JUDGMENT T.C. Raghavan, J. 1. These appeals arise out of O. S. Nos. 207 and 206 of 1957 respectively on the file of the Court of the Subordinate Judge of Quilon. These suits and two other similar suits were tried together and decrees were passed in favour of the different plaintiffs in all of them. These appeals have been preferred by defendants 5 to 9, who are the same in both the suits. In A. S. No. 502 of 1958 the legal representatives of the plaintiff are the contesting respondents and in the other appeal the plaintiff is the contesting respondent. In A. S. No. 502 of 1958 the 3rd defendant, namely the agent of the Quilon branch of the Pandian Bank Ltd., has filed a memorandum of cross objections, in which, thoughsome grounds have been raised on the merits of the case, court fee appears to have been paid only on the costs disallowed to the Bank by the lower court. 2. The facts leading to the appeals may be briefly narrated. The 1st defendant in both the suits belonging to Virudhunagar was a dealer in oil at Quilon and the 3rd defendant Bank had been giving accommodation to him for his business. The 2nd defendant in both the suits, who was the agent of the 1st defendant, entered into contracts with the plaintiffs in both the cases on 26th February and 1st March 1952 respectively for the purchase of coconut oil. On 4th March, 200 tins of oil were received from each of the plaintiffs and cheques for their prices drawn on the Bank were given to them. The goods were then removed in boats to Quilon. On 6th March 1952, the cheques were dishonoured by the Bank and by that time both defendants 1 and 2 left the State for good. Agents of the plaintiffs were immediately sent to Quilon to intercept the goods in transit and to take possession of them. But when the boats reached the jetty at Quilon, an employee of the Bank was present there, at whose instance the goods were removed to their godown, in spite of protests by the agents of the plaintiffs. The plaintiffs thereafter filed the suits on 12th and 8th March respectively.
But when the boats reached the jetty at Quilon, an employee of the Bank was present there, at whose instance the goods were removed to their godown, in spite of protests by the agents of the plaintiffs. The plaintiffs thereafter filed the suits on 12th and 8th March respectively. They applied for attachment of the goods in the godown, which was effected on 25th March 1952 and the goods were sold and the money was brought to court. In the meantime, proceedings in insolvency were started against the 1st defendant on 31st March 1952 in the court of the Subordinate Judge of Ramanathapuram in the Madras State. The 4th defendant in both the suits is the Official Receiver, Ramanathapuram and defendants 5 to 9 are the trustees in the scheme of composition entered into between the insolvent and his creditors. 3. The Trial Court held that the property in the goods passed to the vendee on the delivery of the goods to his men and the boatmen who carried the goods to Quilon were only the agents of the vendee. Consequently, it held that the plaintiffs could not stop the goods in transit. It also held that the case of the plaintiffs, that there were special agreements between them and the vendee that the property in the goods would pass only when cash was received, was not established. Nevertheless, it held that under S.11(d) of the Specific Relief Act the plaintiffs were entitled to get back the goods in specie; and in view of this last finding, the lower court decreed the suits. Since the total amount available in deposit was only Rs. 18,357-8-0 and the total amount due under the suits was over Rs. 23,500/-, the lower court passed decrees in favour of the plaintiffs for proportionate amounts out of the amount in deposit. For the balance and costs the lower court granted personal decrees against defendants 1 and 2. The lower court also disallowed the claim of the 3rd defendant Bank for priority. It is against these decrees that the appeals and memorandum of cross objections have been filed. It may be mentioned that in A. S. No. 502 of 1958 there is an additional contention that the plaintiff firm not being registered, their suit should have been dismissed under S.69(2) of the Partnership Act.
It is against these decrees that the appeals and memorandum of cross objections have been filed. It may be mentioned that in A. S. No. 502 of 1958 there is an additional contention that the plaintiff firm not being registered, their suit should have been dismissed under S.69(2) of the Partnership Act. This plea was rejected by the lower court on the ground that the suit did not arise out of a contract. 4. The learned Advocate General, on behalf of the appellants in both the cases, has contended that S.11 of the Specific Relief Act has no application to the cases and therefore, in view of the finding of the lower court, it should have dismissed the suits. Mr. Joseph Vithayathil appearing for the plaintiff respondent in A. S. No. 503 of 1958 has fairly conceded that the decision of the lower court that S.11 of the Specific Relief Act applies is not sustainable and the decision cannot be supported on that ground. He has attempted to argue that the property in the goods did not pass in these cases to the vendee until cash was paid. According to him, the boatmen were either agents of the plaintiffs or were common carriers. The evidence in the cases does not justify this plea and therefore, I find difficult to accept this contention of Mr. Vithayathil. In the light of the evidence in the cases, I am inclined to agree with the lower court that the vendee's men went and took possession of the goods and engaged the boatmen and sent the goods to Quilon on the responsibility of the vendee. If so, it is clear that the property in the goods passed when the vendee's men got delivery of them and passed the cheques. 5. But Mr. T. K. Kurien, the learned advocate of the plaintiff's legal representatives in A. S. No. 502 of 1958, has sought to support the judgment of the lower court on other grounds. He has drawn my attention to the circumstance that the 1st defendant had no intention to pay the price of the oil, when he made the purchases through the 2nd defendant from the four dealers. The 1st defendant knew that he had no credit with the Bank and the Bank would not honour his cheques. He had also no intention to continue his business at Quilon.
