# Gordon W11udroj/ie Le(Jt/ie1 lll anuja Juring Co v. The Cemmissio11er of Income~fa.'I: M1,.dros Kapur J

- **Citation:** [1962] Supp. 2 S.C.R. 217
- **Court:** Supreme Court of India
- **Decided:** 1959-06-23
- **Bench:** B. P. Sinha, J.L. Kapur, M. !ImAYATULLAH, J. c. SHAH, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/gordon-w11udroj-ie-le-jt-ie1-lll-anuja-juring-co-v-the-cemmissio11er-of-income-2599
- **Pages:** 9

## Headnote

Bank-Mon<y delivered by constituent-;--Special instruction to await direction for deposits-If held by the bank as
trustee-Scheme for settlement of bank's liabilittes sanctionedAmount, if subject to it.
The respondent delivered certain sums of money to the
appellant-bank at Lahore for transmission to Calcutta, with
instructions to await his directions regarding the opening' of
accounts for keeping the money in fixed deposit in the Calcutta Branch of the bank which was proposed to be opened
in the near future. The respondent did not however give any
instruction for opening any account, fixed deposit or otherwise
in regard to the amounts after they reached Calcutta. Within
a few days after the opening of the Calcutta branch of the
bank it ceased making payments and a moratorium for a.
limited period was declared under an ordinance issued by the
Governor General restraining the bank from making payments
to its depositors. After the expiry of the period of the moratorium the Calcutta branch of the bank raised objections to
the respondent's application for withdrawal of the amount
1961
Gordon W11udroj/ie
Le(Jt/ie1
lll anuja .. Juring Co,
v.
The Cemmissio11er of
Income~fa.'I: M1,.dros
Kapur J,
1961
December 20,
:!18 SUPREME COUHT REPORTS (1962] SUPP.
1>·61
whereupon the responde1•t filed a suit in the Calcutta High
Ntw Bat•.J:. uf India
Couft for a decree for refund of the amount.
During the
J;d.
pendency of the suit the High Court of East Punjab sane·
v.
t1oned a scheme under ss. 153 and 153A of the Indian Coml'm•.Y L.l
panics Act, 1913 for set!lemenr of the liabilities of the Bank
The courts below decree.I the respondent's suit. On
appcdl by the bank lJy speci•I k.1ve, the questions which
arose for
<leci~ion \Vere whether the bank was a trustee for
transmission of the c..n1ounts to Calcutta and whether in the
absence of auy instruction for opening a fixed deposit account
the bank was liable to refund the full amount or a reduced
an111u1tt according to the schc1ne sanctioned by the Punjab
High Court.
Held, th 1t when a person dealing with a bank delivers
money to tl1e bank an intention to create a relation of creditor
and debtor between him and the bank is presumed, but the
presumption mar be reburted by proof of special instructions.
When money b paid to a bank with special illJtr1.1ctio11s to
retain the same pending further instructions, a trust is created
and the presumption which ordinarily arises by reason of
payment ol money to the IJank is rebutted.
lle/d, f,1rthcr, that the money delivered by the Respondent
remained in tn1st with the bank and was not held by it as a
deposit suojcct to any scheme for the settlement of the
liabilities of the bank sanctioned by the High Court uudcr
the Companies Act.
1'he Ufjicial Assignee, Madras v. Nateaam Pillai, 1.L.R.
(19401 Mad. 845, Arbuthnot v. D. Rajan
.4.war, I.L.R.
( 1913) 36 Mad. 499 and Farley v. Turner, (1857) 26 L.J.
Ch. i 10, applied.
CrnL APPELLATE JURISDICTION : Civil Appeal
No. 398 of HlliO.
Appeal by special leave from the judgment
an<l decree datc<l June 23, 1959, of the Calcutta
High Court in App~al from Original Decree No. 50
of 1955.
Veda Vya&a, S. K. Kapur and B.P. Mahe&hwari,
for the appellant.
K. L. Gosuin and K. L. Mehta, for the respondent.
l!Hil.
December 20.
The Judgment of tho
Court was delh'ered by
..
2S.C.R.
SUPREME COURT REPORTS
219
SHAH, J.-Mr. Justice Bachawat c.f the High
Court of Judicature at Calcutta <lecrebd Suit No.
1039 of 1948 filed by one Pearey Lal-hereinafter
called the plaintiff-for a decree for lts. l,35,0UO/-
with interest against the New Bank of India Ltd.
The appeal of the Bank against the decree was dismissed by a
Divi~ion Bench of the High Cvurt.
