JUDGMENT V.P. Gopalan Nambiyar, J. 1. These appeals arise out of an application made by the Official Liquidator of the Palai Central Bank Ltd., under section 543 of the Indian Companies Act, 1956, read with section 45-H of the Banking Regulation Act, seeking to recover a sum of about Rs. 2,50,00,000 from the ten respondents to the application, who were the former Directors and Officers of the Bank. Save where otherwise indicated, the Palai Central Bank will be referred to hereafter as "the Bank" or "the Company'' and the respondents to the application by their ranks before the Trial Judge, in the rest of this judgment. 2. The Bank was incorporated on 26th January 1927 and was ordered to be wound up on the 5th December 1960 on an application made by the Reserve Bank of India on the 8th August 1960. On this latter date, the provisional Liquidator was appointed under section 38 (3) (b) (iii) of the Banking Regulation Act. On the 4th April 1963, the application out of which these appeals arise, was filed by the Official Liquidator. The 1st respondent was the Managing Director of the Bank from its inception till 1st April 1960 and continued thereafter as a Director till 8th August i960. The 2nd respondent was a Director of the Bank from its inception till its liquidation, and was also the Manager of the Madras Branch of the Bank from 1937 to 1957. During this period, he functioned as a salaried Manager, till 1st January 1955 and thereafter in an honorary capacity. The 3rd respondent was Director from 23rd December 1938, and the 4th respondent from 14th January 1935, both, till liquidation. The latter was also a salaried officer of the Bank, as Special Attorney from 1933 to 31st December 1954. The 5th respondent was the Director of the Bank from 30th March 1940 till 12th August 1943, and again from 15th July 1947, till 29th December 1954. In addition, he was a salaried officer of the Bank from 1935 till liquidation, being attached to the Head Office of the Bank from 1949, till liquidation, and having functioned from 1st January 1955 onwards, as Officer-Manager. The 6th respondent was a Director of the Bank from 12th August 1943 till 28th March 1956, and was also a salaried officer from the 18th August 1958, till liquidation. The 6th respondent was a Director of the Bank from 12th August 1943 till 28th March 1956, and was also a salaried officer from the 18th August 1958, till liquidation. The 7th respondent was a Director from 5th February 1955, till liquidation. The 8th respondent was the Auditor of the Bank from 8th January 1947, till liquidation. The 9th and 10th respondents were officers of the Bank, the former from 27th October 1937 to 1st August 1958, and the latter from 16th May 1949, till liquidation. 3. The relationship between the respondents is as follows. Respondents 2 and 4 are brothers. The 2nd respondent is the son-in-law of the 1st respondent; the 7th respondent is the 1st respondent's brother's son; respondents 6 and 10 are brothers and first cousins of the 1st respondent, being the sons of the 1st respondent's father's brother. 4. The Official Liquidator's application comprised four heads of claim, described under heads A, B, C and D. The A claim is in respect of nearly 241.44 lakhs of rupees representing bad and irrecoverable advances specified in Annexure 1. The B claim is in respect of 21.63 lakhs of rupees, representing the dividends paid out of capital in the years 1936 to 1949, and tax paid for the said years on the basis of income and profit not actually earned, but made to appear as earned by false and fictitious entries in balance sheets, Profit and Loss Account and the Books of the Bank. The C claim amounting to Rs. 25.5 lakhs of rupees is in respect of dividends paid out of capital for the years 1950 to 1957 and tax paid for those years and for 1958. It is of a nature as the 'B' claim, the reason for bifurcating the two being that the false income and profits covered by the 'C' claim were made to appear by debiting interest on the bad and irrecoverable advances in claim ˜A' when there was no prospect of realising them, and for which credit was given in the Profit and Loss Account. The 'D' claim amounting to Rs. 15,000 was in respect of the unauthorised appropriation of the Company's assets. 5. The 'D' claim amounting to Rs. 15,000 was in respect of the unauthorised appropriation of the Company's assets. 5. Annexure II to the petition shows the net profits during 1936 to 1949, according to the published Profit and Loss Account, the amounts credited to the said account by debit to the 'Branch account' and the 'Interest Receivable Account' and also the amounts paid by way of dividends and taxes. Annexure III shows the interest debited in the accounts for the respective years against major advances, and also the amounts so debited and taken credit in the Profit and Loss Account. For purposes of comparison the figures showing the profits in the respective years in the Balance-sheet and Profit and Loss Account are shown in Annexure IV. 6. In pursuance of his order dated 2nd December 1964, the 'B' claim was taken up for adjudication first by the learned Trial Judge as it was in no way dependent on the remaining claims. The learned Judge by a separate order dated 2nd April 1965 pronounced in respect of the said claim. This will be referred to where necessary as the 'B' claim judgment or order. The hearing in respect of the remaining claims was then proceeding, and after the conclusion of the same, by another separate order, dated 19th November 1965, the learned Trial Judge pronounced in respect of these claims. The same will be referred to where necessary as the 'A' claim judgment or order. 7. A.S. Nos. 326, 325 and 327 of 1965 have been preferred by respondents 1, 2 and 4 respectively against the ˜B' claim order'. A.S. Nos. 316, 318 and 315 of 1956 in that order, are by the same parties against the 'A claim order'. A.S. Nos. 303/65 and 302/66 are by the 3rd respondent against the B and A claim judgments respectively. 326, 325 and 327 of 1965 have been preferred by respondents 1, 2 and 4 respectively against the ˜B' claim order'. A.S. Nos. 316, 318 and 315 of 1956 in that order, are by the same parties against the 'A claim order'. A.S. Nos. 303/65 and 302/66 are by the 3rd respondent against the B and A claim judgments respectively. A.S. No. 328 of 1965 and A.S. No. 301 of 1966 are by the 6th respondent against the 'B' and A claim orders respectively; A.S. No. 319 of 1966 is by the 7th respondent against the 'A claim order'; A.S. No. 305 of 1966 is by the 10th respondent against the 'B' and 'A' claim orders; A.S. No. 329 of 1965 and A.S. No. 306 of 1966 are by the 5th respondent against the 'B and A claim orders' respectively; and A.S. No. 310 of 1965 and A.S. No. 300 of 1966 are by the 8th respondent against the 'B' claim and 'A' claim orders respectively. 8. In dealing with these appeals, it would be convenient to take up for consideration first, the plea of limitation which has been raised with particular reference to the A and B claims. The plea arises this way. In respect of the B claim, the acts complained of, namely the payment of tax and dividends for the years 1936 to 1949, took place between the years 1937 to 1950. Similarly, in respect of the A claim, it was complained that the initial date of the making of the bad and irrecoverable advances has not been precisely disclosed in many cases, but in a large number of them it was contended that, as in regard to the payment of taxes and dividends for the period covered by the B claim the same was made beyond twelve years of the making of the application which has given rise to these appeals, namely, the 4th April 1963. The plea of limitation advanced on this basis before us, was put in a different -shape or form from what appears to have been advanced before the learned Trial Judge; and was presented in different aspects by two of the Counsel who argued these appeals. The plea of limitation advanced on this basis before us, was put in a different -shape or form from what appears to have been advanced before the learned Trial Judge; and was presented in different aspects by two of the Counsel who argued these appeals. In substance the plea amounted to this; that the cause of action for a suit, and therefore of an application to recover the amounts covered by the A and B claims, had become barred by limitation on the date when the application was filed, and cannot, and will not, be revived either by section 45-0 of the Banking Regulation Act, or by section 543 of the Companies Act, 1956. The former provision, it was agreed, provides the period of limitation for proceedings against the Directors, and the 'latter, against non-directors. Section 45-0 of the Banking Regulation Act reads: "Special period of limitation.” (1) Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 (9 of 1908) or in any other law for the time being in force, in computing the period of limitation prescribed for a suit or application by a banking company which is being wound up, the period commencing from the date of the presentation of the petition for the winding up of the banking company shall be excluded. (2) Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 (9 of 1908) or section 543 of the Companies Act, 1956 (1 of 1956) or in any other law for the time being in force, there shall be no period of limitation for the recovery of arrears of calls from any director of a banking company which is being wound up or for the enforcement by the banking company against any of its directors of any claim based on a contract, express or implied; and in respect of all other claims by the banking company against its directors, the period of the limitation shall be twelve years from the date of the accrual of such claims or five years from the date of the first appointment of the liquidator, whichever is longer. (3) The provisions of this sections, in so far as they relate to banking companies being wound up, shall also apply to a banking company in respect of which a petition for the winding up has been presented before the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953). (The words underlined were introduced by the Amending Act 33 of 1959). Section 543 of the Companies Act, 1956, referred to in the non-obstante clause of section 45-O (2) reads: "543 (1). If in the course of winding up a company it appears that any person who has taken part in the promotion or formation of the company, or any past or present director, managing agent, secretaries and treasurers, manager, liquidator or officer of the company” (a) has misapplied, or retained, or become liable or accountable for, any money or property of the company; or (b) has been guilty of any misfeasance or breach of trust in relation to the company; the court may, on the application of the Official Liquidator, of the liquidator, or of any creditor or contributory, made within the time specified in that behalf in sub-section (2), examine into the conduct of the person, director, managing agent, secretaries and treasurers, manager, liquidator or officer aforesaid, and compel him to repay or restore the money or property or any part thereof respectively, with interest at such rate as the court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the court thinks just. (2) An application under section (1) shall be made within five years from the date of the order for winding up, or of the first appointment of the liquidator in the winding up, or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer. (3) This section shall apply notwithstanding that the matter is one for which the person concerned may be criminally liable. As if the provision in the non-obstante clause of section 45-O (2) is not wide enough or sufficient, section 45-A of the Banking Regulation Act gives overriding effect over any other law for the time being in force, to the provisions of Part III-A of the Act, commencing with, section 45-A and ending with section 55. 9. As if the provision in the non-obstante clause of section 45-O (2) is not wide enough or sufficient, section 45-A of the Banking Regulation Act gives overriding effect over any other law for the time being in force, to the provisions of Part III-A of the Act, commencing with, section 45-A and ending with section 55. 9. Looking only to the language of section 45-O certain aspects appear to be plain. First, that it is, what we may call”the third or the residuary part of clause (2) of the section that has application here. According to the said provision, the period of limitation shall be "twelve years from the accrual of such claims, or five years from the date of the first appointment of the Liquidator whichever is longer". The appointment of the Liquidator in the wind- ing up in the present case was on 5th December 1960; and the application made on 4th April 1963 is well within the longer of the two termini and quem provided by the residuary part of section 45-O (2). This result is not affected even if the terminus a quo is taken as the date of appointment of the provisional Liquidator, namely, the 8th August 1960. 10. Next that this conclusion only stands reinforced by the width and amptitude of the non-obstante clause in section 45-O (2) without any need to resort further to the overriding effect supplied by section 45-A of the Act. 11. But this conclusion which appears to flow from the plain language of the section, is sought to be resisted in two different ways. Counsel for respondents 1, 2 and 4 (appellants in A.S. Nos. 325 to 327 of 1965, and 315, 316 and 318 of 1966) put his case thus: that the section postulates a cause of action which is alive on the date when it was enacted; that clause (1) provides for an exclusion of the period of limitation, that the residuary part of clause (2) was meant really to qualify the operation of clause (1) and to provide that even after the presentation of the petition for winding up, limitation shall not remain suspended for more than five years of the appointment of the Liquidator or twelve years of the accrual of the claim. Logic and harmonious construction of the two clauses, it was said, required that the cause of action should be alive for the running of limitation to be suspended under clause (1), and for the bar of limitation to be imposed again by the last part of clause (2). The two alternative termini for limitation provided by the last part of clause (2), namely twelve years from the accrual of the cause of action, or five years from the date of first appointment of the Liquidator, should so the argument ran coalesce, atleast for a day, so that the exclusion, the suspension, and the option in respect of the alternative termini, can all be effective on the date when section 45-O was enacted. So that, for the purpose of this argument, the starting point of the later of the two termini provided by the residuary part of clause (2) must be before the expiry of the time-limit provided for the earlier one. 12. It is impossible to accept the contention that the last part of clause (2) of section 45-O is meant to operate as a qualification of the provisions of clause (1). Clause (1) itself opens with a non-obstante clause, which excludes the operation of the Indian Limitation Act or any other law for the time being in force. The non-obstante clause in clause (2) of the section only gets rid of the provisions of the Indian Limitation Act, section 543 of the Companies Act, or "any other law for the time being in force". Such "other law" cannot obviously be, the parent law itself, by which these very provisions are introduced. That seems sufficient answer to the contention that the residuary part of clause 45-O (2) was meant to qualify the provisions of clause (1). Whatever be the attraction provided by considerations of logic and harmonious construction, it is impossible to read any requirement into the terms of the section that the two alternative termini provided by the last part of clause (2) are such that the later one should start before the earlier one expires. Whether the later one would still be available when the earlier period had already expired before the commencement of section 45-O (2) is a matter, which we shall consider presently. The argument advanced by counsel for respondents 1, 2 and 4 has therefore to be rejected. 13. Whether the later one would still be available when the earlier period had already expired before the commencement of section 45-O (2) is a matter, which we shall consider presently. The argument advanced by counsel for respondents 1, 2 and 4 has therefore to be rejected. 13. Counsel for the 6th respondent (appellants in A.S. Nos. 328 of 1965 and 301 of 1966) put his argument about limitation in a somewhat different way. His contention was that the cause of action in respect of claims A and B had been barred by limitation on 1st October 1959 when section 45-O (2) of the Banking Regulation Act as amended came into force, and that the amendment cannot revive a barred cause of action. For appreciating this argument, it is necessary to consider the provision hearing on limitation in respect of these claims, and the amendments, modifications and substitutions it underwent from time to time. These have been clearly traced in paragraphs 15 to 18, of the B claim judgment of the learned Trial Judge. We shall briefly recapitulate the position. 14. Up to 11th December 1938, the period of limitation for an application such as what we are concerned with in these appeals, was prescribed by section 237 (3) of Travancore Companies Act 1 of 1092 (ME). The section was in the same terms as section 235 of the Indian Companies Act, 1913 (referred to as the 1913 Act) prior to its amendment by Act 22 of 1936. The section read: "237 (1) Power of court to assess damages against delinquent directors, etc. The section was in the same terms as section 235 of the Indian Companies Act, 1913 (referred to as the 1913 Act) prior to its amendment by Act 22 of 1936. The section read: "237 (1) Power of court to assess damages against delinquent directors, etc. Where, in the course of winding up a company, it appears that any person who has taken part in the formation or promotion of the company or any past or present director, manager or liquidator or any officer of the company has misapplied or retained or become liable or accountable for any money or property of the company, or been guilty of any misfeasance or breach of trust in relation to the company, the court may, on the application of the liquidator, or of any creditor or contributory examine into the conduct of the promotor, director, manager, liquidator or officer, and compel him to repay or restore the money or property or any part thereof respectively with interest at such rate as the court thinks just, or to contribute such sum to the assets of the company, by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the court thinks just." 2. ************** (3) The Travancore Limitation Act for the time being in force, shall apply to an application under this section as if such application were a suit; The Travancore Act 1 of 1092 was replaced with effect from 11th December 1938 by the Travancore Act 9 of 1114. The provision for limitation under the 1114 Act was section 291 (1), which was in terms identical with section 235 (1) of the 1913 Act, as amended by Act 22 of 1936. Section 291 (1) read: "291 (1) Power of court to assess damages against delinquent directors, etc. The provision for limitation under the 1114 Act was section 291 (1), which was in terms identical with section 235 (1) of the 1913 Act, as amended by Act 22 of 1936. Section 291 (1) read: "291 (1) Power of court to assess damages against delinquent directors, etc. Where, in the course of winding up a company it appears that any person who has taken part in the formation or promotion of the company, or any: past or present director, manager or liquidator, or any officer of the company has misapplied or retained or become liable or accountable for any money, or property of the company, or been guilty of any misfeasance or breach of trust in relation to the company, the court may, on the application of the liquidator, or of any creditor or contributory made within three years from the date of the first appointment of a liquidator in the winding up or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer, examine into the conduct of the promoter, director, manager, liquidator or officer and compel him to repay or restore the money or property or any part thereof respectively with interest at such rate as the court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the court thinks just." After integration of the Travancore and the Cochin States, the 1913 Act was made applicable to the combined Travancore-Cochin State from 1st April 1951 by the Part-B States Laws Act. Section 235 (1) of the 1913 Act (whose provisions were the same as section 291 (1) of the 1114 Act) was in terms attracted. The 1913 Act was replaced by the Companies Act 1956 which came into force on 1st April 1956. The relevant provision in the said Act, was section 543 which has already been extracted. 15. Meanwhile, on 30th December 1953 section 45-O of the Banking Companies Act had came into force. It was amended by Act 33 of 1959 which came into force, on 1st October 1959. The section as amended, has already been quoted, and the amendments introduced by Act 33 of 1959 have been indicated. 15. Meanwhile, on 30th December 1953 section 45-O of the Banking Companies Act had came into force. It was amended by Act 33 of 1959 which came into force, on 1st October 1959. The section as amended, has already been quoted, and the amendments introduced by Act 33 of 1959 have been indicated. The only amendment introduced to the last part of clause (2) was by providing an alternative period of limitation, of five years from the date of the first appointment of the liquidator. 16. The argument of counsel for the 6th respondent ran thus: that whatever be the position till then, section 45-O (2) as it stood prior to its amendment by Act 33 of 1959, had provided the period of limitation for the A and B claims concerned in these appeals as twelve years from the accrual of such claims; that such provision was "notwith standing anything to the contrary contained in the Indian Limitation Act 1908"; that this limit of twelve years from the accrual of the claim had been reached and exhausted in respect of the A and B claims before the 1959 amendment; and therefore the cause of action, in respect of these claims was not, and cannot be, revived by the 1959 amendment. 17. In spite of the inartistic drafting of section 45-O of the Banking Regulation Act, this argument, on careful analysis, again appears unacceptable. Section 543 (2) of the Companies Act 1956 provided for the application being made within five years from three alternative termini, namely (1) the date of the order for winding up; or (2) the first appointment of the Liquidator; or (3) the misapplication retainer, misfeasance or breach of trust, "whichever is longer''. Two of these alternative termini are re-introduced in section 45- O (2) after the 1959 amendment (one of them with certain modifications) , namely (1) twelve years from the accrual of the claim and (2) five years from the first appointment of the Liquidator. The first of the three alternative termini in section 543 was left out. In view of these, it was not altogether inappropriate to have got rid of section 543 altogether in the non-obstante clause in section 45-O (2), and resurrected it in a modified form in the residuary part thereof. 18. The first of the three alternative termini in section 543 was left out. In view of these, it was not altogether inappropriate to have got rid of section 543 altogether in the non-obstante clause in section 45-O (2), and resurrected it in a modified form in the residuary part thereof. 18. Adverting now to the argument of counsel for the 6th respondent, it appears to us that however sweeping and comprehensive the non-obstante clause in section 45-O (2) may be, it does not get rid of a provision enacted by itself. So that, if prior to 1st October 1959 the cause of action had become barred by section 45-O (2) as it stood till then, the same would not in any way be affected by the amendments introduced by Act 33 of 1959. 19. Arguments on the question whether the cause of action had become barred before 1st October 1959 covered several rarefied regions and matters over which there is conflict of judicial opinion. As before the learned Trial Judge, before us also, arguments proceeded on the footing that limitation is governed by the law in force on the date of the institution of the proceeding, and being so, limitation in respect of the non-director respondents is governed by section 543 of the Companies Act 1956 and in respect of the Director-Respondents, by section 45-O (2) of the Banking Regulation Act as amended by Act 33 of 1959. 