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PETITIONER: STATE BANK OF INDIA

       Vs.

RESPONDENT: GHAMANDI RAM (DEAD) THROUGH SHRI GURBAX RAI

DATE OF JUDGMENT: 13/02/1969

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SHAH, J.C. GROVER, A.N.

CITATION:  1969 AIR 1330            1969 SCR  (3)  51  1969 SCC  (2)  33  CITATOR INFO :  R          1977 SC2069  (8)  D          1987 SC 558  (9)

ACT: Hindu  Law-Joint Hindu family firm-if ’person’ or  ’body  of individuals not incorporated’. Private  International  Law-Priority between  voluntary  and involuntary assignments of debts.

HEADNOTE: The  respondent was the karta of a joint Hindu ’family  firm carrying on business, before the partition of India, in area now  forming part of Pakistan.  The firm had a  cash  credit account with the Imperial Bank (now State Bank of India)  in that  area  and  had  pledged its goods  with  the  Bank  as security   for  repayment  of  the  advances.    After   the partition, the family and its members came away to India and became evacuees in relation to Pakistan.  The Bank sold  the pledged goods in 1948 and after adjusting the amounts due to it  credited the surplus amount in the account of the  firm. The Pakistan (Administration of Evacuee Property) Ordinance, 1949, was promulgated on October 15, 1949 and was amended by the Pakistan (Administration of Evacuee Property)  Amendment Act,  1951.   Under  s. 6(1) of the  Ordinance  all  evacuee property  shall vest and shall be deemed to have  vested  in the  Custodian  in  Pakistan  from  March  1,  1947.   By  a notification dated February 19, 1952 the Pakistan Government exempted,  from  the  operation  of  the  provision  of  the Ordinance ’cash deposits made in Banks by persons other than companies  or associations or bodies of individuals  whether incorporated or not’. The respondent applied under s. 13 of the Displaced  Persons (Debts  Adjustments)  Act,  1951  (Indian  Act)  before  the Tribunal  constituted under the Act, claiming the amount  in the  Bank  credited  in  the account  of  the  family.   The Tribunal  dismissed the application.  In revision, the  High Court allowed the claim on the ground that the amount was  a ’cash  deposit  made  by  an individual’  in  terms  of  the Pakistan Notification dated February 19, 1952. In appeal to this Court,

