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PETITIONER: SHANTI PRASAD JAIN

       Vs.

RESPONDENT: THE DIRECTOR OF ENFORCEMENT

DATE OF JUDGMENT: 19/04/1962

BENCH: AIYYAR, T.L. VENKATARAMA BENCH: AIYYAR, T.L. VENKATARAMA SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR, P.B. WANCHOO, K.N. AYYANGAR, N. RAJAGOPALA

CITATION:  1962 AIR 1764            1963 SCR  (2) 297  CITATOR INFO :  R          1964 SC1023  (4)  RF         1966 SC 495  (5)  F          1966 SC1206  (5)  R          1967 SC1581  (23)  R          1970 SC 494  (8)  R          1979 SC1588  (14)  R          1992 SC1831  (27)

ACT: Foreign  Exchangn--Foreige firm depositing money in  account of India in foreign bank-Money to be used only for purchases from foreign firm-If contravenes prohibition to lend foreign exchange-Relationship  between  Bank  and  India-Whether  of debtor   and  creditor  Contingent  debt-Power  to   adjudge contravention  given  to Director  of  Enforcement  Director empowered to send case to Court if penalty imposeable by him not adequate-If discriminatory--Foreign Exchange  Regulation Act,  1947  (7 of 1947), ss. 4(1), 23,  23D-Constitution  of India, Art. 14.

HEADNOTE: The  appellant had claims, for compensation against  certain German  firms in respect of machineries supplied by them  to the appellant’s concerns.  The appellant went to Germany and arrived at settlements with the firms, under which the firms deposited  certain sums of money with the Deutsche  Bank  in the  account of the appellant with the stipulation that  the money was only to be used by the appellant for purchases  of new  machineries from the same firms after obtaining  import licenses  from the Government of India.  The  appellant  had not obtained permission, general or special, of the  Reserve Bank for opening this account.  Section 4(1) of the  Foreign Exchange Regulation Act, 1947, prohibits a ’Person  resident in  India’, inter alia, from lending to any  person  outside India foreign exchange without the permission of the Reserve Bank.  Section 23 lays down the penalties for  contravention of  s. 4(1) on adjudication by the Director  of  Enforcement and on conviction by a Court.  Section 23D confers upon  the Director  the  power to adjudicate whether  any  person  has

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contravened  s.  4  (1) and empowers him, if he  is  of  the opinion  that  the penalty which he is empowered  by  impose would not be adequate in the circumstances of any particular case,  to  make a complaint in writing to  the  Court.   The Director   inquired  into  the  appellant’s  Deutsche   Bank account, held that the appellant had contravened s, 4(1) and imposed  a penalty of Rs. 55 lakhs.  On appeal  the  Foreign Exchange Appellate Tribunal held that the deposits amounted 298 in   law  to  loans  by  the  appellant  to  the  Bank   and consequently  s.  4(1) was contravened but  it  reduced  the penalty to Rs. 5 lakhs.  The appellant contended (i) that s. 23(1) of the Act offended Art. 14 of the Constitution as two parallel  procedures were provided for the same offence  and it  was  left to the discretion of the executive  to  choose which was to be applied in. a particular case, and (ii) that there was no loan by the appellant to the Bank and therefore there was no contravention of s.   4(1). Held,  that the power conferred upon the Director  under  s. 23D  to  transfer  cases  to a  court  is  not  unguided  or arbitrary  and, does not offend Art. 14 and s. 23(1)  cannot be  assailed as unconstitutional.  A serious offence  should not go without being adequately punished; and in such  cases the  accused should have the benefit of trial by a  Superior Court.   Under  s. 23D the transfer is to a Court  and  that only  when  the  Director  considers  that  a  more   severe punishment  than what he is authorised to impose  should  be awarded. Held, further, that the appellant had not lent money to  the Deutsche  Bank and had not contravened the provisions of  s. 4(1) of the Act.  Though normally when moneys are  deposited in a Bank, the relationship that is constituted between  the Banker and the customer is one of debtor and creditor, there may- be special arrangement under which the relationship may be different.  The right of the appellant to the amounts  in deposit  was contingent on the happening of  certain  events some  of which were beyond his control and until then  there was no debt due to him.  A contingent debt is no debt  until the  contingency happens, and as the right of the  appellant to  the amounts in deposit in his name in the Deutsche  Bank arises  only  on the happening of  the  contingencies,  i.e. granting of the import licenses by the Government of  India, there  was no debt due to him in presenti and there  was  no loan thereof within s. 4(1) of the Act.  The fact that money has  been put in a Bank does not necessarily import that  it is a deposit in the ordinary course of banking.  The purpose of the deposits and the conditions attached to it  indicated that  the  Deutsche  Bank held the  money  under  a  special arrangement which constituted it not a debtor, but a sort of a stakeholder.  The words "a person resident in India" in s. 4(1) has been used in the sense of "resident of India",  and it  was not necessary that at the time of the  contravention of s. 4(1) should be actually in India.   Foley  v. Hill, (1848) 11 H. L. C. 28,  Webb  v.  Stenton, (1883)  11 Q. B. D. 518 and Tapp v. Jones, (1875) L.  R.  10 Q.B. 591, referred to. 299

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 319 and 320 of 1961. Appeals  by special leave from the order dated  October  23, 1959 of the Foreign Exchange Appellate Board, New Delhi,  in

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Appeal No. 51 of 1959. A.   V. Viswanatha Sastri, K. L. Misra, Advocate General for the  State of Uttar Pradesh, B. P. Khaitan, S. K. Kapur  and B.  P.  Maheshwari, for the appellant (in C. A. No.  319  of 1961) and the respondent (In C. A. No. 320 of 1961). M.   C. Setalvad, Attorney General of India, C. N. Joshi and P.  D. Menon, for the respondents (In C. A. No. 319  of  61) and the appellant (in C. A. No. 320 of 1961). 1962 April 19.  The Judgment of the Court was delivered by VENKATARAMA AIYAR, J.-The appellant in Civil Appeal No.  319 of  1961,  Shri S. P. Jain in the Chairman of the  Board  of Directors  of a Company called Sahu Jain Ltd.,  which  holds the managing agency of two companies, the Rohtas  Industries Ltd.  or more shortly the Rohtas, and the New  Central  Jute Mills Ltd.  The Rohtas carry on business in the  manufacture and  sale of paper, and own a paper Mill at  Dalmianagar  in the State of Bihar.  Shri Jain is the Chairman of the  Board of  Directors  of that Company also.  The  New  Centre  Jute Mills Ltd. carry on business in the manufacture and sale  of Jute,  and own Mill at Calcutta.  They also do  business  in the  manufacture  and sale of chemicals and  fertilizers  at Varanasi.  On June 30, 1958, Shri S. P. Jain left India on a tour  to the continent of Europe and on his return  to  this country  he was searched at the Palam Airport on October  1, 1958,  and the following document was found in  his  leather attache case "Deutsche Bank Aktiengesellschaft. 300 Page  2  to our letter of 25th Sept., 1958 to  .Mr.   S.  P. Jain, Hotel Briedenbacher Hof.  Dusseldorf. The "DM-account with limited convertibility No. 50180 of Mr. S.  P. Jain has been credited in 1958, upto now,.  with  the following amounts from German sources ; 20th March 1958 DM  210,118,65 from M/s.  J. M. Voith G.  m: b. H. Maschinenfabrik, Heidenbeim marked "DM 210.081,31 less DM. 262,65 banking charges" (the said charge was made by the remitter’s bank which is not a branch of ours); 11th  July 1958 DM, 205.000 from Messrs.  Escher Wyss G.  m. b.  H.  marked  "as,  per  letter  of  7th  July  1958"   in translation. 9th August 1958 DM 201.424,81 from Messrs. J.M.   Voith   G. m. b. H. Maschinemfabrik, Heiden heim   marked          "DM. 201.676,59 less banking charges." 15th August 1959 DM  472.886, 03 from Messrs. Friedr.   Udhe G.  m.  b.  H.  Dertmund,  marked-in  translation-  "derived expenses DM. 465.633,63 interest payment DM. 7.2.52,40." 24th.   September 1958 DM, 350.000, from  Messrs.   Pintsch- Bamag  A.G.,  Butzbach  marked-in  translation  ,payment  of excess price." 25th September 1953 DM. 250.000 from Messrs.   Pintech-Bamag A.C.,  Butsbech marked-in translation "in respect of  excess price." Now s. 4(1) of the Foreign Exchange Regulations Act (VII  of 1947)herienafter referred to as ,the Act’ providesthat "’Except with the previous general or special permission  of the  Reserve  Bank, no person resident in India  other  than authorised dealer shall 301 outside  India  buy or borrow from, or sell or lend  to,  or exchange  with, any person not being an  authorised  dealer, any  foreign exchange." The expression foreign exchange’  as defined  in s.2(d) means ’foreign currency and includes  all deposits,  credits and balances payable in any foreign  cur- rency and any drafts, travellers’ cheques, letters of credit and bills of exchange expressed or drawn in Indian  currency

