# UN11ED COMMERCIAL BANK LTD v. OKARA GRAIN BUYERS SYNDICATE LTD. & ANR

- **Citation:** [1968] 3 S.C.R. 396
- **Court:** Supreme Court of India
- **Decided:** 1968
- **Case number:** Civil Appeal No. 449 of 1965
- **Bench:** J. C. SiIAH, R. S. Bachawat, G. K. Mitter
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/un11ed-commercial-bank-ltd-v-okara-grain-buyers-syndicate-ltd-anr-4405
- **Pages:** 8

## Headnote

Banking-Deposit Rectif!t-Syndicate openinl/ account in Bank-De·
posit rteeipt in the name of Syndicate account DiJtrict Mqistrate If constitutes him owner of deposit-Condition of deposit that on due date
deposit receipt should be discharged by depositor-Non
production of
deposit receipt-Equitable jurisdiction of High Court.
The respondent-a syndicate with its registered office in Montgo=
in undivided Punjab, had depOl!ited certain amount with the appellant-Bank
and obtained a Fixed Deposit Receipt. The deposit was required to be
made for due performance of the conditiona of a scheme for procurement devised by the Government of Punjab in 1946. The receipt was
made out in the name of the Syndicate Account District
Magistrate,
Montgomery. No account was opened in the bank's books in the name
of the District Magistrate and under the conditions of deposit it was repayable to the respondent on demand on due date. The respondent served
a notice of withdrawal upon the Bank. An endorsement in that behalf
was made on the receipt which was handed over to the District Magistrate,
Montgomery. Following the communal riots in 1947 the staff of the respondent migrated to India and the respondent aet up a new business at
Amritsar.
The respondent demanded the money to which the appellant
replied that the amount could not be returned until the respondent obtains
a discharge from the District Magistrate, MontgOmery (in Pakistan) of his
lien on the fixed deposit reccipt. The respondent filed a petition before the
Debt Adjustment Tribunal, Amritsar, for an order directing the appellant
to pay the amount with interest, and impleaded the District Magistrate,
Montgomery as a respondent.
The District Magistrate filed no claim
before the Tribunal. The Tribunal 'dismissed the petition holding that the
amount stood forfeited by' order of the Disliict Magistrate, Montgomery.
Jn appeal, the High Court made an order in terms of the prayers in the
petition, subject to the condition that the respondent shall give an indemnity for restitution of the amount in case the bank had to pay the amount
to the District Magistrate, Montgomery.
In appeal to this Court.
HELD : The deposit receipt gave rise to no contractual obligation in
favour of the Disliict Magistrate, Montgomery nor was the bank a trustee
for that officer. By an express condition the receipt was not tranlferable.
The name in which the receipt was made out was by itself not sufficient
to create an interest in the amount in favour of the District Magistrate.
The District Magistrate was not in Jaw constituted owner of the money
deposited by the respondent with the appellant by virtne of the delivery
of the, receipt. Jn the books of the appellant the fund stood to the credit
of the resp0ndent : the respondent was the owner thereof and it was the
respo.ndent alone which was entitk:d to d .. ~m.uid payn1ent of the fund. Jn
the absenre of any obligalion--cuntractual or fiducia.ry-un:dertuken
by
the appellant. in favour of the District ~1agistrate, the appellant could not
withhold payment of money deposited after-the expiry of the period of
notice. [399 D-HJ
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tl. CO. BANK V. tJ. G. B. SYNDICAtE (Shah, J.)
397
Even if the condition in the terms of deposit that on due date the deposit n!ceipt should be discharged by the depositors was to be considered
a condition pn!eedent to the enforcement of the obligation of the Bank
in favour of the respondent, the High Court was right in the exercise of
its equitable jurisdiction to direct that the money be paid to the respondent
without production of the receipt. It might =nably be inferred that
the receipt was lost or was destroyed and in such cases the court's equitable
jurisdiction ·could appropriately be exercised.
fhe . direction of the Hill!'
Court that an indemnity be given by the n!spondent to the Bank for restitution if the Bank was to pay the amount to the District Magistrate,
Montgomery has fully protected the Bank against any p

## Text

UN11ED COMMERCIAL BANK LTD.
v.
OKARA GRAIN BUYERS SYNDICATE LTD. & ANR.
Marcil 4, 1968
(J. C. SiIAH, R. S. BACHAWAT AND G. K. MITTER, JJ,]
Banking-Deposit Rectif!t-Syndicate openinl/ account in Bank-De·
posit rteeipt in the name of Syndicate account DiJtrict Mqistrate If constitutes him owner of deposit-Condition of deposit that on due date
deposit receipt should be discharged by depositor-Non
production of
deposit receipt-Equitable jurisdiction of High Court.