The 1st defendant knew that he had no credit with the Bank and the Bank would not honour his cheques. He had also no intention to continue his business at Quilon. He deliberately cheated the four dealers by purchasing goods from them and passing cheques to them knowing full well that those cheques would not be honoured by the Bank. It is also apparent that he left the State post haste, after taking delivery of the goods and before the cheques reached the Bank. The learned Advocate General has pointed out that there is no definite allegation of fraud in the plaint, at any rate, in O. S. No. 206 of 1957. It is true that there is no clear and definite allegation of fraud in the plaint in O. S. No. 206 of 1957. But there is clear allegation of fraud and repudiation of contract in the plaint in the other suit. At any rate, from the circumstances it is abundantly clear that the 1st defendant was committing a fraud and was trying to cheat the plaintiffs, when he purchased oil from them and passed cheques. In view of that circumstance, Mr. Kurien has contended, the trustees in insolvency cannot claim these amounts. He has drawn my attention to the rule in Ex parte James (LR 9 Ch. 609) that the trustee will be ordered, as an officer of the court, to do the fullest equity, and, in certain cases, an even higher standard of conduct is imposed on him. He has also invited my attention to a passage from Williams on Bankruptcy, 16th Edn., p. 256, where it is stated that it is not easy to define the exact bounds of a principle which has arisen from the disciplinary control exercised by the court over its officer, and which, since it operates in a field not covered by the established rules of law and equity, is incapable of reduction to an exact formula, and must in its application be governed in part by ethical considerations. The same rule is found in Ex parte Simmonds (16 QBD 308), in Re Brown (32 Ch. D. 597) and in other cases.
The same rule is found in Ex parte Simmonds (16 QBD 308), in Re Brown (32 Ch. D. 597) and in other cases. Re Thellusson (1919 (11) KB 735) is another case, where the Court of Appeal held that, even if a person had no legal right to recover the money, the Official Receiver ought to refund it to him on the ground that in point of moral justice and honest dealing he could not retain it for distribution among the creditors. The same principles are pointed out by Mulla in his Tagore Law Lectures on the Law of Insolvency in India. He points out at p. 505 (2nd Edn.) the following passage in Ex parte Simmonds: "A trustee in bankruptcy has always been treated as an officer of the Court of Bankruptcy, and the Court will order him to act in an honourable and high minded way". He also points out the following passage in the judgment of James L. J. in Ex parte James: "A trustee in bankruptcy is an officer of the Court. The Court, then, finding that he has in his hands money which in equity belongs to someone else, ought to set an example to the world by paying it to the person really entitled to it. In my opinion the Court of Bankruptcy ought to be as honest as other people." This rule appears in other English Cases as well, e. g. Ex parte Holthausen (LR 9 Ch. 722) and Re Tyler (1907 (1) KB 865). Mulla sums up at p. 507: "The true principle in all such cases is that the Court in Bankruptcy ought not to allow its officer to insist upon a rule of law or equity in the administration of an estate in bankruptcy under the control of the Court where such insistence would produce an unjust and dishonest result." 6. If the aforesaid principle, affirmed in several decisions, is applied to these cases, there is no doubt regarding the result. It is quite clear that the insolvent played a fraud on the plaintiffs and cheated them by taking delivery of the goods and passing cheques, which he knew full well would not be honoured by the Bank.
If the aforesaid principle, affirmed in several decisions, is applied to these cases, there is no doubt regarding the result. It is quite clear that the insolvent played a fraud on the plaintiffs and cheated them by taking delivery of the goods and passing cheques, which he knew full well would not be honoured by the Bank. In those circumstances, even if the plaintiffs have no legal right to get back the goods, the trustees in insolvency must be directed to return the goods to the plaintiffs, because the equity is all in their favour and the trustees in insolvency should act in a high minded way and should not claim the goods for distribution among the creditors. Therefore, the decrees passed by the lower court are just and proper. 7. Regarding the objection under S.69(2) of the Partnership Act in A. S. No. 502 of 1958, I am of opinion that the view expressed by the lower court is correct, that this is not a suit arising from a contract. Therefore, that objection also cannot stand. 8. The only other thing that remains is the memorandum of cross objections. The learned counsel of the 3rd defendant Bank has attempted to argue on merits as well, though he has paid court fee only on the costs disallowed by the court. I do not think there are any bona fides or justification for this attempt and in the circumstances of the case, it cannot be said that the lower court was in error in disallowing costs to the Bank. 9. In the result, both the appeals and the memorandum of cross objections are dismissed. In A. S. No. 502 of 1958 the legal representatives of the plaintiff will get their costs from the appellants and in A. S. No. 503 of 1958 the plaintiff respondent will also get his costs. The other respondents will bear their costs in the appeals, and in the memorandum of cross objections the parties will bear their costs.