20. We shall now proceed to consider whether the cause of action had been barred with respect to the statutory provisions as to limitation, at the relevant periods, as set out earlier. Beginning with section 237(3) of the Travancore Act 1 of 1092 (M.E.) which was in force up to 11th December 1938, no part of the B claim could be barred by limitation, as the earliest payment of tax and dividends would have taken place in 1937. This is so, quite irrespective of whether the period of limitation applicable is article 36 of the Indian Limitation Act, 1908 (or its Travancore counter-part) or article 120 thereof (which again has its corresponding counter-part in the Travancore Act). We would like to record that we are in agreement with the learned Trial Judge and with the preponderance of the judicial opinion on this point, that article 120 is the appropriate article that governs the matter. We would like to record that we are in agreement with the learned Trial Judge and with the preponderance of the judicial opinion on this point, that article 120 is the appropriate article that governs the matter. It has not been shown to us that any of the irrecoverable advances in the A claim had become barred by 11th December 1938. No part of the claim was thus barred by limitation till section 291(1) of the Travancore Act 9 of 1114 was ushered in. According to this provision the period of limitation was three years from the date of first appointment of the liquidator in the winding up, or of the misapplication retainer, misfeasance or breach of trust, whichever is longer. The succeeding stages when the matter was governed by the 1913 Act, by the Companies Act of 1956 and by the section 45-O of the Banking Companies Act have already been indicated. In the light of these provisions several nice questions were posed. Could a cause of action arise, or a claim accrue at all within the meaning of these provisions before the Liquidator, who is given a right of action, was appointed? Do section 235 of the 1913 Act (or its Travancore counter-part) and its successor provision in the 1956 Act give to the Liquidator a new right, or do they only provide a new procedure for enforcing already existing rights? Is the right if such it can be called conferred on the Liquidator in his personal or official capacity, or on the Company represented by the Liquidator? These were some of the questions debated at length before us in the course of the arguments. Article 120 of the Indian Limitation Act 1908 reads: Description of suit Period of limitation Time from which period begins to turn Suit for which no periods of limitation is provided elsewhere in this schedule Six years When the right to sue accrues This article has been expounded by the Supreme Court in atleast three judicial decisions. In Mst. Rukhmabai v. Lala Laxminarayanan and others A.I.R. 1960 S.C. 335, the Supreme Court, following an earlier Privy Councils decision stated that there can be no "right to sue within the meaning of this article unless there is an accrual of the right asserted and an unequivocal threat to infringe it". In Mst. Rukhmabai v. Lala Laxminarayanan and others A.I.R. 1960 S.C. 335, the Supreme Court, following an earlier Privy Councils decision stated that there can be no "right to sue within the meaning of this article unless there is an accrual of the right asserted and an unequivocal threat to infringe it". The proposition was restated in Mohammed Yunus v. Syed Unnisa and others A.I.R. 1961 S.C. 808 and inM.V.S. Manikavala Rao v. M. Narasimhaswami and others A.I.R. 1966 S.C. 470. But these are cases where a person was in enjoyment at least ostensibility of a right, and no manner of cloud had been cast on his right or title. In such cases it was held that the right to sue accrued only when there was a threat of infringement of the right. This line of decisions, speaking with respect, may not be altogether apposite to the situation arising here. Next, there is a line of decisions dealing with article 134 of the Indian Limitation Act, 1908 which have discussed and considered the question whether a suit by a mortgagor for possession of property mortgaged, and afterwards transferred by the mortgagee for valuable consideration, must, in all cases, be brought within 12 years when the transfer becomes known to the plaintiff. (See for instance the Full Bench decisions in Mulla Vittil Seeti Kutti v. K. M. K. Kunhi Pathumma A.I.R. 1919 Mad. 972 and in Balabhan and others v. Rangulal Bankatlal A.I.R. 1955 Nag. 145. There is a strong body of judicial opinion that it must be so brought, and would otherwise be barred, although the cause of action for redemption of the mortgage and for possession may not have arisen by the expiry of the term of the mortgage, before the expiry the 12 year period prescribed by the article. These can again be explained as they have been on the footing that the cause of action for possession arising on a transfer by the mortgagee contemplated by the article is different from the one for redemption. These can again be explained as they have been on the footing that the cause of action for possession arising on a transfer by the mortgagee contemplated by the article is different from the one for redemption. A third set of decisions more difficult to explain is furnished with reference to article 134-B, of the Limitation Act, 1908, providing for suits "by the Manager" of a Hindu, Mohammadan, Buddhist or other religious endowment to recover possession of property wrongly alienated by the previous manager, to be instituted within 12 years of the death, removal or resignation of the previous manager. If there is a hiatus between the death, removal, or resignation of the previous manager and the appointment or assumption of office of the succeeding one, the question has arisen whether limitation would run under article 144 even during this hiatus, and whether article 134-B would be attracted although there is no manager capable of suing in whose favour a cause of action can be said to arise. The rival views are reflected in the majority and the dissenting judgments respectively of the Full Bench decision of five judges in Venkateswara v. Venkitesa I.L.R. 1941 Mad. 599, the former holding in the affirmative on both the points, and the latter, in the negative. In the said Full Bench case, two of the questions (Questions 1 and 3) referred for determination by the Full Bench were these: (1) Where a Manager of a Hindu Religious Institution makes an alienation of the property of the institution for valuable consideration and the succeeding manager seeks to impeach the same, will article 134-B apply when there is an interval of time between the death resignation or removal of the previous manager and the election or appointment of the succeeding one?; and (2) If article 144 be held applicable to the case, does adverse possession commence from the date of the death, resignation or removal of the previous manager? The majority view of the Full Bench with respect to article 144 was approved by the Supreme Court in Sarangadeva Periya Matam v. Ramaswami GounderA.I.R. 1966 S.C. 1603. The Supreme Court pointed out that a math is the owner of the endowed property, and like an idol, is a juristic person, and has a right to sue for recovery of the property. The Supreme Court pointed out that a math is the owner of the endowed property, and like an idol, is a juristic person, and has a right to sue for recovery of the property. Being so, it was observed that the running of limitation against the math under article 144, is not suspended by the absence of a legally appointed matadhipathi and that it would run against it, even if there is neither a de jure or a de facto matadhipathi. At the same time, the Supreme Court expressed no opinion on the interpretation of article 134-B of the Indian Limitation Act. It was noted that article 96 of the 1963 Act, which replaced article 134-B of the 1908 Act is worded differently so as to give the benefit of the later of the two alternative periods of limitation to the plaintiff; but this, it was observed, cannot be regarded as a legislative recognition of the pre-existing law. 21. Whatever be the position with respect to article 134-B of the Limitation Act 1908, as far as article 120 of the said Act is concerned, there is a fair consensus of judicial opinion that there can be no cause of action unless there is person capable of suing. In Subbayya Thever v. Samiappa MudaliarI.L.R. 1938 Mad. 486 a Full Bench -of the Madras High Court after reviewing the English and Indian authorities observed: "With regard to the second question it will be observed that arlicte 120 declares that limitation will start to run when the right to sue accrues. There can be no cause of action until there is a party capable of suing, and until there is a cause of action there can be no question of the law of limitation coming into operation." This construction placed on article 120 was sustained by the majority judgment in the later Full Bench decision in Venkateswara's case I.L.R. 1941 Mad. 599 on the ground that the 3rd column of article 144 unlike article 120 provided a starting point of limitation when possession became adverse, and once it happened, the running of limitation cannot be arrested by the mere absence of a person to sue. 599 on the ground that the 3rd column of article 144 unlike article 120 provided a starting point of limitation when possession became adverse, and once it happened, the running of limitation cannot be arrested by the mere absence of a person to sue. In construing a residuary article like article 120, providing for limitation for a large variety of cases, it is dangerous to generalise; but in regard to this class of claim it is the view in Subbayya Thever's I.L.R. 1938 Mad. 486 case that commends itself to us. We are accordingly of the view that for the purpose of the application with which we are concerned, limitation does not commence to run till the Liquidator is appointed. 22. A construction of section 235 of 1913 Act, section 543 of the 1956 Act, and section 45-O of the Banking Regulation Act, against their historical setting and background, seems to re-inforce the conclusion that beyond the alternative periods provided for bringing the action, no other limitation can be placed on the Liquidator. Prior to the 1913 Act, with respect to the provisions of section 214 of the Indian Companies Act, VI of 1882 (which was the predecessor of section 235 of the 1913 Act) it was ruled in at least two decisions that proceedings under the said section were not subject to the periods of limitation prescribed by the Indian Limitation Act (vide Connell v. The Himalaya Bank Ltd. I.L.R. 18 Allh. 12 and Ramaswami v. Sree Ramulu Chetti I.L.R. 19 Mad. 149. Then came the 1913 Act, section 235 of which, contained sub-section (3) which read: "The Indian Limitation Act, 1908 shall apply to an application under this Act, as if it were a suit." This was added presumably in view of the above decisions. After the addition of this sub-section again, judicial decisions were in conflict as to whether the period of limitation for an application of this type, was article 36 or article 120 or article 90 or article 115. After the addition of this sub-section again, judicial decisions were in conflict as to whether the period of limitation for an application of this type, was article 36 or article 120 or article 90 or article 115. In 1929 Chief Justice Marten in Govind Narayanan v. Ranganath Gopal I.L.R. 54 Bombay 226, had occasion to observe: "I would like to add that in my opinion these appeals show the desirability of some amendment of the Indian Companies Act, 1913, so as to nullify the existing differences of opinion in the various High Courts as to the effect of section 235 of that Act", Then followed the 1936 amendment by which sub-section (3) of section 235 was deleted and a time-limit was introduced into the body of the section. If this legislative history is understood in the light of the well known principle of interpretation in Heydon's case 76-ER. 637 it appears to us that no trammels can be placed on the Liquidator in bringing the action other than those imposed by section 235 of the 1913 Act or section 543 of the 1956 Act. Once the action is instituted within the requisite period of the appointment of the liquidator, the whole field of enquiry is thrown open. Such was the view taken of section 235 of the 1913 Act by a Division Bench of the Allahabad High Court in Benares Bank Ltd. v. Shri Sri Prakasha Bagwan Das A.I.R. 1946 All. 269 and by a single Judge of the Madras High Court in Official Liquidator v. M. Krishnaswami Iyengar A.I.R. 1948 Mad. 51 (re-considering his own views contra, expressed on an earlier occasion). The same view was taken in Official Liquidator v. Mathura Prasad A.I.R. 1963 All. 55. The decision of the single Judge of the Madras High Court was noticed without demur in two Division Bench Rulings of that Court (see Official Receiver of Malabar v. Padmanabha Menon 1954 II M.L.J. 44, and Srinivasa Iyer v. The Official Liquidator, Nurani Union Bank1963 II M,L.J. (H.C.) 46. We are in respectful agreement with the principle of these decisions. 23. Being so, it would follow that as far as the non-director respondents are concerned the claim is within time by reason of section 291 of the Travancore Act 9 of 1114 replaced successively, by section 235 of the 1913 Act, and section 543 of the 1956 Act. 24. We are in respectful agreement with the principle of these decisions. 23. Being so, it would follow that as far as the non-director respondents are concerned the claim is within time by reason of section 291 of the Travancore Act 9 of 1114 replaced successively, by section 235 of the 1913 Act, and section 543 of the 1956 Act. 24. The claim against the Director-Respondents has to be decided in the light of section 45-O (2) of the Banking Regulation Act. We have indicated earlier that on the language of the section, the claim appears to be within time. We have now to notice the recent decision of the Supreme Court in Sree Bank Ltd. v. Sarkar Dutt Roy and Co. A.I.R. 1966 S.C. 1953 rendered subsequent to the order under appeal, and the advantage of which, the learned Trial Judge did not have. The decision was rendered with respect to the provisions of section 45-O (1) of the Banking Companies Act. The provisions of section 45-O (2) and its amendment in particular, by Act 33 of 1959, did not call for notice. But this does not appear to make any material difference. The facts of the Supreme Court decision were briefly these. An instalment decree was passed in favour of the Sree Bank Ltd., on 1st May 1947 for Rs. 31,000, of which, Rs. 2,115 was paid that very day. The decree provided for Rs. 6,885 to be paid on 9th May 1947, and the balance in seven specified instalments on specified date, the first of them, on 30th May 1947. The sum of Rs. 6,885 and the first instalment of Rs. 1,000 on 30th May 1947, were duly paid, but the subsequent instalments were defaulted, and on the terms of the decree the entire decree amount therefore became recoverable. On 11th May 1948, a petition for winding up of the Bank was presented and the Bank was wound up by order dated 3rd August 1948. On 24th August 1957, the liquidator presented an application for execution of the decree which was met by a plea of limitation. This was sought to be overcome by relying on section 45-O of the Banking Companies Act, as it stood prior to its amendment by Act 33 of 1959. On 24th August 1957, the liquidator presented an application for execution of the decree which was met by a plea of limitation. This was sought to be overcome by relying on section 45-O of the Banking Companies Act, as it stood prior to its amendment by Act 33 of 1959. The High Court of Calcutta held that section 45-O did not have retrospective effect in the sense of reviving rights which had become barred on the date on which it came into force, and in that view, held that an application for execution of the entire decree amount was barred, reckoning time from the date of the first default. In the alternative, it held that instalments 2 and 3 and 4 payable on the 30th December 1947 -1948 and 1949 respectively, had become barred before the coming into force of section 45-0 on 30th December, 1953, and nothing in the said section could revive these barred claims. It also held that section 45-0 could not apply to instalments 5, 6 and 7 as the cause of action with respect to these instalments arose only subsequent to the date on which the petition for winding up was presented, and section 45-0 (1) could apply only to cases where the period for the presentation of an application had commenced to run prior to presentation of the winding up application. The High Court therefore upheld the plea of limitation. The decision was reversed by the Supreme Court. Three separate judgments were delivered, but in all of them, it was pointed out that there was indication in section 45-0 (1) that it was intended to be retrospective and this was only re-inforced by the provisions of section 45-0 (3). Sarkar J. gave two reasons in support of his conclusion, that "the better view" would be to hold that section 45-0 (1) would have retrospective operation. The first was that a construction of the provision in the light of the general scope and purview of the statute, the remedy sought to be applied and the former state of law, tended in favour of the retrospective operation of the section. The first was that a construction of the provision in the light of the general scope and purview of the statute, the remedy sought to be applied and the former state of law, tended in favour of the retrospective operation of the section. It was recalled that the object of the Banking Companies Act was to give relief to the innocent depositors, and one of the methods of achieving that object was by extending the period of limitation for the enforcement of the claims of a Bank in liquidation, so that more money may be collected for payment to them. That being so, the learned Judge held that it was only natural to think that the largest extension of the existing period of limitation was intended. The second reason that weighed with the learned Judge was that section 45-0 (3) expressly makes sub-section (1) retrospective so as to apply to a Banking Company being wound up on a petition filed before the amending Act of 1953 and there was no justification for reading any limitation that this could be only in respect of applications which had not become barred before the said amendment. Wanchoo J. also noticed that the Banking Companies Act was passed for the benefit of the depositors and to give time to the liquidators to familiarise themselves with the affairs of the Bank. The learned Judge pointed out that sub-section 3 would be robbed of its effectiveness, if sub-section (1) and sub-section (3) read together, are not understood as providing for retrospective operation of subsection (1), particularly against the background of the legislative intent and the remedy provided. Raghubar Dayal J. also recorded that the object of the legislature in enacting the Banking Companies Act was to protect the interests of the depositors and to expedite the winding up proceedings, and that sub-section (1) of section 45-0 (2) read especially with sub-section (3), had retrospective operation. 25. This pronouncement appears to us to have a material bearing, on the question for consideration. The result of the Supreme Court's decision is that section 45-0 (1) has retrospective operation. Section 45-0 (3) on its terms gives such operation to the provisions of the entire section. 25. This pronouncement appears to us to have a material bearing, on the question for consideration. The result of the Supreme Court's decision is that section 45-0 (1) has retrospective operation. Section 45-0 (3) on its terms gives such operation to the provisions of the entire section. In its setting, and against the background of the avowed object and purpose of the legislation, no less than on its express language, section 45-0 (2) also has retrospective operation, and we see no justification to add any rider that the claim should not have become barred by limitation prior to the coming into force of Act 33 of 1959. Authority is not wanting in support of this view. In Varthakavardhini Bank Ltd.34 Company cases 225 Narayana Pai J. held that so far as the rules of limitation governing the claims by a Banking Company which is being wound up, against its directors are concerned, sub-section (2) of section 45-0 constitutes a complete and self contained code, exclusively applicable to them and nothing contrary to those provisions contained in any other law can apply. The learned Judge ruled that the necessary intendment of the statute was that even if the claim is barred by the expiry of a period of limitation prescribed for its enforcement by any other law, that bar is removed by section 45-0 (2). The decision on the appeal from the learned Judge is P. A. Tendolkar v. Official Liquidator, and Others37 Company cases 392. At page 413, the learned Judges unhesitatingly held that the view taken by Narayana Pai J. that the application was within time against the Directors, was correct. 26. But as against this, it has been contended that section 45-0 (2) can have application only to claims "by the Banking Company" against its Directors, and not to an application of the present type, preferred by the Liquidator. This raises the question whether an application under section 235 of the 1913 Act or section 543 of the 1956 Act can be said to be an application by the Liquidator or by the company. On that again, judicial opinion appears divided. In The Right Hon. G. A. P. Cavendish Bentinck, M. P. v. Thomas Fenn. This raises the question whether an application under section 235 of the 1913 Act or section 543 of the 1956 Act can be said to be an application by the Liquidator or by the company. On that again, judicial opinion appears divided. In The Right Hon. G. A. P. Cavendish Bentinck, M. P. v. Thomas Fenn. 12 A.C. 652 Lord Herschell observed about the English counter-part of these sections: "The right which the 165th section gives is not given to the company, or the representative of the company with whom there is a contract, or as towards whom there is a duty or as regards whom there is a breach of duty; but the right under the 165th section is given to 'any Liquidator or any creditor or contributory of the company. Now there is no duty or breach of duty to the company in respect of which a creditor or contributory can maintain an action, but he has a right to this extent, that if owing to a misfeasance or breach of duty the funds of the company in which he is interested have been diminished those funds shall again be made good and the assets of the company shall be recouped the loss which they have sustained. And, therefore, I think, that assuming that a breach of duty such as is suggested would be a misfeasance giving rise to an application under the 165th section, such an application could only succeed where it could be shown that the breach of duty had resulted in loss to the funds and assets of the company." In the same case Lord Macnaghten observed: "The 165th section of the Act of 1862 has often come under discussion, and it has been settled, and I think rightly settled, that that section creates no new offence, and that it gives no new right, but only provides a summary and efficient remedy in respect of rights which apart from that section might have been vindicated either at law or in equity. In Shiam Lai v. Official Liquidator A.I.R. 1933 All. 789 a Full Bench of the Allahabad High Court, by a majority (Sulaiman, C. J. and King, J.) took the view that the power conferred on the Liquidator under section 235 of the 1913 Act, is a power to make the application on behalf of the Company. In Shiam Lai v. Official Liquidator A.I.R. 1933 All. 789 a Full Bench of the Allahabad High Court, by a majority (Sulaiman, C. J. and King, J.) took the view that the power conferred on the Liquidator under section 235 of the 1913 Act, is a power to make the application on behalf of the Company. Section 179 of the 1913 Act giving the Liquidator a power to sue on behalf of the Company and the fact that no property vests in the Liquidator were relied on to show that whatever legal steps he takes must be deemed to be on behalf of the Company. This view was followed or at least the same view was expressed in Dr. Sailandranath Sinha v. Jasoda Dulal Adhikari A.I.R. 1962 Cal. 490, Jwala Prasad v. Official Liquidator Jwala Bank Ltd. A.I.R. 1962 All. 486 and in P. A. Tendolker v. Official Liquidator and others 37 Com. Cases 392. The rival view that the Liquidator undersection 235 of the 1913 Act made the application in his own independent right is seen in the dissenting judgment of Mukherjee, J. in Shiam Lal v. Official Liquidator A.I.R. 1933 All. 789. The learned Judge stressed the provisions of section 179 of the 1913 Act, requiring the sanction of court for any proceeding by or against the Liquidator. According to the learned Judge the insistence on such sanction is inconceivable if the Liquidator were a representative of the Company. 27. The learned Trial Judge in the instant case appears to be of the view that the Liquidator is given an independent right of action and not as representing the Company (see para 22 of the B claim judgment). The learned Judge was further inclined to the view that the word "claim" in section 45-0 (2) was used to denote a substantive right, and in this sense, the substantive right sought to be enforced in a misfeasance application is the right belonging to the Company, and therefore may be said to be a "claim" "by" the Company (see para 30 of the B claim judgment). For the purpose of section 45-0 of the Banking Companies Act, we do not think it is necessary to express any final opinion on many of the questions involved. The decision on this aspect can be rested on a narrower ground. As pointed out inP. A. Tendolkar v. Official Liquidator and others 37 Comp. For the purpose of section 45-0 of the Banking Companies Act, we do not think it is necessary to express any final opinion on many of the questions involved. The decision on this aspect can be rested on a narrower ground. As pointed out inP. A. Tendolkar v. Official Liquidator and others 37 Comp. Cases 392, the reference to section 543 of the Companies Act, 1956 in the non-obstante clause of section 45-0 (2) would be meaningless and un-understandable if the application contemplated by the former section were not to be viewed, atleast for the limited purpose of section 45-0 (2), as a "claim by the Banking Company". We hold accordingly, and reject the contention that section 45-0 (2) of the Banking Regulation Act cannot apply to the case of an application made by the Liquidator under section 543 of the Companies Act, 1956. On the above analysis we hold that no portion of the A and B claims is barred by limitation either against the Director Respondents or against the non-Directors. 28. We shall now proceed to deal with these appeals on their merits. Before doing so, we shall indicate broadly the findings of the learned Trial Judge on the various claims, which will define the scope of these various appeals. On claim 'A', the learned Judge held respondents 1 to 4, 5, 6, 8 and 9, jointly liable to pay the Company the sum of Rs. 2,40,95,000 with interest thereon, at six per cent per annum from 8th August 1960. These respondents were also found severally liable in respect of the claim to the extent indicated below:, respondents ,1 to 4 for the entire sum and interest thereon; respondents 5, 6 and 8 for Rs. 8,99,779, Rs. 95,63,076 and Rs. 13,37,527 respectively; 9th respondent for the sum of Rs. 49,36,000 and interest thereon from 8th August 1960. The several liability of respondents 5, 6 and 8 and 9 was thus limited, as respondents 5, 6 and 8 were held liable for the irrecoverable advances made during the time when they held office as Director-Respondent 8 was held liable only in respect of advances made after the date of his first Audit Report, and respondent No. 9 was held liable for the advances covered by items 294 to 329 of Annexure I made when he was the Manager of the Bangalore Branch. The Liquidator was asked to file a statement of advances falling within the period of office as Directors, of respondents 5 and 6, and those falling after the date of the First Audit Report, of the 8th respondent. On such statement being filed and respondents 5, 6 and 8 not having chosen to dispute the correctness of the figures given by the Liquidator a decree for the-same followed, as indicated. There was no claim under head A against respondents 7 and 10. 29. With regard to the 'B' claim, the learned Judge directed respondents 1 to 6 and 8, to repay to the Company the sum Rs. 16,52,295 misapplied by them. They were held jointly and severally liable to make the repayment. While the several liability of respondents 1, 2 and 4 was held to extend to the entire amounts, the several liability of the 3rd respondent was limited to Rs. 15,07,470, that of the 5th respondent to Rs. 8,96,848, of the 6th respondent to Rs. 12,96,409, and that of the 8th respondent to Rs. 9,69,180. The liability of respondents 3, 5, 6, and 8 was thus limited for the following reason. The 3rd respondent who was the Director from December 1938, was found liable for the claim for the years 1939 to 1949 for which period alone the Liquidator sought to make him liable. On that basis, his liability was fixed as indicated above. The 5th Respondent's liability in respect of amounts misapplied during his tenure as Director, namely in respect of the claims from 1940 to 1942 and 1947 to 1949, was fixed at Rs. 8,96,848. The 6th respondent's liability was on the same consideration fixed at Rs. 12,96,409 for his period of his Directorship. The 8th respondent was the Auditor from 1946 onwards and his liability for the years 1946 to 1949 was fixed at Rs. 9,69,108. The 10th respondent was exonerated from liability in respect of the 'B' claim. The learned Judge held that it was only just that interest should be paid on the sums misapplied from the date of such misapplication, but as the Liquidator claimed interest only from the date of winding up namely 8th August 1960, the learned Judge directed that the sums decreed will bear interest at six per cent per annum from that date till realisation. 30. 30. With regard to the "C" claim, the learned Trial Judge held (see paragraph 182 of the A claim judgment) respondents 1 to 8 and 10 liable for the sums claimed from them in the summons under claim C with interest at 6 per cent from 8th August 1960. In paragraph 192, a slip in paragraph 182 was corrected limiting the 6th respondent's liability to the period of his directorate, viz. Rs. 17,04,569. There was no claim under this head against the 9th respondent. 31. With respect to the "D" claim, the learned Judge found respondents 1, 2 and 4 liable to jointly and severally, pay the Company, a sum of Rs. 15,000 with interest at six per cent per annum from 8th August 1960. The learned Judge directed that no more will be recovered from any respondent in respect of claims "A", "B" and "C" put together than is due from him under claim "A". It was also directed that the respondents will be jointly and severally liable for the costs of the Liquidator. 32. We shall now proceed to deal with "A" claim. This relates to a sum of Rs. 2,41,44,285 and represents to borrow the language of the summons advances made recklessly without any security or adequate security or on illusory securities and to parties having no means or resources and without making any enquiries about the solvency and resources of the parties concerned. Paragraph 5 on the points of claim has elaborated the charge thus made in the summons. The relevant part of it, has been quoted in paragraph 3 of the learned Trial Judge judgment. We refrain from quoting the same but record our agreement with the learned Trial Judge that the points of claim have been delivered with great particularity and detail. Annexure I to the Points of Claim has listed 329 items of advances described in paragraph 5 as irrecoverable, and the total amount covered by such advances makes up the liability for the "A" claim. Ext. P-1047 is the balance-sheet for the year 1943, which showed the advances made by the Bank in the region of Rs. 48,25,260. Ext. P-1011, the balance-sheet for the year 1950, showed these advances to have swelled to nearly Rs. 3,00,00,000 (to be precise, Rs. 2,98,05,423.) The last balance-sheet of the Bank relating to the year 1959, for the first time showed a loss of nearly Rs. 48,25,260. Ext. P-1011, the balance-sheet for the year 1950, showed these advances to have swelled to nearly Rs. 3,00,00,000 (to be precise, Rs. 2,98,05,423.) The last balance-sheet of the Bank relating to the year 1959, for the first time showed a loss of nearly Rs. 14,50,000 (vide Ext. P-1020). Thereafter there appears to have been a run of the Bank and the winding up petition was eventually filed on 8th August 1960. 