The respondent-a syndicate with its registered office in Montgo=
in undivided Punjab, had depOl!ited certain amount with the appellant-Bank
and obtained a Fixed Deposit Receipt. The deposit was required to be
made for due performance of the conditiona of a scheme for procurement devised by the Government of Punjab in 1946. The receipt was
made out in the name of the Syndicate Account District
Magistrate,
Montgomery. No account was opened in the bank's books in the name
of the District Magistrate and under the conditions of deposit it was repayable to the respondent on demand on due date. The respondent served
a notice of withdrawal upon the Bank. An endorsement in that behalf
was made on the receipt which was handed over to the District Magistrate,
Montgomery. Following the communal riots in 1947 the staff of the respondent migrated to India and the respondent aet up a new business at
Amritsar.
The respondent demanded the money to which the appellant
replied that the amount could not be returned until the respondent obtains
a discharge from the District Magistrate, MontgOmery (in Pakistan) of his
lien on the fixed deposit reccipt. The respondent filed a petition before the
Debt Adjustment Tribunal, Amritsar, for an order directing the appellant
to pay the amount with interest, and impleaded the District Magistrate,
Montgomery as a respondent.
The District Magistrate filed no claim
before the Tribunal. The Tribunal 'dismissed the petition holding that the
amount stood forfeited by' order of the Disliict Magistrate, Montgomery.
Jn appeal, the High Court made an order in terms of the prayers in the
petition, subject to the condition that the respondent shall give an indemnity for restitution of the amount in case the bank had to pay the amount
to the District Magistrate, Montgomery.
In appeal to this Court.
HELD : The deposit receipt gave rise to no contractual obligation in
favour of the Disliict Magistrate, Montgomery nor was the bank a trustee
for that officer. By an express condition the receipt was not tranlferable.
The name in which the receipt was made out was by itself not sufficient
to create an interest in the amount in favour of the District Magistrate.
The District Magistrate was not in Jaw constituted owner of the money
deposited by the respondent with the appellant by virtne of the delivery
of the, receipt. Jn the books of the appellant the fund stood to the credit
of the resp0ndent : the respondent was the owner thereof and it was the
respo.ndent alone which was entitk:d to d .. ~m.uid payn1ent of the fund. Jn
the absenre of any obligalion--cuntractual or fiducia.ry-un:dertuken
by
the appellant. in favour of the District ~1agistrate, the appellant could not
withhold payment of money deposited after-the expiry of the period of
notice. [399 D-HJ
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tl. CO. BANK V. tJ. G. B. SYNDICAtE (Shah, J.)
397
Even if the condition in the terms of deposit that on due date the deposit n!ceipt should be discharged by the depositors was to be considered
a condition pn!eedent to the enforcement of the obligation of the Bank
in favour of the respondent, the High Court was right in the exercise of
its equitable jurisdiction to direct that the money be paid to the respondent
without production of the receipt. It might =nably be inferred that
the receipt was lost or was destroyed and in such cases the court's equitable
jurisdiction ·could appropriately be exercised.
fhe . direction of the Hill!'
Court that an indemnity be given by the n!spondent to the Bank for restitution if the Bank was to pay the amount to the District Magistrate,
Montgomery has fully protected the Bank against any possible Joss and
this eminently reasonable direction was
not liable to
be
set
side.
1400 F-Hl
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 449 of
1965~
Appeal from the judgment and order dated August 29, 1960
of the Punjab High Court in F.A.0. No. 14 of 1954.
Bishan Narain and Hans Raj Dhawan, for 'the appellant.
S. V. Gupte, B. K. Maheshwari and B. P. Maheshwari, for
respondent No. 1.
The Judgment of the Court was delivered by
Shah, J. This appeal is filed with certificate granted by the
High Court of Punjab.
The Okara Grain Buyers Syndicate Ltd.-hereinafter called
'the Syndicate'-was incorporated under the Indian Companies
Act, 1913, with its registered office at Okara, District Montgomery .in the undivided Punjab. In 1946 the Government of undivided Punjab devised a scheme for procurement of foodgrains
and appointed the Syndicate to buy foodgrains on its behalf. For
due performance of the conditions of the scheme, the Syndicate
was required to make a deposit with a recognized Bank. The
Syndicate deposited an amount of Rs. 40,000/- on March 29,
1947, with the United Commercial Bank Ltd.-hereinafter called
'the Bank' -and obtained a Fixed Deposit Receipt dated March
29, 1947. The terms of the receipt were these:
"The United Commercial Bank Limited.