With special leave the Bank has appealed to thie
Court.
The Bank had its registered office originally at
Lahore but after the partition of India the office
was transferred to Amritsar. The plaintiff who was
a resident of Lahore had accounts ·with several
banks including the New Bank of India Ltd.

## Text

2 S.C.R.
SUPH.l<:ME COURT REPORTS
ryl~
•
I
In our opinion the proper test to apply in this
case is, was the payment m:ide as a matter of prac·
ticc which affected the quantum of salary or was
there an expectation by the employee of getting a
gratuity or was the sum of money expended on the
ground of commercial expediency and in order in·
directly to facilitate the carrying on of the business.
But this has not been shown and therefore the
amount claimed is not a deductible item under
s. 10(2)(xv).
The appeal therefore fails and is dismissed with
costs.
Appeal dismissed.
NEW BANK OF INDIA LTD.
v.
PEAREY LAL
( B. P. SINHA, c. J., J.L. KAPUR, M. !ImAYATULLAH,
J. c. SHAH and J. R. MUDHOLKAR, JJ.)
Bank-Mon<y delivered by constituent-;--Special instruction to await direction for deposits-If held by the bank as
trustee-Scheme for settlement of bank's liabilittes sanctionedAmount, if subject to it.
The respondent delivered certain sums of money to the
appellant-bank at Lahore for transmission to Calcutta, with
instructions to await his directions regarding the opening' of
accounts for keeping the money in fixed deposit in the Calcutta Branch of the bank which was proposed to be opened
in the near future. The respondent did not however give any
instruction for opening any account, fixed deposit or otherwise
in regard to the amounts after they reached Calcutta. Within
a few days after the opening of the Calcutta branch of the
bank it ceased making payments and a moratorium for a.
limited period was declared under an ordinance issued by the
Governor General restraining the bank from making payments
to its depositors. After the expiry of the period of the moratorium the Calcutta branch of the bank raised objections to
the respondent's application for withdrawal of the amount
1961
Gordon W11udroj/ie
Le(Jt/ie1
lll anuja .. Juring Co,
v.
The Cemmissio11er of
Income~fa.'I: M1,.dros
Kapur J,
1961
December 20,
:!18 SUPREME COUHT REPORTS (1962] SUPP.
1>·61
whereupon the responde1•t filed a suit in the Calcutta High
Ntw Bat•.J:. uf India
Couft for a decree for refund of the amount.
During the
J;d.
pendency of the suit the High Court of East Punjab sane·
v.
t1oned a scheme under ss. 153 and 153A of the Indian Coml'm•.Y L.l
panics Act, 1913 for set!lemenr of the liabilities of the Bank
The courts below decree.I the respondent's suit. On
appcdl by the bank lJy speci•I k.1ve, the questions which
arose for
<leci~ion \Vere whether the bank was a trustee for
transmission of the c..n1ounts to Calcutta and whether in the
absence of auy instruction for opening a fixed deposit account
the bank was liable to refund the full amount or a reduced
an111u1tt according to the schc1ne sanctioned by the Punjab
High Court.
Held, th 1t when a person dealing with a bank delivers
money to tl1e bank an intention to create a relation of creditor
and debtor between him and the bank is presumed, but the
presumption mar be reburted by proof of special instructions.
When money b paid to a bank with special illJtr1.1ctio11s to
retain the same pending further instructions, a trust is created
and the presumption which ordinarily arises by reason of
payment ol money to the IJank is rebutted.
lle/d, f,1rthcr, that the money delivered by the Respondent
remained in tn1st with the bank and was not held by it as a
deposit suojcct to any scheme for the settlement of the
liabilities of the bank sanctioned by the High Court uudcr
the Companies Act.
1'he Ufjicial Assignee, Madras v. Nateaam Pillai, 1.L.R.
(19401 Mad. 845, Arbuthnot v. D. Rajan
.4.war, I.L.R.
( 1913) 36 Mad. 499 and Farley v. Turner, (1857) 26 L.J.
Ch. i 10, applied.
CrnL APPELLATE JURISDICTION : Civil Appeal
No. 398 of HlliO.
Appeal by special leave from the judgment
an<l decree datc<l June 23, 1959, of the Calcutta
High Court in App~al from Original Decree No. 50
of 1955.
Veda Vya&a, S. K. Kapur and B.P. Mahe&hwari,
for the appellant.
K. L. Gosuin and K. L. Mehta, for the respondent.
l!Hil.
December 20.
The Judgment of tho
Court was delh'ered by
..