33. In investigating the "A" claim, the learned Trial Judge felt it necessary to know what was the procedure followed by the Bank from time to time with regard to the grant of advances and with regard to their realisation. Therefore, by order dated 24th February 1965 the learned Judge called upon the Liquidator to give an affidavit as to who was granting the advances, whether they were made with the sanction of the Head Office, and other relevant matters. The order has been extracted in full in paragraph 136, of the "A" claim judgment, and we do not therefore propose to reproduce the same. In compliance with this order, the Liquidator filed his affidavit dated, 12th March 1965. The 4th respondent filed a counter to this dated 28th March 1965 and the 1st respondent followed by a counter dated 29th March 1965. The Liquidator was examined on 31st March 1965. The respondents did not adduce any evidence in rebuttal, either oral documentary. As noticed by the learned Trial Judge, in paragraph 5 of the "A" claim judgment, the evidence in the case consists almost exclusively of the books and records of the Bank, the only material, which travels outside these being an affidavit dated 23rd September 1964 filed by the Liquidator, in obedience to the directions of court showing the steps taken by him for recovery of the advances listed under claim "A" and the results thereof. In paragraph 130 of "A" claim judgment the learned Judge also noted that the documents have all been marked by consent, and that the books and records of the Bank were made available for inspection to the respondents for a period well over nine months. We will add, that in answer to the notice to admit documents, the Counsel for the 4th respondent submitted a statement admitting the genuineness of the documents produced by the Liquidator, but denied responsibility for their contents. 34. We will add, that in answer to the notice to admit documents, the Counsel for the 4th respondent submitted a statement admitting the genuineness of the documents produced by the Liquidator, but denied responsibility for their contents. 34. We may now notice broadly and generally the main defences to this head of claim. For the Director- Respondents it was contended that the learned Trial Judge has imposed a far higher standard of duty on them than is warranted by law. It was complained that the learned Judge had not bestowed individual attention to all the 329 items of advances listed in Annexure I but had formed his conclusion in respect of them, by some sort of "sampling at random" of these advances and an analysis of the samples so chosen. It was further contended that the Directors had placed their trust and confidence in their subordinates and the officers of the Bank in whom they were entitled to repose confidence and that they should therefore be excused from liability, and that they had acted honestly and reasonably and were entitled to relief under section 633 of the Companies Act, 1956. The other defences taken will be noticed in their proper context. 35. In regard to the 329 advances in Annexure I of the points of claim, the learned Trial Judge asked the Liquidator to select a few illustrative cases, which, from his point of view, would be the strongest against the respondents. He similarly invited the respondents to select what, from their point of view, were the weakest cases against them. The learned Judge reasoned that if the liability of the respondents was established in respect of the cases chosen by them there will be no need to travel further, as, ex hypothesi the rest would all be stronger cases. Even so, the learned Judge was of the view that if any of the Liquidators instances failed, it would be unnecessary to consider the cases not chosen by him, as they would be only weaker ones. The Liquidator chose 25 instances in Annexure I and respondents 1, 3 to 8 and 10, selected 12 instances. Three instances were common to both. The Liquidator chose 25 instances in Annexure I and respondents 1, 3 to 8 and 10, selected 12 instances. Three instances were common to both. The learned Judge then proceeded to analyse these instances, and found that in two of the instances chosen by the Liquidator items 17 and 25 in Annexure I liability of the Directors-Respondents was not established; and that the same was duly established in regard to the rest, including all the instances chosen by the respondents. The learned Judge then excluded the two instances chosen by the Liquidator which broke down on analysis and the amounts covered by them, and determined the liability with regard to the rest. 36. Considerable criticism was directed against this mode of approach made by the learned Trial Judge. We feel it is unjustified and is hardly fair to the learned Trial Judge. For the one thing, if it is possible to arrange the 329 instances in Annexure I in their descending grades of liability vis-a-vis the respondents the difficulty of so grading apart”we do not see what objection on principle there could be, to the analysis being confined only to the top ones and the bottom ones among the instances so graded. It would be unnecessary to traverse the intermediate layers of these instances. This indeed, was recognised and admitted by the counsel who appeared before us. But the impossibility of effecting such a grading was stressed, with particular reference to the fact that at least two instances chosen by the Liquidator had broken down on analysis, which of course, have been discounted. But then, a perusal of paragraph 6 of the "A" claim judgment would show that the Trial Judge went about the matter in a thorough going fashion and left nothing to chance. Apart from analysing the "samples" presented by both sides, he satisfied himself individually, with respect to all the 329 instances. This is what the learned Judge has stated: "There are as many as 329 advances listed under claim "A" in Annexure I to the points of claim and I have been taken through almost all of them. The rest I have examined for myself. It is unnecessary to consider every one of them in this order. This is what the learned Judge has stated: "There are as many as 329 advances listed under claim "A" in Annexure I to the points of claim and I have been taken through almost all of them. The rest I have examined for myself. It is unnecessary to consider every one of them in this order. I asked the Liquidator to select a few illustrative cases which he considered were the strongest cases against the respondents and he has chosen not a few but a fairly large number (his difficulty he professes lay not so much in deciding what to choose but what to leave out they are all so strong) namely, items 2, 5, 12, 20, 45, 46, 49, 50, 51, 84, 85, 88, 89, 122, 123, 124, 138, 143, 162, 163, 192, 295, 299, 301 and 294 of Annexure I making 25 instances in all. If any of the instances failed, then it would be unnecessary to consider the remaining cases because ex concessis they would be weaker cases. Likewise, I invited the respondents to select what they considered the weakest cases against them so that if any of these cases was established it would be unnecessary to consider the rest since again ex concessis they would be stronger cases. Respondents 1, 3 to 8 and 10 have selected. Items 3,4,8,17,25,51, 106,162,163,296,297 and 303 of Annexure I 12, instances in all three instances namely items 51, 162 and 163 are common to both lists. (There is no claim against respondents 7 and 10 under claim A. But, as we shall presently see the nature of the advances listed under claim A is vital to the decision in claim C which is against them as well). Respondents 2 and 9 have not responded my invitation. But I am satisfied that there is no weaker case than the cases selected by the other respondents." The words underlined leave us in no doubt that the learned Judge did not spare himself the trouble of investigating every one of the individual instances in Annexure I. In the course of the hearing before us, we invited counsel to point out any of the 329 instances (apart from items 17 and 25) which, on analysis would break down as regards the liability of the respondents. None of the counsel succeeded in pointing out such instances. None of the counsel succeeded in pointing out such instances. Not content with that, lest the same argument should be advanced with any degree of plausibility any further, we ourselves with the help of counsel, analysed in court everyone of the 329 instances in Annexure I. We have found no reason to depart from the conclusions of the learned Trial Judge. A separate judgment (prepared by Eradi, J.) has, given the result, of our analysis of these 329 instances. 37. The advances in Annexure I except items 17 and 25 being thus shown to be irrecoverable to the extent found, the next question is, who granted these advances? and what was the responsibility, if any, of the respondents in respect of these advances? It was to elucidate these matters that the learned Trial Judge made his order dated 26th February 1965, quoted in paragraph 136 of the 'A' claim judgment. The Liquidator's affidavit dated 10th March 1965 is to this effect: that the loans and advances referred to in 'A' claim were granted prior to 31st December, 1951, that there are no records showing or indicating that the Bank followed any procedure at any time with regard to the grant of these loans and advances and their realisations, nor to show that there was any procedure laid down in regard to obtaining sanction of the Head Office or of the Board in granting such loans and advances; that by a resolution of the Board dated 14th April 1927, a Committee of the Board, styled "Upasabha" of 'Managing Board' Was constituted. and by later resolution dated 24th may 1930 the Managing Board was vested with powers such as (a) allotment of shares (b) fixing limits on overdrafts to new parties (c) grant of loans etc; that the minutes of the managing committee are found recorded in the minutes book of the Board (Exts.p-1540 and p-1541) and these show that the Committee did not at any time, deal with or grant any loans or overdrafts; that the Committee appears to have functioned till 9th August 1952, after which date, there is no sign of its activity, that the Board of Directors itself, as seen from the minutes recorded in Exts. P-1540 and P-1541, considered the grant of loans and advances only on seven occasions, the first on 9th March 1936 and the last on 7th December 1943. P-1540 and P-1541, considered the grant of loans and advances only on seven occasions, the first on 9th March 1936 and the last on 7th December 1943. The other matters detailed in affidavit of the Liquidator, will be referred to in due course, where necessary. 38. We may trace the stand taken by the Respondents-directors on two successive occasions about the grant of loans and advances in particular, and generally in regard to the management of the Bank. We are referring to the pleadings in the proceedings for public examination and in the present proceedings. Report No. 192 of 1961 (Ext. P-1556) was filed by the Liquidator for public examination under section 45-G of the Banking Companies Act. The counter- affidavit filed therein will be referred to with reference to the ranks of the respondents in this misfeasance application. Ext.-1556 (c) is the 1st respondent's counter-affidavit to the 45-G application. In paragraph 5 thereof, he stated that prior to 1949 the Branch Managers were authorised to make advances after examining the sufficiency of the securities in the case of secured advances and the solvency of the parties in the case of unsecured advances; and after 1949 advances made by the Board after necessary scrutiny. Much the same stand, has been taken by him in his Points of Defence. In Paragraph 12 thereof he stated that from 1935, he had assistance of the other Directors, namely Sri Jacob Cheriyan (now dead) and the 4th respondent in the matter of the carrying on of the business of the Bank, that from 1930, the Board of Directors gave power of attorney to some of the Managers also and that the Managers of the several Branches were granting secured and unsecured loans, honestly and with due care in the due course of business. 39. Ext. P-1557 is the 2nd respondent's counter to the section 45-G application. In paragraph 6 thereof, he stated that the advances had all been made bona fide on the bank being satisfied that the borrowers were credit-' worthy for much more than the amount of the advances, and that they were made with due circumspection and on the basis of information that the bank had at the time about the financial position of the borrowers and with due regard to the best interests of the Bank. In paragraph 7 of his points of defence, he admitted that in the matter of granting advances to the parties the Board had little to do except in rare cases, in which its advice was sought by the Managers of the Branches concerned. 40. Ext. P-1558 is the 3rd respondent's counter-affidavit to the section 45-G application. In paragraph 2 thereof, he merely stated that he was not taking any active part in the management of the affairs of the Bank. In paragraphs 5 and 6 of his points of defence he stated that the business of the Bank was being managed by the Managing Director through the Branch Managers who had power and authority to act on behalf of the Bank, that all advances were made by the Branch Managers who were authorised to make them, and that it was not the duty of the Directors of the Bank, nor was it possible for them to enquire into the propriety of the advances made by the Branch Managers, or into the solvency of the parties to whom they were made. 41. Ext. P-1559 is the 4th respondent's counter-affidavit to the section 45-G application. He stated in paragraph 12 that the advances and realisations came up frequently for review before the meetings of the Board of Directors and suitable instructions were given to the Branch Managers to realised the same through legal action or otherwise. In his points of defence, the 4th respondent denied that he had anything to do with the making of advances and loans or their collection. 42. Ext. P-1461 is the counter-affidavit of the 5th respondent to the section 45-G application. Paragraph 16 of the same is to the effect that prior to 1949 Branch Managers were authorised to make the advances, and after 1949 advances were made by the Board, after careful scrutiny. His points of defence states that loans and advances were made by the Branch Managers. 43. Ext. P-1562 is the counter-affidavit of the 6th respondent to the section 45-G application. It is to the effect that prior to 1949, the Branch Managers were authorised to make the advances and after 1949, they were made by the Board. In his points of defence also he states that the advances were made by the Branch Managers in the ordinary course of business. It is to the effect that prior to 1949, the Branch Managers were authorised to make the advances and after 1949, they were made by the Board. In his points of defence also he states that the advances were made by the Branch Managers in the ordinary course of business. He has pleaded that the 1st respondent and two other Directors working at the head office were members of a Committee which came to be called the Managing Board and which functioned till about the end of 1954, and that as a Director he had no part or lot in the scrutiny of the periodical statements received at the head office or in the maintenance of accounts or the preparation of the balance-sheet. He has further pleaded that power had been delegated to the Managing Board by the Board of Directors in regard to the grant of loans and making of advances, fixing limits of accommodation, allotment of shares, recognition of transfer of shares etc. (The Managing Board consisted of the 1st respondent, 2nd respondent and Jacob Cheriyan till 14th January 1935, when the 4th respondent was co-opted as Director and became member of Managing Board in place of respondent No. 2). 44. Ext. P-1563, is the counter-affidavit of the 8th respondent in section 45-G application. It contains nothing material on this question; nor his points of defence. 45. The 4th respondent in the course of his public examination under section 45-G of the Act, deposed as follows: "So far as I can remember the grants of loans and advances were not being brought up before the Board either before or after the grant. That was the case until about 1948. After that some cases, but not all, were being brought before the Board for sanction or ratification. I cannot say whether these matters were being brought before the Managing Board” I still do not remember anything about that Board as distinct from the Board of Directors. So far as the head office was concerned the grant of loans were being looked after mostly by the Managing Director. In some cases of loans and advances the position might have been reviewed by the Board. There might have been such cases even before 1948. If any matters had been considered by the Board that should find place in the minutes book. In some cases of loans and advances the position might have been reviewed by the Board. There might have been such cases even before 1948. If any matters had been considered by the Board that should find place in the minutes book. And if I am told that there were only seven cases considered by the Board between 1936 and 1943 and none between 1943 and 1950 I would say that that must be correct and that it bears out my statement that these matters were not generally coming up before the Board." His above deposition has been marked as Ext. P-1560. 46. The pleadings are thus fairly clear that the loans and advances were granted by the Branch Managers. A case of delegation to a committee of the Directors was pleaded only by the 6th respondent in his points of defence. This was replied to by the Liquidator's reply statement, where it was stated that the constitution of a committee which in effect was concerned only with a transfer of the Bank's shares does not absolve the respondent of his duty as a director and that the Managing Board was concerned only with the transfer of shares of the Bank. The Liquidator in paragraph 6 of his affidavit, dated 10th March 1965 repeated that the Committee (Managing Board), as seen from the minutes book did not deal with the grant of loans or over- drafts or fix limits in respect thereof. This affidavit was answered only by respondents 1 and 4. Respondent No. 6 himself did hot file any affidavit in answer to that filed by the Liquidator. Referring to paragraph 6 of the Liquidator's affidavit the 1st respondent stated that the Committee (the Managing Board) has been reviewing the grant of loans and overdrafts from time to time even though the said proceedings have not been recorded in the minutes book. The 4th respondent in his affidavit contended himself by stating that paragraph 6 (among others) of the Liquidator's affidavit was irrelevant, and called for no answer. 47. We have looked into the resolution of the Board of Directors, dated 24th May 1930 recorded at pages 31 and 32 of Ext. P-1540. The same records that the Managing Board (constituted by resolution, dated 14th April 1927) is to have power to review old limits for overdrafts, to fix new limits, etc. 47. We have looked into the resolution of the Board of Directors, dated 24th May 1930 recorded at pages 31 and 32 of Ext. P-1540. The same records that the Managing Board (constituted by resolution, dated 14th April 1927) is to have power to review old limits for overdrafts, to fix new limits, etc. It does not include any delegation of power to the Managing Board, to grant loans or advances or regarding day-to-day management of the Bank. Paragraph 5 of the Liquidator's affidavit, dated 10th March 1965, to the extent to which it states that the Managing Board had power to grant loans, etc. is wrong. It is therefore clear that the defence of the 6th respondent on the basis of any delegation of powers to a Managing Board to grant loans and advances has no foundation on facts. Equally so, would be any plea of delegation to the Managing Board of the powers of day-to-day management. 48. Valuable evidence is afforded in regard to the grant of advances by the Bank, in particular, and generally about the management of affairs of the Bank, by the reports of the Reserve Bank and the answers furnished to the Reserve Bank, by the (Palai) Bank. We will refer to some of these and, to avoid repetition, quote the relevant portions bearing not only on the 'A' claim, but on the rest of the case. Between June 1951 and July 1960, the Reserve Bank conducted four inspections and two scrutinies of the affairs of the Bank. Ext. P-923-A is the first inspection report of the Reserve Bank regarding the affairs of the Bank, as on 30th June 1951. Ext. P-923, dated 17th June 1952 is the covering letter forwarding the inspection report and inviting the Bank's representation against action under section 42 (6) (b) of the Reserve Bank of India Act (excluding the Bank from the second schedule). The Reserve Bank observed in the inspection report that the Board of Directors, does not appear to have exercised sufficient control over the working of the Bank, that the supervision and control over the working of the Branches appear to have been inadequate in the past, with the result that the Branch Managers freely granted advances mainly on a clean basis and many of these appear to have become sticky. It was noted that their powers have been curtailed since 1949, and the Branches have been required to furnish certain periodical returns to the head office, that these statements submitted at irregular intervals did not contain full details of the advances outstanding and had not been properly scrutinised by the head office, that the system of internal audit of the branches was introduced in 1950, but most of the defects mentioned by the auditor remain unrectified, and the audit reports were not placed before the Board for information. In regard to advances, the Reserve Bank observed that they generally indicated an over-extended position, and although the Bank's attention had been drawn to this feature as far back as February 1949, advances to the extent of 39.1 per cent of the total are concentrated in the hands of 24 borrowers and a sizable portion thereof is due from the Directors, their relations and the firms and companies in which the Directors are interested, that the Managing Director of the Bank grants advances at his discretion, that no restriction appears to be placed up to 1948 on the powers of the Branch Managers in regard to the granting of loans and advances, with the result that some of them had made advances mostly of a clean nature without reference to the head office. It was remarked that the Manager of the Delhi Branch has been overdrawing his account on a clean basis since 1937, but no action has been taken to recover the balance of Rs. 0.65 lakh due from him, nor has interest been charged to his account from the beginning and that in respect of an advance outstanding against the wife of a Director who is also the Manager of the Madras Office, the unsecured portion of the advance amounts to as much as Rs. 2.96 lakhs. (The reference is to item No. 85 of Annexure I. The borrower is the wife of the 2nd respondent and a daughter of the 1st respondent). Certain advances showing undesirable features were picked out by the Reserve Bank and commented in Appendix VI to the Report. These advances aggregate to Rs. 147.78 lakhs. 49. In the course of this inspection, in 1951, the Reserve Bank sent out a questionnaire and this was answered by the 1st respondent on behalf of the Bank. Certain advances showing undesirable features were picked out by the Reserve Bank and commented in Appendix VI to the Report. These advances aggregate to Rs. 147.78 lakhs. 49. In the course of this inspection, in 1951, the Reserve Bank sent out a questionnaire and this was answered by the 1st respondent on behalf of the Bank. We shall reproduce some of the queries and the answers (vide Ext. P-957). 1. What Steps are taken by the Bank to obtain reliable credit information about the borrowers and to keep the information up-to-dated? FORM No. XIII We discuss with our clients and friends as they visit us and as we visit them, the general conditions of business in each locality and of varying fortunes of the different parties. " ********* 1. What is the Bank' procedure for sanctioning and reviewing advances ? FORM No. XVII The application for loans are considered by the head office. The Managers of Branches formally and at times informally, consult the head office. The reviewing of advance is made when the Directors or Officers visit branches, and when the Managers of Branches visited the head office when there is marked change in the price of any one commodity or general business conditions ". ********* 1. Give brief details of the supervision and control exercised by the head office over branches and of the powers of branch officials to grant advances including bills purchased and discounted. FORM No. XX In the beginning when we started branches the bulk of the advances we used to make consisted of gold and pepper loans. The amounts involved for gold loans seldom exceed Rs. 500 per loan our advance rate against a soverign weight of gold having been only Rs. 6 and of pepper around Rs. 100 per candy. From Rs. 6 for gold and Rs. 100 for pepper our lending rate increased with the rise in price of the articles. After 1944, with the sudden rise in our deposits and with the spurt in the prices of goods, raw and manufactured and in land values and with all round boom, our advances naturally rose. In making advance the Branch Managers wrote personal letters to the head office and consulted; and by demi official letters also we exercised control over the branches. In making advance the Branch Managers wrote personal letters to the head office and consulted; and by demi official letters also we exercised control over the branches. When the Directors and Officers of the Bank visited the Branches, books were examined and discussions were made about the policies to be followed in advances and about individual loans. By a circular we issued to the branches on the 8th March 1949 we have now completely restricted the liberty of branch managers. According to the written agreements the Branch Managers have entered into with us, the Branch Managers are precluded from making any advances especially clean advances without the authorisation by the head office. Now it is definitely laid down that no Branch Manager should make a loan without the previous authorisation of the head office unless they be gold loans, or loan is against the bank's own fixed deposit receipts. The Branch Managers periodically visit the head office when instructions are given to them in the matter of loans, discounting of bills, etc. Every branch sends us daily a full and complete copy of their day book for the day. They also send us daily statement of position and also weekly and monthly statements showing the detailed analysis of deposits, the rise and fall of loans and of bills discounted, of profit and loss accounts, of attendance of staff, etc. These statements and returns are scrutinised and demi official and official letters are sent to the branches from time to time. When internal audit of branches are done, instructions are given to the Branch Managers. 50. We should observe that the reference to the circular dated 8th March 1949 in the answer to question No. 1 Form XX, appears to be to Ext. P-806. The Liquidator's averment to that effect in paragraph 17 of his affidavit, dated 10th March 1965 was not controverted. It was presumably on the basis of this circular that the Reserve Bank observed in Ext. P-923 (a) that since 1949, the powers of the Branch Managers have been curtailed. Ext. P-806 however, as observed by the learned Trial Judge, (vide paragraph 148 of the 'A' Claim Judgment) does no such thing. It only asks the Managers to "recall 10 per cent of your advance's in two months' time". P-923 (a) that since 1949, the powers of the Branch Managers have been curtailed. Ext. P-806 however, as observed by the learned Trial Judge, (vide paragraph 148 of the 'A' Claim Judgment) does no such thing. It only asks the Managers to "recall 10 per cent of your advance's in two months' time". Our attention was not called to any other circular corresponding to the date and or having the effect mentioned in the relevant answer in Ext. P-957. We shall not at present comment on the superscription "Strictly Private" to Ext. P-806. 