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PETITIONER: KESHARICHAND JAISUKHAL

       Vs.

RESPONDENT: THE SHILLONG BANKING CORPORATION

DATE OF JUDGMENT: 16/02/1965

BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. DAYAL, RAGHUBAR MUDHOLKAR, J.R. RAMASWAMI, V.

CITATION:  1965 AIR 1711            1965 SCR  (3) 110

ACT: Banker  and  Customer--Nature of relationship between. Indian Limitation Act (9 of 1908), Art. 85---Mutual dealings between Banker and Customer--If article applicable.

HEADNOTE:     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 s. 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.

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   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 s. 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

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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]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil 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,

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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 s.  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

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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.

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   The  next point in issue is whether the proceedings  are governed  by Art. 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 s. 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 s. 45(D). Now, Art. 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  v.  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. v.  Chandrakamal  Bezbaruah(2)  and Monotosh   K.  Chatterjee v. Central Calcutta Bank  Ltd.(3), and  the first mentioned Calcutta case was approved by  this Court   in  Hindustan  Forest  Company  v.   Lal   Chand(4). Holloway,  Acting C. J.  laid down the test of mutuality  on a  construction  of  s. 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)  [1953]  91 C.L.J. 16. (4) [1966] 1 S.C.R. 563. 116     have been reciprocal demands, between the parties".  The addition  of    those words in the corresponding Art. 87  of Act IX of 1871, Art.     85 of Act XV of 1877 and Art. 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

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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 s. 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     s. 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 s. 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

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             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

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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 v. 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 v.  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

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             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.

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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  s. 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. 122