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HELD : (1) Having regard to the juristic nature of the Hindu Joint family under the Mitakshara Law, the family firm could not  be  treated  as a ’person’ within the  meaning  of  the Pakistan notification.  The firm was ’a body of  individuals not  incorporated’  and  hence the amount in  the  Bank  was evacuee  property and had become vested in the Custodian  of Evacuee Property, Pakistan, with effect from March 1,  1947. [687 E-F] Sundarsanam  Maistri v. Narasimhulu Maistri, I.L.R. 15  Mad. 149, 154, referred to. (2)  The rule of Private International Law is that where  an involuntary  assignment occurs after a voluntary  assignment has  already been made, the question whether the  rights  of the voluntary assignee have been postponed or defeated would be  governed by the lex situs of the debt.  In  the  present case,  since  the involuntary assignment in  favour  of  the Custodian  in Pakistan occurred in 1949, when the  Ordinance was  promulgated after the voluntary assignment by the  Bank in favour of the firm in 1948 and the situs of 682 the debt was Pakistan (the Bank having garnishable assets of the  respondent in Pakistan which could be attached  by  the Custodian  in Pakistan), the question of priority  would  be governed  by the law in Pakistan, namely, the provisions  of the Ordinance; and under the Ordinance, the amount vested in the  Custodian in Pakistan with effect from March  1,  1947. Therefore,  the  liability of the Bank to the firm  must  be deemed to have been extinguished. [687 H; 688 G; 689 F] Re  : Queensland Mercantile and Agency Co. [1891] 1 Ch.  536 and Arab Bank Ltd. v. Barclays Bank (Dominion, Colonial  and Overseas) [1954] AC. 495, applied. Dicey, Conflict of Laws, 8th Edn. p. 780, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 449 of 1966. Appeal  by special leave from the judgment and  order  dated September 12, 1963 of the Punjab High Court Circuit Bench at Delhi in Civil Revision No. 104-D of 1958. Niren De, Attorney-General, S. V. Gupte, H. L. Anand and K.   B. Mehta, for the appellant. Bishambar  Lal,  M. R. Garg, H. K. Puri.  and  Radha  Kishan Makhija, for the respondent. The Judgment of the Court was delivered by Ramaswami,  J. M/s.  Ghamandi Ram Gurbax Rai, a joint  Hindu family  firm  consisting of Ghamandi  Ram,  since  deceased, Gurbax  Rai,  Chainan Lal and Jagan Nath, used to  carry  on business  in  Bhawalpur  State  now  forming  part  of  West Pakistan, before the partition of India.  Shri Ghamandi  Ram was  the  manager and karta of the said joint  Hindu  family firm  during the material period.  Before the  partition  of India, the joint Hindu family firm had a cash credit account in  its name in the then Imperial Bank of  India,  Bhawalpur State  now  within Pakistan territory.  The  said  firm  had pledged goods as security for the repayment of the  advances made  in the said account.  On the partition of India,  the joint  Hindu family and its members admittedly  became  eva- cuees and the then Imperial Bank of India, Bhawalpur  State, sold the pledged goods in the year 1948 for the  realisation of  its dues in the said cash credit account and credited  a sum  of  Rs. 2,54,1/11/- left as surplus balance  after  the adjustment of the dues of the Imperial Bank of India in  the said account.  On October 15, 1949, the Pakistan  Government promulgated  Pakistan (Administration of  Evacuee  Property)

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Ordinance,  1949  (Ordinance  No. XV of  1949)  whereby  all property  in Pakistan in which an evacuee had any  right  or interest  vested in the Custodian of Evacuee  Property  with retrospective  effect  from March 1, 1947.   The  expression ’evacuee  property’  was defined by s. 2 sub-s. (3)  of  the Ordinance  to include any right or interest in  joint  Hindu family property.  ’Cash deposits in Banks’ were how- 683 ever excepted from the definition of the term ’property’  by s. 2(5) of the Ordinance.  The Ordinance was amended in 1951 by   the  Pakistan  (Administration  of  Evacuee   Property) Amendment Act, 1951 (Act No. VI of 1951) whereby s. 2(5)  of the  Ordinance was amended so as to bring cash  deposits  in Banks  within the definition of the term ’property’.   By  a notification   dated   February  19,  1952,   the   Pakistan Government exempted from the operation of the provisions  of the  said Ordinance ’cash deposits made at Banks by  persons other   than   companies  or  associations  or   bodies   of individuals whether incorporated or not’. On May 9, 1953, Shri Ghamandi Ram (now deceased) as  manager and karta of the joint Hindu family, firm filed an  applica- tion   under   s.  13  of  the  Displaced   Persons   (Debts Adjustments)  Act,  1951  (Act No. 70 of  1951)  before  the Tribunal  constituted under the said Act at  Delhi  claiming Rs.  3,165/11/- including Rs. 2,341/11/- on account  of  the said  principal and interest at 6% per annum on  the  ground that the said amount had got become evacuee property and the liability  of the Imperial Bank of India had  not  therefore ceased.  During the pendency of the proceedings be-fore  the Tribunal  the  appellant  Bank  was  constituted  under  the provisions of the State Bank of India Act, 1955 (Act No.  23 of 1955) and succeeded to the entire rights and  liabilities of   the  Imperial  Bank  of  India.   The   appellant   was accordingly  substituted  in the said  proceedings  for  the Imperial  Bank  of India.  By its order  dated  November  1, 1956,   the  Tribunal  dismissed  the  application  of   the respondent  on the ground that in terms of the law  enforced in  Pakistan the deposit in the Bank in the account  of  the firm  had become an evacuee property and would be deemed  to have vested in the Custodian with effect from March 1,  1947 and by virtue of the said vesting the liability of the  Bank had  ceased.   The  Tribunal  further  held  that  the  only property  in the pledged goods, which belonged to the  firm, was  the  equity of redemption and that had  vested  in  the Custodian being a ’property’ within the meaning of the  said Ordinance.   The  respondent  took the  matter  in  revision before the Punjab High Court being Civil Revision No.  104-D of  1958.  The application was allowed by Mr. Justice D.  K. Mahajan  by his judgment dated 12th September, 1963  on  the ground  that the amount claimed by the respondent  was  cash deposit  made by an individual in terms of the  notification dated  February 19, 1952 and was thus beyond the purview  of the   provisions  of  the  Ordinance.   The  learned   Judge accordingly set aside the order of the Tribunal and  granted a decree in favour of the respondent for the amount claimed. This appeal is brought by special leave from the judgment of the  Punjab High Court dated 12th September, 1963  in  Civil Revision No. 104-D of 1958. 684 Section 2 sub-section (3) of the Pakistan (Administration of Evacuee Property) Ordinance, 1949 (Ordinance No. 15 of 1949) defines the term ’evacuee property’ as meaning any  property in  which an evacuee has any right or interest, or which  is held by or for him in trust, and includes-               (a)   any  right  or interest in  joint  Hindu

