rate claimed. We do not see any reason to interfere with the rate of interest awarded by the High Court.