East and West Transport Service v. Noakhali Union Bank Ltd.
1946-07-31
body1946
DigiLaw.ai
JUDGMENT Majumdar, J. - The applicant, Noakhali Union Bank, Ltd., (hereafter referred to as the Bank) is the Defendant in this suit which was instituted by the respondent firm, East and West Transport Service (hereinafter referred to as the Firm), for an account of all the realisations made by the Bank as an agent for and on behalf of the Firm from the Civil Supplies Department, Government of Bengal, and for an account of all moneys actually advanced on overdraft account by the Bank to the Firm and for other reliefs. I shall only mention such of the allegations of the parties as are relevant for the purposes of this application. It is alleged by the Firm that it used to do work for the Civil Supplies Department of the Government of Bengal and under an agreement handed over its bill to the Bank to collect moneys due thereon from the Department and gave the Bank a letter of authority dated January 8, 1945. The Bank was to make collections and credit the amounts to the current account of the Firm and the advances made by the Bank from time to time were to be adjusted against the amount collected and credited. There were various other terms. It is alleged that on account of the fraudulent conduct of the Bank the said authority was cancelled. 2. The Bank denies the allegation as also the particulars of the agreement and its case is that the bills were handed over to it as security for due repayment of advances of diverse sums made from time to time by the Bank in its Head Office and branch offices and it had a charge and hen on the bills and moneys payable thereunder. There was an irrevocable letter of authority in its favour and its rights thereunder cannot be disturbed. 3. On an application made by the Finn on May 29, 1946, asking for an appointment of receiver of the moneys payable by the said Department on account of its bills or in the alternative for an injunction restraining the Bank from collecting or realising the amount due thereon an interim injunction was granted. The Bank contested the application when it came up for final hearing on various grounds one of them being that Rs.
The Bank contested the application when it came up for final hearing on various grounds one of them being that Rs. 27,000 or thereabouts was due to it on the overdraft account and it could not be deprived of its rights as a secured creditor. The application was disposed of on June 19, 1146, when it was inter alia ordered "that the Plaintiff firm furnishing security to the satisfaction of the Registrar of this Court for the sum of Rs. 25,000 within a fortnight from the date hereof the Defendant Bank do within two days after such security as aforesaid is furnished return to the Plaintiff farm or its nominees all the documents in its possession including the bills of the Plaintiff firm for works done by the Plaintiff firm for the Civil Supplies Department of the Government of Bengal," and it was further ordered "that the Defendant Bank do with regard to the bills which have been lodged with proper authorities for collection recall the letters addressed to such authorities stopping payments, and write to them that the Plaintiff firm or its nominee has been authorised to collect these bills". It was further ordered that the injunction granted by the order made hereunder dated May 29 last, do continue until such security us aforesaid is furnished and the said documents are returned." it was further ordered "that in default of the Plaintiff firm furnishing such security as aforesaid within the time aforesaid the injunction granted by the said order dater May 20 last do stand vacated". 4. The purpose of the order was obviously to make secure or more readily recoverable such amount up to a limit of Rs. 25,000 as may be eventually found due to the Bank by the on account of the alleged advances. 5. In pursuance of the said order the Registrar in Insolvency accepted a security bond Rs. 25,000 on the 2nd of duly 1946 and issued a certificate to the respondent. I understand that though no procedure is laid down by the Rules of this Court, in the matter of the acceptance of security according to the practice of the Court, the matter is treated as a reference under the Rules and a certificate is issue the Registrar when security is accepted. 6. As the Bank was not satisfied that security bond was in conformity with the order of 19th June last Mr.
