judgement:
No. 59 of1951.
Appeal from the Judgment and Decree dated the 22nd August, 1944, of the High Court of Judicature at Allahabad (Verma and Hamilton JJ.) in First Appeal No. 345 of 1940 arising out of the Judgment and Decree dated the 24th August, 1940, of the Court of the Special Judge, 1st Grade of Shahjahanpur in Miscellaneous Case No. 52 of 1940 and Original Suit No. 2 of 1938.
Chaudhry Niamutullah (Gopalji Mehrotra, with him) for the appellant.
Onkar Nath Srivastava for respondent No. 5. 1953.
October 8.
507 MAHAJAN J.
This appeal is before us on a certificate granted by the High Court of Judicature at Allahabad under section 110 of the Code of Civil Procedure and the only point it raises is whether the appeal preferred by the appellant to the High Court was imperfectly constituted, inasmuch as all the creditors were not impleaded as parties to that appeal.
The facts are that on the 28th October, 1936, Rama Krishna Narain and others submitted an application under section 4 of the U. P. Encumbered Estates Act, 1934, to the sub divisional officer, Tilhar, Shahjahanpur, praying that the provisions of the said Act be applied to them.
This application was eventually transferred by the sub divisional officer to the court of the special judge, first grade, Shahjahanpur.
The landlords on 26th August, 1938, submitted a written statement to the special judge under section 8 of the Act and therein stated inter alia that they had a pro prietary interest to the extent of ten annas share in 52 items of taluqdari villages which formed part of taluka Bharawan.
A notice of this application was published as required by section 11(1) of the Act in the U.P. Gazette dated 13th May, 1939.
On 30th November, 1939, Raja Dev Singh, who subsequently became a ward of the Court of Wards, filed a claim petition under section 11(2) of the Act and alleged therein that he was the proprietor of 6 1/2 pies share in 47 items of property mentioned in schedule (A) of the landlords ' written statement.
This claim was.
disallowed by the special judge by an order dated 24th August, 1940, and it was held that Raja Dev Singh was not the owner of the property claimed by him in his objection petition.
The Deputy Commissioner of Hardoi who is the Court of Wards of Bharawan estate filed an appeal against this decision of the special judge to the High Court.
All the applicant landlords were impleaded as respondents in the appeal along with the Unao Commercial Bank Ltd., one of the creditors who had taken part in the proceedings before the special judge at that stage.
It does not appear from the record that the other creditors had either filed written statements 67 508 under section 10 or had made any allegation that the landlords had secreted any property.
Their names were not mentioned in the memorandum of parties annexed to the memo of costs, and in these circumstances they were not impleaded as respondents in the appeal.
Subsequently the appellant made an application for impleading them as respondents in the appeal and prayed that he be given the benefit of section 5 of the Indian Limitation Act.
This application was rejected, and eventually the appeal was dismissed on the ground that it was.
defective and could not be entertained in the absence of all the creditors as respondents in the appeal.
The, cross objection filed by the Unao Commercial Bank with respect to costs was allowed.
The appellant on 21st November, 1944, filed a petition for leave to appeal to His Majesty in Council.
It was alleged in this application that the valuation of the subject matter of the appeal in the trial court in the High Court and before His Majesty in Council was over Rs. 10,000 and that though in the result the judgment and decree of the High Court affirmed the judgment and decree of the trial court , a substantial question of law affecting not only the parties but of general interest was involved.
The High Court with out deciding whether the appeal raised a substantial question of law granted leave to the appellant under section 110 of the Code of Civil Procedure on the ground that the judgment of the High Court being one of variance, and the value of the subject. matter in dispute in the trial court as well as in the appeal to His Majesty in Council being over Rs. 10,000, the case fulfilled the requirements of that section.
Mr. Srivastava who represented the debtors landlords before us raised a preliminary objection that the certificate under section 110 of the Civil Procedure Code was defective and the appeal was thus incompetent and could not be entertained by us.
He contended that the only variation made by the High Court in the judgment of the trial judge was in respect of costs and such a variation in the matter of costs only did not invoice the decree a decree of variance, and that 509 being.
so, the ground on which the High Court had granted the certificate was erroneous and the certificate being defective this appeal could not be heard.
In our opinion, this contention is without force.
It is no doubt true that costs are not taken into consideration and are treated as extraneous to the subjectmatter of a suit, and variation in the matter of costs does not make the decree of the appellate court a decree of variance; but as already stated, the appellant did not pray for the certificate on that ground.
He had expressly alleged that the decree being one of affirmance he was entitled to a certificate, because the subject of the suit as well as of the appeal was a sum of orver Rs. 10,000 and the case involveda4 substantial question of law.
It is obvious that the ground on which the appeal was dismissed by the High Court raises a question of law of importance to the parties and that being so, on that ground alone the appellant was entitled to a certificate under section I 10, Civil Procedure Code.
The certificate therefore is good, though the around on which it was granted is erroneous.
It is always open to an appellant to support the certificate on grounds other than those, on which it has been actually ordered to be given.
The preliminary objection therefore fails.
In order to determine whether the creditors are necessary parties in proceedings under chapters 3 and 4 of the U.P.
Encumbered Estates Act, 1934, it is necessary to refer to the relevant provisions of the Act.
The law was enacted for giving relief to encumbered estates in U. P. Section 4 provides that any landlord, who is subject to or whose immoveable property or any part thereof is encumbered with private debts, may make an application in writing to the Collector of the district, stating the amount of such private debts and also of his public debts both decreed and undecreed and requesting that the provisions of this Act be applied to him.
The section gives an option to the landlord who is subject to private debts to make an application for obtaining relief under the provisions of the Act.
The Collector then transmits the application to the special judge appointed under the Act.
510 The direct consequence of the acceptance of such an application by the collector is that the creditors are deprived of their rights of proceeding against such a landlord in civil or revenue courts in respect of their debts and all attachments made in execution of decrees become null and void and no process in execution can issue after that date.
The provisions of the Act are clearly detrimental to the contractual rights of the creditors and to their remedies in civil law and such a statute can by no stretch of imagination be described to have been enacted for the benefit of creditors.
Section 8 of the Act confers power on the special judge of calling upon the applicant to submit to him within a period to be fixed by him in this behalf, a written statement containing full particulars respecting the public and private debts to which he is subject or with which his immoveable property is encumbered; of the nature and extent of his proprietary rights in land; of the nature and extent of his property which is liable to attachment and sale; and lastly, of the names and addresses of the creditors, so far as can be ascertained by him.
If the applicant fails to submit a written statement as called for or furnish the information referred to in the proviso to sub section (2), the special judge is empowered to dismiss the application.
The landlord is not required to implead any creditors as party respondents in his written statement, but he has to furnish information, regarding the names and addresses of his creditors so far as they are known to or can be ascertained by him and his failure to give information may result in a dismissal of the application.
Section 9 requires the special judge to publish in the official gazette a notice in English calling upon all persons having claims in respect of private debts both decreed and undecreed against the person or the property of the landlord to present to the special judge within three months from the date of the publication of the notice, a written statement of their claims.
He is also required to cause copies of such notice to be published in such paper or papers as he may direct and to exhibit it at his own office, at the office of the collector and at some 511 conspicuous place where the landlord resides.
He is further directed to send a copy of the notice and a copy of the written statement under sub section (1) of section 8 by registered post to each of the creditors whose names and addresses are mentioned in the statement under clause,(d) of sub section (1) of section 8.