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             family  property  which would  accrue  to  the               evacuee upon the partition of the same, or               (b)   property obtained from an evacuee  after               the twenty eighth day of February, 1947, until               confirmed by the Custodian,               but does not include-               (i)   any  movable property in  the  immediate               physical possession of any evacuee, or               (ii)  any property belonging to a joint  stock               company the head office of which was situated,               before  the fifteenth day of August, 1947,  in               any  place in the territories  now  comprising               India  and continues to be so  situated  after               the said date".               Section  2  sub-section (5) defines  the  term               ’property’ as follows:-               "  property’ means property of any  kind,  and               includes   any  right  or  interest  in   such               property and any debt or actionable claim, but               does not include a mere right to sue or a cash               deposit in a bank".               Section  2(5) of the Ordinance was amended  by               Pakistan (Administration of Evacuee  Property)               Amendment  Act, 1951 (Act No. VI of  1951)  in               the following manner:               "2(b)  in  clause  (5) the words  ’or  a  cash               deposit in Bank’ shall be omitted".               Section 6 of the Ordinance states               "6(1)  All  evacuee property  shall  vest  and               shall  be deemed always to have vested in  the               Custodian  with effect from the first  day  of               March, 1947.               The  notification of February 19, 1952  issued               by the Pakistan Government in exercise of  the               powers   conferred  by  section  45   of   the               Ordinance is in the following terms :               "In  exercise  of  the  powers  conferred   by               section 45 of the  Pakistan (Administration of               Evacuee  Property) Ordinance XV of  1949,  the               Central Government in                                    685               supersession of its Ministry’s notification F.               22(1)51-P  dated the 9th May, 1951 is  pleased               to exempt from the operation of the provisions               of  the said Ordinance cash deposits  made  at               Banks  by  persons  other  than  companies  or               associations or bodies of individuals  whether               incorporated or not".               Section 7 of the Ordinance states               "7.  (1)  Every person who is, or has  at  any               time after the twenty-eighth day of  February,               1947,  ’Men  in  possession,  supervision   or               management  of any evacuee property, shall  be               deemed to hold or to I have held, as the  case               may  be,  such  property  on  behalf  of   the               Custodian               (2)   Every  person  who  is  in   possession,               supervision  or  management  of  any   evacuee               property  or  property which he knows  or  has               reason  to believe is evacuee property  shall,               as  soon  as may be but not later  than  sixty               days from the commencement of this  Ordinance,               intimate  to  the  Custodian  in  writing  his               willingness to surrender such property to  the               Custodian  or to any person authorised by  the