2S.C.R.
SUPREME COURT REPORTS
219
SHAH, J.-Mr. Justice Bachawat c.f the High
Court of Judicature at Calcutta <lecrebd Suit No.
1039 of 1948 filed by one Pearey Lal-hereinafter
called the plaintiff-for a decree for lts. l,35,0UO/-
with interest against the New Bank of India Ltd.
The appeal of the Bank against the decree was dismissed by a
Divi~ion Bench of the High Cvurt.
With special leave the Bank has appealed to thie
Court.
The Bank had its registered office originally at
Lahore but after the partition of India the office
was transferred to Amritsar. The plaintiff who was
a resident of Lahore had accounts ·with several
banks including the New Bank of India Ltd. Ia
view of the impending partition, the plaintiff was
anxious to transfer his moveable property outside
the territory it was apprehended would be included
in Pakistan, and he gave instructions for transferring his accounts with the Bank to its other
branches in India. He also paid an amount of
Rs. 1,25,()00/- on July 18, 1947, into tbe Bank at
Lahore with instructions to transmit the samethe to
Bank's branch at Calcutta which it then proposed
to open in the near future. An amount of
Rs. 10,000/- was also paid into the Bank at Lahore
on July 19, 1947, with similar instructions. In
respect of these two transactions the Bank executed
receipts which are set out below :
''Received the sum of Rs. l,25,000/-
(Rs. One Lac & twenty five thousand) only
from Mr. Pearey Lal on account of amount to
be remitted to Calcutta branch for preparing
various F.D. Receipts subject to his instructions on or after the opening date when he
would call upon them personally.
Lahore
for the New Bank of India Ltd.
The 18th day of
Sd. Illegible
July, 1947.
Manager."
1961
New Bonk of lndit
Ltd:
v
Pearey Lal
Shah J.
1961
N11tJ LJ,uik of India
Ltd.
v.
PeaitJ Lal
.\hoh J.
220 SCJPHEME COURT REPORTS [1962) SUPP.
...............................................................
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"l{eceived the sum of Rs. 10,000/-(Rupces
ten thousa.nd) only through Mr. Pearcy Lal for
transmission to our Calcutta. Office for making
up various F.D. Rec<·ipts at his instance when
he calls upon them poc•onally on or after the
opening date of the Brnncb.
Lahore
for the New Bonk of India Ltd.
19-i-4i.
Sd. Illegible
Manager."
Tho two amounts were transmitted by the Bank to
Calcutta. A branch of tho Bank was opened at
Calcutta on September 24, 1947, but within a few
days thereafter the Bank ceased making payments.
It appears that a moratorium for a limited period
was declared under an Ordinance issued by the
Governer-Genera.l
restraining
the
Bank from
ma.king
payments to its depositors. In December,
1\147,
after the expiry of the period of the moratorium tho plaintiff applied to the Bank's bran~h at
Calcutt.a for facility to withdraw tho whole a.mount
but th~ Calcutta Branch raised certain technical
objections against such a course. On March 2i, 19!8
tho plaintiff commenced an action against the Bank
int,er alia for a. decree of Rs. 1,35,000/- in the
Calcutta High Court on its original side.
During
the pcndency of the suit the High Court of East
Punjab sanctioned a scheme for arrangement under
ss. 153 and l53A of tho Indian Companies Act, 1913,
for sottlement of tho liability of the Bank. By the
first clause of thti scbeme the expreBBion "deposit"
was to include "Fixed Deposit.s, Bank's mm Gash
Certificates, Current Accounts, Deposits at Call,
Savings Fune! Accounts A'Uounts lying in Sundries
or in any other kind of Credit Accounts, Bank Drafts,
Ca.sh Order~, and documents of the like nature and
amounts due to Bankers over and above the value
of Government Securities lying .,.. ith them against
I
2 S.C.R.
SUPREME COURT REPORTS
221
such depositors". It was directed by the scheme,
as it finally emerged, that the depositors were to be
paid 70!% of the deposits held by them and to he
allotted shares of the face
value of 5% of the
deposits.