Section 10 provides that every claimant referred to in section 9 shall in the written statement of his claim give full particulars thereof and shall state so far as they are known to or can be ascertained by him, the nature and extent of the landlord 's proprietary rights in the land and the nature and extent of the landlord 's property other than proprietary rights in land.
The provisions of this section not only require a creditor to give particulars of his own debt but also give him opportunity to contend that the landlord has secreted some property.
Section 11 (1) of the AA directs the special judge to publish a notice specifying the property mentioned by the applicant under section 8 or by any claimant under section 10.
The object of the provisions made in section 11 (1) is to find out the extent of the property that can be utilized to wards liquidation of the debts ascertained under the subsequent provisions of the Act.
Section 11 (2) provides as follows: Any person having any claim to the property mentioned in such notice shall, within a period of three months, from the date of the publication of the notice in the official gazette make an application to the special judge stating his claim and the special judge shall determine whether the property specified in the claim, or any part thereof is liable to attachment sale or mortgage in satisfaction of the debts of the applicant.
" Sub section (3) directs the special judge to determine such claims before he proceeds to determine the amount due to any creditor under section 14.
He is further directed not to pass any decree under section 14 until the expiry of a period of one month from the last day on which he determines a claim under section 11.
Sub section (4) off section 11 provides that any order passed by the special judge under this section shall be 512 deemed to be a decree of a civil court of competent jurisdiction.
Section 13 enacts that every claim, decreed or undecreed against the landlord shall, unless made within the time prescribed be deemed for ;III purposes and on all occasions to have been duly discharged.
Section 14 lays down the procedure for determination of the amount of debts.
The judge is directed to give notice of the date of enquiring into the claims of the creditors to the different claimants and to the person who has made the application under ,section 4.
He is directed to examine each claim after hearing all such parties as desire to be heard and after considering the evidence, if any, produced by them.
The section lays down them mode of calculating interest on the amount of such claims and provides for the application of the provisions of the Usurious Loans Act to the proceedings under the Act.
Sub section (7), provides as follows: "If the special judge finds that any amount is due to the claimant be shall pass a simple money decree for such amount together with any costs which he may allow in respect of proceedings in his court and of proceedings in any civil court stayed under the provisions of this Act, together with pendente lite and future interest at a rate not greater than the rate specified in section 27 and if he finds that no amount is due, he may pass a decree for costs in favour of the landlord.
Such decree shall be deemed to be a decree of a ' civil court of competent jurisdiction but no decree against the landlord shall be executable within the United Provinces except under the provisions of this Act.
" Section 18 provides that subject to the right of appeal or revision, the effect of a decree of the special judge under sub section (7) of section 14 shall be to extinguish the previously existing rights, if any, of the claimant, together with all rights, if any, of mortgage or lien by which the same are secured and, where any decree is given by the special judge to substitute for those rights a right to recover the amount of the decree in the manner and to the extent specified in the Act.
Section 45 provides for appeals and revisions against orders and decrees of the special judge.
513 It is apparent from the provisions of the Act cited above that the U.P.
Encumbered Estates Act is no more, nor less than, a code for the administration of the assets of the landlord debtor and for giving relief to him in a number of ways against the contractual rights of his creditors.
It clearly deprives the creditors of any remedies that they would ordinarily have in ordinary civil courts and extinguishes the mortgages held by them.
Sectional(2) deals with claims of third parties to the property alleged by the landlord as belonging to him and the judge is required to determine whether such property is liable to attachment or sale.
It is noteworthy that under section 14(1) the special judge is directed to follow a certain procedure, but no such procedure is prescribed under section 1 1(2).
In section 14 he is required to fix a date and to give notice of the date of inquiring into the claims of the creditors to all the claimants.
There is no such parallel requirement in respect of claims of third parties under section 11(2), though as a matter of practice similar procedure is also followed in an enquiry under this section.
The question that requires consideration in these circumstances is whether the rules of the first schedule to the Code of Civil Procedure should be rigorously applied to proceedings under the Encumbered Estates Act, and whether the creditors who are no doubt ' .persons interested in those proceedings and who would ultimately be entitled to recover their decretal debts from the property the extent of which falls for determination in an enquiry under section II, are necessary parties in the enquiry, or are merely proper parties thereto and as such entitled only to notice of the proceedings.
Order 1, Rules I and 3 of the Code of Civil Procedure, provide in regard to the persons who are to be joined as plaintiffs or those who have to be joined as defendants in suits.
Rule 1 is in these terms: "All persons may be joined in one suit as plaintiff, in whom any right to relief in respect of or arising of the same act or transaction or series of act transactions is alleged to exist, whether 514 severally or in the alternative, where, if such persons brought separate suits, any common question of law or fact would arise." Rule 3 provides: " All persons may be joined as defendants against whom any right to relief in respect of or arising out of the same act or transaction or series of acts or transactions is alleged to exist, whether jointly, severally or in the alternative, where, if separate suits were brought aaainst such persons any common question of law or fact would arise.
" It is apparent that strictly speaking the provisions of these rules cannot be applied to the proceedings contemplated by the U. P. Encumbered Estates Act.
These proceedings cannot be.
described as suits.
It was conceded at the Bar that an inquiry into third party claims under section 11(2) cannot be described as a suit.
Neither section 8 nor section 1 1 provides that the creditors have to be impleaded as parties respondents in such an objection application.
As already said, the section provides that the applicant has to give information about the names of the creditors and the amounts due to them.
Till the time that a decree is passed under section 14 in favour of any of the creditors it cannot be, said that any one of them is entitled to share in the property of the debtor.
It is only when a claim has been made under section 10 by a creditor and it has ripened into a decree that he is entitled to share in the assets of the landlord.
But if he commits a default in submitting a written statement of the claim under section 10, the claim stands discharged under section 13.
In this particular case it is not clear whether any of the creditors except the Unao Commercial Bank had made a claim under section 10.
It is also not clear whether any decree under section 14 has been passed in favour of any of the creditors.
An inquiry for the determination of the quantum of the debts of the landlord can only be made after third party claims have been settled under the provisions of section 11(2).
In view of these provisions it seems difficult to hold that the technical and 515 strict rules as to impleading of parties can have appli cation to proceedings under section 11 of the U.P.
Encumbered Estates Act.
It is true that the creditors must be given notice and opportunity to say whether the landlord has secreted any property, but if they do not do so and are content with the disclosures made by the landlord they cannot be said to have any further interest in the quantum of the property which the landlord has mentioned under the provisions of section 8 in his written statement.
In that situation, if a third party claims any item of property mentioned by the landlord in the written statement, the controversy at that stage lies only between the landlord and the claimant, though in the result the creditors may either be benefited or deprived of some of the 'assets which the landlord discloses in the application as liable to attachment and sale towards payment of decrees that may be passed in favour of the creditors.
It can well be assumed that the fight at that stage being a bona fide fight between the objector and the landlord, the interests of the creditors will be fully represented by the landlord and any decision obtained in his favour or against him would be binding on all the creditors on the principles enacted in explanation 6 to section I 1, Civil Procedure Code.
If, therefore, in such a contest the claimant loses and the landlord succeeds, then in an appeal against that decision he need only implead the landlord as a party respondent and it is not necessary to implead all the creditors as respondents merely on the ground that ultimately they would be affected by the result, either to their benefit or to their detriment.