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but payable in any foreign currency." As  Shri  Jain had admittedly not  obtained  the  permission general  or  special of the Reserve Bank,  for  opening  the account  aforesaid,  the  Director  of  Enforcement  started proceedings  against  him  under s. 4(1) of  the  Act.   The explanation  of Shri Jain was that the amounts  in  question had  been  deposited into the Bank by four German  firms  in settlement  of claims which two Indian Companies the  Rohtas and  the New Central Jute Millis Ltd. had against  them  for delayed  and defective supplies of machinery  and  equipment under previous contracts, that the deposits in question  had been  made  subject  to the condition that  they  should  be utilised  only for making initial payments towards price  of new  machineries to be purchased from the German  firms  and that  in  consequence  there was no loan  by  the  appellant within  s.4(1)  of  the Act.   The  Director  rejected  this explanation  and held that s.4(1) had been  contravened  and imposed  a  fine  of  Rs. 55 lakhs on  Shri  Jain  under  s. 23(i)(a) of the Act.  Against this order there was an appeal to  the Foreign Exchange Appellate Board who, examining  the question  in  the light of fresh materials which  were  made available  to  them accepted the version of Shri  Jain,  and held  that  the deposits had been made by the  German  firms under the circumstances and on the condition stated by  him. They  however  held that even so the  deposits  in  question would inn law be loans by Shri Jain to the 302 Bank,  and. that in consequence, s.4(1) of the Act had  been infringed, as no permission had been obtained as required by it.  In this view they confirmed theorder     of     the Director but reduced the fine to Rs.5  lakhs.    Against this order both Shri S. P. Jainand  the Union  of  India have preferred the above appeals  with  the  leave  of  this Court under Art.136 of the Constitution.  In this  judg- ment  Shri S. P. Jain will be referred to as  the  appellant and the Union of India as respondents. On the contentions urged before us the questions that  arise for our decision in these appeals are :               (1)What. are the terms and conditions on which               the deposits in question were made;               (2)whether on those terms and conditions there               has  been a violation of s.4(1) of the Act  by               the appellant; and               (3)whether the imposition of penalty under  s.               23  (i)  (a) of the Act is bad on  the  ground               that  the section is in contravention of  Art.               14 and in consequence void. It  will  be convenient to dispose of  the  last  contention first,  as it goes to the very root of the  jurisdiction  of the  Director of Enforcement to proceed under  the  impugned section.  Section 23 (1) of the Act is as follows               "23(1)   If   any  person   contravences   the               provisions of section 4, section 5, section 9,               or  sub-section  (2) of section 12 or  of  any               rule,  direction or order made thereunder,  he               shall-               (a)be  liable  to such penalty  not  exceeding               three times the value of the foreign  exchange               in  respect  of which  the  contravention  has               taken   place,   or  five   thousand   rupees,               whichever in more, as                303               may be adjudged by the Director of Enforcement               in the manner hereinafter provided, or               (b)   upon conviction by, a Court, be  punish-

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             able  with imprisonment for a term  which  may               extend  to  two years, or with fine,  or  with               both." Then there is s. 23-D which, omitting what is not  material, ruins as follows: -               "23.D(1)  For the purpose of  adjudging  under               clause  (a) of sub-section (i) of  section  23               whether  any  person  has  committed  a   con-               travention, the Director of Enforcement  shall               hold an inquiry in the prescribed manner after               giving that person a reasonable opportunity of               being  heard  and if, on such inquiry,  he  is               satisfied  that the person has  committed  the               contravention,  he may impose such penalty  as               he   thinks   fit  in  accordance   with   the               provisions of the said section 23 :               Provided that if, at any stage of the inquiry,               the Director of Enforcement is of opinion that               having  regard  to the  circumstances  of  the               case,  the  penalty which he is  empowered  to               impose   would.not  be  adequate,  he   shall,               instead of imposing any penalty himself,  make               a complaint in writing to the Court." It  will  be  seen that when there  is  a  contravention  of s.4(1),  action  with respect to it is to be  taken  in  the first  instance  by  the Director of  Enforcement.   He  may either  adjudge  the matter himself in  accordance  with  s. 23(1)(a),  or he may send it on to a Court if  he  considers that  a  more servere penalty than he can impose  is  called for.  Now the contention of the appellant is that when  ,the case is transferred to a Court, it will be tried in 304 accordance  with  the procedure prescribed by  the  Criminal Procedure Code, but that when the Director himself tries it, he  will follow the procedure prescribed therefor under  the Rules  framed under the Act, and that when the law  provides for the same offence being tried under two procedures, which are  substantially  different, and it is left  to  the  dis- cretion  of  an executive officer whether the  trial  should take  place  under the one or the other of  them,  there  is clear discrimination, and Art. 14 is contravened.  Therefore s.  23  (1)  (a)  must, it is  argued,  be  struck  down  as unconstitutional and the imposition of fine on the appellant under that section set aside as illegal. It is not disputed by the appellant that the  subject-matter of the legislation, viz., Foreign Exchange, has features and problems  peculiarly its own, and that it forms a  class  in itself.   A  law which prescribes a  special  procedure  for investigation  of  breaches of foreign  exchange  regulation will  therefore  be not hit by Art. 14 as it is based  on  a classification  which has a just and reasonable relation  to the  object of the legislation.  The vires of s. 23 (1)  (a’ is accordingly not open to attack on the ground I that it is governed  by a procedure different from that  prescribed  by the  Code  of  Criminal  Procedure.   That  indeed  is   not controverted by the appellant.  That being so, does it  make any  difference in the legal position that s. 23-D  provides for  transfer by the Director of Enforcement of cases  which he can try, to the Court ? We have not here, as in State  of West  Bengal  v. Anwar Ali (1) a law, which  confers  on  an officer  an  absolute discretion to send a  case  for  trial either to a Court or to a Magistrate, empowered to try cases under  a special procedure.. Section 23-D confers  authority on  the very officer who has power to try and dispose  of  a case  to send it on for trial to a Court, and that too  only