51. Ext. P-924, dated 14th July 1952 is a report from the Managing Director, to the Reserve Bank of India, explaining the several defects pointed out in the 1st inspection report. Statedly, this was approved by all the Directors. It began with an expression of surprise at the course that the inspection report had taken, and wound up with an expectation of hope for a "correct, generous assessment of the position." In between, occur the following: "During the years between 1931 and 1937 when we had seventeen offices, the Branch Managers were advancing loans only against the security of Bank's deposits, gold jewels and pepper. An examination of the balance-sheets of our branches like Thodupuzha, Vaikom, Nagercoil, Alwaye, etc. shall bear out these facts. During these years our advances were concentrated on gold and pepper. After 1938 severe stipulations were made to branches to restrict loans. The expansion occurred only during the time from 1943 to 1947 when due to the higher level of prices the requirements of borrowers could be met only by considerable enhancement of limits. This higher level of prices was much more noticeable in the Travancore-Cochin State than elsewhere Now no branch office is allowed to make any advances without previous reference to us. It has also been decided that not only the head office but the Board of Directors should examine applications for fresh loans. In a few cases it may be necessary to put a little more money to re-inforce the advances already made. In a large number of cases where the borrowers are settled in rural areas owning agricultural lands, even if it takes a little more time than is usually allowed by banks to borrowers to repay the principal or remit the interest, the money advanced can be absolutely secured. In a large number of cases where the borrowers are settled in rural areas owning agricultural lands, even if it takes a little more time than is usually allowed by banks to borrowers to repay the principal or remit the interest, the money advanced can be absolutely secured. In rural areas the character, trustworthiness and the means of a borrower are much intimately and personally known to a bank than in large cities. (We cannot help adding that comment should be needless on the, description as "rural areas" of Delhi, Madras, Bangalore, Cochin and Quilon, the advances in which branches were among those adversely commented on by the Reserve Bank). Among the advances showing undesirable features are largely included what are mentioned in the Reserve Bank statements as irregular advances. By an irregular advance is only meant an amount sufficient to cover one year's interest on the advance has not been remitted by the borrower concerned. A person worth Rs. 5 lakhs in landed property borrows Rs. 5,000 from the bank. He does not remit interest on the amount. This becomes an irregular advance. After fourteen months he closes the debt with interest in full. The regular nature of the advances does not in any way lessen the security of the advances. This must be the experience of all banks operating in rural areas. In a country like India where Joint Stock enterprises are still considered to be in its infancy and where the work of the stock exchanges are not comprehensive it cannot be taken that the lack of being listed on the stock exchanges is a sign for that reason of unsoundness of the company concerned. There are large numbers of small, sound, well-working companies whose shares are on that account strongly held and due to that cause transactions in these shares are few and far between and thus happens to be out of the purview of the stock exchanges. However, to be on the safe side we are preparing a list of approved shares which are quoted on the stock exchanges for our guidances in future. Due to the sudden recession in prices, certain advances happened to be partially uncovered. However, to be on the safe side we are preparing a list of approved shares which are quoted on the stock exchanges for our guidances in future. Due to the sudden recession in prices, certain advances happened to be partially uncovered. The question was whether a forced sale causing the ruin of the parties and the consequent panic that might be generated would be the wiser policy or whether to insist on the borrowers to give other securities in the form of house properties or landed properties, was the more sound source to be adopted. At all events we thought creation of a panic would do little either to the bank or to the parties concerned. As for the wife of the manager of the Branch Office mentioned in the report, although she happens to be the wife of a Branch Manager, it is a well-known fact that she is rich. She is being requested to make the account fully secured or repay the money borrowed." XX XX XX XX In villages and small towns the borrowers from a Bank and their assets are well known and if its transactions had been faulty or dubious the bank would not have grown from a small institution from a small village to be the premier banking institution in this region possessing the cleanest reputation. This fact becomes more significant when it is considered that in the matter of banking competition the Travancore-Cochin State was the worst and that in no other area in India there had been such a large number of banks. It must also be borne in mind that we had to compete with several banks founded, managed and continuously subsidised by the Government. Those banks brought up under Government patronage could not attain the size or reputation we happen to possess. But for the fact that we held the ground and kept our reputation, unimpaired during the fierce onslaught of the T. N. and Q. Banking crisis the severe economic depression, the war crisis and the Travancore independence debacle, driving the country into a state of civil war, all these dangers rolled into one, the banking structure in the entire State would have collapsed perhaps never to recover for the next fifty years. The fact that the Directors of the Bank have been recognised as the leaders in the profession is borne out by the fact that the Government of Travancore have consulted them often in matters affecting banks, co-opted them to the legislatures of the State, appointed them to committee pertaining to finance, invited their opinion in the matter of financial integration of the States and in the negotiations with the Reserve Bank of India and nominated them to the Boards of Directors of Companies in which the Government have interest. The Banking profession in the Travancore-Cochin State have acknowledged their experience and knowledge by nominating its Managing Director to be the President of the first banker's conference to be held in the State and by unanimously selecting one of its Directors as the permanent President of the Travancore-Cochin Bankers Association successively. We have mentioned these facts just to show that the Bank is being managed by men of standing and respectability in the State and who are generally acknowledged as men having some insight in the matter of banking". 52. To the above communication, the Reserve Bank replied by Ext. P-925 dated 11th November 1952, stating that it was prepared, as a special case, to defer passing of an order under section 42 (6) (b) of the Reserve Bank of India Act, for a period of six months, provided the Bank makes an application in that behalf and agrees to comply with the conditions set out in the enclosure [Ext. P-925 (a)] to the letter. Conditions 1 and 7 were as follows: 1. (a) The Bank should appoint immediately a Banking Adviser (after informally consulting the Reserve Bank), who will be responsible to the Board of Directors and not subordinate to the Managing Director of the Bank. He should tender advice to the Board in writing on all important matters involving policy such as advances, investments, branch control, etc. (b) The Bank should not grant further advances to Directors, or their relations or individuals or firms or companies in which the Directors are interested as partners, director or guarantors, until the Banking Adviser in terms of Condition No.1(a) above has been appointed". x xx x 7. (b) The Bank should not grant further advances to Directors, or their relations or individuals or firms or companies in which the Directors are interested as partners, director or guarantors, until the Banking Adviser in terms of Condition No.1(a) above has been appointed". x xx x 7. The Reserve Bank of India shall be entitled at any time to call for any statement and information relating to the business of the bank as also to depute its officer(s) to attend any or all meetings of the bank's Board of Directors or of any of the committees of the bank, without however taking part in proceedings of such meetings, and/or for carrying out a scrutiny of the Bank's affairs by an examination of its' books of account and records or otherwise, as may be deemed necessary by the Reserve Bank". The application contemplated by the Reserve Bank's letter Ext. P-925 was made, and on behalf of the Bank, the Managing Director signified willingness to comply with the conditions set out in Ext. P-925 (a) (vide Ext. P-926). By Ext. P-928, dated 19th October 1953, the Reserve Bank granted on extension of time up to the end of December 1954, for implementing fully the conditions imposed by it by Exts. P-925 and P-925 (a), subject to the additional condition that the Directors of the Bank except the Managing Director should not hold any office of profit in the Bank. It was proposed in implementation of condition VII to conduct the 1st scrutiny of the Bank's affairs. Acceptance by the Board of Director's of the additional condition was signified by Ext. P-930, dated 11th January 1954. In pursuance of condition No. 1, Mr. J. A. Frost, a retired officer of the Imperial (State) Bank of India was appointed in May 1953 to guide the Board and tender advice to it on all important matters (as will appear from Exts. P-938 (a) and P-939 (a). Ext. P-933 dated 12th May 1955 is a letter by the Reserve Bank, imposing certain additional conditions shown in the enclosure [Ext. P-933, (a)] after examining the progress reports and statements till then submitted to it, and proposing terms and condition No. 7 already imposed, to depute an officer to conduct the second scrutiny of the Bank's affairs. Ext. P-933 dated 12th May 1955 is a letter by the Reserve Bank, imposing certain additional conditions shown in the enclosure [Ext. P-933, (a)] after examining the progress reports and statements till then submitted to it, and proposing terms and condition No. 7 already imposed, to depute an officer to conduct the second scrutiny of the Bank's affairs. Additional condition No. 1 sought to be imposed on the Bank was that the Bank should appoint a person as chief Executive Officer in the place of the Banking Adviser appointed under Condition No. 1 (a) of Ext. P-925 (a), which condition was withdrawn. Additional condition (iii) was that the Bank should not book as profit unrealised interest on the advance noted in Appendix VI to the inspection report and those found to have undesirable features during the recent scrutiny by an Officer of the Reserve Bank, with respect to the Bank's position, as on 31st December 1954. In its reply dated 20th July 1955 (Ext. P-934) approved at the meeting of the Board of Directors, the Bank stated: "The Bank has not at any time debited interest on any account which had been found bad. Many of the accounts on which interest was not actually remitted by the parties for a period of time, were paid then the accounts were settled. As a portion of the Bank's advances are due from agricultural interests and from persons in rural areas, such advances do not partake of the nature of strictly commercial loans where borrowers get collections from day to day and are able to rotate their borrowings at a quicker pace. The fact that a party of ample resources and sound credit does not remit interest on his loans need not necessarily mean that his loan is doubtful and both the principal and interest due would not eventually be forthcoming. Classification of a debt as doubtful can really be made only after close and thorough enquiry of all the circumstances connected with it. The resources, integrity of character and the financial ability of a borrower, the ever-changing rise and fall in the scale of value of properties, all these and other considerations must weigh in judging a debt to be sound or doubtful. Quick and haphazard sorting of debts as sound or otherwise can lead to no correct assessment. The resources, integrity of character and the financial ability of a borrower, the ever-changing rise and fall in the scale of value of properties, all these and other considerations must weigh in judging a debt to be sound or doubtful. Quick and haphazard sorting of debts as sound or otherwise can lead to no correct assessment. If we fail to book as profit, interest on large number of advances which would at all events be finally settled in full, the only effect can be to produce a profit and loss account which would show imaginary loss. Instead of disclosing the correct position of the Bank and without bringing any benefit it can create unwanted panic and trouble for the institutions." Correspondence followed in regard to these additional conditions (vide Exts. P-935, P-936). In Ext. P-936, the Reserve Bank commented that although working under adverse conditions for more than 2 ½ years, no progress whatsoever had been made by the Bank in reducing the unsecured advances as well as in the recovery of advances having undesirable features [which were subject of Conditions 4 and 5 stipulated by the Reserve Bank in Ext- P-925 (a)]. It also signified its assent to accept Sri Padmanabhan Nair, Special Officer, suggested by Bank being appointed as Chief Executive Officer. 53. Ext. P-938 (a) is the 2nd inspection report of the Reserve Bank, on the affairs of the Bank, as on 31st December 1955. This was communicated to the Bank by Ext. P-938, dated 7th February 1957. It was observed that although the Managing Director's powers have been restricted, since the last inspection report (the reference must be to Ext. 53. Ext. P-938 (a) is the 2nd inspection report of the Reserve Bank, on the affairs of the Bank, as on 31st December 1955. This was communicated to the Bank by Ext. P-938, dated 7th February 1957. It was observed that although the Managing Director's powers have been restricted, since the last inspection report (the reference must be to Ext. P-925 (a) he still virtually determines the Bank's policy, that the agenda for the Board meetings are neither circulated to the Directors nor placed before the Board, that despite the fact that a large proportion of the Bank's advances had become frozen and the indications given by the Reserve Bank regarding the unsatisfactory progress made by the Bank, the Board had not reviewed the overall financial position of the Bank and the state of accounts brought to its notice since the last inspection report; that the Chief Executive Officer, the Managing Director has not pursued vigorously the question of recovering sticky advances and has not been able to enforce strict adherence by the Branches to the instructions issued by the head office; that the Ex-Manager of the Delhi Branch, who was the then Manager of the Delhi Branch had granted while managing the former Branch a large number of un authorised advances which had become sticky but no explanation had been called for from him in the matter; that while in charge of the Delhi Branch, his free drawing through his Current Account, amounted to Rs. 0.77 lakhs treated by the Bank as a clean overdraft, and no action had been taken in the matter in spite of advice by the Banking Adviser. In regard to advances it was observed that since the date of the previous inspection, advances had increased by 38.34 lakhs mainly by the application of interest charged to sticky advances. It was noticed that the powers of the Managing Director and the Managers in the matter of certifying advances have been defined after the last inspection, and the former is authorised to grant both ' secured and unsecured advances up to Rs. O.1 lakh in each case while the latter were authorised to grant advances up to 0.5 lakh against gold ornaments, Bank's own Fixed Deposits and Government Securities, and up to Rs. 0.3 lakh against fresh fully paid up shares of companies approved for the purpose and merchandise. O.1 lakh in each case while the latter were authorised to grant advances up to 0.5 lakh against gold ornaments, Bank's own Fixed Deposits and Government Securities, and up to Rs. 0.3 lakh against fresh fully paid up shares of companies approved for the purpose and merchandise. It was noticed that although after the last inspection the head office issued instructions to Branches asking to maintain credit reports on the borrowers and to review them annually no such reports were maintained in respect of several borrowers owing large sums, while in cases where they have been maintained, they are not periodically revised. Thus, it was observed, that the Madras and Delhi Branches together accounting for Rs. 60.42 lakhs or 28.2 per cent of the total unsecured advances did not maintain any credit reports at all. It was pointed out that advances amounting' to Rs. 34.01 lakhs (or 9.6 per cent of the total advances) had been outstanding mostly on a clean basis against some of the Directors, their relations and the firms and companies in which they are interested, that Rs. 16.86 lakhs due from two Directors and the relation of another Director alone, have been left outstanding for more than 25 years. In regard to unsecured advances it was observed that no attention appears to have been paid to the creditworthiness of the borrowers at the time of certifying the advances and that the several overdraft accounts are inoperative for the past few years. It was observed that the supervision and control exercised by the Board over the Branches continued to be ineffective, that after the 2nd scrutiny the Reserve Bank had insisted on the Bank appointing a competent person as Chief Executive Officer in the place of Mr. J. A. Frost who was due to retire in July 1955, that Shri K. A. PadmanabhanNair of the Imperial (State) Bank of India was appointed as such with the consent of the Reserve Bank which also agreed on the representation of the Bank to the 1st respondent continuing as Managing Director; that Shri Padmanabhan Nair died in December 1955, which was not reported to the Reserve Bank, nor any appointment made in his place. P-938 (a) also states that the imposition of the condition that no Director should hold an office of profit in the Bank led to the resignation of the 5th respondent on 31st December 1954 and his replacement by the co-option of 7th respondent on 5th February 1955, that four other Directors, namely Jacob Cheriyan, 2nd respondent, 4th respondent and 5th respondent gave up their offices of profit and continued as Directors. By the covering letter Ext. P-938, forwarding the Inspection Report, the Reserve Bank stated that there was enough to suggest that the Bank was conducting its affairs in a manner detrimental to the interests of its depositors and called upon the Bank to submit its representation against action proposed under section 42 (6) (b) of the Reserve Bank of India Act. 54. Ext. P-939 (a) dated'8th April 1957 is the representation submitted by the 1st respondent and approved by the Board of Directors in answer to Ext. P-938. Ext. P-939 is the covering letter which accompanied the same. The following extracts from Ext. P-939 (a) are relevant. "7. Appendix I of the Inspection Report would unmistakably show that notwithstanding political ferment and the restrctions, imposed by the Reserve Bank of India on account of its inherent soundness and vitality and the reputation and the good will its Directors could engender, the bank has developed and has become stronger and still stronger. 8. With all due deference we wish to mention that the Inspection Report has laboured to give by the use of vague words and phrases like 'not satisfactory', 'has not pursued vigorously' 'serious efforts', 'not generally', which on a cursory glance of the report might produce in the reader's mind an impression which is incorrect, contrary to facts, and if we may be allowed to put it that way, absolutely misleading. The facts and figures which we have already pointed out would clearly show the strength of our contention. ***** 12. It has really pained us, the slipshod way in which the officers responsible for the inspection has disposed of the members of the Board. The colour in which the officers responsible for the inspection has seen the members of our Board and the way in which he has lightly brushed them off as being mostly the relations of the Managing Director seems to be native to the angle in which he can see men and institutions. The colour in which the officers responsible for the inspection has seen the members of our Board and the way in which he has lightly brushed them off as being mostly the relations of the Managing Director seems to be native to the angle in which he can see men and institutions. We may be permitted to add here that his report of every feature of the institution is coloured and coloured. He comes from a region which is little in common with the differing problems and features of our area. His sojourn here being short, we are afraid he could not at all assess in proper perspective the things he was asked to report on. We may be forgiven if we are also drawn to the conclusion that the officer had meagre, knowledge of practical problems that face a private Joint Stock Banker in day today working. He could not realise the difficulties and obstacles that have to be surmounted in piloting an institution through good times and bad, through war and peace, through periods of rise and fall of prices through legal labyrinths, State enactments and political upheavals. He does not seem to have viewed the complexities of the problems involved in adapting and shaping an institution to suit standards and procedures which became applicable to it a generation after it was found. ***** [We may remark that the above protest appears to have been occasioned by the prosaic way”as it appeared to the Directors” in which the Reserve Bank referred to the Directors of the Bank and it officers, rather differently from how the Directors were inclined to portray themselves, for instance, in Ext. P-939 (a)] 14. The agendas for the Board meeting could easily be prepared in the manner mentioned in the Inspection Report. More details of the discussions taking place at the meetings of the Board could if so desired, be incorporated in the minutes of the Board. We were just following a certain manner. As far as we could understand, there is no uniform and cut to measure standard in such things and the practice and procedure differ from company to company, and from institution to institution. We were just following a certain manner. As far as we could understand, there is no uniform and cut to measure standard in such things and the practice and procedure differ from company to company, and from institution to institution. If we might quote a historical instance, it is perhaps amazing that the Cabinet of the United Kingdom Government did not make or keep any record of its discussions, or decisions for many decades until the coming of Shri Lloyed George as the Premier of England. Even then, it was the exigencies of the First World War which promoted the keeping of such minutes. We have mentioned this just to say that all practices, procedures, conventions etc. grow from time to time and are perfected as time passed. The Directors are now meeting regularly every month. They can meet more frequently every month. They can meet more frequently in future so as to exercise stricter control and supervision. * * * * We wish to confine our representation to broader aspects and leave out the vague, unsubstantiated, allegations, generalisations and contradictions in the Inspection Reports. The non-appointment of a substitute in the place of Padmanabhan Nair was explained as having happened despite the Directors' enquiries for a suitable person and 'advertisement in the papers for the purpose. 55. After this representation the Reserve Bank by Ext. P-940 dated 27th July 1957 agreed to defer passing of an order as proposed under section 42 (6) (b) of the Reserve Bank of India Act provided the Bank made an application for the purpose and complied with the conditions set out in the enclosure, Ext. P-940 (a). Conditions 3, 4, 5 and 8 therein were: 3. The Bank should appoint immediately a qualified person with sufficient commercial banking experience as its Chief Executive Officer, after informally consulting the Reserve Bank; 4. Shri K. George Joseph should cease to be the Manager of the Madras Branch and a competent and experienced person should be appointed in his place; 5. The Bank should not grant fresh advances to Directors and their relations and the concerns in which they are interested and the advances at present outstanding against them should be substantially reduced; * * * * 8. The Bank should not grant fresh advances to Directors and their relations and the concerns in which they are interested and the advances at present outstanding against them should be substantially reduced; * * * * 8. The Bank should create a specific reserve equal in amount to that credited to the Profit and Loss Account by way of unrealised interest on its advances which are considered by it as bad or doubtful of recovery and those specifically pointed out to it." 56. The Bank proposed certain minor amendments by Ext. P-941 which were accepted by the Reserve Bank of India by Ext' P-942. The Bank protested by Ext. P-943 against the condition for deputing an Officer of the Reserve Bank to attend the Board meetings of the Bank, but the Reserve Bank stood its ground and reimposed practically the same conditions it insisted on earlier, and also deputed an Officer to attend all meetings of the Board of Directors of the Bank or any committees constituted by it, and to carry out an inspection. 57. Ext. P-946 (b) dated 15th September 1958 is the third Inspection Report of the Reserve Bank on the affairs of the Bank as on 28th March 1958 forwarded with covering letter Ext. P-946. It was again observed that the agenda of the Board meeting was not circulated in advance, that although it was stated that the position of the individual advances have been reviewed by the Board, the decisions taken in the case of suit filed accounts, are not indicated, that the Board has not reviewed the overall financial position of the Bank at any time, that the advances due from Directors, their relations and the firms in which they are interested amounted to Rs. 33.30 lakhs or 7.9 per cent of the total advances, mostly outstanding on a clean basis. Certain advances aggregating to Rs. 193.69 lakhs showing undesirable features were commented upon in Appendix VII to the Report. The report wound up by stating that there was sufficient material to suggest that the Banking Company was conducting its affairs in a manner detrimental to the interests of the depositors. By Ext. Certain advances aggregating to Rs. 193.69 lakhs showing undesirable features were commented upon in Appendix VII to the Report. The report wound up by stating that there was sufficient material to suggest that the Banking Company was conducting its affairs in a manner detrimental to the interests of the depositors. By Ext. P-946 (a) the Reserve Bank under section 35-A(l) of the Banking Companies Act directed the Bank not to declare any dividend to the shareholders until it satisfied the Reserve Bank that the loans and advances in Appendix VII of its Report had been either realised or fully provided for or written off. The Bank replied by representation Ext. P-947, and the Reserve Bank countered by Ext. P-948 dated 28th April 1958, by which, in addition to the direction evidenced by Ext. P-946 (a) it issued additional directions [Ext. P-948 (a) ]. Condition No. 8 was the same as Condition No. 8 in Ext. P-940 (a) already quoted. In regard to the above, correspondence followed (vide Exts. P-949 to P-954) and eventually the Bank agreed to all the directions of the Reserve Bank (vide Ext. P-955). 