The court has power, if it considers that the presence of the creditors is necessary at the hearing, to give them notice of the appeal so that they may have the opportunity of placing their con tentions before it.
The observance of such a procedure may well conduce to a fair hearing of the appeal, even if the creditors have raised no plea of any kind before the special judge.
In a case, however, where the creditors raise a plea that the landlord has secreted certain property and it should be included in the schedule and such property is then claimed by a third 516 party, they may well be regarded as real parties to the controversy and failure to implead them may result in the appeal being imperfectly constituted.
In the situation that arises in the present case the appeal should have been held to be properly constituted because all those who raised any controversy whatsoever as to the ownership of the property in dispute were impleaded.
We are fully conscious of the fact that the view that we have expressed above is not in conformity with a number of decisions of the Oudh Chief Court and the Allahabad High Court.
It is therefore necessary to examine those decisions in order to see whether the reasons given therein are sound or erroneous.
In Rameshwar vs Ajodhia Prasad(1) a Bench of the Oudh Court held that all the creditors who were impleaded as parties to the application under the Act are necessary parties to an appeal by the objector against an adverse order passed against him under section 11.
This judgment proceeds on the assumption that all the creditors having been impleaded as parties to the application and not having been made respondents in the appeal, the appeal became imperfectly constituted.
In this case the question whether under the provisions of the Encumbered Estates Act an applicant is required to implead creditors as parties to the application was neither argued nor considered; on the other hand, it was assumed that all the creditors have to be impleaded as parties in the application made by the claimants under the Act.
That assumption is, of course, erroneous.
Under section 4 the applicant is entitled to request the collector, that the provisions of the Act be applied to him and relief given to him under its provisions.
He is not required even to give information about the names and addresses of creditors and no question of impleading anyone as a respondent arises at that stage.
When the collector has forwarded this application to the special judge, then the special judge is empowered to call upon the applicant to file a written statement and therein he is bound %to give information About the (1) A.I.R. 1941 Oudh 580, 517 names and addresses of his creditors so far as they are known to him or can be ascertained by him.
In the written statement which he is called upon to file on a requisition by the special judge he is not called upon to implead any persons as parties, in the sense in which that term is used in the Code of Civil Procedure.
This decision therefore is not of any help on the point that was argued before us.
In Chaudhri Bishunath Prasad vs Sarju Saran Tewari(1), another Bench of the Oudh Court held that an enquiry into the indebtedness of the landlord is to be carried out by the special judge in the presence of all the creditors, that though it is true that each creditor is interested in establishing his own debt against the landlord, he is further interested that the landlord should not be allowed to withhold any property from the court, and that if 'a claimant under section I I sets up a title to the property shown by the landlord to belong to him, although the real contest may for the time being be between the claimant on the one hand and the landlord on the other hand, it is to the ultimate interest of the entire body of the creditors that the property should be held to belong to the landlord, and if the decision is in favour of the landlord, all the creditors will be entitled to have their debts satisfied out of such property; but if, however, the decision is against them, the property will go out of the reach of the creditors and will not be available to them for the satisfaction of their debts.
It was further held that as all.
the creditors had not been joined as parties to the appeal and as they were interested in the result of the appeal, it could not be held that they were wholly unconcerned in the result of the case and therefore the appeal was not maintainable.
It seems to us that in making these observations the learned Judges did not clearly bear in mind the distinctions between the provisions of sections 11 and 14 of the Act.
Section 14 lays down a definite procedure so far as the enquiry into the claims of creditors is concerned .
Each creditor has to establish his claim against the landlord as he (1) A.I.R. 1942 Oudh 16.
518 would do if he had filed a suit against him.
This enquiry is made after the quantum of the property of the debtor has been ascertained under section 11.
As already pointed out, if any creditor raises any dispute as to the quantum of the property as he is entitled to raise such a dispute in his written statement filed under section 10, in that situation it may well be held that such a creditor is directly interested in the enquiry under section 11 ; but it is difficult to see that all other creditors who have accepted the list of property filed by the debtor as true are directly interested in the enquiry under that section and are as such necessary parties and that without impleading them the enquiry cannot proceed.
Rules I and 3 of Schedule I Of the Code of Civil Procedure do not lay down that every person who is ultimately interested in the result of a suit should be impleaded as a defendant.
All that these rules insist upon is that all persons should be joined as defendants against whom any right to relief is alleged to exist, provided that such right arises in respect of the same act or transaction or series of acts or transactions and the case is one where common question of law or fact would arise.
It is not possible to hold that the objector can claim any right to relief against the creditors as such.
The right to relief in the enquiry under section 11 is only against the landlord who alleges himself to be the owner of the property which the claimant says belongs to him, and creditors have no right of interest in the property claimed by the objector.
The test of ultimate benefit therefore laid down by the Oudh Court for holding that all creditors are necessary parties in the enquiry under section 11 of the U.P.
Encumbered Estates Act does not fulfil the conditions laid down in the Code for impleading parties as plaintiffs or as defendants.
If they are not necessary parties in the true sense of the term in the enquiry under section 11, a fortiori failure to implead them as respondents in the appeal detective.
In Lakshmi Narain vs Satgurnath(1) another Bench of the Oudh Court took the ' same view.
In this case.
(1) A.I.R. 1942 Oudh 339.
519 the earlier decisions of the Oudh Court were followed The view was reiterated that creditors are parties in the proceedings under the Encumbered Estates Act.
In Benares Bank Ltd., Benares vs Bhagwandas (1), a Full Bench of the Allahabad High Court considered this question and expressed the same opinion as had been expressed in the Oudh decisions referred to above.
Mr. Justice Braund, who was one of the Judges constituting the Full Bench, with great reluctance shared the opinion of the majority merely out of respect for the opinion of Pathak J. and it appears that, left to himself, he would have held otherwise.
The majority judgment was delivered by Pathak J. He enunciated two tests for deciding whether a certain person was a necessary party in a proceeding: (1) that there must be a right to some relief against such party in respect of the matter involved in the proceedings in question, and (2) it should not be possible to pass an effective decree in the absence of such party, and proceeded to observe that the creditors of a landlord who have claimed relief under the Encumbered Estates Act are necessary parties to the proceedings under that Act and that the object of the Act is to compel the landlord to surrender his entire property for the benefit of his creditors and to liquidate the debts of all the creditors in accordance with and to the extent per mitted by the Act.
There can be no question that these are the true tests for determining whether a person is a necessary party to certain proceedings but the question is whether judged on these tests the creditors of a landlord under the U. P.
Encumbered Estates Act can be said to be necessary parties in an enquiry under section 11.
It seems to us that in the first instance it is an incorrect assumption to make that the object of the Act is to grant relief to the creditors of a landlord; it is quite the converse.
The object of the Act is to grant relief to the landlord whose estate is encumbered with debts, by scaling, down the debts and by depriving the creditors of their (1) A.I.R. 1947 All. 18.
520 civil remedies.
The creditors are allowed to prove their debts and obtain decrees from the special judge according to the provisions of and to the extent allowed by the Act and they lose all their rights on securities held by them.
Coming to the application of the tests laid down by the learned Judge, it is not possible to hold that any right of relief exists in an objector under section 11 as against the creditors.
It is also difficult to see how an effective decree cannot be passed as regards title to the property in the absence of creditors.