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             Custodian  in this behalf upon receipt  of  a-               notice from the Custodian that the property is               evacuee property, and shall surrender the same               if called upon by the Custodian or any  person               authorised as aforesaid.               (3)   The provisions of sub-section (2)  shall               not apply to any person who is in  possession,               supervision  or  management  of  any   evacuee               property  by virtue of an allotment made by  a               Rehabilitation Authority".               Section 7 of the Ordinance was amended in 1951               in the following terms :-               "5.  In  sub-section (2) of section 7  of  the               Ordinance, for the words ’sixty days from  the               commencement  of  this  Ordinance’  the  words               ’such  date as may be notified by the  Central               Government  in the Official Gazette, shall  be               substituted, and the words ’upon receipt of  a               notice from the Custodian that the property is               evacuee property’ shall be omitted".               Section 11 of the Ordinance states               "11.  (1)  Any amount due to any  evacuee,  or               payable  in respect of any  evacuee  property,               shall  be paid to the Custodian by the  person               liable to pay the same.               (2)   Any  person  who makes a  payment  under               subsection   (1)  shall  be  discharged   from               further liability to pay to the extent of  the               payment made.                Sup/69-9               686               (3)   Without  prejudice  to  any  penalty  to               which  he may be liable under section 29,  any               person  who  makes  or has  made  any  payment               otherwise than in accordance with  sub-section               (1)  or  any law for the time being  in  force               requiring  payment  of any such amount  as  is               mentioned in sub-section (1) to be made to the               Custodian  shall  not be discharged  from  his               obligation  to  pay the amount  due,  and  the               right   of  the  Custodian  to  enforce   such               obligation  against such person  shall  remain               unaffected". The first question involved in this appeal is whether upon a correct  interpretation of the notification of the  Pakistan Government  dated February 19, 1952, the joint Hindu  family firm " Ghamandi Ram Gurbax Rai" was ’a body of  individuals’ within  the  meaning  of the notification  and  whether  the amount  in  dispute  had accordingly become  vested  in  the Custodian  of  Evacuee Property, Pakistan with  effect  from March  1, 1947 by virtue of the provisions of the  Ordinance thereby  divesting the said joint Hindu family firm  of  its interest therein. According  to  the Mitakshara School of Hindu  Law  all  the property  of  a  Hindu joint family is  held  in  collective ownership  by  all  the  coparceners  in  a  quasi-corporate capacity.  The textual authority of the Mitakshara lays down in  express terms that the joint family property is held  in trust   for  the  joint  family  members  then  living   and thereafter  to  be born (See Mitakshara,  Ch.  11-27).   The incidents of co-parcenership under the Mitakshara law are  : first,  the  lineal male descendants of a person up  to  the third   generation,  acquire  on  birth  ownership  in   the ancestral properties.is common; fifthly, that no  alienation of the property any tune work out their rights by asking for