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when he consider that a more severe (1)  [1952] S. C. R. 284. 305 punishment  than what he is authorised to impose, should  be awarded.   In  a  Judicial  system,  in  which  there  is  a hierarchy   of  Courts  or  Tribunals,  presided   over   by magistrates or officers belonging to different classes,  and there is a devolution of powers among them graded  according to their class, a provision such as s. 23-D is necessary for proper  administration of justice.  While on the one hand  a serious  offence  should  not go  without  being  adequately punished  by reason of cognizance thereof having been  taken by  an inferior authority, the accused should on  the  other hand have in such cases the benefit of a trial by a superior court.   That  is  the principle underlying s.  349  of  the Criminal  Procedure  Code, under which  magistrates  of  the second and third class, are empowered to send the cases  for trial   to   the  District  Magistrate   or   Sub-Divisional Magistrate, when they consider that a more severe punishment than they can inflict is called for.  In our view the  power conferred  on the Director of Enforcement under s.  23-D  to transfer cases to a Court is not unguided or arbitrary,  and does not offend Art. 14 and s. 23 (1) (a) cannot be assailed as unconstitutional. (1)Passing on to the question as to the terms on which the deposits  standing  to the credit of the  appellant  in  the Deutsche Bank were made, though before the Director, and the Appellate  Board, the truth of the settlements  between  the German firms, and the appellant was itself questioned by the respondents,  before us it is not disputed that  there  were such  settlements  or that the deposits were  made  pursuant thereto.  The ’whole of the controversy before us is limited to the question whether the deposits were unconditional  and absolute or whether they were made subject to the condition, that the appellant could operate on them only for payment of the  price  of new machineries to be  purchased  from  those German firms. 306 Before entering on a discussion of the materials bearing  on this point, we may deal shortly with   a question  which was agitated  before  the  Director    of  Enforcement  and  the Appellate  Board.   That is whether the  provisions  of  the Evidence  Act  are applicable to the proceedings  under  the Act.  Rule 3 (5) of the Rules framed under the Act  provides that in taking evidence, "the Director shall not be bound to observe  the provisions of the Indian Evidence Act, 1872  (1 of 1872)".  Section 24-A of the Act provides that the  court shall presume the genuineness and the truth of the  contents of certain documents tendered in evidence by the prosecution unless the contrary is proved.  The Director of  Enforcement held that by reason of the above provisions the Evidence Act had  no  application  to proceedings  under  the  Act.   The Appellate  Board  came to a different conclusion.   It  held that s. 24-A had application only to proceeding in Court and that Rules 3 (5) had not the effect of rendering  admissible evidence  which  was irrelevant or  inadmissible  under  the Evidence  Act.  In our opinion this is the correct  view  to take  of the scope of s. 24- A and Rule 3 (5) and  that  was conceded before us by the learned Attorney General appearing for the respondents. For  a satisfactory determination of the question as to  the terms on which the deposits in account No. 50180 were  made, it is necessary to narrate briefly the history and nature of the   disputes,  which  form  the  subject-matter   of   the settlements.   They  have  their origin  in  four  contracts

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entered  into  with four German firms, two of  them  by  the Rohtas and the other two by the New Central Jute Mills  Ltd. Taking the first of them, some time prior to 1953 the Rohtas had placed an order with a German firm called Messrs.  Voith &  Company  for  the supply of three  paper  Machines.   The shipment of these machines was 307 delayed  beyond the time stipulated and moreover  when  they were  supplied  their production was found to be  far  below what  had been guaranteed under the agreement.   The  Rohtas claimed  compensation  from M/s.  Voith &  Company  on  both these accounts and after some correspondence between them  a representative  of the German firm Mr. Zimmermann came  over to India to make an enquiry on the spot, and as a result  of the  discussion which he had with the Rohtas he  recommended on  February 21, 1957 that a sum of pound 17,900/- might  be paid  by the German firm as compensation for delay in  ship- ment.   He however declined to admit the claim made  by  the Rohtas  on  account of the deficiency in the output  of  the machines.   In accordance with this  recommendation  Messrs. Voith  &  Co.  remitted  on March  15,  1958,  German  Marks equivalent to the sum of pound 17,900/- to the Deutsche Bank to  be credited in the name of the appellant and it  was  so credited on March 20, 1958.  The appellant was in due course informed  of the deposit, but on May 14, 1958, he  wrote  to M/s.   Voith  & Co. that he was not prepared to  accept  the amount in full satisfaction as no compensation was paid  for deficiency   in  output.   Thus  ’the  dispute  ’was   still unsettled, when the appellant left for Germany. Coming  next to the second contract, some time in  1951  the Rohtas had purchased from M/s.  Escher Wyss another firm  in West  Germany a Yankee Paper-making Machine.  As soon as  it was installed it was discovered that some of its parts  were defective  and  that  its output was  also  below  what  was guaranteed.   On  December 17, 1953, the  appellant  brought these  defects  to the notice of the German firm  and  asked them  to substitute good and suitable parts in the place  of the unusable old ones.  On this a protracted  correspondence followed  but  as the machines could not be  worked  without replacement of the defective parts, the Rohtas could 308 not  wait until a settlement was reached and  so  purchased, the   requisite  parts  from  another  German  firm   called O’Dorries  and made a demand on M/s.  Escher Wyss &  Company for   compensation.   A  representative  of  the  firm   Mr. Staudenmaier  came  over  to  India some  time  in  1956  to investigate the matter, and after making  a local inspection he  submitted  proposals for remodelling the  machines.   On June 17, 1957, the Rohtas wrote to the German firm that they were not agreeable to these proposals and requested them "to have the claims settled as put forward by us in our previous letters".   Thus  the  claim under this  contract  was  also pending settlement at the material period. The  facts  relating  to  the  third  and  fourth  contracts concerned  in these disputes are that the New ’Central  Jute Mills  Ltd.  had  decided to instal at Varanasi  a  Gas  and Synthesis Ammonia Plant for the manufacture of Chemicals and Fertilisers and placed orders for the machineries and  parts with two German firms M/s.  Friedrich Udhe and M/s.  Pintsch Bamag.   The  case  of the appellant is  that  many  of  the equipments which were supplied by the two firms were not  in accordance with the specifications, that the pipe lines were Dot  properly fabricated and were untailored and that  there was  also  shortage in the supplies made  by  M/s.   Pintsch Bamag.  The New Central Jute Mills Co. claimed  compensation