One test of the effectiveness of a decree is whether that decree can be executed without the presence of creditors as regards property decreed in favour of a claimant.
It is obvious that in execution proceedings a warrant of attachment and for delivery of possession can only be issued against the owner, viz., the landlord, and not against the creditors.
In these proceedings the special judge can give no relief to the objector against the creditors.
So on the tests mentioned by the learned Judge it is clear that the creditors of a debtor are not necessary parties in these administrative proceedings under the Encumbered Estates Act, though they may be given notice of those proceedings and afforded opportunity to watch those proceedings in order to see that no property is secreted from them and it is preserved for satisfaction of decrees that may eventually be passed in their favour.
In his judgment Pathak J. proceeded to observe that though the landlord is a, party to the dispute under section 11, it is obvious that the main party who is vitally interested in that dispute is the entire body of creditors, because the issue that arises out of such a claim is whether the property which is the subject matter of the claim is liable for the satisfaction of the debts due to the entire body of creditors.
This statement also, in our opinion is not very precise.
It is not correct to say that the result of a decision,in such a claim makes the property liable for satisfaction of debts due to the entire body of creditors who had made claims at that stage.
The property is only 521 liable for satisfaction of decrees that may be passed subsequently under section 14.
It may well be that of the persons who have been disclosed as creditor under section 8, a number of them may not at all be interested in the result of the decision of the claim under section II.
It is an overstatement to make that the main party who is vitally interested in the dispute is the entire body of creditors '.
The dispute relates to title to property and according to all principles of impleading of parties it is not the eventual benefit that a person may derive from a certain decision that is the crucial test in deciding whether a party is a necessary party or merely a proper party.
Pathak J. proceeded to observe as follows : "Could it be suggested that in a suit under Order XXI, rule 63, Civil Procedure Code, the decree holders who desire to seize the property belonging to the judgment debtor are not necessary parties?" With great respect again, this analogy is not very happy or apposite.
Under Order XXI, rule 63, it is only the attaching creditor who has the right to file a suit or of being impleaded as defendant in a suit by the judgment debtor.
AR the creditors of the judgment debtor who have not attached the property are not necessary parties in a suit under Order XXI, rule 63, though after the decision in that suit they may be entitled to share in the rateable distribution of the property if they make an application for that purpose.
In a way it is true to say that in all suits by a creditor against a debtor where the debtor owes to a number of creditors, every other creditor is interested in seeing that that creditor 's suit is dismissed or his debt is considerably cut down; but from that it does not follow that in a suit on a promissory note by a creditor against the debtor all the other creditors are necessary parties.
The eventual interest of a party in the fruits of a litigation cannot be hold to be the true test of impleading parties under the Code of Civil Procedure and it is rather difficult to hold that where that is not the true test under the Code, that should be adopted as A test in proceedings of an administrative 522 character under the U. P.
Encumbered Estates Act.
it cannot be forgotten that under the provisions of section 11 no provision has been made for issuing notice to all the creditors.
Reference may also be made to rule 6 framed under the Encumbered Estates Act.
This rule provides that the proceedings under this Act shall be governed by the Code of Civil Procedure so far as they are applicable.
As already pointed out, the provisions of Order 1, rules 1 and 3, cannot aptly be held applicable in such proceedings.
We cannot uphold the view of Pathak J. that all creditors become parties to the proceedings under the Act in the technical sense of the term after a notice has been served upon them and in any event after they have filed the written statements, that they continue to remain ' as parties until the debts are liquidated or proceedings terminated in accordance with the provisions of the Act.
This seems to be too wide a statement of the law on the point.
Can it be said that after each individual creditor obtains a decree in respect of his claim under section 14, each one of these creditors has to be impleaded as a party in an appeal preferred by that creditor or by the debtor.
It is not possible to give an answer in the affirmative to such proposition.
no hesitation in saying that though he ultimately abondoned n thinking that in.
We have therefore Mr. Justice Braund, his view, was right administrative proceedings technical rules of the First Schedule of the Code of Civil Procedure regarding impleading of parties should not be invoked and that the matter should be viewed in a more liberal way, regard always being had to the fact that there is no collusion between the debtor and the claimant and that there are persons who are bona fide litigating in respect of the title of the claimant under section 11, and if there has been such a bona fide fight which results in a decree in an appeal against that decree it is sufficient that those who took an active part in the proceedings under section II are impleaded.
It is not necessary to implead each and every creditor who either did pot appear or put forward a written statement under 523 section 10 or took no active part in the proceedings under section 11(2).
In the view that we have taken it is not necessary to decide the question whether the High Court was right in not exercising its powers under Order XLI, rule 20, in impleading the creditors as respondents to the appeal.
For the reasons given above we allow this appeal, set aside the judgment of the High Court and remand the case to that court for hearing the appeal in accordance with law on its merits.
If the High Court thinks fit that the presence of any creditors would help the court in arriving at a true decision of the matter it in its discretion may give notice to the creditors of the date of hearing, We leave the parties to bear their own costs of this appeal.
Appeal allowed.
Agent for respondent No. 5: section section Shukla.

summary/full:
Creditors who did not take an active part in the proceedings are not necessary parties to an appeal from an order rejecting a claim made in a proceeding under section 11 (2) of the U. P. Encumbered Estates Act, 1934.
The technical rules of the Civil Procedure Code regarding the impleading of parties should not be applied to such proceedings.
The matter should be viewed in a more liberal way, regard being always had to the fact that there is no collusion between the debtor and the claimant.
I Rameshwar vs Ajodhia Prasad (A.I.R. 1941 Oudh 580), Chaudhri Bishuanth Prasad vs Sarju Saran Tewar (A.I.R. 1942 Oudh 16), Lakshmi Narain vs Satgurnath (A.I.R. 1942 Oudh 339) and Benares Bank Ltd. vs Bhagwandas (A.I.R. 1947 All. 18) overruled.


judgement:
ivil Appeal No. 630 of 1963.
48 Appeal from the judgment and order dated June 8, 1959 the Assam High Court in Civil Rule No. 42 of 1957.
D.N. Mukherjee, for the appellant.
Naunit Lal, for the respondent No. 3.
The Judgment of the Court was delivered by Wanchoo, J.
This appeal on a certificate granted by the Assam High Court raises the question of the constitutionality of an annual tax levied by local boards for the use of any land for the purpose of holding markets as provided by section 62 of the Assam Local Self Government Act, No. XXV of 1953, (hereinafter referred to as the Act).
The appellant is a landholder in the district of i Kamrup.
As such landholder, he holds a hat or market on his land since the year 1936 and this market is known as Kharma hat.
In 1953 54, the local board of Barpeta, within whose jurisdiction the Kharma market is held, issued notice to the appellant to take out a licence and pay Rs. 600/ for the year 1953 54 as licence fee for holding the market.
Later this sum was increased to Rs. 700/ for the year 1955 56.
The appellant continued .protesting against this levy but no heed was paid to his protests and the amount was sought to be recovered by issue of distress warrants and attachment of his property.
Consequently, the appellant filed a writ petition in the High Court challenging the constitutionality of the impost on a number of grounds.
In the present appeal two main contentions have been urged in support of the appellant 's case that the impost is unconstitutional, namely, (i) that the Assam legislature had no legislative competence to tax markets, and (ii) that the tax actually imposed on the Kharma market infringes article 14 of the Constitution.