The plaintiff claimed by his suit that he had
entrusted to the Bank at its registered office at
Lahore Rs. 1,35,000/· on July 18 and 19, 1947, with
instructions to transmit the same to the branch of
the Bank which it proposed to open at Calcutta and
to hold th~ amount sub-ject to further instructions
to be given by him when he would .call personally
at the branch at Calcutta on or after the opening
date, that prior to the opening of the said Calcutta
Branch the plaintiff countermanded his instructions
on or about September 13, 194 7 and demanded at
Lahore that it be returned, but the Bank wrongfully claimed to have remitted the two sums to its
Calcutta Branch and to have kept the same in a
fixed C:eposit account in the name of the plaintiff,
even though the plaintiff, had opened no such
account at the Calcutta Branch and had given no
instructions to put t~e same into any account by
way of fixed deposit or otherwise. The plaintiff,
accordingly, claimed that the Bank was a trustee
for transmission of the amount and in the absence
of any instructions given by him for opening a fixed
deposit account; in· respect of the amount transmitted the Bank stood qua the plaintiff in a fidu-
·•ciary relation and was liable to refund the full
amount. Jn substance, it was claimed by the
plaintiff that the amount lying with the Bank at
Calcutta was not a deposit within the meaning of
the sch~me and was not liable to any reduction.
The Bank submitted that the amount of
Rs. l,35,000/- was deposited by the plaintiff at its
head office at Lahore for the purpose of opening a
fixed deposit account in the name of the plaintiff
upon the terms that the fixed deposit would carry
New Bank of India
Ltd.
••
P1arey Lal
Shah J.
JP81
Jl1w Bonk of lrt-fia
lid.
v.
l"tPl:J lat
S'cli J.
222 SUPREME COURT REPORTS [1962] SUPP.
interest a.a on the reepeotive dates of the deposits,
that it was agreed that the plaintiff would be
allowl'd to take Joana upto 90% of the deposit
at a rate of interest of half peroent. above
the current fi:x:cd doposit rates and that the
amount would be transmitted to the Calcutta
Branch of the Bank for the purpose of orediting
the i;ame to the fixed deposit account of the plaintiff. The Bank denied the alleged instructions in
8optember, l\147, countermanding the original
arrangement and contended that the plaintiff was
bound by the sch~me of arrangement sanctioned
by the High Court of Enst l unjab. The Bank
offered to pay the amount due to the plaintiff
umkr the scheme uf arrangement 8lld also to
allot shares of the value of 5% in accordance with
the scheme.
A decree on admiselon was pa.s~d against
the Bank for Rs. 81,000/-
and tho suit was
contested bv tho Bank for the balance uf the
olaim.
·
The trial Court held that oven though the
plaintiff failed to prove the instructions in .the
month of September, 1947, s 0 t up by him countermanding tran.smission, it was established on the
evidt-noe, that the plaintiff had entrusted to the
Bank Rs.1,35,00'l/- fortraDBmission auu the plainti!f
having given no further instructions, the Bank held
the amount a.s trustee for the plaintiff and that the
plaintiff'a claim waa not liable to bo reducl'd under
the scheme sanotioned by the High C11urt of Eallt
Punjab. The Court also neg..tived the pica of
the Bank tba.t tit" amount of Ra.1,35,000/-was depoRited with thA · Bank at Lahnro for oprning a
ft:x:ed depolrit account subject to the conditions
which the Bank set up. The findii:1g of the trial
Court were confirmed, in app"&l, by a Division
Bencm of the ·:H'igh Court .llot Calcutta.
. The facts found proved, according to the
findinga .of the trial Court and confirmed by the
..,
2 S.C.R·
SUPREME COURT REPORTS
223
High Court are therefore that the plaintiff delivered
an amount of Rs. 1,25,000/- on July 18, 194 I, and
Rs. 10,000/- on July 19, 1947,. to the Bank at
Lahore for transmission to Calcutta, with instructions to await the directions of the plaintiff regarding the opening of accounts for keeping the same
in fixed deposit or othenyis~ in the Calcutta .Branch
of the Bank, and the plamt1ff never gave mstructions for opening any account, fix<·d
depo~it or
otherwise, in regard to· the amounts after they
reached Calcutta.
Delivery of the amount for transmission to
the Bank created e.x facie a relationship of a
fiduciary <:haraeter. But counsel for the Bank
contends. that when the amount was handed over
at Lahore to the Bank by the plaintiff who was
an old . constituent of the Bank it must be presumed that a relationship of debtor and creditor arose
and by the addition of instructions for transmission
of the amou.nt to another branch the relationship
of trustee and cestuique'trust did not arise. He
submitted that the contention that the relation
between the plaintiff -and the Bank was of creditor
and debtor was supporteq by three important circumstances : ( l) that the Bank agreed .to pay
interest on· the amount delivered by the plaintiff;
(2) that the'Bank cha.rged no commission or remuneration. for transmission of the a.mount and (3)
that.even on the plaintiff's ·case the amount was
to be utilized · .for. opening fixed deposit accounts
at Calcutta .. It is true. that in the ·absence of nther
evld~w.i• a peiiaon
J:l~Yillg . monl)y into a ·Bank,
whether. he· .. i;e· a cq~iwent of the Bank or not,
may he pret'Qme4.t~ 'have _paid the money to be
held ~ bankers ordinarUy hold the money1 of their
constituents. Jfno specific.instruction• are · giv('n
at the time of payment or thereaftei:, and even if
the money ie•luild iJ1 a su•pense account .the bank
doea. not thereby become a trustee for . the a.mount
paid. In other words, when a person dealing with
1961
New Bank ef India
Ltd . ..