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for  the  defective supplies as aforesaid  from  the  German firms, and negotiations for settlement of these claims  were also pending at the relevant dates. Another  factor forming the background for  the  settlements must now be mentioned.  At about this time the appellant bad come  to  a  decision  to  instal  a  new  Paper  Plant   at Dalmianagar and a new Ammonium Chloride Plant at Varanasi. 309 To  carry out those projects it was necessary to secure  the requisite  foreign exchange and for that the  permission  of the Government of India had to be obtained.  Accordingly the appellant wrote on May 26, 1958, to the Ministry of Commerce & Industries and again on June 5, 1958, to the Ministers for Industries  and for Finance settling out his  proposals  for expensations  and  desiring to know the amounts  of  foreign exchange  which could be made available for these  projects. In  his  reply  to the appellant dated  June  9,  1958,  the Minister  for  Industries  stated: "As you  know  under  the present acute foreign exchange position, no earlier payments before  production are permitted .... Also  export  earnings from the products of a particular plant lay only be  allowed to be used for payments for that very plant and nor for  the payment of Import and other capital goods and equipment". for the Continent was that he had outstanding claims against four German firms and negotiations for their settlement were pending,  and that he had on hand schemes for  expansion  of industries  at Dalmianagar and Varanasi which could  be  put through  only if the requisite machinery could  be  imported but  that the Government of India would not  permit  imports which involved payments of price at the time of delivery  of goods. The  appellant left India for Europe on June 30,  1958.   In the following months he contacted the respresentative of the four German firms mentioned above and all the disputes  were settled.   According  to  the appellant, the  terms  of  the settlement which were same in all the four contracts were as follows:  The  amount  payable to the  Indian  Companies  as compensation  was  fixed.   It was to be  deposited  by  the German firms to the credit of the 310 appellant  in the Deutsche Bank.  The Indian Companies  were to  obtain import licences from the Government of India  and place orders with the respective firms for the supply of new machineries.   The amounts ’in credit in the  Deutsche  Bank were  to be supplied pro tanto for the payment of the  price of  these machines to the respective firms.   The  appellant was not to operate on this account except for the purpose of making payments to the German in the manner aforesaid. It is now necessary to refer to the evidence bearing on  the settlements,   because,   as  already  stated,   while   the respondents  admit  that  there were  settlements  with  the German  firms and deposits were made pursuant thereto,  they do  not admit that the deposits were made subject to  condi- tions,  as stated by the appellant.  It will  be  remembered that on March 20, 1958, M/s.  Voith & Company had  deposited with Deutsche Bank DM. 210.081,31 Marks being the equivalent of  pound  17,900/- as compensation  for  delayed  shipment, which was the only portion of the claim admitted by them, in full  settlement  of  all the claims  of  the  Rohtas.   Now pursuant to the settlement reached with the appellant,  they deposited on August 1, 1958, a further sum of DM. 201,67,659 Marks  in  the name of the appellant in the  Deutsche  Bank. The  terms of the settlement appear, in two letters  written by  M/s.   Voith  & Company on August 1, 1958,  one  to  the Rohtas  and the other to the Deutsche Bank.  In  the  letter

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addressed  to  the Rohtas M/s.  Voith and Company  say  "Mr. Jain  informed us of your plans for the future such  as  the establishment  of a new complete pulp and paper making  unit in  Assam,  and in particular, of your immediate  desire  to increase  the  production of your Board Machine  P.M.  I  in Dalmia  ’a  ar.. For this re-construction  project  we  have already submitted an offer......Regarding the remodelling of your  311 P.M.  I.,  we understand that you have already  obtained  an industrial  licence  and that you expect to  get  an  import licence for the equipment offered by us.  An advance payment of  20%  of  the  ex-works  price  is,  however,  for   this comparatively  small  order a pre-condition for  our  credit insurance.   In  view of Mr. Jain’s assurance that  we  will enjoy  preference  for the supply of our  machinery  in  the event  that  an import licence for the new paper  mill  will eventually  be  obtained,  and in order to  make  the  early placing  of  your  order for the reconstruction  of  P.M.  I possible, we have finally agreed to meet your claims for the paper machines already supplied to the extent of a total sum of DM. 412,058 including the amount already placed with  the Deutsche Bank, Dusseldorf, in March representing 20% of  the price  quoted in our offer of January 15th, 1958.   We  are, therefore, remitting the balance to the Deutsche Bank as per letters  addressed  to them translation of which  we  attach hereto.   This settlement of your claims is,  considered  on the definite understanding that the total amount can only be utilised by you to make to us the initial payment of 20%  on and when the import licence for the reconstruction of P.M.I. is  received.   The Bank is, therefore, instructed  to  hold both  remittances  made  by us at  your  disposal  for  this purpose only.  On the same day M/s.  Voith & Company advised the  Deutsche Bank that they had remitted a further  sum  of DM.? 201,676.59 to it in addition to the previous remittance of DM. 210,381.31 and then go on to say ,the two amounts are paid  in final settlement, of the claims of Messrs.   Rohtas Industries Limited against us in connection with the  supply of 3 paper machines.  We repeat that the said amounts may be utilised  by  Mr. S. P. Jain, Chairman  of  Messrs.   Rohtas Industries  Limited, only for the purpose of asking  initial payments to us against further purchase of 312 machinery, which payments will be made on final approval  of our tender after receipt of the Indian import licence.   For other’s sake please confirm receipt of these instructions to us." It should  be mentioned that under the Export Regulations in force  in  Germany no goods manufactured  therein  could  be exported  unless 20% price quoted were paid for  before  the goods left the country.  The effect of the arrangement  come to  between M/s Voith & Company and the appellant  was  that the  firm  would be free to export goods to  the  Rohtas  on payment to it of 20% of the price out of the funds  standing to the credit of the appellant in the Deutsche Bank, and  it may  be gathered that the total amount of  compensation  had relation  to  the  20  per cent of  the  price  of  the  new machinery to be purchased. The settlement made in respect of the three "other contracts was  also  on the same lines.  M/s.  Escher Wyss  &  Company settled the claim of the Rohtas on July 7 1958, and wrote to the  appellant as follows : "We are pleased that a  solution has been arrived in the course of the talks we had with  you to settle your long outstanding claim.  We have declared  to pay  the  agreed amount of DM. 205.000, as  finally  settled

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immediately  for  your satisfaction to Deutsche Bank  to  be held by them for your utilising in purchase of machinery  by Messrs.   Rohtas Industries Ltd., Dalmianagar from us  after you have finally decided on the several plans discussed here and obtained import licences from your Government.  We  have pointed   out  to  you  that  we  attach  great   value   to entertaining  good and friendly relations and to do  further business with you.  We shall thank you also to let us have a confirmation that all claims against our firm in  connection with our delivery of Yankee Paper Machine are now definitely settled." On the same 313 day  M/s.   Escher Wyss & Company transferred a sum  of  DM. 205.000  to the Deutsche Bank communicating to. them a  copy of  the  letter addressed to the  appellant  containing  the terms  of  the  deposit  with them.   The  amount  was  duly credited to the account of the appellant on July 11, 1958. On  August  11, 1958, a settlement was reached  between  the appellant  and  M/s.  Friedrich Udhe &  Company,  who,  then addressed  the following letters to the Deutsche  Bank:  "We are  releasing a sum of DM. 472,866,03 as  derived  expenses DM.  465.633,63 and interests payment DN. 7.252.40  to  meet claims of Mr. S. P. Jain, President, New Central Jute Mills, Calcutta.  We request you to hold this amount in the name of Mr. S. P., Jain but it shall not be payable to him and is to be  utilised  only  for payment to us  against  purchase  of expansion machinery by Sahu Chemicals-Proprietor New Central Jute  Mills-after  they  secure  licence  and  DM   transfer guarantee  from their Government." The amount  was  actually credited  in the Deutsche Bank in the name of the  appellant on  August  15,  1958,  Confirming  this  arrangement   M/s. Friedrich Udhe wrote to the appellant on August 18, 1958, as follows  : "As a very special case, to promote our  pleasant business relations, we have, only in view of your  assurance for  expansion  order,  released a  sum  of  DM.  472,886,03 calculated  as aforesaid, against our engineering  fees  and expenses  on your existing supply, which must  be  utilised, however,  only towards your meeting payments to  us  against order  and  shipments  which are essential  for  our  credit insurance.   We have made over this amount to Deutsche  Bank A.  C.  with  instructions  to hold  the  same  for  payment aforesaid  after your Government grants you licence  and  DM transfer  guarantee is established as may be  acceptable  to competent German authorities." 214 On September 21, 1958, there was a settlement of the dispute with  M/s.  Pintsch-Bamag under which the latter  agreed  to pay  600.000 Marks in full satisfaction of the claim on  the same  terms as in the other contracts.  On the same day  M/s Pintsch  Bamag  wrote the following letter to  the  Deutsche Bank.  "We hereby notify you that we are placing DM. 600.000 with  you  in payment of excess price claimed by Mr.  S.  P. Jain,  President  of  New Central Jute Mills  Co.  Ltd.,  we further  advise that the amount is to be held by you in  the name of Mr. S. P. Jain, but it would not be available to him except for making payment to us against extension  machinery to  be  ordered with us by Sahu  Chemicals  Proprietors  New Contrat  Jute  Mills Co., on their  obtaining  licence  from their  Government and approval of payment  conditions.",  On September  24,  1958,  M/s.   Pintsch  Bamag  wrote  to  the appellant. that they had deposited the amount settled in the Deutsche Bank and added "we must however point out expressly that  but  for the assurance of extension order  to  us,  it would  not  have been possible for us to meet  your  claims. This  amount  will be available therefore  only  for  making