We shall therefore consider these two contentions only.
This attack on behalf of the appellant is met by the respondent by relying on item 49 of List 1I of the Seventh Schedule to the Constitution, and it is urged that the State legislature was competent to impose the tax under that entry, for this was a tax on land.
As to article 14, the reply on behalf of the respondent is that under section 62 of the Act, a rule has been framed prescribing Rs. 1000/ as the maximum amount of tax which may be levied by any local board in Assam on markets licensed under that section.
The rule also provides that any local board may with the previous approval of Government impose a tax within this maximum according to the size and importance of a market.
So it is submitted that the tax has been imposed by Barpeta local board in accordance with this rule, and the appellant has failed to show that there has been any discrimination in the fixation of the amount of tax on the Kharma market.
The High Court repelled the contentions raised on behalf of the appellant and dismissed the writ petition.
As however, questions of constitutional importance were involved, the High Court 49 granted a certificate under article 132 of the Constitution; and that is how the matter has come up before us.
The first question which falls for consideration therefore is whether the impost in the present case is a tax on land within the meaning of entry 49 of List II of the Seventh Schedule to the Constitution.
It is well settled that the entries in the three legislative lists have to be interpreted in their widest amplitude and therefore if a tax can reasonably be held to be a tax on land it will come within entry 49.
Further it is equally well settled that tax on land may be based on the annual value of the land and would still be a tax on land and would not be beyond the competence of the State legislature on the ground that it is a tax on income: (see Ralla Ram vs
The Province of East Punjab(1).
It follows therefore that the use to which the land is put can be taken into account in imposing a tax on it within the meaning of entry 49 of List II, for the annual value of land which can certainly be taken into account in imposing a tax for the purpose of this entry would necessarily depend upon the use to which the land is put.
It is in the light of this settled proposition that we have to examine the scheme of section 62 of the Act, which imposes the tax under challenge.
It is necessary therefore to analyse the scheme of section 62 which provides for this tax.
Section 62(1) inter alia lays down that the local board may order that no land shall be used as a market otherwise than under a licence to be granted by the board.
Sub section (2) of section 62 is the charging provision and may be quoted in full: "On the issue of an order as in sub section (1), the board at a meeting may grant within the local limits of its jurisdiction a licence for the use of any land as a market and impose an annual tax thereon and such conditions as prescribed by rules.
" Sub section (3) provides that when it has been determined that a tax shall be imposed under the preceding sub section, the local board shall make an order that the owner of any land used as a market specified in the order shall take out a licence for the purpose.
Such order shall specify the tax not exceeding such amount as may be prescribed by rule, which shall be charged for the financial year.
It will be seen from the provisions of these three sub sections that power of the board to impose the tax arises on its passing a resolution that no land within its jurisdiction shall be used as a market.
Such resolution clearly affects land within the jurisdiction of the board and on the passing of such a resolution the board gets the further power to issue licences for holding of markets on lands within its jurisdiction by a resolution and also the power to impose an annual tax thereon.
Now it is urged on behalf of the appellant that when sub s (2) speaks of imposing of "an annual (1) 50 tax thereon" it means the imposition of an annual tax on the market, and that there is no provision in List II of the Seventh.
Schedule for a tax on markets as such.
"Markets and fairs" appear at item 28 of List H, and it is urged that under item 66 of the same List, fees with respect to markets and fairs can be imposed; but there is no provision for imposing a tax on markets in the entries from 45 to 63 which deal with taxes.
It may be accepted that there is no entry in List II which provides for taxes as such on markets and fairs.
It may also be accepted that entry 66 will only justify the imposition of fees on markets and fairs which would necessitate the providing of services by the board imposing the fees as a quid pro quo.
That however, does not conclude the matter, for the contention on behalf of the State is that tax under section 62 is on land and not on the market and further the tax depends upon the use of the land as a market.
It seems to us on a close reading of sub section
(2) that when that sub section speaks of "annual tax thereon", the tax is on the land but the charge arises only when the land is used for a market.
This will also be clear from the subsequent provisions of section 62 which show that the tax is on land though its imposition depends upon user of the land as a market.
Sub section (3) shows that as soon as sub section (1) and (2) are complied with, the local board shall make an order that the owner of any land used as a market shall take out the licence.
Thus the tax is on the land and it is the owner of the land who has to take out the licence for its use as a market.
The form of the tax i.e. its being an annual tax as contrasted to a tax for each day on which the market is held also shows that in essence the tax is on land and not on the market held thereon.
Further the tax is not imposed on any transactions in the market by persons who come there for business which again shows that it is an impost on land and not on the market i.e. on the business terein.
Then sub s (5) provides that the tax shall be paid by the owner of any land used as a market which again shows that it is on the land that the tax is levied, though the charge arises when it is used as a market.
Sub section (6) then lays down that on receiving the amount so fixed the board shall issue a licence to the person paying the same.
Here again the license is for the rise of the land.
Then comes sub section
(8) which provides that wherever.
being the wner or occupier of any land uses or permits the same to be used as a market without a licence shall be liable to fine.
This provision clearly shows that the tax is on the land and it is the owner or occupier of the kind who is responsible and is liable to prosecution if he fails to take cut a licence.
No liability of any kind is thrown on those who come to the market for the purpose of trade.
Sub section (9) then lays down that where a conviction has been obtained under sub section
(8), the District Magistrate or the Sub Divisional Officer, as the case may be, may stop the use of the land as a market.
Sub section (10) then provides that every, 51 owner, occupier or farmer of a market shall cause such drain to be made therein and take all necessary steps to keep such market in a clean and wholesome state and shall cause supply of sufficient water for the purpose as well as for drinking purpose.
Sub sections (ID and (12) give power to the board on the failure of any owner, occupier or farmer to comply with a notice under sub section
(10), to take possession of the land and the market thereon and execute the works itself and receive all rents, tolls and other dues in respect of the market.
This will again show that the tax provided by section 52(2) is a tax for the use of the land and it is not a tax on the market as such, for the income from the market in the shape of tools, rents and other dues is not liable to tax under section 52 and is different from tax.
The scheme of section 62 therefore shows that whenever any land is used for the purpose of holding a market, the owner,occupier or farmer of that land has to pay a certain tax for its use as such.
But there is no tax on any transaction that may take place within the market.
Further the amount of tax depends upon the area of the land on which market is held and the importance of the market subject to a maximum fixed by the State Government.
We have therefore no hesitation in coming to the conclusion on a consideration of the scheme of section 52 of the Act that the tax provided therein is a tax on land, though its incidence depends upon the use of the land as a market.
Further as we have already indicated section 62(2) which uses the words "impose an annual tax thereon" clearly shows that the word "thereon" refers to any land for which a licence is issued for use as a market and not to the word "market".
Thus the tax in the present case being on land would clearly be within the competence of the State legislature.
The contention of the appellant that the State legislature was not competent to impose this tax because there is no provision in List II of the Seventh Schedule for imposing a tax on markets as such must therefore fail.
Then we come to the contention under article 14 of the Constitution.
As to that it is well settled that it is for the person who alleges that equality before law has been infringed to show that such really is the case.
It was therefore for the appellant to produce facts and figures from which it can be inferred that the tax imposed in the present case is hit by article 14 of the Constitution.