6. As the Bank was not satisfied that security bond was in conformity with the order of 19th June last Mr. K. Chaudhuri, counsel for the Bank, mentioned the matter to in the presence of Mr. S. K. Basu, counsel for respondent, and asked for certain direct but I was not disposed to deal with the matter or make any order on a verbal application of that description. Thereafter the present application was made by the Bank on July 11, 1946, asking for the relief that the injunction con turned by the order of 19th June be vacated inasmuch as according to the Bank no security was turn shed and if necessary the bond may be cancelled and security discharged or in the alternative fresh security be ordered to be furnished. 7. It appears from the security bond that the obligors thereunder are Krishna Mukherjee the managing partner of the Firm, and the Bharat insurance Co., Ltd., which is a guarantee society, and the bond has been signed by the said Krishna Mukherjee, the managing partner for the Firm, and the said Bharat Insurance Co., Ltd. 8. It has been contended on behalf of the Bank that the said security is not in conformity with the order of 10th June, inasmuch as (a) it does not comply with the provision of r. 60, Ch. 38 of the High Court Rules, which provides that a guarantee society may be accepted as security upon its joining in a bond with a person ordered to give the security and here the person ordered to give security being the Firm and the person joining in the bond being the managing partner in his individual capacity, the rule has not been complied with; (b) even if the managing partner be considered as a person capable of entering into a bond for and on behalf of the Firm the conditions of the bond do not give effect to the purpose of the order which was to secure the ultimate liability of the Firm in respect of the amount that may be found due to the Bank upon taking of accounts; (c) the condition treats the managing partner as a receiver and proceeds on the basis that such managing partner would receive an amount of Rs. 25,000 and render the periodical account, etc.
25,000 and render the periodical account, etc. All this was never contemplated by that order, nor was any receiver ever appointed and in case it becomes necessary to enforce the bond it could be well resisted by the obligee Insurance Co. that the bond could not be forfeited. 9. It has been contended on behalf of the Firm (i) that the Court having ordered security being furnished to the satisfaction of the Registrar, the Registrar became a persona designate and he having accepted the bond as security the Court cannot interfere with his discretion. In support of that proposition the case in Re Madan Theatres, Ltd. I. L. R. 61 Cal. 429, (1934) which is again based upon the decision of a Court of Appeal in England--Hoare & Co. v. Morshed [1903] 2 K. B. 359 (C. A.) was relied upon ; (ii) that the matter of acceptance of security is always streated as a reference and a certificate accepting security having been issued by the Registrar it should be treated as final and conclusive, unless it is varied by the Court under the procedure laid down by the Rules of this Court. The present application is not an application within those rules nor made within the time allowed and as such the Court could not make an order ; (iii) the language of the bond is clear ; there is an unequivocal obligation on the part of the obligors to carry out the directions contained in the order of 19th June last and all other orders and directions which may be made or given by the said Court in the premises. Mr. Ghose admits--and I use his own words--that the bond could have been more happily worded, but he contends the extraneous matter in the bond did not matter and should not be taken into consideration as the Court should consider the bond as a whole and see if the amount could be recoverable from the obligees in the event of the liability of the Firm being established. 10. I shall dispose of the point raised as to noncompliance with reference rules by saying that in this matter the Registrar did not act in the exercise of his jurisdiction as Registrar but as a persona designata.
10. I shall dispose of the point raised as to noncompliance with reference rules by saying that in this matter the Registrar did not act in the exercise of his jurisdiction as Registrar but as a persona designata. According to the existing practice the matter of acceptance of security may be treated as a reference for the sake of expediency giving facility to the parties, for rendering such assistance to the Registrar in the matter which the Registrar must require, nevertheless it is not a reference of the nature to which the rules of reference strictly apply and as such the contention fails. While I agree with the opinion of the learned judge given in Madan Theatres Ltd. I. L. R. 61 Cal. 429 (1934) that when a Court has directed security to be furnished by a party to the satisfaction of the Registrar, the decision of such authority on the sufficiency of the security cannot be questioned, I am not prepared to go to the extent of holding that the Court has no jurisdiction to review its orders when such authority designated in accepting such security has not acted in accordance with the order or has otherwise acted improperly. My view is that although the Court left the question of sufficiency of security to the discretion of the Registrar, the Court can always intervene by way of review (when it finds that in accepting such security some mistake or default has been committed though inadvertently by the Court or its officers, on the principle that the Court cannot suffer any wrong or unreasonable order to be passed) and direct its officer to act on such principles as it itself would have applied had it not delegated its functions. 11. The view I hold above finds support in the Judgment of this Court in the case of Bibhabati v. Ramendra 42 C. W. N. 188 (1937) and the decision of the Patna High Court in the case of Anand Das Vs. Ram Bhusan Das, AIR 1937 Patna 380 . 12. Now, on examination of the bond it appears that one of the obligors is Krishna Mukherji, the managing partner of the Plaintiff firm, the other obligor being the guarantee society viz. Bharat Insurance Co. Under rule 60, Ch.