58. Ext. P-956 (b) is the fourth and last Inspection Report of the Reserve Bank of India dated 4th July 1960, regarding the position of the Bank as on 31st December 1959. Ext. P-956 is the covering letter communicating the same. It was observed that the Managing Director, had since the last inspection, been divested of all powers of Chief Executive Officer, and although he does not attend to regular duties he continued to draw the same emoluments as before, viz. salary of Rs. 1,500 p.m. and free use of the Bank's motor car. From February 1958, Sri K. M. George (10th Respondent) was designated as the Bank's Secretary and he was appointed as its Chief Executive Officer up to 31st July 1960. It was observed that the supervision and control exercised by the head office over the working of the Branches continued to be inadequate and ineffective, that the advances have increased from Rs. 421.56 lakhs to Rs. 529 lakhs since the last inspection, that the advances to Directors, their relations and the firms in which they are interested were shown in Appendix VIII and these aggregated to Rs. 36.95 lakhs as against Rs. 421.56 lakhs to Rs. 529 lakhs since the last inspection, that the advances to Directors, their relations and the firms in which they are interested were shown in Appendix VIII and these aggregated to Rs. 36.95 lakhs as against Rs. 33.30 lakhs as on the date of the last inspection, that on the basis of the value of securities held and other relevant considerations, the amount of Rs. 218.51 lakhs out of the Bank's total advances appear to be irrecoverable, while a sum of Rs. 17.71 lakhs is doubtful of recovery, and a further amount of Rs. 111.57 lakhs had become either frozen or sticky, that unsecured advances are granted to Government officials at Trivandrum Branch and adjusted by specified monthly instalments from the amounts of their salary bills collected by the Branch, that no agreement in writing was executed by the borrowers, and the stipulated instalments are often not collected, that at the New Delhi and Madras Branches temporary clean accommodation has been given to a number of parties by allowing them to draw against the credits given in their Current or Savings Bank Accounts, to the debit of the Suspense Payment Accounts, and that the Bank has thus violated the direction prohibiting it from granting unsecured advances. The Report wound up by saying that there is sufficient material to suggest that the Banking Company is conducting its affairs in a manner detrimental to the interests of its depositors. 59. The impression that we get from these materials, of supineness, indifference and inattention on the part of the Directors, was sought to be displaced by showing some evidence of activity of their part to concern themselves with the propriety of the advances, the creditworthiness of the borrowers and the prudence of the investments. Our attention was called in particular to Exts. P-834, P-835, P-836, P-836 (a), 838, 839 (a), 840, 841, 842, 843, 844, 845, 848, 849, 854, 856, 868, 875, 876, 881 and 882 to show the personal attention, supervision and control exercised by the Directors in regard to the grant of advances. Complaint was made that these documents have escaped the attention of the Liquidator and of the learned Trial Judge. There is no substance in the complaint. Nor do these documents brought to our notice advance the case of the Director-respondents. Complaint was made that these documents have escaped the attention of the Liquidator and of the learned Trial Judge. There is no substance in the complaint. Nor do these documents brought to our notice advance the case of the Director-respondents. The Liquidator has referred to these documents in paragraphs 14 and 18 of his affidavit dated 10th March 1965. In paragraph 14, he referred to the circular Ext. P-882 dated 30th September 1943 issued from the head office to the Branches. The circular refers to a loan application form having been prepared by the head office, which the Branch Managers were to get duly completed by the borrowers, before recommending their loans. This loan application form was statedly devised to furnish the head office with all necessary materials about the borrowers, so that it might come to a decision regarding the loans. The Liquidator averred in paragraph 14 of his affidavit, that there was nothing on record to show that any such loan applications were filled up and sent by any of the Branches in respect of the loans and advances referred to in Annexure I; and in paragraph 18, he stated that the proceedings of the meetings of the Directors did not disclose the matters covered by the correspondence (Exts. 834 to 881). The averments in paragraph 18 are among those dismissed as irrelevant in the counter-affidavit filed by respondent No. 4. Regarding paragraph 14 he stated that he did not know anything of the details and could not make any answer except to say that he did not admit the corrections of any of the statements. Respondent No. 1 in his counter-affidavit stated that in view of his old age he was not in a position to answer the allegations in paragraph 15 and the subsequent paragraphs of the affidavit, and said nothing specifically in answer to paragraph 14. 60. The learned Judge referred to Ext. P-882 in paragraph 141 of the 'A' claim judgment, and to Exts. P-834 to 881 in paragraph 142 thereof. The learned Judge stated that there is nothing to show that any of the loan applications in Annexure I were submitted to the head office as required by Ext. P-882; nor that these advances (with two exceptions viz. items 162 and 285) ever came up before the Board of Directors either for sanction or review. A perusal of Exts. The learned Judge stated that there is nothing to show that any of the loan applications in Annexure I were submitted to the head office as required by Ext. P-882; nor that these advances (with two exceptions viz. items 162 and 285) ever came up before the Board of Directors either for sanction or review. A perusal of Exts. P-834 to P 881 has satisfied us that they evidence certain sporadic and secret instructions, issued by the Directors in individual cases. They show at best, that besides the 1st respondent, some of the others also, and especially the 4th respondent, were taking active part in the management of the Bank. The learned Trial Judge himself in paragraph 155 of the 'A' claim Judgment recorded his impression, confirmed by the counter-affidavit of the 1st respondent to the Liquidator's affidavit dated 10th March 1965 and by the answers furnished to the Reserve Bank, (Ext. P-957) that in making the advances the several Branch Managers were not acting on their own but on the instructions oral or secret of the members of the Board, or at any rate, of those who were taking an active part in the management. With the exception of Exts. P-881 and P-881 (a) which were considered by the learned Judge while discussing item 3, and Ext. P-876 which relates to item 190, none of the others have been shown to relate to the advances in Annexure I. For reasons noted below, we feel that the learned Trial Judge was right in his impression, and record our agreement with the same. 61. Ext. P-843 discloses telephonic instructions having been issued by the 4th respondent regarding the grant of one loan. Ext. P-806, as we noticed, is superscribed "strictly private". A look at Ext. P-845 (b) and P 846 is sufficient to condemn the way in which the Managing Director (1st respondent) proceeded to sanction loans to the Mother-General of the Adoration Convent, Vazhappally, Changanacherry, in the one case, and to one K. M. Kurien in the other. These are scribblings on small bits of paper by the Managing Director. There is no record to show the instructions stated to have been issued to the Changanacherry Office in Ext. P-845 (b). None of the matters evidenced by Exts. P-834 to 881 find any record in the Minutes Book of the Board. These are scribblings on small bits of paper by the Managing Director. There is no record to show the instructions stated to have been issued to the Changanacherry Office in Ext. P-845 (b). None of the matters evidenced by Exts. P-834 to 881 find any record in the Minutes Book of the Board. While we do not wish to deny the Directors the privilege of exalting themselves at least from one self-conceived point of view to the level of the British Cabinet, which, according to them, kept no record of its discussions till a certain stage [vide Ext. P 939 (a) ], we cannot relieve them from their obligations and their liability on account of their reckless inattention to the affairs of the Bank and the unbusiness like way, in which they acted. The way in which the Directors reacted to the Reserve Bank's report has been correctly and properly summed up by the learned Trial Judge in para 147 of the 'A' claim judgment. We shall have occasion when dealing with the B & C claims to refer further to the secret instructions issued by the Directors and also to certain documents which show that the Directors had sufficient knowledge of the bad and irrecoverable nature of the advances, that they were averse to writing off these advances even when they were apprised of their real position, and that credit reports that a party is not worth anything, were not relished by the Directors (See paragraph 76 infra, where we have referred to Exts.P-812, 814, 817, 769, 770, 784, 771, 772, 773, 776, 778, 782, 783, 788 and 793). 62. Survey of these materials discloses that from the beginning there was no enquiry or investigation at the time of granting the loans listed in Annexure I, that no loan applications or credit statements were obtained and that there was no procedure regarding the grant of loans or for their periodical review, or as to the steps to be taken for their recovery. Most of these loans were made by the Branch Managers. In this connection we should refer to the powers of attorney, granted to the various officers of the Bank. These, as noticed in paragraph 138 of the 'A' claim Judgment, were of four types, A, B, C and D. Specimen of these powers would be found in Ext. Most of these loans were made by the Branch Managers. In this connection we should refer to the powers of attorney, granted to the various officers of the Bank. These, as noticed in paragraph 138 of the 'A' claim Judgment, were of four types, A, B, C and D. Specimen of these powers would be found in Ext. P-1544, and the originals themselves of some of them are Exts. P-917 toP-921. The Managing Director (1st respondent) held an 'A' type power. Respondents 2, 4, 5 and 6 and two others, namely K. H. Chacko (a brother of respondents 5 and 6), and C.J.Thomas, (the Manager of the Delhi Branch between 1936-1954) held the 'B' type power. The 'A' and 'B' types of power conferred absolute powers in the matter of grant of loans. The "C" type of power was generally in favour of Branch Managers, and it empowered them to advance money subject to the approval of the Directors of the Bank, and to the directions given by them from time to time. The 'D' type power of attorney was given to certain other employees of the Bank, and it conferred no authority in the matter of granting loans. Only the Managers at Madras (2nd respondent) and Delhi held the 'B' type power of attorney. The Managers of the remaining Branches, if at all, held only the 'C' type power of attorney, and could grant loans and advances only subject to the approval and the directions of the Directors. There is nothing to show that these Managers ever obtained approval of the Directors for the grant of loans and advances. Nor did the Board of Directors ever bestir itself by exercising any supervision, check or control in regard to these loans and advances. 63. A number of substantial advances in Annexure I were made at Quilon, Ponkunnam and Vaikom Branches. The managers of these Branches, Shri P. K. Varghese, M. Ramachandra Kammath and V. J. John have no power of attorney. There is nothing to show that they had any authority to grant loans and advances. The 9th respondent Sri J. Isaac who was in charge of the Bangalore Branch, when one of the flagrantly outrageous advances in Annexure I was made (item 295 of Annexure I) held only a 'C' type power of attorney. There is nothing to show that they had any authority to grant loans and advances. The 9th respondent Sri J. Isaac who was in charge of the Bangalore Branch, when one of the flagrantly outrageous advances in Annexure I was made (item 295 of Annexure I) held only a 'C' type power of attorney. Nothing was shown that the approval of the Directors was obtained to the grant of the advances by persons who held the 'C' type power. The records and the pleadings show that the Respondent-Directors gave a carte blanche to the Branch Managers in the matter of making advances and that the latter made no enquiries before making them. Despite the wrong statement made by the Directors in their answers furnished by them to the Reserve Bank (Ext. P-957) that Ext. P-806 circular had restricted the powers of the Branch Managers a statement which the Reserve Bank was apparently prepared to accept in Ext. P-923 (a)”the circular did no such thing. Ext. P-882 circular issued as early as in 194-3 is not shown to have been observed at all, and in its 2nd Inspection Report [P-938 (a)] the Reserve Bank commented that in the Madras and Delhi branches which together accounted for more than Rs. 60 lakhs, or 28.2% of the total advances, no credit reports at all were maintained. The un-canalised powers given to the Branch Managers was commented on in the Reserve Bank's Inspection Report Ext. P-923 (a), and it was only after a retired officer, (Mr. Frost) of the Imperial (State) Bank of India, was appointed as an adviser of the Bank in 1953, that, at his instance a resolution was passed by the Board on 2nd April 1955 fixing limits on the power of the Managers in the matter of granting advances, and a Manual of instructions was also printed and distributed. (See Ext. P-822 dated 15th March 1955 from Mr. Frost to the 1st respondent). There was no internal audit of the Branches till it was introduced in March 1950 and even then the reports of the auditor were never placed before the Board and the defects pointed out by him were left unrectified. On this, the Reserve Bank -commented in the 1st Inspection Report [vide Ext. P-923 (a)]. It was only in May 1953, on the insistance of Mr. Frost, that an Inspector of Branches was appointed. On this, the Reserve Bank -commented in the 1st Inspection Report [vide Ext. P-923 (a)]. It was only in May 1953, on the insistance of Mr. Frost, that an Inspector of Branches was appointed. Till then there was no inspection of any kind, of any of the Branches. 64. The Reserve Bank complained about the unfettered powers of the Managing Director both in the 1st Inspection Report Ext. 923 (a) and its second Report Ext. 938 (a). Appointment of a Banking Adviser not subordinate to the Managing Director was proposed as early as 11th November 1952 by Ext. P-925 (a), and Mr. Frost was appointed in 1953. After his retirement, appointment of a Chief Executive Officer was proposed in May 1955 by Ext. P-933 (a), and, on account of the intercessions of the Bank, the Reserve Bank signified by Ext. P-936 that it would have no objection to Shri Padmanabhan Nair already on duty as Special Officer, being appointed Chief Executive Officer, the 1st respondent continuing as Managing Director in an honorary capacity. Shri. Padmanabhan Nair died in December 1955, but the matter was not reported to the Reserve Bank, about which it commented in its second Inspection Report [Ext. P-938 (a)]. By Ext. P-940 (a) again, the Reserve Bank proposed in July 1957, to appoint a qualified person as Chief Executive Officer. The object of this proposal which should have been implicit, was made explicit in Ext. P-942, as meant to secure a more experienced and competent person. In response, the 10th respondent was appointed Secretary on 8th February 1958 according to the 10th respondent it was only in 1959”and Shri. P. Pais a retired official of the Imperial Bank was appointed officer on special duty on 1st August 1957 [vide Ext. P-946 (b)]. After the third Inspection Report, the Reserve Bank again proposed by Ext. P-948 (a) that the Officer on special duty should be responsible to the Board of Directors and not to the Managing Director and suggested by Ext. P-954 dated 7th March 1960 the appointment as Chief Executive Officer of a person suggested by the Reserve Bank, the abolition of the Managing Director's post, and stoppage of the remuneration of Rs. 1,500 paid to the 1st respondent. This was agreed to by Ext. P-955; but still in the 4th and last Inspection Report, [Ext. P-954 dated 7th March 1960 the appointment as Chief Executive Officer of a person suggested by the Reserve Bank, the abolition of the Managing Director's post, and stoppage of the remuneration of Rs. 1,500 paid to the 1st respondent. This was agreed to by Ext. P-955; but still in the 4th and last Inspection Report, [Ext. P-956 (b)] we see the Reserve Bank commenting that although the 1st respondent did not attend to any regular duties, he continued to draw the same emoluments and to enjoy the same benefits, namely, free use of the Bank's car, and that he has since retired, with effect from 1st April 1960. The 10th respondent was appointed as Chief Executive Officer up to 31st July 1960. 65. It is seen from a letter of the Reserve Bank of India, quoted in the circular Ext. P-806 that even by March 1949, the Reserve Bank had drawn attention to the alarming state of the advances of the Bank. It continued to repeat its warnings throughout the four Inspection Reports. Many advances with unsatisfactory features were specifically commented on. In its first Inspection Report Ext. P-923 (a), the Reserve Bank drew attention to the Manager of the Madras Branch, himself a Director of the Bank (2nd respondent), having been allowed advances at Palai and Madras and to the withdrawals allowed to him in his clear overdraft account at Palai since 1st April 1951, and in his partly secured account at Madras; to another Director having overdrawn his Palai Account; and to the unsecured advances in the name of the wife of the 2nd respondent to the tune of Rs. 2.96 lakhs; to the unsecured advance due from the Directors, their friends and concerns in which they were interested being of the volume of Rs.31.88 lakhs. The figures for this last category of advances rose to 34.01 lakhs at the second inspection, stood at 33.30 lakhs at the third, and 36.96 lakhs at the fourth and last inspection. The second Inspection Report drew attention to the Manager of the Delhi Branch having overdrawn Rs. 0.77 lakhs, and to steps not having been taken in spite of advice and suggestion of the Bank's Adviser (Mr. Frost) See Ext. The second Inspection Report drew attention to the Manager of the Delhi Branch having overdrawn Rs. 0.77 lakhs, and to steps not having been taken in spite of advice and suggestion of the Bank's Adviser (Mr. Frost) See Ext. P-821,”but the Manager being paid the same salary and allowed the usual benefits; and to no explanation having been called for, from the Ex-Manager of the Bangalore Branch for unauthorised advances nor from the Manager of the Madras Branch. In its last Inspection Report, the Reserve Bank commented on the unsecured advances granted to Government officials in Trivandrum [vide Ext. P-956 (b)]. We should draw attention to Ext. P-821 dated 17th November 1954 written by Mr. Frost, the Banking Adviser to the Managing Director. It states that there are a number of advances which are undoubtedly irrecoverable, that in a large number of advances interest is being periodically added to "sticky" accounts, in which recovery of even the existing balance is problematic, and such interest is being incorporated into the balance sheet and shown as Bank's earning available for distribution. The adviser wound up with the following quotation from Thompson's "Dictionary of Banking", which should have been very wholesome advice to the Directors. "Where interest is added periodically and not paid, it will of course gradually diminish any margin between the amount of the loan and the estimated realisable value of the security, and a point may be reached when a Banker will not be justified in passing such interest to his Profit and Loss Account. The interst should be placed, pending developments to a suspense or reserved interest account". The advice thus offered was not heeded. 66. The disclosure made by the above state of record is very revealing. We have no doubt that in making advances in Annexure I, or in suffering them to be made, the respondents were acting in the most unbusiness like fashion. They did not bestow even the reasonable amount of attention to the Company's affairs, which the obligation of diligence carries with it. They did not also exercise any real discretion and judgment in granting these loans and advances. Referring to these advances and the way in which they were made, the learned Judge in paragraph 158 of the 'A' claim judgment stated: "158. They were all reckless advances, a large number of them clearly dishonest. They did not also exercise any real discretion and judgment in granting these loans and advances. Referring to these advances and the way in which they were made, the learned Judge in paragraph 158 of the 'A' claim judgment stated: "158. They were all reckless advances, a large number of them clearly dishonest. On their own showing, the Directors in whom the management of the Bank was vested and in whom, if I may put it so, the confidence was reposed by countless depositors that their money would be profitably and safely invested were completely indifferent to their duties and took not the least care to ensure the proper execution of their duties or of the trust and confidence reposed in them. They lent, or suffered the lending, of lakhs and lakhs of the Bank's money with no more care and caution than a man of ordinary prudence would exercise in advancing a small loan of Rs. 5 or Rs. 10 to an acquittance or a dependent. It is obvious that they would not have lent, or suffered to be lent Rs. 100 of their own money with the reckless indifference with which lakhs and lakhs of the Bank's money (in substance the depositors' money) which was entrusted to their charge was lent. For the obvious reason, that, unlike as in the case of an ordinary company, a Banking company does its business not so much with its own money or with money borrowed in the ordinary course of business, but with the funds provided by deposits, whose only assurance is the trust and confidence that they repose in it, I should think that the duties of the Directors of a Banking company partake of a higher fiduciary character than the duties of the Directors of an ordinary company. But, putting the duties of the Director respondents no higher than the duties of the Directors of an ordinary company, I have little hesitation in holding that, in the matter of the advances listed in Annexure I, they have, at the lowest been guilty of culpable negligence or reckless indifference the performance of their duties." 67. But, putting the duties of the Director respondents no higher than the duties of the Directors of an ordinary company, I have little hesitation in holding that, in the matter of the advances listed in Annexure I, they have, at the lowest been guilty of culpable negligence or reckless indifference the performance of their duties." 67. We unreservedly endorse the above conclusion of the learned Judge, and we do not think that taken against the background of the facts and circumstances which we have outlined, that the learned Trial Judge has been guilty, as complained, of overstating the duties and responsibilites of the Directors, or of placing them on a higher pedestal than what is warranted by the law. 68. The learned Judge considered the individual liability of the Director-respondents 1 to 6, in paragraphs 161 to 166 respectively, of the 'A' claim judgment. We record our agreement with the reasoning of the learned Judge in these paragraphs. While doing so, we only wish to state that in paragraph 161, while stating that the 1st respondent was also a member of the Managing Committee the learned Trial Judge noticed that the Committee was, by a resolution dated 24th May 1950 invested with the power and duty of granting loans. This, as we have pointed out is a mistake; but that does not affect the learned Trial Judge's reasoning or conclusion with which we concur. Briefly stated the position is this. There is enough material to show that respondents 1, 2 and 4 were actively concerned with, and were actively interesting themselves in, the management of the Bank. The 1st respondent was, of course, the Managing Director of the Bank. Article 82 of the Articles of Association vested the management of affairs of the Bank in him, subject to the control of the Board. His dominating position and uncanalised powers were commented on repeatedly in the Reserve Bank's reports to which we have drawn attention. He was also a member of the Managing Committee. The 2nd respondent held positions as a Director of the Bank from its inception till liquidation, and as a member of the Managing Committee from 1927 till 14th January 1935; and as Manager of the Madras Branch from 1937 to 1957, where a large bulk of the bad advances amounting to Rs. 2771 lakhs were made during his term as Manager. 2771 lakhs were made during his term as Manager. The 4th respondent in spite of his claim to have been occupied with multifarious activities in the national and international spheres, was in the thick of the management of the Bank guiding and directing its affairs, and drawing remuneration regularly. Respondents 3, 5 and 6 would parade themselves before us as to borrow the language of Walsh, J. in the Union Banks case I.L.R 47 All. 669 "ornamental and do-nothing" type of Directors. The 3rd respondent would protest that he was a simple agriculturist, with no banking experience and no knowledge of English, brought into the Directorate at the instance of the promoters and shareholders, out of regard and respect for his father who was a Director. His points of defence and his counter affidavit in the application for public examination (P-1558) are in English and do not even show that their contents were translated to him and he signed after realising their meaning and import. Like other Directors, he has not cared to offer even a shred of evidence in support of his case and his points of defence and the counter affidavit leave us in no doubt that he was well conversant with the working of the Bank and not at all innocent of it. Likewise, there is no evidence on the side of the 5th and 6th respondents. Even accepting their case that they were "ornamental, do-nothing" type of Directors we 'would still held them (respondents 3, 5 and 6) liable on the basis of complete abdication of their powers and reckless inattention to their duties and responsibilities. As noticed, the 'A' claim is not directed against the 7th respondent; and the 9th respondent has not appealed to us. 69. In paragraph 167 of the 'A' claim judgment the learned Trial Judge dealt with the liability of the Auditor (8th respondent); and in para 168, with that of the 10th respondent. We shall deal with these separately while dealing with their appeals. 70. We were pressed with the argument that the Directors were relieved from liability by reason of delegation of powers to the Branch Managers, under the various powers of attorney. There was a further plea on behalf of some of the Directors that they were relieved from liability by reason of the delegation of powers to the Managing Board. 70. We were pressed with the argument that the Directors were relieved from liability by reason of delegation of powers to the Branch Managers, under the various powers of attorney. There was a further plea on behalf of some of the Directors that they were relieved from liability by reason of the delegation of powers to the Managing Board. No such plea (obviously inspired by the English Decision in Dovey v. Cory 1901 A.C. 477 has been expressly or specifically raised in the pleadings of any of the Directors. The learned Trial Judge in paragraph 154 of the 'A' claim judgment referred to the plea of delegation in favour of the Managing Committee as something which "might perhaps be urged on behalf of such of the Director-respondents as were not in the Board, but was not actually urged". Apart from want of pleading, and the utter lack of evidence in support thereof, the plea in relation to the 'A' claim has no foundation on facts as there is no delegation of the power of granting loans and advances to the Managing Board. Even so, the 'C' and 'D' types of powers of attorney did not confer any power at all to grant loans and advances, and any plea of delegation based on the grant of those types of powers must likewise fail. Assuming that power to grant loans had been delegated to the Managing Committee, and to the power-holders, we are still of the view, that the Directors cannot escape liability by such delegation of powers. In our decision in the Popular Bank appeals 1969 K.L.J. 95, we have held that we cannot accept the broad submission that irrespective of the size and standing of the Bank, the volume of business transacted therein, and the competence and the trustworthiness of the delegates, a delegation of powers will per se carry with it a denudation of responsibility. There is a duty and a responsibility on the part of the Directors delegating their powers to see that the delegate kept within the limits of the power delegated and functioned properly and effectively. Assuming there was a delegation, this duty of effective supervision and control over the delegate, the Directors failed to discharge, and they are therefore liable. 