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payment  to us against extension machinery and the bank  has been  specifically advised to hold the same for you only  in accordance therewith." The evidence above referred to clearly establishes that  the deposits  in  account No. 50180, were made  subject  to  the conditions  stated by the appellant, and there is  intrinsic evidence  in  the entries themselves in this  account  which support  this  contention.  Thus the entry relating  to  the receipt  of deposit from Messrs.  Friedrich Udhe  speaks  of "derived  expenses" and "interest’ ’; and those relating  to the receipt from Messrs.  Pintsch Bamag read as "payment  of excess  price  and  "in respect  of  excess  price".   These entries  have  reference  to the nature  of  the  claime  on account  of which the deposit are made, and would be  wholly out of place in 315 the  case  of ordinary deposits.  On the  other  hand,  they would be quite explicable if made under; special  directions from the depositors. But  the matter does not rest there.  While the  appeal  was pending  before the Appellate Board both the parties  agreed that further information should be elicited from the Bank as to  several matters concerning the deposits, and  on  August 21,  1959,  a questionnaire agreed to by counsel  on  either sides  was sent by the appellant to the Bank for its  reply. Therein the Bank was asked to furnish particulars  regarding the  heading of account No. 50180 the certified copy of  the relevant  entries therein, the certified copy of  page-1  of the  letter  dated September 25, 1958 from the Bank  to  Mr. Jain,  and the communications which passed between the  Bank and  Mr.  Jain  in  respect of  the  six  items  of  deposit appearing  in the account.  Among the questions sent to  the Bank were the following :-               (a) Please state whether the amounts  referred               to  were deposited with you and were  held  by               you   on  the  conditions  mentioned  in   the               letters, copies whereof are enclosed herewith.               (b)   What  is meant by the  expression  ’,DM"               account  with limited convertibility" ?   What               does  it signify in relation to  the  deposits               taken by you under the conditions mentioned in               those  letters ? Was the acceptance  of  these               conditional  credits by the Bank confirmed  to               the persons who deposited these amounts- ? To  this the Bank sent a reply dated September 1,  1959,  to the  Chairman of the Board, but addressed to the  appellant. Therein  it give particulars of the six items of deposit  as contained in the letter 316 dated  September  25, 1958.  Then there  are  the  following statement which are material               "’The  deposited amounts are being held by  us               subject   to  the  conditions  given  in   the               enclosed  certified  copies  of  the  relevant               letters   from  the  German  parties   concer-               ned...... As is evident from the  stipulations               mentioned  above,  you  are  not  entitled  to               withdraw   the  amounts  specified  or   parts               thereof,  without  fulfilling  the  terms  and               conditions  stipulated  in the  said  letters.               The  acceptance of these conditions,  has,  of               course, been confirmed to the firms  concerned               and  we are, therefore, bound to  observe  the               conditions vis-a-vis those firms, too,  before               we  possibly could carry out any  instructions

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             from  your part to dispose of the  funds.   It               need  not be emphasized that these  conditions               applied  during all the time the amounts  have               been   maintained  in  this  ,account   where,               indeed,  they continue to be kept on the  same               basis." As the letter of the Bank did not contain replies to all the questions  raised  in the letter of August 2  1,  1959,  the Appellate  Board directed that it should be asked to send  a further  reply  with  respect  to  all  the  questions.   On September  17, 1959 the appellant accordingly wrote  another letter  to, the Bank asking for a reply specifically to  all the questions, to which the Bank again replied on  September 23,  1959.   Therein  they stated that the  heading  of  the account  was  "Mr.  Shanti Prasad Jain, Account  No.  50180" that  the account consisted in its entirety of six items  of credit  totalling DM. 1.689: 429,50 and that there  were  no further  credits or debits in the account.  The  reply  then proceeds on to state. ; The restrictions prevailing  against the  317 disposal of the amounts as imposed upon us by the firms  who deposited  the money are-as is customary in  such  cases-not expressed  or  referred to in the heading  of  the  account. Such  restrictions  are marked to the account  concerned  by means of internal instructions.  That is what has been  done in this case too.  We give below the exact copy of page 1 of our letter dated 25th September, 1958 except for the portion wherein  we  communicated  to  you  some  particulars  of  a strictly  confidential  nature concerning the affairs  of  a third  party,  some  client of ours.   This  information  we cannot disclose to any other party, as you evidently went us to do...... we, however, state that this omitted part page-1 does not in any way relate either to the account of the  six items   of   deposit  or  to  you".   The  copies   of   the communications  addressed  by the German firms to  the  Bank were enclosed. It  is  not  disputed  for  the  respondents  that  if   the statements contained in the replies given by the Bank are to be  accepted  at  their  face value then  the  case  of  the appellant  must  be  held  to  be  established  beyond   all reasonable   doubt.   But  they  contend  that   there   are circumstances which give rise to a suspicion that the  above statements  might  have  been inspired’  by  the  appellant. ’They argue that the letter of the Bank dated September  25, 1958,  shows that what we have on record is only the  second page  of the account of the appellant in the Bank  and  that shows that this is only a continuation of a previous account which has not been produced.  It is also pointed out that in the  letter  which the Bank sent to the Appellate  Board  on September 23, 1959, it was stated that the annual  statement of  the account ending December 31, 1958, had been  sent  to the  appellant  but that again has not been  produced.   All this,  it is said, throws a cloud of suspicion on the  truth of the arrangement as set up by the appellant,                             318 We are not impressed by this contention.  There is no  basis the  evidence  for  the  supposition  that  the  account  as produced is not the whole   of the dealing  of the appellant with  the Bank. The Bank has categorically stated  that  the six  items of credit were all the transactions  standing  in the  name  of  the  appellant and  there  is  no  reason  to discredit  it.           Nor  is  there  any  force  in  the contention  that  the annual statement ending  December  31, 1958,  had not been produced by the appellant,  because  the