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partition  thirdly that till partition each member  has  got ownership  extending  over the entire  property,  conjointly with  the  rest;  fourthly, that as a  result  of  such  co- ownership the possession and enjoyment of the properties  is common;  fifthly,  that  no alienation of  the  property  is possible unless it be for necessity, without the concurrence of  the  coparceners, and sixthly, that the  interest  of  a deceased  member  lapses on his death to the  survivors.   A coparcenary under the Mitakshara School is a creature of law and cannot arise by act of parties except in so far that  on adoption  the  adopted  son becomes a  coparcener  with  his adoptive  father as regards the ancestral properties of  the latter.   In Sundarsanam Maistri v. Narasimhulu Maistri  and Anr.  (1)  Mr. Justice Bhashyam Ayyangar  stated  the  legal position thus :-               "The  Mitakshara  doctrine  of  joint   family               property  is founded upon the existence of  an               undivided family, as               (1)   I.L.R. 25 Ma 149,’154.                                    687               a  corporate  body [Gan Savant Bal  Savant  v.               Narayan Dhond Savant(1) and Mayne’s ’Hindu Law               and  Usage’, 6th edition, paragraph  270]  and               the  possession of property by such  corporate               body.   The first requisite therefore  is  the               family unit; and the possession by it of  pro-               perty  is  the  second  requisite.   For   the               present purpose, female members of the  family               may  be  left  out of  consideration  and  the               conception of a Hindu family is a common  male               ancestor  with his lineal descendants  in  the               male  line, and so long as that family  is  in               its  normal  condition  viz.,  the   undivided               state--its  forms  a  corporate  body.    Such               corporate body, with its heritage, is purely a               creature  of law and cannot be created by  act               of parties, save in so far that, by  adoption,               a  stranger may be affiliated as a  member  of               that corporate family".                Adverting  to  the  nature  of  the  property               owned,  by  such a family  the  learned  Judge               proceeded to state "                As  regards the property of such family,  the               ’unobstructed  heritage’  devolving  on   such               family, with its accretions, is, owned by  the               family  as ’a corporate body and one  or  more               branches  of  that  family,  each  forming   a               corporate body within a larger corporate body,               may  possess separate ’unobstructed  heritage’               which, with its accretions, may be exclusively               owned by such branch as a corporate body".                 Having regard to the juristic nature of  the               Hindu joint family, according to the  doctrine               of Mitakshara, we are of the opinion that  the               Hindu joint family firm of Ghamandi Ram Gurbax               Rai  cannot  be  treated  as  an  ’individual’               within the meaning of the notification of  the               Pakistan Government dated 19th February, 1952,               but  the said firm must be treated as ’a  body               of  individuals whether incorporated  or  not’               within the meaning of that notification. We  proceed  to consider the next question arising  in  this appeal  viz., whether the liability of the appellant to  the respondent  in India would be deemed to be  extinguished  in view  of  the  operation of the  Pakistan  Evacuee  Property

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Ordinance  and  in view of our finding that  the  amount  in dispute  had  become  vested in  the  Custodian  of  Evacuee Property, Pakistan with effect from March 1, 1947 by  virtue of the provisions of the Ordinance.  It is not disputed that the appellant had got garnishable assets in Pakistan out  of which  the Pakistan Government could realise the  amount  by attachment  of the property of the appellant.  The  question is : what is the rule of Private International Law in,  such a  case of involuntary assignment of debts ?   The  question has ’arisen in (1)  I.L.R. 7 Bom. 467. 688 English Courts with regard to the legislation passed  during or  after a war by which the contractual      rights of  the enemies vested in the public authorities, such as custodians or  administrators  of  enemy  property.   It  was  held  in English  courts that in such a case the question  whether  a given contractual right, e.g., a debt, is transferred  under such   legislation  and  whether  therefore  payment  to   a custodian  or  administrator has the effect  of  discharging the,  debtor, depends on the situs of that right and not  so much on the proper law of the contract from which the  right arises.  (See Dicey Conflict of Laws, 8th Fd. p. 780).   For example  in  Arab  Bank Ltd.  v.  Barclays  Bank  (Dominion, Colonial and Overseas) (1), the appellant Bank had a  credit balance  on the current account with the  respondent  bank’s branch  in  Jerusalem.  The British Mandate  over  Palestine expired  at  midnight  on May 14, 1948,  and  thereupon  the Provisional Council of State and the Provisional  Government of  the  State of Israel were constituted.   War  broke  out between  Israel  and  the Arab States,  which  rendered  the further  performance  of  the contract  of  current  account impossible.  From the date of the termination of the Mandate the   appellant  Bank’s  premises  were  situate   in   Arab controlled  territory  and the respondent  Bank’s premises were situate in Israel territory.  By legislation the  State of  Israel vested in an official called the  ’Custodian  of the  Property  of Absentees’, the property in the  State  of Israel  belonging  to a class of  persons  and  corporations which  included  the Arab Bank.  The  respondents  paid  the appellants’   credit  balances,  amounting  to  some   pound 5,83,000 to the custodian.  In 1950 the appellants sued the respondents for this sum.  It was held that the right to  be paid  the  credit  balance survived  the  outbreak  of  war, remaining  in  existence. subject to the suspension  of  the appellant bank’s right to recover it.  Being locally situate in  Israel,  it became subject to the  legislation  of  that State  and vested in the custodian, and was not  recoverable by the appellant bank from the respondent bank.  The key  to the problem lies in distinguishing between (1) questions  of assignability,  which are governed by the proper law of  the debt,  and  (2)  questions  of  attachment  or   garnishment (involuntary  ’assignment) governed by the lex situs of  the debt.   If,  for example, an involuntary  assignment  occurs after a voluntary assignment has already beep made, the  lex situs  determines  whether  the  rights  of  the   voluntary assignee have been postponed or defeated.  If the  voluntary assignment  occurs  first,  the lex  situs  determines  what rights,  if  any, the voluntary assignee  has  acquired.   A question of priorities arose in the case of Re :  Queensland Mercantile  and Agency Co. (2), the facts of which  were  as follows :-               "The  Union Bank of Australia held  debentures               issued by the Queensland Company charging  the               shares