In that connection, all that the appellant has stated in his writ petition is that the board fixed a high rate arbitrarily and thus discriminated against the appellant 's market as against the other neighbouring markets where the tax had been fixed at a much lower rate, and that this was hit by article 14.
There was certainly an allegation by the appellant that article 14 had been infringed; but that allegation is vague and gives no facts and figures for holding that the tax imposed on the Kharma market was discriminatory.
It appears that the tax was imposed for the year 1953 54.
which was continued Inter on, with some modifications.
At that time there were five 52 markets on which the tax was imposed including the Kharma market.
The lowest tax was at Rs. 400/ on two markets, then at Rs. 500/ on the third market and at Rs. 600/ on the Kharma market and finally at Rs. 1000/ on the fifth market.
Rule 300(2), flamed in accordance with section 63(3) runs thus: "Rs. 1000/ (Rupees one thousand) only per annum has been fixed as the maximum amount of tax which may be levied by the local boards in Assam on markets licensed under section 62 of the Act.
Any local board may with the previous approval of Government impose a tax within this maximum according to the size and importance of a market.
" Now the rule provides that Rs. 1000/ is the maximum tax and within that maximum the board has to graduate the tax according to the size and importance of the market.
The size of the market naturally takes into account the area of the land on which the market is held; the importance of the market depends upon the number of transactions that take place there, for the larger the number of transactions the greater is the importance of the market.
If therefore the appellant is to succeed on his plea of article 14 on the ground that the tax fixed on his market was discriminatory he had to adduce facts and figures, firstly as to the size of the five markets on which the tax was levied in the relevant years and secondly as to the relative importance of these markets.
But no such facts and figures have been adduced on behalf of the appellant.
It is true that the respondent in reply to the charge of discrimination was equally vague and merely denied that there was any arbitrary discrimination.
But it was for the appellant to show that in fixing the tax on the five markets as it did, the board acted arbitrarily and did not take into account the size and importance of the markets.
As there is no material before us by which we can judge the relative size and importance of the five markets, it is not possible to hold that there was discrimination in taxing Kharma market at Rs. 600/ per year as compared to taxing the three other markets at less than Rs. 600/ .
The attack therefore on the amount actually fixed on the ground of discrimination must fail.
We therefore dismiss the appeal with costs.
Appeal dismissed.

dataset_name: IN-Abs

summary/full:
The appellant as a land holder held a hat or market on his land.
The respondent, the local board, within whose jurisdiction the market was held, issued notice to the appellant to take out a licence and pay a certain sum as licence fee for holding the market.
Inspire of the continued protests of the appellant against the levy, the amount was sought to be recovered by the issue of distress warrants and attachment of his property.
The appellant file.d a writ petition in the High Court challenging on a number of grounds, the constitutionality of the impost, which was dismissed.
In appeal by certificate the appellant contended that (i)the Assam Legislature had no legislative competence to tax markets, and (ii) the tax actually imposed on this market infringed article 14 of the Constitution, because the board fixed a higher rate for the appellant 's market as compared with other neighbouring markets.
HELD:(i) The tax in the present case being on land within the meaning of Entry 49 of List II of the Seventh Schedule of the Constitution, would clearly be within the competence of the State Legislature.
[49 E C] The Scheme of section 62 of the Assam Local Self Government Act, 1953 shows that the tax provided therein is a tax on land, though its incidence depends upon the use of the land as a market and the owner, occupier or farmer of that land .has to pay a certain tax for its use as such.
But there is no tax on the transaction that may take place within the market.
Further the amount of tax depends upon the area of the land on which the market is held and the importance of the market subject to a maximum fixed by the State Government.
Section 62(2) which used the words "impose an annual tax thereon" clearly shows that the word "thereon" refers to any land for which a licence is issued for use as a market and not to the word "market".
The use to which the land is put can be taken into account in imposing a tax on it within the meaning of entry 49 of the List II.
Ralla Ram vs The Province of East Punjab, , applied.
[51 C F] (ii) It was for the appellant to show that in fixing the tax on the other markets as it did, the board acted arbitrarily and did not take into account the size and importance of the markets.
As there was no material by which the relative size and importance of those markets, could be judged, it was not possible to hold that there was discrimination in taxing this market.
[52 F G]


judgement:
Appeal No. 892 of 1963.
Appeal by special leave from the judgment and order dated December 22, 1958, of the Assam High Court in Misc.
(First) No. 39 of 1955.
D.N. Mukherjee, for the appellant.
P.K. Chatterjee, for the respondent.
112 The Judgment of RAGHUBAR DAYAL, R.S. BACHAWAT and V. RAMASWAMI, JJ. was delivered by BACHAWAT, J. MUDHOLKAR, J. delivered a separate Opinion.
Bachawat, J.
The respondcnt 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 non payment of the cheque on the Nath Bank, and on December II, 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.
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 appeilant refused to give any instructions, the 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 113 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.
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 section 45(D) of the 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.
The main contention of the appellant in the Courts below was that the respondent had accepted the demand draft on its own responsibility.
The High Court held that the respondent accepted the draft with the consent and sanction of the appellant.
This finding is no longer challenged.
But the appellant before us contends that the respondent having credited the appellant 's account with the amount of the two cheques on the Bharati Central Bank and having accepted on its own responsibility from the Bharati Central Bank the cheque dated December 9, 1945 on the Nath Bank ought not to be allowed to say that it received the cheque on account of and as agent of the appellant, and that in any event the respondent acted negligently and in breach of its duty as the collecting agent of the appellant and is bound to give credit for the sum of Rs, 8,800.
These contentions in the present form were not raised in the Courts below.
Nevertheless, we allowed the appellant to raise these contentions, but we think that there is no substance in them.
According to the uncontradicted testimony of the witness called on behalf of the respondent, the two cheques on the Bharan Central Bank were entrusted by the appellant to the respondent for collection.
In paragraph 2 of its objections, the appellant admitted that the cheques were entrusted to the responsible for realisation.
Beyond doubt, on December 9. 1946 the respondent received the two cheques for collection in the usual way as agent of 114 the appellant and not with the intention of acquiring title to them.
On the same day, the respondent credited the appellant 's account with the amount of the cheques before the cheques were cleared.
But on December 11, 1946, before the appellant drew upon this amount and as soon as the cheque on Nath Bank received in course of collection of the two cheques was dishonored, the respondent debited the appellant 's account with the like amount.
It does not appear that the credit entry in the accounts was contemporaneously communicated to the appellant.
Nor does the appellant prove any arrangement that the appellant was entitled to draw against the amount of the cheques before they were cleared.
In the circumstances.
the fact that the appellant 's account was credited with the amount of the two cheques does not show that the respondent ceased to be an agent for collection of the cheques.
The respondent duly presented the cheques on the Bharati Central Bank for payment.
Instead of paying the cheques in cash, the Bharati Central Bank sent its own cheque on the Nath Bank.
According to the uncontradicted testimony of the witness called on behalf of the respondent, it was not the usual practice of the banks at Shilling to collect cash in all cases in respect of cheques entrusted for collection.
When the respondent found that the drawer Bank instead of paying cash offered to pay by a cheque, the respondent acting in good faith in the interests of the appellant, accepted the cheque on its own responsibility.
On being informed of the dishonour of the cheque on Nath Bank, the appellant adopted and ratified the respondent 's acceptance of the cheque.
and on that footing, asked the respondent to represent the cheque.
