Bank of India vs Monojit Sen

Subhro Kamal Mukherjee, J.—This is Plaintiff''s second appeal against a judgment of reversal.

This is a suit instituted by the Bank of India, inter alia, for recovery of sum of Rs. 9,017.55 (Rupees nine thousand seventeen and fifty five paisa) only against the Defendant No. 1 and for direction on the Defendant No. 3 to issue debentures in lieu of shares standing in the name of Central Bank of India Limited in the absence of production of specimen signatures of Defendant No. 1 and to hand over the same to the Plaintiff/ bank. The Plaintiff, also prayed for a declaration that the shares pledged with the bank by the Defendant No. 1 be declared as first and paramount charge for due payment of the bank''s dues.

The bank instituted Title Suit No. 39 of 1977 in the court of the learned Subordinate Judge, Fourth court at Alipore contending that the Defendant No. 1, Monojit Sen, had one over draft account with the Bhawanipur Branch of the Bank with a limit of Rs. 8,500,00 (Rupees eight thousand five hundred) only. The said Monojit Sen along with his wife had a joint savings account with the said Bhawanipur Branch of the bank being savings bank account No. 1160. Admittedly, the said Monojit Sen issued a cheque for Rs. 5,600.00 (Rupees five thousand six hundred) only from the said savings bank account and the said cheque was presented for encashment on May 22, 1974. The said savings bank account did not have sufficient fund to cover the amount of the said cheque and, accordingly, the bank obtained telephonic instructions from the Defendant No. 1 and transferred a sum of Rs. 5,600.00 (Rupees five thousand six hundred) only from the said over draft account to the said savings bank account to enable the bank to honour the cheque and to safeguard the interest and reputation of the constituent. The Defendant No. 1 although received the statement of accounts from the bank in respect of the over draft account showing such transfer of sum of Rs. 5,600.00 (Rupees five thousand six hundred) only from the said over draft account to the said savings bank account, he did not raise any objection whatsoever. The Defendant No. 1 is, thus, liable to pay a sum of Rs. 9,017.55 (Rupees nine thousand seventeen and fifty five paise) only including interest, but he refused to honour the demands of the bank.

Only the Defendant No. 1 contested the suit alleging that the Plaintiff/bank had no authority to transfer fund from the said over draft account to the said savings bank account.

The learned Subordinate Judge by the judgment and decree dated July 29, 1980 decreed the suit in preliminary form for Rs. 9,017.55 (Rupees nine thousand seventeen and fifty five paisa) only with costs against the Defendant No. 1 with further interest till realization. It was declared that the shares mentioned in schedules ''A'' and ''B'' to the plaint are first and paramount charge for due payment of the Plaintiff''s dues. The Defendant No. 3 was directed to issue debentures in lieu of shares standing in the name of Central Bank of India Limited even in the absence of specimen signatures of Defendant No. 1 and to hand over them to the Plaintiff. The Defendant No. 1 was granted opportunities to pay the decreetal dues within three months from the date of the decree, in default, liberty was granted to the Plaintiff for initiating proceedings for making the preliminary decree final.

The Defendant No. 1 preferred Title Appeal No. 943 of 1980 in the court of the learned District Judge, 24 Parganas, which was eventually transferred to the court of the learned Additional District Judge, Tenth, Court at Alipore, District: 24 Parganas.

By judgment and decree dated January 5, 1982 the learned judge in the lower appellate court allowed the appeal in part. The decree of the learned trial judge was modified to the extent that the suit was decreed in preliminary form for Rs. 9,017.55 (Rupees nine thousand seventeen and fifty five paisa) only minus the amounts specified in the cheque issued by the Defendant No. 1 in respect of his savings bank account holding, inter alia, that the bank had no authority to transfer fund from the said over draft account to the said savings bank account without obtaining written consent from the constituent. However, liberty was granted to the bank to file a suit for recovery of its dues in proper forum. Other part of the decree was, however, confirmed and two months time was granted to the Defendant No. 1 to pay the decreetal dues.

Being aggrieved the Plaintiff/bank has come up with this second appeal.

Although no substantial question of law was formulated at the time of hearing of the appeal under Order 41, Rule 11 of the Code of Civil Procedure, Mr. Durga Sankar Mullick, learned Advocate, appearing in support of the appeal, formulated the following substantial question of law:

Whether the learned judge in the lower appellate court was justified in holding that it was not open to the bank to transfer fund from the over draft account standing in the name of the Defendant No. 1 to the savings bank account standing in the names of the Defendant No. 1 and his wife in order to honour a cheque issued by the Defendant No. 1 from his savings bank account as it is settled law that, in the absence of evidence to the contrary, the bank has right to combine two accounts for some acts or omissions on the part of the customer ?

Lord Denning, M.R. in Halesowen Presswork and Assemblies Limited v. Westminister Bank Limited (1971) 1 Q.B. 1 observed:

I would observe that in W.P. Greenhalgh and Sons v. Union Bank of Manchester (1924) 2 K.B. 153, Swift J. gave voice to an important dictum. He said, at P. 164;

If a banker agrees with his customer to open two or more accounts, he has not, in my opinion, without the assent of the customer, any right to move either assets or liabilities from the one account to the other; the very basis of his agreement with his customer is that the two accounts shall be kept separate;

I do not think that dictum is correct. It is quite contrary to the long line of cases which show that a banker is entitled to combine two accounts unless there is an agreement to keep them separate. You have to find an agreement to keep them separate. The mere opening of two accounts does not do it;

I, therefore, find substance in the argument of Mr. Durga Sankar Mullick. Admittedly, the Defendant No. 1 had issued a cheque from their savings bank account for Rs. 5,600.00 (Rupees five thousand six hundred) only. The fund in the savings bank account was insufficient. The Defendant No. 1 had an over draft account with the same branch of the Plaintiff/bank. The Plaintiff/bank transferred a sum of Rs. 5,600.00 (Rupees five thousand six hundred) only from the said over draft account to the said savings bank account and honored the cheque issued by the Defendant No. 1 and saved the reputation of the Defendant No. 1. The Defendant No. 1 in course of his deposition admitted before the court that ''he received the statements of account from the bank showing such transfer of fund. It has been established beyond any doubt that although he received such statements of account from the bank, he did not raise any objection whatsoever objecting to the bank''s action in honouring his cheque till the institution of the suit. When the bank insisted upon for payment of the said sum of Rs. 5,600.00 (Rupees five thousand six hundred) only, the account of the Defendant No. 1 became irregular and the Defendant No. 1 wanted to avoid his liability on the allegation that he has not instructed the bank to honour his cheque. The conduct of the Defendant No. 1 is totally unsatisfactory and his long silence compels me to believe that bank has instructions to transfer the fund from one account to another in order to honour the cheque issued by the Defendant No. 1. The banker is entitled to combine the said two accounts. The Defendants have failed to establish existence of any agreement to keep them separate.

Accordingly, the judgment and decree passed by the lower appellate court are set aside and that of the learned trial judge are restored.

The appeal, is thus, allowed.

There will be no order as to costs.

Let Xerox certified copy of the judgment and decree, if applied for, be supplied to the applicants on urgent basis.