P'earey Lal
Shah J,
1961
Ntw Bani nJ lndi1
/./J.
v,
r 111·~1 1,.,1
Sho.~ J.
221
SUPREME COURT REPORTS [1962) SUPP.
a. bank deliverR monoy to the Bank an intention
to ert>1it.,.. a. relation of creditor a.nd debtor botween
him 11.n1! the Bank is presumed, it being the normal
cour"" of the b11sinPss of the Bank to accept deposit!! from its customers. But thia presumption is
one of fact arising from the nature of the business
carried nn by the B11.nk and is rebutted by proof
of sp<'cial
in~tmctions, or circumstances attending
the transaction.
Whero the money is pa.id to a
bank with,special instructions to retain the same
pending further instruct.ions (The Official Asaignee,
Madral! v. Nale.wm PiUai (') ). or to pay over the
same to · anothn
p~rson who has no
banking
&ccount wit.h tho bank and the b11.nk accepts the
instru~tions Rnd h"lds the money pending instruotiorni from t.hat other person (Arbuthnot & Co. v.
D. Ra,jam Ayyar (')), or where instructions are given
by a customer to his banker that a part of tho
amount lying in his account ho forwarded to
another hank to meot a. bill to become due and
na.vable ll\· him and the amount is sent by the
bank,ir as dir<'cted (Fc"IR.y v. Turner(')), a trust
re~ultH a1.d the presumption which ordinarily arises
by rca.~on of paymont of the money to the bank is
rebuttt·d.
It i~ not nOCl'ssary in this appeal to consider
whether hrcauso of an agreemrnt to pay intcrPst
the rPlationship ma:v be deemed to be of debt.or
and creditor, beoa.us' it was held by both the
courts brlow t.hat no such agrooment i• provP<l, anrl
11.coording to the Rettle<l prRotice uf this rourt the
finding is r!'garded as binding.
The Bank char1wd no commiBSion or remune·
ration fot
trsn~mitting the amount to Calcntts,
but that, in our judgment, ill a ciroumAtance which
permit!! of no
inference agRinet the pla.intiff.
Undoubtedly, when thn amount was de'.ivered to
the Bank bv the plaintiff it wa.8 his intention to
open fixed deposit aooount in Calcutta with the
(1) I L. R. tl940) Mad. 845.
(2) I. L. R. (1913) 36 Mad. 499.
{') {18S7] 26 L. J. Ch. 710,
2 S.C.R.
SUPREME COURT REPORTS
225
Bank's branch but the fixed. deposit accounts were
to be opened after instructions were received.
The transaction, '\S evidenced by the two
receipt.s, was primarily one of cntrustment of the
amount to the B;ink for transmission to Calcutta.
After the purpose for which the moneys were
entrusted was carried out, in the absenoe of further
instructions the defendant did not cease to be a
trm;tee.
So long as instructions were not given by
the p!P.intiff for appropriation of the amounts the
Bank continued to hold the amounts transmitted
for 'ind on Lehalf of the plaintiff and thne is no
evidence that the plaintiff gave instructions or
acquiesced in the opening of a fixed deposit account
after the same reached Calcutta. It is immaterial
that the Bank purported to open .fixed deposit
account in the name of the plaintiff with the
amounts received at its head office at Lahore.
That course of action was adopted without the
~onsent of the plaintiff and it could not bind the
plaintiff. The High Court was, therefore, right in
holding that the amount delivered by the plaintiff
to the Bank at Lahore remained in trust even
after it reached Calcutta, and it was not held by
tho Bank, in deposit for the plaintiff within the
meaning of the scheme sanctioned by the High
Court of East Punjab.
In that view of the case the appeal fails and
is dismissed with oosts.
Appeal dismissed.
lHl
J\'tw Banlr. of lndta
Ltd.
v,
Pearey Lat
Shall J,