Subsequently, the appellant instructed the respondent to accept a demand draft drawn by the Bharati Central Bank on the head office in lieu of its cheque on the Nath Bank, and approved of all steps taken by the respondent in the matter of collection of the draft.
Instead of disowning the acts of the respondent in respect of the collection of the cheques on the Bharati Central Bank, the appellant ratified them.
In the circumstances, it is not open to the appellant now to say that the respondent accepted the cheque on the Nath Bank or the draft of the Bharati Central Bank on the respondent 's own account and not as agent of the appellant.
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 customer 's accounts and in taking such other steps as may be proper, to secure the customer 's interests.
In the instant case, it is not shown that the respondent acted negligently or in breach of its duties or contrary to any instructions given by the appellant or any lawful usages prevailing amongst bankers at Shillong.
115 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. 4 in the negative.
The next point in issue is whether the proceedings are governed by article 85 of the Indian Limitation Act, 1908, and if so, whether the suit is barred by limitation.
The argument before us proceeded on the footing that an application under section 45(D) of the Banking Companies Act is governed by the Indian Limitation Act, and we must decide this case on that footing.
But we express no opinion one way or the other on the question of the applicability of the Indian Limitation Act to an application under section 45(D).
Now, article 85 of the Indian Limitation Act, 1908 provides that the period of limitation for the balance due on a mutual, open and current account, where there have been reciprocal demands between the parties is three years from the close of the year in which the last item admitted or proved is entered in the account; such year to be computed as in the account.
It is not disputed that the account between the parties was at all times an open and current one.
The dispute is whether it was mutual during the relevant period.
Now in the leading case of Hirada Basappa vs Gadigi Muddappa(1).
Holloway, Acting C. J. observed: "To be mutual there must be transactions on each side creating independent obligations on the other, and not merely transactions which create obligations on the one side, those on the other being merely complete or partial discharges of such obligations." These observations were followed and applied in Tea Financing Syndicate Ltd. vs Chandrakamal Bezbaruah(2) and Monotosh K. Chatterjee vs Central Calcutta Bank Ltd.(3), and the first mentioned Calcutta case was approved by this Court in Hindustan Forest Company vs Lal Chand(4).
Holloway, Acting C. J. laid down the test of mutuality on a construction of section 8 of Act XIV of 1859, though that section did ' not contain the words "where there (1) [1871] Vl Madras High Court Reports.
142, 144.
(2) [1931] L.L.R,.
55Cal.
642 (3) (4) 116 have been reciprocal demands, between the parties".
The addition of those words in the corresponding article 87 of Act IX of 1871, article 85 of Act XV of 1877 and article 85 of the Act of 1908 adopts and emphasises the test of mutuality laid down in the Madras case.
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 section 45 (O) of the Banking Companies Act.
The Courts below, therefore, rightly answered issue No. 1 in the negative.
The claim by the respondent on account of interest was contested in the Courts below, but that claim is no longer contested before us.
The High Court discussed at length the legal characteristics of a demand draft as also questions relating to the interpretation of section 45(O) of the Banking Companies Act.
In view of the contentions raised before us, those questions do not arise, and we do not propose to express any opinion thereon.
In the result, the appeal is dismissed with costs.
Mudholkar, J. I regret my inability to agree with the judgment of my learned brother Bachawat.
This appeal arises out of a petition made under section 45 D of the Banking Companies Act, 1949 (10 of 1949) by the Liquidator of the respondent, the Shillong Banking Corporation for inclusion of the name of the appellant in the list of debtors of the Bank.
The liquidator filed a list of 20 debtors of the Company with necessary particulars in Annexure A, to the application.
One of the debtors mentioned therein is the appellant and the amount of debt due from him to the Bank is stated therein to be Rs. 5,965 5 9.
Annexure A appears to have been prepared in accordance with the rules framed under the Banking Companies Act.
The fourth item in the Annexure is "Description of 117 papers, writings and documents, if any, relating to each debt".
In respect of this item the following particulars have been set out: "A cheque for Rs. 8,800 on Bharati Central Bank Ltd., Shillong was realised by the Bank 'on behalf of the party ' by a Demand Draft on Calcutta Branch of the Bharati Central Bank Limited, but the said Demand Draft could not be realised due to the suspension of business by Bharati Central Bank Ltd. The Bank 's claim to be treated as preferential Creditor has been admitted.
" A notice of this claim having been served on the appellant he preferred an objection before the Court.
There, the appellant had contended that the claim of the Bank is barred by time.
Paras 2, 3, and 5 of the objection are material and it would be convenient to set them out in full.
They run as follows: "2.
That it is a fact that this opposite party did give a cheque for Rs. 8,800 to the Bank on the Bharati Central Bank Ltd., Shillong for realisation in 1947 and in normal course it realised the amount in cash but either for its own convenience or for remitting its own money to Calcutta it accepted a draft from the Bharati Central Bank Limited on its branch at Calcutta without any instruction or intimation to this opposite party and also this opposite party withdrew their amount by a cheque after this and if in the meantime the said bank stopped its business this opposite party cannot be held liable for the same.
(3) That had the bank not received any cash payment in case of the opposite party 's cheque as it should have received it should have informed them in time.
(5) That it is not a fact that the demand draft was accepted by the bank instead of cash payment with any knowledge of this opposite party and as such the claim of the Bank is false and frivolous." Deka J., who heard the application framed four issues one of which related to limitation and the fourth was as follows: "Issue No. 4, whether the plaintiff bank is bound to give credit to the defendant for a sum of Rs. 8,800 covered by a cheque or cheques on the Bharati Central Bank Limited, Shillong Branch?" The only oral evidence tendered was that of Narendra Nath Dutta, Assistant of the respondent Bank.
Upon a consideration of the evidence of Dutta and the documents placed on ' record Deka J. found against the appellant on these issues and passed a decree in favour of the Bank for Rs. 5,965 5 9 in addition to Rs. 2,000 by way of interest.
He further allowed Rs. 300 as costs and 6 per cent p.a. interest on the decretal amount till realisation.
An appeal was preferred by the appellant under the Letters Patent 118 and that having been dismissed he has come up before this court by special leave.
It is the case of the respondent Bank that the appellant had a mutual open and current account with the Bank.
It is upon that basis that they have met the appellant 's contention that the suit was barred by time.
On December 9, 1946 the respondent credited two cheques to the appellant 's account one for Rs. 8,200 and another for Rs. 600 and sent them for collection to the Bharati Central Bank Ltd., Shillong Branch upon which they were drawn.
Instead of obtaining cash from the Bharati Central Bank the respondent obtained and accepted from that Bank a cheque on the Nath Bank Limited.
This the respondent did, as admitted by Dutta, without consulting the appellant.
Dutta has further admitted that the respondent Bank obtained the cheque on their own responsibility.
They then presented the cheque to the Nath Bank on December 10, 1946.
The Nath Bank returned the cheque with a note "full cover not received".
According to the witness the Bank referred the matter to the appellant and with his specific instruction the cheque was presented the next day to the Nath Bank, when also it was returned.
Thereafter, the witness proceeds, the respondent connected the appellant for instructions.
On December 13, 1946 they accepted a demand draft from the Bharati Central Bank for an identical amount which they sent to their Calcutta Branch for collection.
When the demand draft was presented to the Calcutta Branch of the Bharati Central Bank they requested by letter dated December 16, 1946 to present it to the Shillong Branch.