Ram Bhusan Das, AIR 1937 Patna 380 . 12. Now, on examination of the bond it appears that one of the obligors is Krishna Mukherji, the managing partner of the Plaintiff firm, the other obligor being the guarantee society viz. Bharat Insurance Co. Under rule 60, Ch. 38 of our rules a guarantee society may be accepted as surety upon its joining in a bond with the person ordered to give security. The Plaintiff firm was ordered to give security. The bond has been executed by the said managing partner for the firm. Whether such execution would amount to the Plaintiff firm joining in the bond so as to make the guarantee society acceptable as surety is a question not free from difficulty. The power to execute a bond by one partner so as to make it binding on the other partners may be construed as not coming within the implied power of the partner under Sec. 19 of the Partnership Act. Further, there was no evidence either before the Registrar or before me showing that the said managing partner was authorised to execute a bond for and on behalf of all the partners of the firm. 13. Besides, the conditions of the bond which should specify the real agreement between parties, the observance of which is intended to be secured by the bond, show that they have not been in conformity with the purpose of the order which as I have already indicated, was to secure the Bank's claim, if so upheld, to the extent of Rs. 25,000. The conditions therefore should have been such as answer the said purpose. There was no question of the managing partner being appointed Receiver or being made liable to render accounts. It appears from the letter of the attorney of the Bank that draft bond was not Fettled in his presence. Whatever may have been the true position the Registrar proceeded upon the footing that it was accepted by both the parties. It was in any event the duty of the firm to draw the Registrar's attention to the order an the language used in the bond. It seems that the Registrar inadvertently accepted &he bond in the form which is not appropriate to the of the present case on the footing as I mentioned before.
It was in any event the duty of the firm to draw the Registrar's attention to the order an the language used in the bond. It seems that the Registrar inadvertently accepted &he bond in the form which is not appropriate to the of the present case on the footing as I mentioned before. It may, however, he argued that when the condition of a bond is expressed language as to be unintelligible by reason of its inappropriateness with reference to the of the case, the obligatory part being clear, the condition should be considered as void and the obligation as binding and consequently the bond should be accepted as good security. That it may well be, under special circumstance and that is when a bond has been executed by the parties in which the Court had nothing to do. The Court had merely to construe bond and the Court might construe in the manner suggested above, but I do not see any reason why a Court should accept or allow a bond to be accepted by its officers pursuant to its order which may create any difficulty in its enforcement, if it becomes necessary to enforce in future, by reason of the absence of appropriate language or absence of strict compliance with the rules of this Court. 14. In the circumstances I think the bond the form as executed and filed should not be accepted. I therefore remit the matter to the Registrar for the purpose of taking security his satisfaction in pursuance of the order of the 19th June, bearing in mind that if any bond is taken as security, the form used should contain such variation as would bring it in harmony with the purpose of the said order. This is what is contemplated by r. 1, Ch. XL of our Rules. Consequently, the time to furnish security under the order of 19th June he extended by a fortnight from today. By this order the order of 19th June is not varied in any way other than extending the time to furnish security. The firm is to pay the bank the costs of this application. Registrar will act on counsel's endorsement.