71. In the light of our above conclusion, it follows that A.S. Nos. Assuming there was a delegation, this duty of effective supervision and control over the delegate, the Directors failed to discharge, and they are therefore liable. 71. In the light of our above conclusion, it follows that A.S. Nos. 301,302, 306, 315, 316 and 318 of 1966 which are appeals by the Director-respondents against the 'A' claim judgment have to be dismissed in so far as they relate to the 'A' claim subject to one modification which we shall direct, having regard to the statement filed by the Liquidator as to the recoveries effected by him from the advances in Annexure I. The said direction will of course govern all the appeals preferred against the 'A' claim. The remaining appeals against the 'A' claim judgment are: A.S. No. 300/66 (by the 8th respondent) A.S. No. 305/1966 (by the 10th respondent) and A.S. 319/66 (by the 7th respondent). Of these A.S. No. 319 of 1966 is directed only against liability in respect of the C claim. We shall deal with this appeal after considering the facts relating to the said claim. A.S. No. 305 of 1966 by the 10th respondent, raises the question of liability only in respect of the 'C' claim. As we have yet to notice the facts relating to the 'C' claim, and as the appeal is by a non-Director, we shall postpone consideration of the said appeal till after dealing with the facts relating to the ˜C' claim and the appeals by the Directors. A.S. No. 300 of 1966, the appeal by the Auditor will be dealt with separately, after treatment of the facts relating to the 'B' and 'C' claims. 72. We may now notice the argument advanced on behalf of almost all the appellants before us, regarding section 45-H of the Banking Regulation Act. A.S. No. 300 of 1966, the appeal by the Auditor will be dealt with separately, after treatment of the facts relating to the 'B' and 'C' claims. 72. We may now notice the argument advanced on behalf of almost all the appellants before us, regarding section 45-H of the Banking Regulation Act. The section in so far as it is material reads: "45-H. Special provision for assessing damages against delinquent directors, etc.”(1) Where an application is made to the High Court under section 543 of the Companies Act 1956 (1 of 1956) against any promoter, director, manager, liquidator or officer of a Banking company for repayment or restoration of any money or property and the applicant makes out a prima facie case against such person, the High Court shall make an order against such person to repay and restore the money or property unless he proves that he is not liable to make the repayment or restoration either wholly or in part: Provided that where such an order is made jointly against two or more such persons, they shall be jointly and severally liable to make the repayment or restoration of the money or property. (2) Where an application is made to the High Court under section 513 of the Companies Act, 1956 (I of 1956), and the High Court has reason to believe that a property belongs to any promoter, director, manager, liquidator or officer of the banking company, whether the property stands in the name of such person or any other person as an ostensible owner, then the High Court may at any time, whether before or after making an order under sub-section (1), direct the attachment of such property, or such portion thereof, as it thinks fit and the property so attached shall remain subject to attachment unless the ostensible owner can prove to the satisfaction of the High Court that he is the real owner and the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to attachment of property shall, as far as may be, apply to such attachment." Section 543 of the Companies Act, 1956 has already been extracted. By inter-relating the two sections the argument was that section 45-H would be attracted only where the application is in respect of "misapplication" or "retainer" of any money Or property of the Company, or "accountability" for such money or property, within the meaning of section 543 (1) (a) of the Companies Act, and cannot apply to an application in respect of any "misfeasance" or "breach of trust", within clause (b) thereof. This is claimed to be a necessary result of both the application contemplated and the order envisaged, being limited, by the language of section 45-H, to one for repayment or restoration of the money or property of the Company and not for compensation, or damages. Although section 45-H is some what inartistically drafted, we feel there is no substance in his argument. The opening words of section 45-H, refer to an application "under section 543 of the Companies Act, 1956". These are certainly wide enough to cover an application on grounds specified in clauses (a) and (b) of sub-section (1) of the said section. The latter parts of section 45-H referring to restoration or repayment of any money or property etc. may well be regarded as descriptive and illustrative, but certainly not exhaustive, of the reliefs claimed in the application or granted by the order. To hold otherwise would be to perpetuate an irrational distinction that where the Liquidator complains of misapplication or retention he need make out only a prima facie case under section 45-H, and can throw the burden on the party proceeded against to rebut the same; whereas, if he applied on grounds of misfeasance or breach of trust, he must prove the case in the ordinary way. We say such a distinction is irrational, because we are notshown on what rational grounds the distinction could be supported. The historical background of section 45-H only confirms our view that it is wide enough to cover all grounds of application under section 543. The expressions "section 543 of the Companies Act, 1956", were substituted in section 45-H by an amendment effected in 1956, in the place of the words "section 235 of the Indian Companies Act, 1913". The 1913 Act did not compartmentalise the different grounds of application into clauses(a) and (b), as section 543 of the 1956 Act did. When the 1956. The expressions "section 543 of the Companies Act, 1956", were substituted in section 45-H by an amendment effected in 1956, in the place of the words "section 235 of the Indian Companies Act, 1913". The 1913 Act did not compartmentalise the different grounds of application into clauses(a) and (b), as section 543 of the 1956 Act did. When the 1956. Act replaced the 1913 Act, the corresponding provision of the 1956 Act was substituted in section 45-H for section 235 of 1913 Act. Indeed, on the terms, whether of section 543 of the 1956 Act, or of section 235 of the 1913 Act, itseems difficult to bisect the grounds of action vis a vis the reliefs claimed or granted on the application. While the expression "repayment'' or "restoration" of money or property used in these sections may seem appropriate to the grounds of " misapplication " or "retainer", the relief of "compensation" is mentioned in these sections, also in respect of "misapplication", "retainer", "misfeasance" or "breach of trust". This appears to provide another indication that the grounds of the application and the reliefs to be granted in respect of them were not meant or intended to be kept in water tight compartments. We hold that section 45-H is not confined to an application made under section 543 of the Companies Act on grounds merely of misapplication or retainer, but would cover also cases of an application on the grounds of misfeasance or breach of trust. That being so, section 45-H of the Companies Act, is attracted and the Liquidator having certainly made out a prima facie case, the burden is on the respondents to displace the effect of the same. They have not discharged the said burden. Even unaided by the provisions of section 45-H of the Banking Regulations Act, we are of the opinion that on the facts and materials proved in this case, the Liquidator has made good his claims against respondents to the extent to which we find the same made out. The documents in the case were all marked by consent. There was no need for any formal proof of the documents or formal evidence in regard to their contents. The documents having been proved, we are unable to draw any other inference or conclusion than what we have drawn from them. 73. The documents in the case were all marked by consent. There was no need for any formal proof of the documents or formal evidence in regard to their contents. The documents having been proved, we are unable to draw any other inference or conclusion than what we have drawn from them. 73. We shall now proceed to consider the facts relating to 'B' and 'C' claims. We have already set out the basis of the claims as given by the Liquidator in his points of claim. 74. Analysing the 'B' claim, the pattern of action followed for the years 1946 to 1959 is practically the same, viz., of inflating the profits and crediting false profits by bogus and fictitious entries in the books and records of the Bank. The same may be illustrated by way of sample, with respect to the entries”or the lack of them”for the year 1940. These have been detailed in paragraph 47 of the 'B' claim judgment of the learned Judge. The position disclosed is this. 75. Ext. P-1479 is the Day-Book for the year 1940. Page 248 of the same shows an entry of Rs. 1,06,907-9-9 as interest received with full break up details. The items of income and expenditure disclosed by the audited profit and loss accounts of the Branches have been incorporated at pages 248 to 258. Page 260 shows a credit entry "interest received”by interest on advances Rs. 60,635-5-7". At the same page under the Branch account there is a debit of the said amount under head "to cash due and account interest". Ext. P-1480, which is the General Ledger for the year 1940, shows at page 86 that the Bank incurred a net loss of Rs. 7,719-12-11 for the year 1940, (contrary to the picture presented by the Day-Book entries of a net profit of Rs. 52,915-8-1). The entry has been initialled by the Auditor. Ext. P-1004 is the audited balance-sheet and profit and loss account as on 31st December 1940 approved at a meeting of the Board on 29th March 1944 at which respondents 1, 3 and 4 were present, and signed by them. The same would show that eleven of the Branches worked at a loss, totalling to Rs. 60,635-5-7. Ext. Ext. P-1004 is the audited balance-sheet and profit and loss account as on 31st December 1940 approved at a meeting of the Board on 29th March 1944 at which respondents 1, 3 and 4 were present, and signed by them. The same would show that eleven of the Branches worked at a loss, totalling to Rs. 60,635-5-7. Ext. P-1457 (a) is the debit voucher showing the names of the Branches, namely Alleppey, Alwaye, Fairfield, Bangalore, Cochin, Delhi, Madras, Mangalore, New Delhi, Peermade and Trivandrum, against which the debits were made. The amount debited against each Branch is exactly the same as the quantum of the loss incurred by it, -(except what appears to have been a typing error in showing the debit against the Bangalore Branch as Rs. 5,695-13-10, the exact loss suffered by it being Rs. 5,965-13-10). The credit voucher Ext. P-1457 (a) (2) describes the credit, as on account of interest on advances to Branches realised and transferred from Branch account. Neither the Branch journals in the head-office nor the head-office journals in the Branches contain any entry regarding these debits. It is plain therefore that the credit entry of Rs.60,635.57 is fictitious. From 1936 up to and inclusive of 1949, the same pattern of debiting the Branches without informing them was followed. 76. From 1949, the pattern followed was that a profit was disclosed or made to appear by charging interest on irrecoverable and bad advances with the result that the Branches were made to present a picture of gain or profit when in fact they had sustained loss. The position may be illustrated, by way of a sample again, with respect to the year 1948. This is dealt with in paragraph 78 of the ˜B' claim judgment. The position disclosed is as follows: Ext. P-1530 is the Day-Book of the Cochin Branch, for the year 1950, page 215 shows that the physical entry of debit of Rs. 1,29,790 is dated 30th December 1949. The said entry is after the entry at page 214 dated 20th April 1950 and before the entry at page 216 dated 21st April 1950. Ext. P-1528 is the Day-Book of the Vaikom Branch. Pages 210 to 212 show supplement to supplementary entries. Total credit under these entries is Rs. 53,050. Page 212 shows these credits. The said entry is after the entry at page 214 dated 20th April 1950 and before the entry at page 216 dated 21st April 1950. Ext. P-1528 is the Day-Book of the Vaikom Branch. Pages 210 to 212 show supplement to supplementary entries. Total credit under these entries is Rs. 53,050. Page 212 shows these credits. The 8th respondent (the auditor) has signed on 3rd March 1950 in this page both before and after the entries showing credits. Entries before the credit show that the Branch had a loss. Ext. P-1525 the General Ledger kept by the Branch, shows at page 4 under the head office account that this debit entry was taken into account by a correction made only on 5th April 1950. Ext. 1531 is the Day-Book of the Quilon Branch. Page 458 shows that the accounts for the year 1949, were closed by entries on 30th December 1949. Page 459 appears to have been first left blank, for, there is double-crossing in the middle of the page with figures "1950" written in between, as if to indicate that the accounts for the year 1950 were to commence from the next page, as they actually have done. But evidently, on second thoughts,”to put it no more than that”at this page occur the entries crediting the head office with Rs. 1,23,277-1-6 and the debiting of the Branch with the corresponding amount. Ext. P-1526 is the General Ledger for the Quilon Branch for the years 1949 and 1950. Page 219 shows that on the 1st May 1950, by interpolation made between certain entries, Rs. 1,23,277-1-6 was credited and the credit to the head office was correspondingly inflated. Page 215 shows that on 3rd January 1950, the balance entered originally was struck off and new figures entered so as to take into account the interpolated credit entry of Rs. 1,23,277-1-6. Ext. P-979 is the memo by the head office to the Ponkunnam Branch. Ext. P-980 series are memos to the Vaikom Branch and P-978 series are memos to the Cochin Branch. Ext. P-1522 the General Ledger for the Ponkunnam Branch shows the concerned entries as having been made as on 31st December 1949”see page 15. But Ext. 1,23,277-1-6. Ext. P-979 is the memo by the head office to the Ponkunnam Branch. Ext. P-980 series are memos to the Vaikom Branch and P-978 series are memos to the Cochin Branch. Ext. P-1522 the General Ledger for the Ponkunnam Branch shows the concerned entries as having been made as on 31st December 1949”see page 15. But Ext. P-1533, the General Ledger of the head office kept in the Branch would show”see page 7”that the balance in the head office account was altered to take this debit into account only on 23rd May 1950. Ext. P-1532 is the Day-Book of the Nagarcoil Branch. Page 73 thereof shows that it was only on 25th March 1950 that the debit entry of Rs. 50,000 was made therein, although it was made as on 31st December 1949. On the same day, i.e., on 26th March 1950, Rs. 8,734 is debited in the Branch account as transferred to head office. Ext. P-1533 is the head office journal maintained in the above amount at page 261 [Vide Ext. P-1533(a)]. 77. We have sketched the pattern of the entries in the books of the Bank during the periods relating to the ˜B' and ˜C' claims with respect to an instance each, by way of sample in regard to these claims. In view of the limited arguments before us in respect of these claims and in view of what has been recorded by the learned Trial Judge to which we shall immediately refer, we do not think it necessary to encumber this judgment with details of the facts relating to the other years covered by these claims, which have been exhaustively dealt with by the Trial Judge, and with which we are in general agreement. In paragraph 90 of the ˜B' claim Judgment, the learned Trial Judge recorded: œThat the facts disclosed by the entries, or the want of them, in the books of the Bank and by the other documents of the Bank marked in the case are as set forth above is not disputed”only the inference there from that the books were falsified so as to show fictitious income and fictitious profits is denied, and, of course, hotly denied. But I fail to see what other inference is possible. The respondents have given no evidence whatsoever either on affidavit or from the box to explain or rebut the evidence furnished by the books. But I fail to see what other inference is possible. The respondents have given no evidence whatsoever either on affidavit or from the box to explain or rebut the evidence furnished by the books. (I notice on going through the record, that respondents 2 and 7 have stated their points of defence in the shape of an affidavit and that the affidavit of the former contains a prayer that it may be permitted to be read as evidence. But I was not moved for the grant of leave and no attempt was made to read it as evidence). Nor have they made the least attempt to show with reference to the books of the head office or of the several Branches (all of which were open to them for inspection) that the impugned credit entries in the profit and loss accounts for the several years represented income actually earned, if not actually realised. In their points of defence they have largely contended themselves with the bare denial that the credits in question were fictitious and with the bare assertion that the credits were in respect of income actually earned and that the balance sheets and profit and loss accounts were correctly, drawn up. Respondents 1, 5 and 6 have stated that the credits, and the corresponding debits to the Branches and the interest receivable account, were on account of some of the Branches having charged less than the stipulated rates of interest or none at all in the years prior to 1949. This resulted in a fall in the profits for these years, and, to cover this, the short-fall was estimated, and, credit taken thereof in the profit and loss account as interest received, by raising corresponding debits in the Branch account and the interest receivable account. (This seems to me perilously close to an admission of manipulation to cover up losses). Respondents 5 and 6 have added that the Branch accounts for the several years remained unreconciled. The auditor, the 8th respondent, has taken shelter under the fact that the Branch accounts were not reconciled and has added that the reserves would cover the intangible assets. (This seems to me perilously close to an admission of manipulation to cover up losses). Respondents 5 and 6 have added that the Branch accounts for the several years remained unreconciled. The auditor, the 8th respondent, has taken shelter under the fact that the Branch accounts were not reconciled and has added that the reserves would cover the intangible assets. How this, even if true, can be of any assistance if in fact the income and the profits shown are fictitious is not clear and I might add that if the Liquidator's case is true the reserves themselves are fictitious being transfers from fictitious profits. And, as is only to be expected when trouble is afoot, the remaining respondents have generally tried to throw the blame (if blame there is, which they deny) on the 1st respondent who they say was in complete charge as the Managing Director." Before us also, there was no argument by any of the appellants that the Bank actually earned the profits disclosed by its books and accounts during the period covered by the 'B' and ˜C' claims. There was no argument either, that the inferences drawn by the Judge from the entries in the books of the Bank and the want of relevant entries, were unjustified or improper. Much the less were any arguments advanced before us year-war, or with respect to any particular years that the detailed consideration and analysis of the position made by the learned Judge with respect to each of the years in question was wrong or incorrect. The only arguments on this aspect of the claim addressed by counsel for respondents 1, 2 and 4, and adopted by the others, were: (1) that the Bank was following the mercantile system of accounting under which even interest accrued but not actually realised could be credited; (2) that even if the crediting of interest was wrong, it was done in good faith, on the advice of the Auditor and that the Reserve Bank knew about this even in 1951; (3) that a portion of the claim is barred by limitation; and (4) that in any event the Directors are liable only for the amount of dividends actually received by them, and not for the amounts taken out by the other shareholders. 78. We are unable to see any merit in any of these contentions. 78. We are unable to see any merit in any of these contentions. The mercantile system of account authorises the crediting of amounts which are legally due before they become actually due, and not of interest on loans and advances which have become irrecoverable, nor of amounts false and fictitious. We do not see any good faith on the part of the Directors in regard to the matters covered by the 'B' and 'C' claims. Little material was placed to prove good faith. Indeed the materials available, far from establishing good faith on the part of the Directors, seem to point to a contrary conclusion. We shall refer to a few telling facts and materials which have a vital bearing on the 'C' claim and which would be seen to bear closely also on the 'A' claim. Ext. P-812 dated 27th July 1949 and P-814 dated 29th July 1949 are circulars sent to all officers regarding interest rates for loans, signed by the Managing Director (Ext. P-814 is actually a copy of the circular). By Ext. P-815 dated 20th August 1949 sent by the Delhi Manager to the head office it was pointed out inter alia that it might not be quite correct, in the circumstances to increase the profits. An official reply was given to this by the Managing Director by Ext. P-816 dated 3rd September 1949, followed”or accompanied”by a "confidential'' letter of the same date (Ext. P-817) signed by the 10th respondent in which occurs the following:” "I suppose it is clear that the object of revision is not so much to bring the prospect of realisation nearer, as to raise the profits, though we welcome the former." (We shall have occasion to revert a little more in detail about these letters while considering the appeals preferred by the 10th respondent.) In Ext. P-769 dated, 4th March 1950 we find the Madras Auditor writing to the Directors pointing out, among other things, that 8 items of unsecured loans were in their opinion considered as doubtful as no amounts had been received in respect of them for the last two years, either towards pincipal or towards interest. Six out of the 8 items thus specified are to be found in Annexure I. In respect of six of these eight items, there was no pronote at all and in respect of the remaining two, the pronotes had become time-barred. Six out of the 8 items thus specified are to be found in Annexure I. In respect of six of these eight items, there was no pronote at all and in respect of the remaining two, the pronotes had become time-barred. By Ext. P-770, dated 20th February 1951, marked "confidential", the Quilon Branch, "as desired over the phone", sent to the head office a list of soine of the bad debts (amounting to Rs. 37,000) and doubtful debts (amounting to Rs. 7,76,000) and stated that over and above these items they had over Rs, 1,45,000 in the suit filed account, a major portion of which is to be treated as doubtful. It was suggested that yearly interest need not be debited to these accounts. 12 of the items shown in Ext.P-770 are to be found in Annexure I. Items 1, 2, 3 and 4 in the list of doubtful debts are respectively, items 2, 13, 12 and 14 in Annexure III. Items 1 to 4 of the items of bad debts are items 23, 46, 31 and 41 in Annexure I. Ext. P-784, dated 20th December 1954, in a circular by the 7th respondent signed "for Managing Director", to all offices. It is marked "confidential". The subject is: 'Bad' and doubtful debts'. It instructed all offices to continue as bad or doubtful, items which were so classified for the purpose of balance-sheet for the year 1952, and which had not been written off till then; other items to be so classified only after decision taken by the head office. Ext. P- 771 dated 8th June 1956 is a communication by the Managing Director to the Managers of 19 Branches, again marked œconfidential�. It calls for a report on each of the items treated as bad or doubtful of recovery in the balance-sheets of the Branches as on 31st December 1955. The Branches are instructed to consider very carefully the different aspects of the advances before making a recommendation to write off any amount, and reminded that all possible avenues must be searched before treating debts, as irrecoverable. The Branches responded to Ext. P-771, by Exts. P-772, P-773, P-776 and P-778 (to mention only a few examples). In Ext. P-778 dated 21st July 1956 the Quilon Branch had indicated five items of debts which are considered absolutely irrecoverable, as all the amounts had become barred since 1952. The Branches responded to Ext. P-771, by Exts. P-772, P-773, P-776 and P-778 (to mention only a few examples). In Ext. P-778 dated 21st July 1956 the Quilon Branch had indicated five items of debts which are considered absolutely irrecoverable, as all the amounts had become barred since 1952. Four out of the five items referred to herein [P-778 (a)] are among the items in Annexure I. It is interesting to read the details furnished in Ext. P-778 (a). But despite the same, by Ext. P-782 dated 19th December 1956, the Quilon Branch was told that it was not yet time to treat the debts as completely irrecoverable. We see from Ext. P-783 dated 15th December 1955 that the Cochin Agent is told by a "private and confidential" letter to write personal letters about doubtful debts before writing officially. Ext. P-788 dated 8th April 1953 is a "confidential" letter from the Delhi Branch to the 10th respondent, informing that the pronotes held under the four major advances noted therein will become barred in the course of the next twelve months. The items specified therein are items 122, 123, 126 and 129 of Annexure I. Three of these (items 122, 123 and 126) are also in Annexure III. The amounts are substantial, and aggregate to more than Rs. 21 lakhs. The letter admitted that there had not been any cash remittances in any of these accounts for the last six years or more, that there was hardly any credit for any of the borrowers and therefore letters asking for credit report are kept pending. Significantly, the letter adds: "Of course you will not relish any credit reports stating that the party is not worth anything, even if you are convinced of the truthfulness of the statement." Ext. P-793 dated 26th December 1959 is again a communication of the Delhi Branch to the head office which states: "At present, the figures we show as doubtful in our statements are not doubtful debts- but are actual bad debts that should have been written off long ago. We have not even attempted to calculate the doubtful portion of the advances, which are not barred by limitation. We have not even attempted to calculate the doubtful portion of the advances, which are not barred by limitation. If the procedure is that we are expected to write off the doubtful debts before the account gets time-barred, we are afraid that several proposals for writing off, may be overdue from this Branch." These documents which we have picked out as samples, show the course of action pursued by the Directors. They are sufficiently telling and revealing, and call for no further comment. They furnish further proof,--if such be needed”in support of the conclusion drawn by the Trial Judge and by us that the Directors were from time to time issuing secret ("confidential") instructions, written or oral (over the telephone) in regard to the management of the affairs of the Bank. They also completely demolish the case of good faith pleaded on behalf of the Directors. 79. We have already found that no portion of the claim is barred by limitation. We are unable to see how the liability of the Directors can be restricted only to dividends received by them, and not to the amounts paid out to the other shareholders. If responsibility for wrong payment of dividends is established we see no reason or principle to restrict the liability of the Directors to amounts actually received by them and no more. They are of course free to have their remedy, if any, against the shareholders. None of the defences pleaded before us on behalf of respondents 1, 2 and 4 and adopted by the rest seem to avail the Director-respondents in respect of the ˜B' and 'C' claims. 