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total amount standing to the credit of the appellant on that date as stated in the letter of the Bank, is precisely  what is shown in the account at page-2.  It is, therefore,  clear that  there  were  no  dealings between  the  Bank  and  the appellant,  other than those we are concerned with.  Nor  is there any position the complaint that it is only the  second page  of  the account that has been produced and  the  first page suppressed.  The Bank has made it clear that the  first page only contains some confidential communications relating to a customer, and that there are no entries relating to the deposits of the appellant in that page. It  is argued for the respondents that it is unusual  for  a Bank to take deposits on the terms stated by the  appellant, and   that  furnishes  cogent  reason  for   rejecting   the settlements pleaded by him as an afterthought.  It should be mentioned  that  while  the matter was  pending  before  the Appellate  Board, the respondents obtained the  opinions  of German  Banks and a German Lawyer as to whether deposits  on the terms mentioned by the appellant were usual and what the incidence of such deposits was.  Among the opinions received was  one from Sal Oppanheim Koein in which it is  stated  "A Germanbanking  practice  in export trade  with  India-as described  in  your  above letter-is not known  to  This  is strongly relied  on for the 319 respondents, but then it is further stated in that opinion : "We  think  it possible however, that in  individual  cases, agreements  of this kind could be arranged between  the  two contracting partners...... If the contracting parties  reach such an agreement, and if the customer instructs his bankers accordingly,  the bankers, will, as a matter of usual  busi- ness conduct inform the third party beneficiary  accordingly of  the instructions and all relevant modalities which  they have received.......... If it has been ascertained that  the Indian  beneficiary has not fulfilled or cannot  fulfil  the stipulations   agreed  upon,  be  forfeits  his  claims   to conditional.  payment and the bank can then,  on  principle, refund  the  customer  of the secured  amount.   As  in  the aforementioned  case, proceedings here depend on  the  terms stipulated in individual cases, between the customer and his bankers." We  have  then  the  opinion of the  Dresdner  Bank  on  the practice  of  the German Banks.  There. in  after  observing that  they  would as a matter of  principle  avoid  handling transactions  of the sort referred to lost they  should  get involved in dispute between the depositor and the payee, the Bank proceeds on to state that "we will handle such business only if the depositor and the payee are known to us as  well reputed  businessmen"  and that, when a Blocked  Account  is opened at the depositor’s request in the name of the  payee, the responsibility of the Bank with reference to the  amount "vis-a-vis  the depositor to release the deposited money  to the payee is only upon receipt of a special authorization to this effect from the depositor" and that "on the other  hand Bank,  may  refund this amount to the depositor  only  after expiration of +,he term stipulated by the depositor or, with the  payee’s  consent, before expiration of  the  stipulated term."’ This is relied on behalf of the appellant. 320 Another  Bank,  Messrs.  Schacht & Company stated  in  their opinion  that  a German Bank when  handling  deposits  would follow  exclusively the instructions given by the  depositor and  that when payments have to be made out of the  deposits on  the  fulfilment  of certain conditions  the  Bank  would "effect   the  payment  only  after  fulfilment   of   these

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conditions  given  by the depositor"  and  that  conditional deposits  would "as a rule be limited in time so that  after expiration  of this limit amounts which have not  been  paid out for reasons of non-utilization or non-fulfilment of  the conditions will be at the depositor’s free disposal." One Mr. J. Bergermann a lawyer of Bonn states in his opinion that  "it  is  common  practice  to  accept  deposits  under conditions"  and  that in case of such  deposits  the  payee ,’could  not  enforce  payments if the  conditions  are  not fulfilled." There was some argument before us as to who will be entitled to  the amounts in deposit in case the conditions agreed  to between the parties are not fulfilled.  One view is that the amounts  would  then  revert back to  the  depositors.   The German lawyer could not say on this question more than  this that "ifthe   conditions  are  not  fulfilled  the   legal situation isdoubtfull." The correct position possibly  is that if the conditions become impossible of performance, the contract becomes void on the ground of frustration, and  the parties  are  thrown  back  on their  rights  prior  to  the settlement.   It  is  however unnecessary to  enter  into  a discussion  of this question, as all that we  now  concerned with  is to see whether deposits of the kind set up  by  the appellant  are so unusual, as to cast a suspicion  on  their truth.  The evidence on record shows that such deposits  are well  known,  though  not  very  common  in  German  banking practice, and there are therefore no sufficient grounds  for discrediting the 321 statements  of  the  Bank,  as to the  terms  on  which  the deposits were made. But   the  respondents  argue  that  stripped  of  all   its embellishments, the substance of the agreements between  the appellant and the German firms, was that the latter were  to pay  compensation to the Indian Companies, not in cash,  but in  kind, by delivery of goods manufactured by them  against new orders, that that object could have been easily achieved by  the  Indian Companies and German firms entering  into  a simple  contract  to that effect, without  complicating  the matter by associating the Deutsche Bank in the  transaction, and  that there is therefore ground for suspecting that  the present version of the terms of the arrangement is an  after thought  so conceived as to fit in with deposits which  must have been made previously in the normal course. We  are unable to accept this argument.  The  Doutsche  Bank occupies,  it should be marked, a position analogous to  the State  Bank  in  this country, and it is  a  Bank  of  great international repute, and status.  Its statements as regards the  conditions which the deposits were made are not  to  be lightly brushed aside, and no grounds have been shown as  to why  they should not be accepted.  On the other hand,  there is  on  record unimpeachable evidence which  fully  supports them.   On  March  15,  1958, when  M/s.   Voith  &  Company remitted to the Bank the sum equivalent to pound 17,900/- to the  credit  of  the  appellant,  they  gave  the  following instructions to the Bank :               "The said amount should be held in the name of               Mr.  S. P. Jain, Chairman of  Messrs.   Rohtas               Industries Ltd., who will arrive in Germany in               the  course of the next month.  As soon as  we               have arrived on a final understanding With Mr.               S. P. Jain would be authorised to               322               utilise  the above amount for payment only  of               the  purchase of further machinery by  Messrs.

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             Rohtas  Industries  Limited from  us.   Please               be  advised  that the amount may not  be  used               otherwise by Mr. S. P. Jain or Messrs.  Rohtas               Industries Limited." Thus the deposit was conditional, and it was to be repaid to the  depositors  in  payment of the price of  goods,  to  be thereafter  ordered  by, and supplied to  the  Rohtas.   The importance of this lies in this that it is the first of  the six  credits  in  account  No. 50180,  which  is  now  under scrutiny,  and it was long prior to the  settlement  reached between  the  parties,  which was on August  1,  1958.  This completely  shatters  the theory that the statement  of  the Bank  might  have  been  ’inspired’  as  suggested  for  the respondents.   The  fact would appear to be  that  when  Mr. Zimmermann came over to India in February 1957 for  settling the claim of the Rohtas for compensation, he must have  been apprised  of  the intention of the appellant to  expand  the industries,  and  as  practical  businessmen,  he,  and  the appellant  must  have  evolve  the  scheme  of   conditional deposits,  to  be applied in payment of future goods  to  be ordered by the Indian Companies.  Such a scheme would be  of advantage to M/s.  Voith & Company because that would insure them  new business, and they could make up for it in  fixing the   price.    The  Indian  Companies  would   under   this arrangement be in a position to overcome the difficulties of getting foreign exchange, and it would be easy to get import license from the Government of India.  And as for depositing the  amounts  in  the  Bank,  that  would  not  merely  lend assurance  to  the  Indian Companies, but  also  enable  the parties to comply with the German regulations, as to payment of  20 per cent of the price of manufactured  goods,  before they axe exported.  This precisely is the sort of 323 arrangement which businessmen might be expected to  conclude in the situation in which the parties were placed. It  should be noted that when the proposal of M/s.  Voith  & Company  and the deposits made by them were communicated  to the appellant, he raised no objection in his reply dated May 14,  1958,  to the conditions under which  the  deposit  was made.  He declined to accept it only because no compensation was  awarded for deficiency in output, and it is this  claim which  was  also settled on August 1, 1958,  when  a  second deposit  was  made  by M/s.  Voith &  Company.   The  scheme evolved  by the appellant and M/s.  Voith & Company set  the pattern for settlement’ with the other three firms, and that is how all the four contracts came to be settled on the same terms.  On the evidence above referred to., we are satisfied that  the  deposits in account No. 50180 were  made  by  the German firms on the conditions stated by the appellant.   We have  reached  this  conclusion on a  consideration  of  the evidence  on  record,  without  reference  to  any  abstract doctrine  as  to burden of proof.  But it is only  right  to observe,  that  the  proceedings under the  Act  are  quasi- criminal in character and it is the duty of the  respondents as  prosecutor to make out beyond all reasonable doubt  that there has been a violation of the law.  Vide the decision in re.  H. P. C. Productions Ltd. (1) cited for the  appellant. The learned Attorney General did not contest this position. (2)That brings us on to the next question which is whether on  our  finding  as  to the  nature  of  the  deposits  the appellant has contravened s. 4(1) of the Act.  The appellate Board  has held that he has, for the reason that  under  the law the true relationship between a Banker and a customer is that  of  a  debtor  and  creditor  and  that  it  makes  no difference  in  that relationship that  the  deposites  were