Then, according to Dutta.
on the advice of the appellant they presented the draft to the Shillong Branch of the Bharati Central Bank.
In the meanwhile the Bharati Central Bank had applied for moratorium and this demand draft was not cashed.
It would appear that in the proceedings for reconstructing the Bharati Central Bank the respondent asked to be treated as preferential creditors in respect of the amount for which the draft had been made out and have been so treated.
It is contended on behalf of the appellant that the respondent having accepted the demand draft on their own responsibility and having sought to be treated as preferential creditors of the Bharat, Central Bank and having in fact been so treated cannot now turn round and say that the appellant 's cheques were not honoured and that, therefore, they are entitled to claim the sum of Rs.5,965 5 9 and interest from him.
The question to which I would address myself is whether the respondent has to be regarded as the appellant 's agent only for the collection of these two cheques or whether they received these two cheques for being credited in the mutual and open current account between themselves and the appellant.
It is no doubt that where a customer hands in a cheque to his banker for collection the banker accepting the performance of that duty becomes the agent of the customer for the purpose of collection.
But if a banker credits a cheque in the customer 's account with the bank would the banker be necessarily deemed to be his agent when he takes the step of collecting the amount 119 payable under the cheque.
If the customer makes an endorsement on the cheque to the effect that it is handed in for collection no difficulty would arise.
But if there were no such endorsement what would be the position? The accepted position in banking law is that when a banker receives money from a customer he does not hold it in a fiduciary capacity.
(see Practice and Law of Banking by H.P. Sheldon, 8th edn.
p. 201).
As the author points out : "To pay that money is 'deposited ' with a banker is likely to cause misapprehension.
What really happens is that the money is not deposited with, but lent to the banker, and all that the banker engages to do is to discharge the debt by paying over an equal amount when called upon.
" Sheldon has quoted the following observations of Lord Cottenham in Foley vs Hill (1948). "Money, 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 banker 's 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 banker 's money; he is known to deal with it as his own; he makes what profit he can, which profit he retains to himself, by paving 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 said as follows: "In Joachimson vs Swiss Bank Corporation, 1921 Lord Justice Atkin gave an admirable summary of the position.
He stated that the banker undertakes to receive money and collect bills for his customer 's 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 customer 's 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 fayour 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 120 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 nothing 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 respondent have 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 appellant 's agents but as payee.
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 ed) "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, Shilling.
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 rune of Rs. 8,800, particularly on their own showing what was owing to them from the appellant was something less than Rs. 6,000 they cannot now be heard to say that they merely acted as the appellant 's agents.
121 For these reasons, disagreeing with the High Court, I hold that the appellant 's name cannot be included in the list of the respondent 's 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 BY COURT In accordance with the opinion of the majority, this appeal is dismissed with costs.

summary/full:
The appellant had a combined overdraft and deposit account, also described as a mutual open and current account, with the respondent bank.
In December 1946, the respondent credited two cheques to the appellant 's account one for Rs. 8,200 and the other for Rs. 600 and sent them for collection to the Shillong branch of the Bharati Central Bank, on which they were drawn.
Instead of obtaining cash from that Bank, the respondent accepted a cheque on the Nath Bank.
This the respondent did without consulting the appellant and on its own responsibility.
When the respondent presented the cheque to the Nath Bank, it was returned with a note "full cover not received".
The respondent thereupon debited the appellant with the sum of Rs. 8,800 in the accounts without informing him.
On the instructions of the appellant, who was informed about the dishonouring of the cheque, the respondent accepted a demand draft from the Bharati Central Bank drawn on its Calcutta branch for the amount.
The Calcutta branch of the Bharati Central Bank however requested the respondent to present it to the Shillong branch.
The respondent presented the draft to the Shillong branch of the Bharati Central Bank, but the Bank applied for moratorium and closed its business, in January 1947 and the draft was not cashed.
In the proceedings for the reconstruction of the Bharati Central Bank, the respondent asked to be treated as a preferential creditor in respect of the amount of the draft, and was so treated.
The dealings between the appellant and respondent continued till December 1950.
In May 1953, the respondent Bank was ordered to be wound up and the liquidator presented an application to the High Court under section 45D of the Banking Companies Act, 1949, for settlement of the list of debtors, claiming a decree for about Rs. 6,000 and interest, against the appellant.
The appellant resisted the claim but the High Court decreed it.
In the appeal to the Supreme Court, it was contended that (i) the respondent acted negligently and in breach of its duty as collecting agent of the appellant and was bound to give credit for the sum of Rs. 8,800 and (ii) the claim was barred by limitation.
HELD: (per Raghubar Dayal, Bachawat and Ramaswami.
JJ.) (i) It was not shown that the respondent acted negligently or in breach of its duties or contrary to any instructions given by the appellant or any lawful usages prevailing amongst bankers and therefore was not bound to give credit to the appellant for the sum of Rs. 8,800.
[114 H] A banker entrusted by its customer with the collection of a cheque is bound to act according to the directions given by a customer, and in the absence of such directions, according to the usages prevailing at the place where the banker conducts his business 111 and applicable to the matter in hand.
The banker is also bound to use reasonable skill and diligence in presenting and securing payment of cheques and placing the proceeds to his customers ' accounts and in taking such other steps as may be proper to secure the customer 's interests.
The respondent in the instant case received the two cheques for collection in the usual way as agent of the appellant and not with the intention of acquiring title to them.
The appellant, instead of disowning the various acts of the respondent in respect of the collection of the cheques, had ratified them.
By preferring a claim as creditor in respect of the draft, in the liquidation proceedings of the Bharati Central Bank, the respondent was not accepting the draft in satisfaction of its dues from the appellant.
It was only preserving all the rights in respect of the draft and was acting in his best interests.
[114 A, F H; 115 A B] (ii) The respondent gave loans on overdrafts and the appellant made deposits.
The loans and deposits created mutual obligations.
Since the account was mutual and continued to be so until December 1950, the claim against the appellant was not barred by limitation having regard to section 45 (0) of the Banking Companies Act.
[116 B, E] Per Mudholkar, J. (Dissenting), the appellant 's name could not be included in the list of the respondent 's debtors.
[121 A] Where a customer hands in a cheque to his banker for collection, the banker accepting the performance of that duty becomes the agent of the customer for the purpose of collection.
But if a banker credits a cheque in the customer 's account with the bank, the banker would not necessarily be deemed to be the customer 's agent, when he takes steps for collecting the amount payable under the cheque.
The facts, that the cheques when paid in, were credited in the appellant s account with the respondent and that when the cheques were returned unpaid, the respondent made a debit entry against the appellant 's account without informing the appellant show mat the respondent accepted the position that it was acting in the matter not as the appellant 's agent but as a payee.
Since the appellant had a mutual open and current account with the respondent, the respondent would, with respect to the amounts for which the cheques were drawn, have become upon realisation of the cheques drawn by the appellant an actual recipient of the money from the appellant.
Therefore, though it is true that the amount was not received by the respondent in cash it must be deemed to nave received the sum either by reason of the fact that it obtained from the Bharati Central Bank a cheque for the amount on the Nath Bank, or by the acceptance of the demand draft.
Having claimed as against the Bharati Central Bank to be treated as a preferential creditor for the sum of Rs. 8,800 whatever rights the respondent would be against that Bank and not against the appellant.
[118 H; 120 A, C, F H]