80. Section 205 of the Indian Companies Act provides that no dividend shall be declared or paid by a company for any financial year except out of profits. Article 89 of the Memorandum of Articles of Association of the Bank (Ext. P-1030) gives effect to the above statutory injunction. The Bank had admittedly not earned enough profit to warrant the payment of dividend which is the subject-matter of the 'B' and 'C' claims. The payment of dividend during those years was therefore clearly an act ultra vires the Directors, for which, they cannot escape liability. (See In re National Funds Assurance Co. 10 Chan. D.118 In re Sharpe -and Bennett 1892-1-Ch.Dn. The payment of dividend during those years was therefore clearly an act ultra vires the Directors, for which, they cannot escape liability. (See In re National Funds Assurance Co. 10 Chan. D.118 In re Sharpe -and Bennett 1892-1-Ch.Dn. 154 But we were pressed on behalf of some of the Directors with the argument that they did not participate in some of the Board meetings and resolutions which declared dividends for the concerned years, and were therefore not responsible. This argument requires to be carefully examined. In Land Credit Company of Ireland v. Lord Fermoy 1869-70-(5)Ch. A. 763 the Directors of a Company whose business was to make loans appointed an executive committee. The committee in order to raise the price of shares, bought shares in the names of the Secretary and another, and in order to pay for these shares, drew cheques on the Bankers of the Company. These cheques were reported to a meeting of the Directors, as having been drawn for loans and approved by them. The money was applied accordingly. There was evidence that the transaction was explained to some of the Directors; but one of the Directors was present during a part of the meeting only, and denied all knowledge of the transaction. The Company being ordered to be wound up the Liquidator applied against all the Directors praying that they may be ordered to repay the amount. It was held that the Director who denied all knowledge of the transaction was, in the circumstances, not liable to pay. Lord Heatherley, Lord Chancellor, expressed himself thus: "I am exceedingly reluctant in any way to exonerate directors from performing their duty, and I quite agree that it is their duty to be awake, and that their being asleep would not exempt them from the consequences of not attending to the business of the company. But we must look at the nature of the business of this company. XXXXXX But it would be carrying the doctrine of liability too for to say that the directors are liable for negligence, not because they did not ask whether Costelloe and Oliphant were solvent and respectable, but because they did not inquire what they were going to do with the money. To do this would be carrying the doctrine of the responsibility of directors far beyond anything laid down in this Court. To do this would be carrying the doctrine of the responsibility of directors far beyond anything laid down in this Court. Whatever may be the case with a trustee, a director cannot be held liable for being defrauded; to do so would make his position intolerable". In In re National Funds Assurance Company 1878-79-10 Ch. 118 and In re Exchange Bank Ltd. 1882-XXI Ch. Dn. 519 otherwise known as Flitcroft's case actual knowledge on the part of the Directors that no profits had been made by the Company, was satisfactorily proved, and they were therefore held liable for wrongful distribution of dividend. In Rance's case VI-Ch. A. 104 a reckless payment of dividends made by the Directors when there was no balance-sheet at all, and without ascertaining or having anything to show that profits had been made by the Company, was held to make them liable. In the Oxford Benefit Building Society's case 35 Ch. 502 the Directors who paid dividends out of estimated profits, against the provision in the Articles which required them to pay out of realised profits were held liable on the ground that their action amounted to carelessness of a description so gross as to make the good faith of the Directors, to say the least of it, extremely questionable" (per Kay, J.). In Forest Dean Coal Mining Company's case 1878-79-10-Ch. 450 it was ruled by Jessel, M. R. œOne must be careful in administering the law of jointstock companies not to press so hardly on honest directors so as to make them liable for these constructive defaults the only effect of which would be to deter all men of property and perhaps all men who have any character to lose, from becoming directors of companies at all". 81. Many of these cases were noticed in In re Denham and Co. 1884-25- Ch. Dn. 752. It was held that one Crocke, one of the Directors, was not personally liable for fraudulent reports and balance-sheets and dividends paid under them, and that the words œby order of the Directors" at the foot of the reports was not sufficient to charge him with liability. Chitty, J. observed at page 766: "No doubt Mr. 1884-25- Ch. Dn. 752. It was held that one Crocke, one of the Directors, was not personally liable for fraudulent reports and balance-sheets and dividends paid under them, and that the words œby order of the Directors" at the foot of the reports was not sufficient to charge him with liability. Chitty, J. observed at page 766: "No doubt Mr. Crook has been guilty of considerable negligence in the discharge of the duties of his office, for he did not attend a single meeting of the directors during the period in question, nor indeed until after inquiries had been set on foot. He appears to have abstained from doing anything whatever, being misled, as he says by reason of the extraordinary powers conferred by the articles upon Denham. He was in fact deceived as many other shareholders were. No man is bound to presume a fraud; and, as Lord Heatherley said in the case of Land Credit Company of Ireland v. Lord Fermoy 'Whatever may be the case with a trustee, a director cannot be held liable for being defrauded; to do so would make his position intolerable'. It is sufficient if director appoint a person of good repute and competent skill to audit the accounts and have no ground for suspecting that anything is wrong. The directors are not bound to examine entries in the company's books. As the late Master of the Rolls, Sir George Jessel, said in Hallmark's case ˜I know no case except Ex parte Brown which shows that it is the duty of a director to look at the entries in any of the books; and it would be extending the doctrine of constructive notice far beyond that or any other case to impute to this director the knowledge which it is sought to impute to him in this case'. In the present case the accounts appear to have been duly audited, and the auditors were, as is shown by the affidavits, apparently accountants of skill and integrity. The auditors are not before me on the present occasion, but still I am bound to say that, from the evidence such as it is, it does appear that the auditors themselves were to some extent cognisant of and parties to the fraud. Mr. Crook was, however, entitled to trust them; there was nothing at all to arouse his suspicions that they were not doing their duty. Mr. Crook was, however, entitled to trust them; there was nothing at all to arouse his suspicions that they were not doing their duty. In my opinion, therefore, Mr. Crook was not guilty of such gross and wilful negligence, as in the. language of Lord Romilly in Rance's case, was equivalent to fraud. No decision has gone the length of rendering a director liable under such circumstances as those in which Mr. Crook was placed. In In re National Funds Assurance Company, and in Flitcroff'scase it was proved to the satisfaction of the court that all the directors who were rendered liable had actual knowledge that no profits had been made. In Rance's case there was in fact no balance-sheet, and there was a reckless payment made by the directors without ascertaining, or having anything before them to show that profit had been made. " In Leeds Estates v. Shepherd XXXVI Ch. Dn. 787 it was held that the Directors never exercised any judgment at all, and they had fallen short of that standard of judgment, which having regard to theOxford Benefits Society's case they ought to have exhibited in the management of the Company. 82. The decision in British Guardian Life Assurance Company's case 1880-XIV-Ch. Dn. 335 raised the question of liability of one of the Directors, Mr. Williamson, for non-investment of the funds of the Company. Hall, Vice Chancellor, expressed himself thus: "I now come to the question of Mr. Williamson's liability” Whether or not he is under any, and I hold that he having been a director during the whole of the time in which investments ought to have been made having been a most active member of the board, constantly attending, and rarely absent from the meetings of the directors, is, in common with his co-directors, liable. It has been observed that the liquidator has rights under the Act which the company might not have against the directors; but however that may be, Mr. Williamson's liability is clear as a director, and he has not brought forward any ground for being relieved wholly or partially in respect of any particular dealing with any sum. He has not shown that he was not a participator in the non-investments of the funds, and the onus, I consider, rests with him." (underlining ours) The words underlined seem to suggest that if Mr. He has not shown that he was not a participator in the non-investments of the funds, and the onus, I consider, rests with him." (underlining ours) The words underlined seem to suggest that if Mr. Williamson was not a participator, he could not be held liable. The said inference is only strengthened by other decisions. We are aware of the observations made by Palmer in his Company Law (20th Edn.) at page 563 referring to In re Denham and Co.'s case. The learned author observes: "It is doubtful whether, if similar facts arose today, the court would decide in the same manner, because now-a-days the courts take a stricter view of the duties of a director than they took some seventyfive years ago.� Buckley in his book "On the Companies Acts" (13th Edn.) at page 872, notices Denham's case as authority for the proposition that a Director cannot necessarily be fixed with liability in respect of the acts of his co-directors of which he has no knowledge and in which he takes no part. Gore Browne in his "Hand-book on Jointstock Companies" (41st Edn.) at page 375 notices the Denham's case and other cases as authority for the proposition that Directors are not liable for the fraud or misconduct of other persons employed by the Company or of their co-directors unless they have participated in the wrong doing, for the company's servants are not the agents of the Directors. In Cullerne v. The London and Suburban General Permanent Buildings Society 1890-XXV-Q.B.D. 485 the facts were that the Directors had passed a resolution authorising advances to members on the security of shares. The plaintiff in the action, who was one of the Directors, concurred in the resolution. Advances were made to a member on security of shares, and the company incurred loss. The plaintiff was not actually a party to the making of the advances and he sued to recover from the society the deposits made by him. This was met by a counter-claim in respect of the loss incurred on the ground that the advances were ultra vires and was attributable to the illegal resolution, which authorised them. It was held (per Lord Esher, M.R., Lindley and Lopes, L.JJ.) that the plaintiff was not liable for the loss. This was met by a counter-claim in respect of the loss incurred on the ground that the advances were ultra vires and was attributable to the illegal resolution, which authorised them. It was held (per Lord Esher, M.R., Lindley and Lopes, L.JJ.) that the plaintiff was not liable for the loss. Lindley, L.J. expressed himself thus: "It does not, however, also follow that because the resolution of December 1876, and of February 1883, are contrary to law and are invalid, the plaintiff is responsible for what other people did on the faith of them. It is probably true that if no such resolutions had been passed no such advances as they authorised would have been made; but the real cause of the loss sustained by the society is the improper advance; the resolution was not the causa causans of the loss, but only a causa sine quanon. If the resolution alone had been passed nothing would have happened; it would have had no result. A new wrongful act by independent persons was the real cause of the loss. The resolution, therefore was not the real cause, not the causa causans. It must be borne in mind that the resolutions in question were not orders given to subordinate officers for them to carry out; the resolutions merely expressed the views of the directors as to their own powers under the society's rules, and their views of what should be done as regards advances. The resolutions no doubt introduced the practice of making advances without proper security; but no one was bound to act in any particular case in conformity with them, and every director ought to have known that the resolutions were ultra vires. They were bad on the face of them. Every one acquainted with the statutes would have seen that they were bad without any further inquiry. The plaintiff ought not to have passed the resolutions, and his co-directors ought not to have acted on them. I am not aware of any authority which goes the length of deciding that under those circumstances the plaintiff is liable for what they have done. The plaintiff ought not to have passed the resolutions, and his co-directors ought not to have acted on them. I am not aware of any authority which goes the length of deciding that under those circumstances the plaintiff is liable for what they have done. They were not his servants or agents; their authority was as great as his, their knowledge the same as his; and, even assuming that he misled them upon a point of law, this does not make him liable to the society for the loss of money which they advanced and not he." In Young v. The Naval, Military, and Civil Service Co-operative Society of South Africa. Ltd.1905-I-K.B. 687, the above decision was followed. The facts there were that A became a Director of the Company in April 1902 and voted for a resolution in May 1902, that all reasonable travelling expenses incurred from time to time should be reimbursed. A, was a Director till January 1903, and during his directorate, was paid out of the Company's assets, his travelling expenses for attending the Board meetings. After resignation in 1903, he claimed the balance of his remuneration and travelling expense as a Director. The Company's defence was that the resolution of May 1902 was ultra vires and it counter-claimed repayment of the travelling allowance already paid to the plaintiff. Farwell, J. observed: "The company further claims from the plaintiff re-payment of the sums paid to two other directors; but there is no evidence that the plaintiff did more than vote in favour of the resolution of May 13, 1902 and had a general knowledge that travelling expenses were being paid, except in the case of 1/-to Colonel Peile, the cheques for which he signed. I must hold him liable for this Rs.10 but with regard to the rest I am of opinion that the case is covered by the decision of the Court of Appeal in Cullerne v. London and Sububran andC., Building Society and that the plaintiff is not liable.� We may also notice the decision in In re Wincham Shipbuilding, Boiler and Salt Company {Hallmark's case) 1878-IX-Ch. 239. 239. It was held that the mere fact of acting as a Director of the Company, and attendance at meetings in that capacity, is not enough to affix a person with knowledge that his name has been entered on the share register and with consequent liability, if he neither applied for shares nor received any notice of allotment. Jessel M.R. observed: "It is contended that Hallmark, being a director, must betaken to have known the contents of all the books and documents of the company, and so to have known that his name was on the register of shares. But he swears that in fact he did not know that any shares had been allotted to him. Is knowledge to be imputed to him under any rule of law? As a matter of fact, no one can suppose that a director of a company knows everything which is entered in the books, and I see no reason why knowledge should be imputed to him which he does not possess in fact. Why should it be his duty to look into the list of share-holders? I know no case except Ex Parte Brown which shows that it is the duty of a director to look at the entries in any of the books; and it would be extending the doctrine of constructive notice far beyond that or any other case to impute to this director the knowledge which it is sought to impute to him in this case." At least one of the Indian decisions has followed the principle in In re Denham's case although on quite different acts. (See T.S. P1.S. Thinnappa Chettiar v. G. Rajagopalan Official Liquidator of Oriental Investment Trust Ltd. Madras A.I.R. 1944 Mad. 536. In the light of the above decisions we are of the view that the Director-respondents, who have not been shown to be much more than mere nominal directors and who did not attend the Board meetings at which the dividends which are the subject-matter of the 'B' and 'G' claim were settled and passed, cannot be held responsible. Despite the complete absence of evidence on the side of the Directors, there is one circumstance which fortifies us in taking this view. The Reserve Bank has been repeatedly commenting in its inspection reports that the agenda for the Board meetings are not circulated to the Directors or placed before the Board [See Exts. Despite the complete absence of evidence on the side of the Directors, there is one circumstance which fortifies us in taking this view. The Reserve Bank has been repeatedly commenting in its inspection reports that the agenda for the Board meetings are not circulated to the Directors or placed before the Board [See Exts. P-933 (a) and 948 (b)]. To hold the Directors who were absent from the Board meetings at which resolutions to declare dividends were adopted and passed, liable in the circumstances appears to us, to carry the doctrine of liability of the Directors too far. If, for this reason, they cannot be held liable for the dividends in respect of any period, it was agreed that they should be exonerated from liability for the tax paid also in respect of the said period. In the light of the above, the position disclosed is that no interference is called for in regard to A.S. 325, 326 and 327 of 1965 preferred respectively by respondents 2, 1 and 4. In the remaining appeals, the position is as follows: A.S. No. 328 of 1965 83. The 6th respondent was not a party to the Board meeting of the Directors which passed the balance-sheets for the years 1943 and 1948 (Ext. P-1072 and Ext. P-1009). His liability in respect of the 'B' and 'C' claim must therefore be reduced by a total amount of Rs. 5,38,518 being the total of the dividends declared and income-tax and super-tax paid for the years 1943 and 1948 as shown in Annexure II. Counsel for the 6th respondent filed a statement dated 25th September 1968 showing these amounts, and counsel for the Liquidator admitted the same. In A.S. 328/65 we direct that the liability of the 6th respondent be reduced accordingly. A.S. Nos. 303 of 1965 and 302 of 1966 84. The 3rd respondent had not participated in the Board's resolutions, which settled the halance-sheets for the years 1941, 1944, 1952 and 1953. The former two years pertain to the ˜B' claim, and the latter two to the 'C' claim. The amounts paid as dividends and as income-tax and super-tax for these years as shown in Annexnres II and IV of the petition are as follows: Year Dividends Rs. Income-tax and Super-tax Rs. 1,48,759 1941 35,691 17,132 1 1944 43,855 53,081 1952 1,47,289 1,29,109 5 5,93,191 1953 1,48,142 1,68,651 Total 3,73,977 3,67,973 85. The amounts paid as dividends and as income-tax and super-tax for these years as shown in Annexnres II and IV of the petition are as follows: Year Dividends Rs. Income-tax and Super-tax Rs. 1,48,759 1941 35,691 17,132 1 1944 43,855 53,081 1952 1,47,289 1,29,109 5 5,93,191 1953 1,48,142 1,68,651 Total 3,73,977 3,67,973 85. The 3rd respondent's liability in respect of the ˜B' claim will stand reduced by a total of Rs. 1,48,759. A.S. 303/65 will stand allowed to this extent. His liability in respect of the 'C' claim will stand reduced by Rs. 5,93,191. A.S. 302/66 will stand allowed to this extent. AS. No. 319 of 1966 86. This appeal is by the 7th respondent and relates only to the 'C' claim. We were pressed with what appears to be an oversight in the learned Trial Judge's judgment. The 7th respondent became a Director on 5th February 1955. He has been made liable for tax paid for the years 1955 to 1958 and for dividends for the years 1955 to 1957. It was pointed out that in paragraph 19 of the points of claim the Liquidator himself pleaded that the 7th respondent is liable severally and jointly with others only to the extent of Rs. 11,04,912. Paragraph 186 of the 'A' Claim judgment finds respondents 1 to 8 and 10 jointly liable to pay the Company, a sum of Rs. 35,49,642 with interest at 6% from 8th August 1950, and it limits only the several liability of the 7th respondent to Rs. 11,04,912. Counsel for the 7th respondent contended that the joint liability also should, on the pleading, be restricted to this amount. In view of the specific pleading in paragraph 19 of the petition, counsel for the Liquidator fairly conceded the position. In A.S. 319 of 1966 we therefore make it clear, that the joint liability of the 7th respondent, will also be restricted to the amount of Rs. 1,14,912, and otherwise, we dismiss the appeal. A.S. No. 329 of 1965 and A.S. No. 306 of 1966 87. These are appeals preferred by the 5th respondent against 'B' and 'A' Claim judgments respectively. The 5th respondent was Director from 30th March 1940 to 11th August 1943 and from 16th August 1947 to 29th December 1954. Thereafter he was an Office Manager in the head office. A.S. No. 329 of 1965 and A.S. No. 306 of 1966 87. These are appeals preferred by the 5th respondent against 'B' and 'A' Claim judgments respectively. The 5th respondent was Director from 30th March 1940 to 11th August 1943 and from 16th August 1947 to 29th December 1954. Thereafter he was an Office Manager in the head office. On his behalf, complaint was made that in respect of the 'C' Claim he has been made liable for tax and dividends paid even in 1955, 1956 and 1957 which fall outside his directorate. The learned Judge recognised the position in paragraph 165 of the 'A' Claim judgment and called for a statement of the advances made during his directorate and in the light of that, and as the 5th respondent did not dispute the statement filed by the Liquidator, passed a decree against him in respect of the 'A' Claim. In paragraph 179 of the said judgment, the learned Judge referred to the active complicity, inter alia, of the 5th respondent after he became an officer attached to the head office in the matter of preparation of balance-sheet, profit and loss account etc. But it is clear from prayer (1) in the points of claim, as well as from the summons that relief was claimed against the 5th respondent only in his capacity as a Director, and his liability, if any, as an Officer of the Bank did not call for investigation. Counsel for the Liquidator conceded that the 5th respondent's liability as a Director for the 'C' Claim cannot extend beyond his directorate. But it was argued that he was liable as officer. For this, reliance was placed on the general statement in paragraph 8 of the points of claim that respondents 1 to 6 are jointly and severally liable for Rs. 2,41,44,286. But this is in relation to the ˜A' Claim. Paragraph 109 of the 'B' Claim judgment, made the 5th respondent liable only in respect of the amounts misapplied during his tenure as a Director, namely in respect of the claim from 1940 to 1942 and 1947 to 1949 totalling to Rs. 8,96,848. But there is no such limitation to be found in the 'A' Claim judgments, in respect of the liability of the 5th respondent for the ˜C' Claim. 8,96,848. But there is no such limitation to be found in the 'A' Claim judgments, in respect of the liability of the 5th respondent for the ˜C' Claim. In view of the definite pleading, the 5th respondent cannot be made liable for the 'C' claim in respect of dividends and taxes paid for the years 1955, 1956 and 1957. His liability in respect of the 'C' 5 claim will accordingly stand reduced by Rs. 8,93,931 (vide Annexure IV). No grounds have been made out for interference with the Trial Judge's order against the 5th respondent in respect of the 'A' and 'B' Claims. A.S. No. 329 of 1965 preferred by him against the 'B' Claim judgment, will therefore be dismissed; and A.S. 306/66 will stand allowed to the limited extent of reducing the liability of the 4th respondent in respect of the 'C' claim by Rs. 8,93,931. A. S. No. 305 of 1966 88. We shall next take up A.S. No. 305 of 1966, preferred by the 10th respondent. The liquidator himself, sought to make the 10th respondent liable only in respect of the 'B' and 'C' claims. The learned Trial Judge exonerated him in respect of the 'B' claim, so that, his appeal is confined only to the ˜C' claim. The 10th respondent was not a Director but only a junior officer entertained on 16th May 1949, in the head office and continued since then in the service of the Bank. It was only in February 1958 that he was appointed Secretary (Chief Executive Officer) of the Bank subject to the approval of the Reserve Bank, which, according to his pleading was given only in August 1959. We are not concerned with the period for which he functioned as Secretary (except possibly for a month or more). The direct allegations against the 10th respondent are in paragraph 20 of the points of claim, to the effect that he was aiding and abetting the manipulation of accounts regarding the debiting of interest, etc. These were answered in his points of defence in which he pleaded inter alia that he had no powers of initiative, but was a purely ministerial hand, bound to obey and carry out the orders of the Directors and his superiors. He also pleaded that he is entitled to the benefit of section 633 of the Companies Act. These were answered in his points of defence in which he pleaded inter alia that he had no powers of initiative, but was a purely ministerial hand, bound to obey and carry out the orders of the Directors and his superiors. He also pleaded that he is entitled to the benefit of section 633 of the Companies Act. In paragraph 112 of the 'B' claim judgment, the learned Trial Judge noticed that there was sufficient evidence to show that the 10th respondent had subsequent knowledge of what had been done in the years relating to the 'B' claim, but felt that this was not sufficient to fix him with responsibility in respect of the claim. Accordingly he was exonerated from liability for the ˜B' claim. But in paragraph 181 of the ˜A' claim judgment, the learned Judge put the case against the 10th respondent thus: "181. The 10th respondent joined the head office on the 16th May 1949, as an officer and served at the head office till the end becoming the Secretary of the Bank on the 20th August 1959. From 1952 onwards he was, on his own showing, engaged in the supervision of the work of the Branches with regard to the recovery of outstandings and dues. In absolving him of liability so far as claim B is concerned I have found that, though it had not been proved that he was in any way responsible for the falsification of the balance-sheets and profit and loss accounts for any of the years 1936 to 1949, he had subsequent knowledge of the falsification and that he was actually privy to the false adjustments made after 1949 in order to reconcile the branch accounts with the head office accounts wherein false debits had been raised against the Branches for the purpose of showing fictitious profits for those years. But, for the years 1950 to 1958, there can be little doubt that he was privy to the falsification of the balance-sheets and profit and loss accounts so as to show fictitious profits. As we have seen he was attending to much of the correspondence that passed between the head office and Branch Managers regarding the bad irrecoverable advances and the debiting of interest to those advances and he was from time to time giving instructions as to how the accounts should be maintained with a view to inflate the profits. 182. As we have seen he was attending to much of the correspondence that passed between the head office and Branch Managers regarding the bad irrecoverable advances and the debiting of interest to those advances and he was from time to time giving instructions as to how the accounts should be maintained with a view to inflate the profits. 