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conditional.  The respondents maintain that this (1)  [1962] 2 W. L. R. 51. 324 is the correct view to take of the relationship between  the appellant  and the Deutsche Bank with reference  to  account No.  50180  and that he must be held to have  lent  out  the monies   deposited  in  that  account  to  the  Bank.    The contention of the appellant on the other hand is  threefold. Firstly,  it is said, that on the terms of the deposits,  he has  no present right to the amounts standing to his  credit in  the account, that he would become entitled to them  only on  the happening of certain contingencies, and  that  until then  there was no debt due to him and that therefore  there could be no lending in respect, of that debt.  Secondly,  it is  contended,  that when the German firms  transferred  the amounts mentioned in account No. 50180 to the Deutsche  Bank that was not by way of deposit with it as a bank but by  way of  entrustment  for  safe custody to be paid  over  to  the person  who  might become entitled to them in terms  of  the agreement   and  that  the  monies  deposited  Under   those agreements. were not monies lent to the Bank.  And  thirdly, it  is argued, that on the terms on which the deposits  were made in the Bank, the position of the Banker was not that of a  debtor  but that of a trustee, the  appellant  being  the beneficiary  entitled  to the amounts on fulfilment  of  the conditions of which the Bank had been apprised.  We must now examine these contentions. Now  the law is well settled that when moneys are  deposited in a Bank, the relationship that is constituted between  the banker  and the customer is one of debtor and  creditor  and not trustee and beneficiary.  The banker is entitled to  use the  monies  without being called upon to account  for  such user,  his  only  liability being to return  the  amount  in accordance  with  the  terms  agreed  between  him  and  the customer.    And  it  makes  no  difference  in  the   jural relationship whether the deposits were made by the  customer himself, or 325 by some other persons, provided the customer accepted  them. There  might  be special arrangement under  which  a  Banker might  be  constituted  a trustee, but apart  from  such  an arrangement,  his position qua Banker is that of  a  debtor, and  not trustee.  The law was stated in those terms in  the old  and well-known decision of the House of Lords in  Foley v. Hill (1), and that has never been questioned. If  the point under consideration fell to be decided  solely on  the  basis of account No. 50180 in  the  Deutsche  Bank, there   could  be  no  answer  to  the  contention  of   the respondents that the appellant was a creditor in respect  of the  amounts  deposited in that account he must be  held  to have advanced them as loan to the Bank.  It needs hardly  to be stated that it makes no difference in the legal  position that the amounts shown in the account were not deposited  by the  appellant  but by the German firms as he  bad  accepted them.   But  it  is contended for  the  appellant  that  the acceptance  of  the  deposits  by  him  was  under   special agreements  entered into with the German firms,  which  gave him no present right to the amounts, that though the account stands  in his name he has no right to operate on  it,  that before  he  can  do  so he  must  obtain  licence  from  the Government  of  India to import the goods,’  then  place  an order  with  the respective German firms for supply  of  new machineries and parts and then only draw on the account  and that  even then it can only be for the payment of the  price payable  to  those firms for the supply of new  goods.   The

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right  of the appellant to the amounts in deposit is, it  is argued, contingent on the happening of these events and that until then there was no debt due to him and s..   4(1)   had no application. (1) [1848] 11 H.L.C. 28-9 E.R. 1002. 326 In   our  opinion  this  contention  is  well  founded.    A contingent debt is strictly speaking not a debt at all.   In its ordinary as well as its legal sense, a debt is a sum  of money  payable  under  an existing obligation.   It  may  be payable forthwith, solvendum in presenti, then it is a  debt "due";  or  it may be payable at a  future  date,  solvendum futuro; then it is a debt "accuring".  But in either case it is a debt.  But a contingent debt has no present  existence, because it is payable only when the contingency happens, and exhypothesi that may or may not happen. The  question  whether  a  contingent  debt  is  a  debt  as understood in law has often come up for consideration before English Court in connection with garnishee proceedings taken by judgment creditors to attach it as a debt.  The, decision has  invariably been that they are not debts ,accruing"  and could  not be attached.  In Webh v. Stenton (1),  the  point for  decision was whether an amount payable by a trustee  to the  beneficiary  in  futuro could attached  by  a  judgment creditor  as a debt "owing or accruing" and it was  answered in  the  negative.  Discussing the  distinction  between  an existing  debt and a contingent debt, Lord Lindley  observed "I  should say, apart from any authority, that a debt  legal or  equitable can be attached whether it be a debt owing  or accruing; but it must be debt, and a debt is a sum of  money which is now payable or will become payable in the future by reason  of  a  present  obligation,  debitum  in   presenti, solvendum in futuro.  An accruing debt, therefore, is a debt not yet actually payable but a debt which is represented  by an  existing  obligation.... The result seems to  me  to  be this: you may attach all debts, whether equitable or  legal; but only debts can be attached; and moneys which may or  may not become payable 327 from a trustee to his cestui que trust are not debts." "The meaning of ’accruing debt" observed Lord Black burn  in Tapp  v.  Jones(1), ",is debitum in  presenti  solvandum  in futuro,  but  it goes no further, and it does  not  comprise anything which may be a debt, however, probable- or  however soon it may be a debt." The  law is thus well settled that a contingent debt  is  no debt until the contingency happens, and as the right of  the appellant  to  the  amounts in deposit in his  name  in  the Deutsche   Bank  arises  only  on  the  happening   of   the contingencies already mentioned, it follows that there is no debt  due  to  him in presenti and there could  be  no  loan thereof within s. 4(1) of the Act. We  should add that our conclusion that there is no  present debt  owing to the appellant is based on the fact  that  the contingency  on  which his title to the amounts  in  deposit will  arise,  such  as the grant of import  licence  by  the Government  is one the fulfilment of which is wholly  beyond his  control.  Different consideration might arise when  the contingency  is  one  which can be  fulfilled  by  the  very person, who is to take under it. It is further contended on behalf of the appellant that  the payments made by the German firm in account No. 50180 cannot be  regarded as deposits made by or on behalf of a  customer in  the normal course of banking business and that  in  con. sequence  the  principle of law that  when  banker  receives