No. Misc. 9872-4/18 Okara(Punjab) 29th March, 1947.
Received from the Okara Grain Buyers Syndicate
Limited, Okara A/ c District Magistrate, Montgomery
Rs. Forty thousand only as a depllsit at the rate of 2 per
cent per annum to remain till notice of twelve months
for its withdrawal by either side expires.
For the United Commercial Bank Ltd.
(Sd.)
............... .
Accountant.
Rs. 40,000/-
Manager.
396
SUPUMB coua.t B.BPO&tS
[1968) 3 S.C.R.
Terms for the Deposit Receipt
This deposit receipt is issued subject to the following terms and conditions.
1. This receipt is not transferable.
2. This deposit cannot be withdrawa before due
date.
3. Interest on this deposit ceases on the due date.
4. The amount of this deposit cannot be withdrawn
in part or by cheque or draft.
5. On due date this deposit receipt should be discharged by the depositors on one anna stamp if it is
required to be repaid, otherwise an endorsement as to
its renewal should be made in the space provided thereof.
6. Receipts will when so required, be issued in the
names of two or more persons and will be made payable to any one or more of them or to the survivors."
The Syndicate served a notice of withdrawal on March 29, 194 7
upon the Bank and an endorsement in that behalf was made
on the receipt. The rc!ceipt was then handed over to the District
Magistrate, Montgomery. On account of widespread communal
riots in the month of August 1947, non-muslim residents of the
area found it unsafe to continue to reside at Okara, and the staff
and Managing Director of the Syndicate migrated to India leaving all the property, goods etc. of the Syndicate at Okara. The
Syndicate set up a new place of business at Amritsar and registered itself in the State of Punjab.
In reply to a demand made on October 26, 1951, by the
Syndicate the Bank replied that the amount deposited will not be
returned until the Syndicate obtains a discharge from the District
Magistrate, Montgomery, of his lien on the fixed deposit receipt
and an intimation in that behalf was given by the District Magistrate relinquishing his lien on the fixed deposit receipt.
The
Syndicate then filed a petition before the Debt Adjustment Tribunal, Amritsar, .under s. 13 of the Displaced Persons (Debt Adjustment) Act 70 of 1951, for an order against the Bank for
payment of Rs. 40,000/- as principal and Rs. 3,200/- as interest
@ 2% per annum upto March 3, 1952, and future interest at
6% per . annum till realization.
To this petition, the District
Magistrate, Montgomery, was also impleaded as party-respondent.
The Tribunal dismissed the petition holding that the amount of
Rs. 40,000/- deposited by the Syndicate stood forfeited by order
of the District Magistrate, Montgomery, and the petition was
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U. CO. BANK v. U. G. B. SYNDICATE (Shah, J.)
399
on that account not maintainable. In appeal, the High Court
of Punjab made an order in terms of the prayer in the petition,
subject to the condition that the respondent shall give an indemnity for restitution of thP. amount in the event of the Bank having
to pay the amount to the District Magistrate, Montgomery. The
High Court held that the deposit was sl4bject to conditions ~x
pressly mentioned in the receipt and no others and that the District
Magistrate was not given any dominion over the amount of
Rs. 40,000/- dep'Osited by the Syndicate.
In this appeal, counsel for the Bank urged that the terms of
the receipt created no obligation enforceable against the Bank at
the instance of the syndicate, and that in any event the liability
could be enforced only if the District Magistrate discharged the
receipt and handed it over to the Bank acknowledging that he
had no claim against the Syndicate.
The deposit receipt is made out in the name of the Syndicate.
It is acknowledged by the receipt that an amount of Rs. 40,000/-
was received from the Syndicate and the amount was to remain
with the Bank till notice of twelve months for its withdrawal by
either side expired. The deposit receipt gave rise to no contractual obligation in favour of the District Magistrate, Montgomery,
nor was the Bank a trustee for that officer. It is common ground
that no account was opened in the Bank's books in the name of
the District Magistrate, Montgomery.
Condition No. 5 of the
Conditions of Deposit also clearly indicates that payment of the
amount on the due date was to be made to the Syndicate, for
it expressly provides that on due date the deposit receipt shall be
discharged by the depositors if it is required to be repaid, otherwise an endorsement as to its renewal shall ·be made in the space
provided in that behalf. It is not the case of the Bank that the
receipt was transferred to the District Magistrate, Montgomery.