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             (1) [1954] A.C. 495.               (2) [1891] 1 Ch. 536.               689               in  that company that were not fully paid  up.               The  Bank  was domiciled in  England  and  the               company in Queens land.  After the capital had               been called up, but before it was paid by  the               shareholders,  who thus became debtors of  the               company, the X Company domiciled in  Scotland,               began  an  action for negligence  in  Scotland               against   the   Queensland.    Company,    and               immediately  issued  the Scottish  process  of               arrestment  against numerous shareholders  who               were  domiciled  in Scotland.  The  effect  of               this process according to Scottish law was  to               prevent  the shareholders, pending a  decision               in  the action of negligence, from paying  the               calls to the ’company". The  question that fell to be decided was’whether the  Union Bank,  is debenture-holders, were entitled to be paid  first out  of the unpaid shares, according to the, law of  England and  of Qeensland; or whether the X Company  in-  accordance with  the law of Scotand, had a prior right over the  shares to  the extent of the damages :hat they might be awarded  in the action of negligence.  A question of priorities  between two  assignees  was thus raised.  The Union  Bank  contended that  the  question  fell  to  be  decided  by  the  law  of Queensland,  since the Oueensland Company was a creditor  in respect  of the unpaid shares and any assignment by it  must be  ested  by the law of its domicile  North,  J.,  however, applied  Scottish  law.  His reasoning was  that  since  the debtors  were resident in Scotland and therefore the  unpaid calls  which  formed the subject-matter of  the  assignments were  situated in that country, the assignment must rank  in the order prescribed by Scottish law.  He assimilated choses in   action  to  tangible  movables,  assertine   that   ’an assignment of the’ latter class of property was Governed  by the  lex  situs.   In our opinion the  same  legal  position prevails  in  India  and  therefore  the  liability  of  the appellant  in this case to the respondent in India  must  be deemed to have been extinguished. For  these  reasons  we  hold that  this  appeal  should  be allowed,  the judgment of the Punjab High Court  dated  12th September, 1963 in Civil Revision No. 104-D of 1958-  should be  set  aside and the judgment of the  Tribunal  under  the Displaced Pe-sons (Debt Adjustment) Act in case No. 74/11/13 of 1956/1952 should be restored dismissing the claim of  the respondent.  There will be no order with regard to costs  in the  High  Court.   But as directed by this  Court  on  30th October  1964, while granting special leave, appellant  will pay the cost of respondents in this’ Court. V.P.S.                     Appeal allowed, 690