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monies  from a customer he becomes his debtor in respect  of those  moneys  has no application.   There  is  considerable force  in this argument.  It is well know that Bank  engage, in addition to their normal work as Bankers, in several (1)  (1875)L.R.100 B.591, 328 activities,  which  are  not associated  with,  and  do  not involve  any  elements of banking.  In  Halsbury’s  Laws  of England,  Third  Edition,  Vol. 2, Not"  (g)  it  is  stated "Numerous other functions are undertaken at the present  day by banks, such as the payment of domiciled bills, custody of Valuables, discounting bills, executor and trustee  business or  acting in relation to stock exchange  transactions,  and banks have functions under certain financial legislation, e. g. by delegation under the Exchange Control Act, 1947, or as authorised   dealers   under  that   Act   and   subordinate legislation.   These  functions  are  not  strictly  banking business." In  Paget’s  Law  of Banking, Sixth Edition, p.  43,  it  is stated  that "superimposed on this general  relationship  of banker  to  customer  there  may  be  special  relationships arising from particular circumstances and requirements"  and that the express terms of those relationships overrides  the implied terms arising from the general relationship.  It was argued  for the respondents, that this statement of the  law could   have,  as  suggested  by  the  word   superimposed’, reference  only  to  special  contracts  entered  into  with customers,   and  that  involves  the  admission  that   the appellant  is  a customer.  Normally no  doubt  Banks  would undertake  these  works for their customers,  but  there  is nothing  to prevent them from doing so for others  as  well. In  Corpus  Juris  Secundum,  Vol.  9,  it  is  stated  "The intention  of  the  parties controls the  character  of  the relation  between Bank and depositor, which may be  that  of bailee  and  bailor, but is ordinarily that  of  debtor  and creditor"  (Page 546).  And it is pointed out when money  is delivered  to  a  Bank  "for  application  to  a  particular specific  purpose" it is not a general deposit creating  the relationship  of  debtor  and  creditor,  but  a  (,specific deposit"  creating the relationship of bailee and bailor  or trustee and beneficiary.  Vide p. 570,                             329 Therefore  the fact that money has been put in a  Bank  does not necessarily import that it is a deposit in the  ordinary course  of banking.  We have to examine the substance of  it to  see whether it is in fact so or not.  It is  unnecessary for  the  purpose of this case to elaborately  examine  what banking  business, properly so called, consists in.   It  is summed up as follows in Halsbury’s Laws of England.   Third- Edition  Vol. 2 p. 150 Para 277: ’,’the receipt of money  on current or deposit account and the payment of cheques  drawn by  and  the collection of cheques paid in by  a  customer." Applying these tests, can it be said that account No.  50180 is  truly  a banking account?  Did the  appellant  open  the account  in the Bank with a view to deposit his moneys  from time to time, and to operate on it by drawing cheques?   The question admits of only one answer, and that is in the nega- tive.   The  account was opened in the Bank with a  view  to effectuate the arrangement between the German firms, and the appellant,  which was that the amounts were to be repaid  to the depositors a price of new machineries to be supplied  by them  and the appellant was not to operate on it except  for that purpose.  The Bank was informed of this arrangement and took  the deposits with notice of the rights of the  parties thereunder.   Under  the circumstances the Bank  has  really

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only custody of the money as if it were a stakeholder,  with a liability to hand it over to the persons who would  become entitled  to  it under the arrangement.  On these  facts  it cannot be said that there is a deposit in a commercial sense of the word.  It would be more correct to say that the  Bank holds   the   money  under  a  special   arrangement   which constitutes it not a debtor, but a sort of a stakeholder. It  was  also argued on behalf of the  appellant  that  when Deutsche Bank received the amounts 330 from  the German firms on the terms mentioned by  them,  the relationship  that  was  constituted  between  it  and   the appellant was one of trustee and beneficiary and not that of debtor  and creditor and that therefore s. 4(1) was  out  of the  way.   We  are unable to agree  with  this  contention. Under the terms of the arrangement between the German  firms and the appellant the deposits were to stand in the name  of the  appellant and so they never vested in the Bank.  It  is true  that the- Bank would have the right to use  the  funds but  that  is not because they belong to it but  because  it must  be taken to be the understanding of the parties,  when they  entrusted the moneys to it pending there repayment  to the  German firms in terms of the agreement, that  the  Bank was to have the right to use them until a demand is made for their return.  Relience was placed for the appellant on  the decision  of the Privy Council in Official Assignee v.  Bhat (1),  where  it  was  held  that  a  trust  fund  which  was authorised  to be invested in business could be  traced,  on the  principle laid down in re.  Hallett’s Estate (2),  into the assets of the business. But in that case it was admitted that the deposit was a Trust and the point for decision  was only  whether  the undoubted rights of  the  beneficiary  to follow  that amount was lost by the authority given  to  the trustee to use it in his business.  But here the question is whether  the  Bank is a trustee and the fact that  they  are entitled  to  use the funds does not clothe  them  with  the character  of a trustee.  If that were not so  every  banker must be a trustee which clearly is not the law.  Then  again who are the beneficiaries under the trust, the German  firms or  the appellant?  The fact is that the  arrangement  under which  the monies were deposited in the Bank is sui  generis and its position in truth is that of a bailee, not a  debtor or  trustee.   It is unnecessary to  pursue  the  discussion further (1) (1933) L.R. 60. I.A. 203. (2)  (1890) 13 Ch.  D. 696. 331 in  view of our decision that the relationship  between  the Bank and the appellant is not that of debtor and creditor. It  remains to deal with the contention urged on  behalf  of the appellant that even if it be held that the appellant had made  the  deposits in question in the Deutsche  Bank  as  a customer,  there had been no contravention of is. 4  (1)  of the  Act as the prohibition enacted therein is only  against lending  of foreign exchange by a person who is resident  in India  and that at the time of the deposits in question  the appellant  was  not in India but in Germany.   There  is  no substance   in  this  contention.   The  intention  of   the Legislature  was  plainly to prohibit  all  transactions  in foreign  exchange  by  persons who are  residents  of  India whether  such  transactions take place during  their  actual residence in India or during their sojourn in foreign parts. To  hold that the prohibition under the Act does not  extent to  acts  done  outside India by  residents  of  India  must inevitably lead to large-scale evasion of the Act  resulting

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in its object being defeated.  A construction which leads to such a result must be avoided.  The expression "resident  in India" is clearly used in the sense "resident of India". It  may be mentioned that the words used in s. 1 (I) of  the corresponding British Statute Exchange Control Act. 1947 are "no  person resident in, the United Kingdom, other  than  an authorised dealer, shall, outside the United Kingdom, buy or borrow  any gold or foreign currency from, or sell  or  lend any  gold or foreign currency to, any person other  than  an authorised dealer": It will be-seen that the language in the Indian  Statute  is in identical terms.  In re.   H.  P.  C. Production  Ltd.  (1) cited on behalf of the  appellant  the question was whether certain transactions entered into by  a resident of England 332 but  outside England were hit by s. 1 and the basis  of  the decision is that they would be if the other conditions  were satisfied.   We  have no hesitation in holding that  if  the appellant did in fact land monies to the Deutsche Bank while he was in Germany he would, have contravened s. 4 (1) of the Act. In  view  of our conclusion that the appellant  has  only  a contingent  right  to  the amounts  standing  in  credit  in account  No.  50180 and that the deposits were made  in  the Bank not in the course of normal banking business but  under a  special  arrangement, it must be held that there  was  no lending of those amounts by the appellant to the Bank within s.  4(1)  of the Act and the order of  the  Appellate  Board Imposing a fine of Rs. 5 lakhs on him under s.    23(1)(a) must be held, to be illegal and set aside. In  the result Appeal No. 319 of 1961 is allowed and  Appeal No. 320 of 1961 dismissed with costs, one hearing fee. 333