By an express condition the receipt is not transferable. The name
in which the receipt was made out is by itself not sufficient to
create an interest in the amount in favour of the District Magistrate. The District Magistrate was not in law constituted an owner
of the money deposited by the Syndicate with the Bank by virtue
of the delivery of the receipt. In the books of the Bank the fund
stood to the credit of the Syndicate : the Syndicate was the owner
thereof and it was the Syndicate alone which was entitled to
demand payment of the fund. In the absence of any obligationcontra~tu~J or fi~uciary-undertaken by the Bank in favour of
the D1str1ct Ma_gIStrate, the Bank could not withhold payment
of money deposited after the expiry of the period of notice.
It was urged by counsel for the Bank that unless the receipt
wa~ p~oduced duly discharged, the Bank was not under an
obhgat10n to repay the money.
Reli~nce was placed upon the
•
400
SUPREME COURT llEPOllTS
[1968] 3 S.C.R.
following observations in Sheldon's Practice and Law of Banking,
A
8th Edn., at p. 163 :
"If the deposit receipt merely acknowledges the deposit of the money, the banker cannot demand its production before paying over the money. But if the form
of the receipt is such that the signing of the receipt is
a condition precedent to the withdrawal of the money,
then the deposit receipt must be returned when the money
is handed over. But the banker is not entitled to withhold payment of the money should the receipt be lost
or destroyed. All that he can .do is to ask the depositor
for an indemnify. Whether he is legally entitled to de-
. 'mand such an indemnity, the receipt not being a negotiable instrument, is another question.",
and upon the statement at p. 174, Art. 327 Vo]; 2 of Halsbury's
Laws of England, 3rd Edn. :
"The receipt of money on deposit account constitutes
the banker a debtor to the depositor, but not a trustee
thereof for him.
The debt is repayable either on demand or on condition agreed with the depositor. Specified notice may be stipulated for, and the return of the
deposit book (or receipt) made a condition of repayment, or the deposit may be for a fixed period. If the
return of the deposit book is a condition precedent, no
actual debt arises until its return. In case of the loss
of the book, however, a court would exercise its equit-
"able jurisdiction, and not allow the absence of the receipt to stand in the way of the depositor reclaiming his
money."
In the proceeding before the Tribunal, the District Magistrate, Montgomery filed no claim. We are of the view, even if
Condition No. 5 of the terms of deposit receipt is a condition
precedent to the enforcement of the obligation of the Bank in
favour of the Syndicate, that the High Court was right in exercise of its equitable jurisdiction to direct that the money be
paid to the Syndicate without production of the receipt. It may
reasonably be inferred that the receipt is lost or destroyed and the
Court's equitable jurisdiction may appropriately be exercised in
this case.
Whether the District Magistrate has the receipt is on
the evidence problematic. Again the High Court has fully protected the Bank against any possible loss by directing that an
indemnity be given by the Syndicate to the Bank for restitution
if the Bank is to pay the amount to the District Magistrate, Montgomery, and this eminently reasonable direction is not liable to
be set aside.
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U. CO. BANK V. U. G. R. SYNDICATE (Shah, J.)
401
It was urged that the Government of Pakistan have forfeited
the amount standing to the credit of the Syndicate in the Bank's
books of account at Okara, and the validity of that act cannot
be questioned in the Indian Courts. But there is no evidence on
the record that any order was passed by the Pakistan Government
forfeiting, in exercise of any authority-statutory or sovereign-,
the amount deposited by the Syndicate with the Bank. The only
document on the record on which reliance is placed is a sheet of
paper entitled "A list of securities of rion-muslims forfeited to
Government of Pakistan deposited in the United Commercial Bank
Ltd." tendered in evidence by Shamim Yazdani an employee of
the Bank in Pakistan. The witness was examined on interrogatories and he identified the list of securities of non-muslims which,
it was claimed, were forfeited by the Government of Pakistan
and in the list produced by him, Item No. 14 is the amount of
Rs. 40,000/- deposited by the Syndicate on March 29, 1947 at
Okara. The list does not purport to bear the signature of any
officer of the Government of Pakistan, nor does it purport to
specify the authority in exercise in which it is claimed that the
amount was forfeited. A copy of a letter dated March 4, 1949,
from N. A. Haroon, Officer on Special Duty, West Pakistan
Government, Finance Department, Laltore, addressed to the
Manager, United Commercial Bank Ltd. was also produced by
Shamim Yazdani. It is recited in the Jetter that he was directed
to enclose a list of securities of non-muslims deposited with the
Branch Office and forfeited at Lyallpur, Okara and the Bank was
requested to make arrangements for early realization of the amount
for payment to .the District Food Controllers concerned. Neither
the original letter nor its authenticated copy has been produced.
There .is no reference to the source of the authority of the officer
who purported to forfeit the amount. The letter even does not
recite that the order of forfeiture was made by him acting on
behalf of the Government of Pakistan.
It is common ground that the money deposited had not been
paid by the Bank to the Government of Pakistan till the High
Court decided the appeal. Counsel for the Bank urged that once
an order was passed forfeiting the amount, the Bank held the
amount on behalf of the Government of Pakistan. But underlies
that argument the assumption that such an order was in fact passed by the Government of Pakistan. In the absence of any evidence .to that effect, we are unable to hold that any such order of
forfe1un:e was passed.
We do not feel called upon in this case
to ~ons1der whether. ~n order passed by the Government of a
foreign country forfe1tmg the property of an Indian national must
be recognized by the Courts in this country as a complete discharge of the obligation in circumstances similar to those in this
case, when the question is raised in . the Courts here.
402
SUPREME COURT REPORTS
[1968] 3 S.C.R
It was faintly suggested that the amount of Rs. 40,000/- had
vested in the Custodian, Evacuee Property in Pakistan.
But
the question was never mooted at any stage of this litigation, and
we cannot permit counsel for the Bank to make out that case for
the first time in this Coun.
Finally it was contended, relying upon the judgment of this
Court in The Delhi Cloth and General Mills Co. Ltd. v. Hamam
Singh and Others(') that the dispute must be determined by the
law of Pakistan and not by the law in India. In that case, the
plaintiffs were residents of Lyallpur and were appointed by the
Government of undivided Punjab to administer a scheme for rationing of cloth.
The Cloth Mills through its branch office at
Lyallpur supplied those persons with cloth from time to time and
maintained a running account of the transactions. On partition
in 1947, Lyallpur was allotted to Pakistan and the plaintiffs migrated to India as refugees. The Pakistan Government i~sued an
Ordinance vesting all evacuee property in Pakistan in the Custodian of Evacuee Property in Pakistan, and prohibited payment
of money to evacuees in Pakistan and ordered that all moneys
payable to, or claimable by ev~cuees, be paid to the Deputy
Custodian of Evacuee Property iu Pakistan. Payments so made
were to operate as a discharge from further liability to the extent
of the payment. Breach of this Jaw was punishable· as an offence.
The Deputy Custodian of Evacuee Property demandetl of the
Mills the money payable to the plaintiffs and in sath;faction of
the payment the Mills paid the amount. In defence to a suit filed
by the plaintiffs in the Court of the Subordinate Judge, Delhi,
the Mills pleaded that they had discharged their liability by payment made to the Deputy Custodian of Evucuee Property in Pakistan. The Court held that Lyallpur was the place of primary
obligation, that the elements out of which the contract to pay
arose were most densely grouped at Lyallpur, and Lyallpur was
the natural seat of the contract and the place with which i• had
its closest and most real connection. Accordingly the proper law
of the contract was the Jaw of Pakistan, and that even under the
English doctrine 1he situs of the debt was Lyallpur and therefore
either way the Jaw of Pakistan applied.
Assuming that it was the Jaw of Pakistan which applied to the
repayment of the debt due under the receipt, the Bank has failed
to prove its defence that they are not liable to pay the money
due under the deposit receipt.
To recapitulate the facts,
the
amount was deposited by the Syndicate; it was repayable to the
Syndicate when demanded; the notice of repayment of the amount
was served at the date when the deposit was made. The District
Magistrate, Montgomery had no contractual relationship with
(I) [19SS] 2 $.C.R. 4a2.
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U, CO. BANK V. U.G.B. SYNDICATE (Shah, J.)
403
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the Bank, nor was the Bank constituted a trustee for the District
Magistrate.
The Bank has failed to prove that in exercise of any
statutory or sovereign authority the Government of Pakistan have
forfeited the amount. Nothing has been placed which may support the plea that under the law of Pakistan the Bank is not
liable to repay the amount due under a deposit feceipt on the
B. due date, because an officer of the State is said to have the
custody of the receipt evidencing the deposit.
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The order for payment -0f interest at a rate exceeding 2 %
per annum was also chaJlenged by the Bank.
But the rate of
interest was stipulated only for the period of the deposit receipt.
The Syndicate claimed interest at rate of 6% per annum from
the date on which the petition was filed before the Tribunal under
the Displaced Persons (Debt Adjustment) Act 70 of 1951. Interest from the date of the petition was within the discretion of
the High Court, and the High Court has awarded interest at the
rate claimed. We do not see any reason to interfere with the
rate of interest awarded by the High Court.
The appeal therefore fails and is dismissed with costs.
Y.P.
Appeal dismissed.