182. I hold respondents 1 to 8 and 10 liable for the sums claimed from them in the summons under claim C." While considering the claim against the 10th respondent, it must be borne in mind that from 1950 to 1958, which are the years with which we are concerned, he was junior officer, a mere ministerial hand with no powers of attorney of any of the four types in his favour. We have carefully examined the documents placed before us and referred to by the Trial Judge, from which liability has been fastened on the 10th respondent. We are unable to hold on the materials placed before us that any act or omission of the 10th respondent could be said to have been responsible for the wrongful payment of tax and dividends which are the subject-matter of the 'C' claim. When he joined service of the Bank on 16th May 1949, the 1st respondent was the Managing Director, and respondents 4, 5 and Jacob Cherian among the Directors, were also officers of the Bank. One R. Krishna Iyer who was the Chief Accountant was in service till 1956, and he is seen to have issued directions in regard to the affairs of the Bank [vide Exts. P-901 and P-901 (a)]. At the instance of the Reserve Bank Mr. J. A. Frost was appointed Adviser to the Bank, and it was on his advice that the 10th respondent was put in charge of supervision of the Branches with regard to the recovery of the outstandings. Our attention was not called to any rules or circulars or office-orders, delineating or defining the functions and responsibilities of the various officers of the Bank, and in particular, of the 10th respondent. This has been noted by the learned Trial Judge himself (vide paragraph 98 and 100 and 102 of the 'B' claim Judgment and 136 of the 'A' claim judgement). We were referred to certain letters written, by the 10th respondent. Ext. This has been noted by the learned Trial Judge himself (vide paragraph 98 and 100 and 102 of the 'B' claim Judgment and 136 of the 'A' claim judgement). We were referred to certain letters written, by the 10th respondent. Ext. P-266 dated 1st December 1955 is a 'private and confidential' letter written by the 10th respondent to see that some operation is done in the account of a customer of the Bank, so that it does not appear time-barred at the close of the year. Exts. P-336, P-365, P-671, P-672, P-775, P-729 (marked 'private and confidential') P-783 (already noticed) P-789, P-792 and P-817 were the other letters of the 10th respondent which have been referred to. The last of these is not expressly referred to by the Trial Judge but is indicated in paragraph 173 of the 'A' claim judgment. Ext. P-817 was sent by the 10th respondent in answer to Ext. P-815. By Ext. P-815, the Delhi Manager wrote to the head office, stating inter alia that it was not proper to increase the rates of interest on advances (done by Exts. P-812 and P-814), and that the auditor had been remarking about the impropriety of crediting full interest on all advances to the profit and loss account. In answer to this, by Ext. P-817 dated 3rd September 1949 (marked 'confidential') the 10th respondent replied stating that the present level of profits in the Bank is not adequate to cover its needs and that there is no alternative to increase the rates on advances. He wound up by saying "our Accountant Mr. Krishna Iyer tells me the auditor's suggestion though sound, is not practicable". Counsel appearing for the 10th respondent drew our attention to the circulars issued by the head office, regarding the debiting of interest (vide Exts. D-29 to D-35)-It was contended before us that while the learned Trial Judge had himself exonerated the 10th respondent in respect of the 'B' claim notwithstanding Ext. P-817, and the corrections made by him in the draft of the circular (Ext. P-812), there was hardly any sufficient material to hold him liable in respect of the ˜C' claim. We are inclined to agree with this submission. We asked counsel for the liquidator as to what part could be attributed to the 10th respondent in the payment of tax and dividends which were the subject-matter of the 'C' claim. P-812), there was hardly any sufficient material to hold him liable in respect of the ˜C' claim. We are inclined to agree with this submission. We asked counsel for the liquidator as to what part could be attributed to the 10th respondent in the payment of tax and dividends which were the subject-matter of the 'C' claim. The answer given was that these payments were rendered possible only as a result of the acts and omissions of the 10th respondent. We find there was if at all, but too feeble a connection between the acts of the 10th respondent and the improper payment of tax and dividends complained of under this head. We are therefore of the opinion that the liquidator has not pinpointed the liability of the 10th respondent in respect of the 'C' claim. A. S. No. 305 of 1966 will accordingly stand allowed. A. S. No. 310 of 1965 and A. S. No. 300 of 1966 89. There remain now for consideration only the appeals preferred by the auditor, the 8th respondent. These are A. S. Nos. 310 of 1965 against the 'B' claim judgment and A.S. No. 300 of 1966 against 'A' claim judgment. The 8th respondent has been found liable by the Trial Judge for a sum of Rs. 9,69,180 in respect of the 'B' claim, and for Rs. 25,49,642 in respect of the ˜C' claim. He has been found jointly liable with the other respondents, for Rs. 2,40,95,000 and severally liable for Rs. 13,37,527 in respect of the 'A' claim. The 8th respondent became, the auditor of the Bank on 8th January 1947 and continued as auditor till liquidation. Arguments on his behalf were not directed against the inferences drawn by the learned Trial Judge from the balance-sheets, profit and loss account and other books and records of the Bank, as, about the legal position in regard to his liability as auditor. The 8th respondent's points of defence has profusely cited chapter and verse from the text books and judicial decisions dealing with the liability of an auditor in misfeasance proceedings. The principles laid down in the decision in In re Kingston Cotton Mill Company (No. 2) 1896 (2) Ch. 279 largely formed the basis of the contentions on either side. The 8th respondent's points of defence has profusely cited chapter and verse from the text books and judicial decisions dealing with the liability of an auditor in misfeasance proceedings. The principles laid down in the decision in In re Kingston Cotton Mill Company (No. 2) 1896 (2) Ch. 279 largely formed the basis of the contentions on either side. We do not propose to expatiate very much on propositions that are well-settled, such as, that the object and purpose of the audit is to secure to the shareholders independent and reliable information; that it is no part of the auditor's duty to give advice to the Directors or shareholders as to what to do; that he has nothing to do with the prudence or imprudence of loans or other transactions; and that he is a watch-dog and not a bloodhound. We should like, however, to extract the felicitous language of the learned Trial Judge in paragraph 111 of the 'B' claim judgment. The learned Trial Judge there stated: "So far as the 8th respondent, the auditor for 1946 onwards is concerned, very lengthy arguments have been addressed regarding the duties of an auditor on the familiar bloodhound as opposed to watchdog lines. But this much I suppose no one would deny”and counsel for the 8th respondent has not been disposed to deny it”namely, that even the tamest of watch-dogs has a duty not to connive with the thief. The bare statement of the facts which I have given above regarding the preparation of the balance-sheets and profit and loss accounts for the years 1946 to 1949 is sufficient to show that the 8th respondent was actively assisting the management in the falsifications that made the misapplication for those years possible and it is hardly necessary to go into details and point out that he must have been aware that the debits in the head office books were not being posted in the Branch journals and were not being communicated to them, that the accounts of some of these Branches had been audited and their balance-sheets certified by him, and that the explanation trotted out on his behalf-he himself, advisedly I should think, did not get into the box to speak to it”that the incriminating figures in his handwriting in the working sheet Ext. P-976 for the profit and loss account for 1946 showing the credits (which I have found to be fictitious) to be made were posted by him from the final balance-sheet for the purpose of reconciliation and not the other way about, is worse than useless. I hold him liable in respect of the claim for the years 1946 to 1949 amounting to Rs. 9,69,180." 90. The gross remissness and in-attention to duty displayed by the 8th respondent in the course of his audit may be illustrated with respect to the position disclosed in regard to a few of the balance-sheets and profit and loss accounts. As there was no argument before us that the inference drawn by the learned Judge in regard to the balance-sheets and the other relevant materials for the concerned years, was either improper or unjustified, we do not propose to discuss the position with respect to everyone of the concerned records. The learned Trial Judge has done it carefully and exhaustively and we are content to endorse what he has said on this aspect of the claim. By way of illustration we may refer to the learned Trial Judge's treatment of the balance-sheet for the year 1946. The matter has been dealt with in paragraphs 68 to 71 of the 'B' claim judgment as follows:” "The audited balance-sheets and profit and loss accounts for 1946 of seven of the Bank's Branches, Thodupuzha, Ernakulam, Muvattu-puzha, Peermade, Trivandrum, Mangalore and New Delhi(Exts. P-974, P-968, P-972, P-975, P-969 and P-971 respectively) show that these Branches worked at a loss during the year and that the total loss suffered was Rs. 1,17,806-1-1. Around sum of Rs. 1,17,800 representing the losses of these Branches was credited to the profit and loss account in the books of the head office by debit to the Branch account in the names of these seven Branches, the debit against each Branch being exactly the loss suffered by it excepting that the debit against the Ernakulam Branch was for a sum of Rs. 5,407-8-0 as against the actual loss of Rs. 5,413-9-1 so as to make total the round figure of Rs. 1,17,800, see pages 117 and 55 respectively of the day books Exts. P-1496 and P-1497. The concerned debit voucher Ext. 5,407-8-0 as against the actual loss of Rs. 5,413-9-1 so as to make total the round figure of Rs. 1,17,800, see pages 117 and 55 respectively of the day books Exts. P-1496 and P-1497. The concerned debit voucher Ext. P-1463 (a) (1) shows the debit as being on account of interest and charges due from the above-named seven Branches while in the profit and loss account a sum of Rs. 91,900 was credited on account of interest received, the balance of Rs. 25,900 being credited as commission. However, in the credit voucher, Ext. P-1463 (a) (2), for the above sum of Rs. 91,900, a sum of Rs. 66,500 is shown as, 'Cash received from several persons' and only the balance of Rs. 25,400 is shown as, 'Cash received from Branches'. The entire sum of Rs. 25,900 credited in the profit and loss account as commission was described as, 'Cash received from several persons'”see Ext. P-1463 (a) (3). Thus out of the sum of Rs. 17,800 debited to the branch account in the day book and in the general ledger, according to the credit vouchers only a sum of Rs. 25,400 was 'Cash received' from Branches. Moreover, the credit vouchers show the credits as on account of cash received although according to the books they are credits by transfer. 69. The balance-sheets and profits and loss accounts for the year, of five of the aforesaid seven Branches, namely Thodupuzha, Ernakulam, Muvattupuzha, Peermade and Trivandrum were audited by the 8th respondent. All the items of income of the seven Branches as appearing in their profit and loss accounts were duly incorporated in the books of the head office and the credit of the sum of Rs. 1,17,800 was in addition to this. The profit and loss accounts and balance-sheets of these branches do not disclose any such amounts as transferred or due to the head office, and as usual, the debits were not carried to the branch journals and were kept secret from the Branches. 70. After the credit of the above sum of Rs. 1,17,800 but before incorporating the income and expenditure of the several branches, the profit and loss account of the head office”the head office was at that time directly transacting business at Palai, there being no separate Branch there”showed a loss of Rs. 2,35,616-3-2”see Ext. P-1498, page 92. Ext. 70. After the credit of the above sum of Rs. 1,17,800 but before incorporating the income and expenditure of the several branches, the profit and loss account of the head office”the head office was at that time directly transacting business at Palai, there being no separate Branch there”showed a loss of Rs. 2,35,616-3-2”see Ext. P-1498, page 92. Ext. P-976 is a rough consolidated profit and loss statement for the Bank as a whole. This statement shows the loss of what I might call the Palai Office as Rs. 2,35,616-3-2 and the loss of the seven Branches which worked at a loss as Rs. 1,17,806-1-1. The total profit of the Branches which worked at a profit is shown as Rs. 4,78,511-15-10. After deducting from the amount the total loss suffered by the Palai Office and the seven Branches already referred to, a net profit of Rs. 1,25,089-11-7 was arrived at. On the reverse of Ext. P-976 there appears the following statement under heading "provision to be made for 1946". Dividend Rs. 1,17,500 General reserve Rs. 50,000 (at least) Doubtful debts Rs. 40,000 Taxation Rs. 1,25,000 (least) Total Rs. 3,32,500 From this required amount, a sum of Rs. 1,35,357-3-7 (being the profit of Rs. 1,25,089-11-7 arrived at for the year, plus the balance of Rs. 10,267-8-0 brought] forward from the previous year) was deducted and a shortfall of Rs. 1,97,142 reached. This figure was rounded of to Rs. 2,00,000 which was shown to be the deficit. In the consolidated profit and loss statement on the obverse of Ext. P-976 we find, in the last column, additional credit entries of Rs. 1,32,258-10-0, Rs. 45,481-7-6 and Rs. 43,659-14-6 in the handwriting of the 8th respondent to the interest received, discount, and commission accounts respectively, and in the day book the total of these three items, Rs. 2,21,400 is found credited to the profit and loss account”see Ext. P-1496, page 119”by debit to the branch account”see Ext. P-1497, pages 61 and 62 as hereunder: Cochin Rs. 15,440-1-6 (as interest) Quilon Rs. 18,640-8-0 (as discount) Do Rs. 27,109-5-0 (as commission) Trivandrum Rs. 16,550-9-6 ( ,, ) Delhi Rs. 31,368-0-0 (as interest) Do Rs. 24,440-7-6 (as discount) Bangalore Rs. 85,450-8-6 (as interest) Do Rs. 2,400-8-0 (as discount) Total Rs. P-1496, page 119”by debit to the branch account”see Ext. P-1497, pages 61 and 62 as hereunder: Cochin Rs. 15,440-1-6 (as interest) Quilon Rs. 18,640-8-0 (as discount) Do Rs. 27,109-5-0 (as commission) Trivandrum Rs. 16,550-9-6 ( ,, ) Delhi Rs. 31,368-0-0 (as interest) Do Rs. 24,440-7-6 (as discount) Bangalore Rs. 85,450-8-6 (as interest) Do Rs. 2,400-8-0 (as discount) Total Rs. 2,21,400-0-0 It may be repeated that the balance-sheets and profit and loss accounts of three of these branches, namely, Cochin, Quilon and Trivandrum were audited by the 8th respondent, that all items of income as shown in the audited profit and loss accounts of these five branches were duly incorporated in the head office books, that the additional credit of Rs. 2,21,400 in addition to these items, and that the audited balance sheets and profit and loss account of the branches do not show any such amounts as transferred to or due to the head office. Also that the debits were not entered in the branch journals and were kept a secret of the head office. It may also be remarked that, while a total sum of Rs. 1,56,108-1-7 was credited in the profit and loss account of the bank as interest earned by the Mangalore Branch, the audited balance-sheet of that branch (Ext. P-969) shows that the total advances of the branch as on 31st December 1946 was only Rs. 1,05,852-3-5. 71. By these credit entries totalling Rs. 3,39,200 a loss of Rs. 1,29,182 was converted into a profit of Rs. 2,10,018 a sum of Rs. 1,75,950 was paid as income-tax for the year and a sum of Rs. 1,04,525 distributed as dividend. The balance-sheet and profit and loss account for the year (Ext. P-1007) was approved at meeting of the Board held on 1st March 1947 at which respondents, 1, 3, 4 and 6 were present and it was signed by respondents 1, 3 and 4." 91. We may record that Ext. P-976 was, after notice by the Liquidator, admitted by the 8th respondent in his statement dated 1st April 1964, to have been prepared in the handwriting of Krishna Iyer, with remarks admitted to be in the handwriting of the 8th respondent. 92. We may give just a few more instances to show the irresponsible way in which the Auditor discharged his duties. Ext. 92. We may give just a few more instances to show the irresponsible way in which the Auditor discharged his duties. Ext. P-1528, the day book of the Vaikom Branch for the year 1949 shows certain credit entries at page 211 totalling to Rs. 53,050. The 8th respondent has signed in this page on 3rd March 1950 both before and after the entries showing credit. The entries before credit show that the branch had sustained loss. Elementary skill and diligence should inform the 8th respondent that the debit entries of 31st December 1949, made under dated 3rd March 1950, could only have been made on 5th April 1950 when alone the general ledger kept by the branch in the head office was corrected so as to take into account, this debit entry. We agree with the learned Trial Judge that the initialling made by the 8th respondent below the debit entries, must have been done by him, when he visited the branch in 1951, for the audit of the accounts of 1950. 93. We have referred to Ext. P-1531, the Day Book of the Quilon Branch for 1949, and to the double-crossing at page 459 thereof to indicate that the accounts had been closed by entries at the previous page on 30th December 1949. But it is on this page that the Head Office is credited with a sum of Rs. 1,23,277-1-6 and the Branch debited with the corresponding amount. A look at the page and at the next one where the accounts of 1930 are commenced seems to us to be sufficient to show that the credit and debit entries referred to could only have been subsequent interpolations. Yet we find that the 8th respondent certified two balance-sheets of this Branch, both on 27th January 1950, as correct. These are Exts. P-1065 (a) and P-1066. The former of these, takes the debit into account, while the latter does not. 94. We have already noticed that Exts. P-1532, the Day Book of the Nagercoil Branch, and Ext. P-1533, the head office journal kept in the Branch, show debit entries on 25th March 1950 although these are made as on 31st December 1949. Ext. The former of these, takes the debit into account, while the latter does not. 94. We have already noticed that Exts. P-1532, the Day Book of the Nagercoil Branch, and Ext. P-1533, the head office journal kept in the Branch, show debit entries on 25th March 1950 although these are made as on 31st December 1949. Ext. P-1523, page 7, would show that these could only have been made on 23rd May 1950 when alone the balance in the head office account in the general ledger kept by the Branch, was altered so as to take into account this debit. Ext.B-989, the balance-sheet and profit and loss account of the Ponkunnam Branch for 1949, certified by the 8th respondent on 18th January 1950, does not take this debit into account. 95. We have already referred to in para 73 (supra) how by manipulations made in the books and records of the Bank a net loss of Rs. 7,719-12-11 incurred by the Bank for the year 1940 was converted into a profit of Rs. 52,915-8-8-Here again we feel that the Auditor ought, with reasonable diligence and skill, have been able to detect the manipulation of entries and inflation of profits. 96. In addition to the above circumstances we may observe that the Reserve Bank in almost everyone of its Inspection Reports had been pointing out the unsatisfactory way in which the books of account had been maintained by the Bank. In the first Inspection Report, Ext. P-923 (a), it observed that the books and accounts are not maintained satisfactorily, that errors in posting of ledgers remained undetected for long intervals, that some of the deposit ledgers at the Madras and Palai Offices have not been balanced for several years, that the Bank balances shown in the Bank ledger have not been tallied with the general ledger since 1943, and that some Bank Accounts remain unreconciled from 1946 or even earlier. 97. In its second Inspection Report, Ext. P-938 (a), the Reserve Bank devoted a fairly long paragraph to the books of account of the Bank. It pointed out several instances of over-writing and unauthenticated cancellation in the Stock Register of Cash, that at the Bangalore Branch none of the Officers had initialled against entries made in the Bills Payable Register, and that at the Madras Branch the balance schedules in the Deposit and Loan Ledgers are not checked properly. 98. It pointed out several instances of over-writing and unauthenticated cancellation in the Stock Register of Cash, that at the Bangalore Branch none of the Officers had initialled against entries made in the Bills Payable Register, and that at the Madras Branch the balance schedules in the Deposit and Loan Ledgers are not checked properly. 98. In its third Inspection Report, Ext. P-946, the Reserve Bank again returned to the charge that the books of account are not satisfactorily maintained, It repeated the same in its fourth and final Inspection Report, Ext. P-956 (b). 99. In the welter of authorities to which our attention was drawn”text books and judicial decisions”one principle laid down in the Kingston Cotton Mills Company's case stands out firm and clear. It is to this effect, that if there is anything calculated to excite suspicion the Auditor should probe it to the bottom, but in the absence of anything of the kind he is only bound to be reasonably cautious and careful. The positive and negative aspects of the auditor's duties have thus been summed up in In reLondon and General Bank (No. 2) 1895 (2) Ch. 673 Lindley, L. J. stated the positive aspects thus: "His business is to ascertain and state the true financial position of the company at the time of the audit, and his duty is confined to that. But then comes the question, how is he to ascertain that position? The answer is, by examining the books of the company. But he does not discharge his duty by doing this without inquiry and without taking any trouble to see that the books themselves show the company's true position. He must take reasonable care to ascertain that they do so. Unless he does this his audit would be worse than an idle farce. Assuming the books to be so kept as to show the true position of the company, the auditor has to frame a balance sheet showing that position according to the books and to certify that the balance-sheet presented is correct in that sense. Unless he does this his audit would be worse than an idle farce. Assuming the books to be so kept as to show the true position of the company, the auditor has to frame a balance sheet showing that position according to the books and to certify that the balance-sheet presented is correct in that sense. But his first duty is to examine the books, not merely for the purpose of ascertaining what they do show, but also for the purpose of satisfying himself that they show the true financial position of the company." As to the negative aspects, the learned Lord Justice stated: "An auditor, however, is not bound to do more than exercise reasonable care and skill in making inquiries and investigations. He is not an insurer; he does not guarantee that the books do correctly show the true position of the company's affairs; he does not even guarantee that his balance-sheet is accurate according to the books of the company. If he did, he would be responsible for error on his part, even if he were himself deceived without any want of reasonable care on his part, say, by the fraudulent concealment of a book from him. His obligation is not so onerous as this. Such I take to be the duty of the auditor: he must be honest”i.e., he must not certify what he does not believe to be true, and he must take reasonable care and skill before he believes that what he certifies is true. What is reasonable care in any particular case must depend upon the circumstances of that case. Where there is nothing to excite suspicion very little inquiry will be reasonably sufficient, and in practice I believe businessmen select a few cases at haphazard, see that they are right, and assume that others like them are correct also. Where suspicion is aroused more care is obviously necessary; but, still, an auditor is not bound to exercise more than reasonable care and skill, even in a case of suspicion, and he is perfectly justified in acting on the opinion of an expert where special knowledge is required". In In re Kingston Cotton Mill Company (No. 2) 1896 (2) Ch. 270 Lindley, L.J. reiterated what he had said in the earlier case. In In re Kingston Cotton Mill Company (No. 2) 1896 (2) Ch. 270 Lindley, L.J. reiterated what he had said in the earlier case. Lopes, L. J. stated the position thus: "It is the duty of an auditor to bring to bear on the work he has to perform that skill, care, and caution which a reasonably competent, careful, and cautious auditor would use. What is reasonable skill, care, and caution must depend on the particular circumstances of each case. An auditor is not bound to be a detective, or, as was said, to approach his work with suspicion or with a forgone conclusion that there is something wrong. He is a watch-dog, but not a bloodhound. He is justified in believing tried servants of the company in whom confidence is placed by the company. He is entitled to assume that they are honest, and to rely upon their representations, provided he takes reasonable care. If there is anything calculated to excite suspicion he should probe it to the bottom; but in the absence of anything of that kind he is only bound to be reasonably cautious and careful". 100. We do not think it necessary to labour the point by ransacking the authorities. But we think that a near parallel to the case on hand is afforded by the decision in Registrar of Companies, Bombay v. P. M. Hedge A.I.R. 1954 Mad.1080. We are of the opinion that there was enough in the books of account and the records of the bank to excite suspicion and the auditor deplorably failed to "probe it to the bottom". He did not take the elementary care and caution of satisfying himself as to whether the books and the accounts of the bank had been kept properly and whether they disclosed the real position in regard to the affairs of the Bank. Had he done so, he could have easily seen the interpolations made in the books of the Bank, the credits by false and fictitious entries and the many other irregularities and discrepancies. We are, therefore, of the opinion that the learned Judge rightly held that the 8th respondent liable. We have no hesitation in rejecting his plea that he is entitled to relief under section 633 of the Companies Act, 1956. We are, therefore, of the opinion that the learned Judge rightly held that the 8th respondent liable. We have no hesitation in rejecting his plea that he is entitled to relief under section 633 of the Companies Act, 1956. We can credit him with neither honesty nor reasonableness in the discharge of his functions and he has not let in any evidence to prove either. 101. We have based ourselves on the propositions in the old cases of London and General Bank1895, 2 Ch.673 and In re Kingston Cotton Mills No. 2. There is some authority that the auditor's duties must, at present, be tested on the touchstone of stricter and more exacting standards. Whether this be in view of the statutory provisions incorporated in the Companies Acts since the English decisions referred to, or on acconnt of the more exacting standards of reasonable skill and care than those which prevailed in 1896, we need not pause to consider. [See the recent English decision in Thomas Garard and Sons Ltd., In re 1867,3 W.L.R. 84 See also: Practical Auditing by Spicer and Pogglar, 2nd Edn., p. 158]. Even judged by the orthodox and less rigorous tests laid down in the two earlier English cases, we are of the view that the 8th respondent is liable. In the recent Supreme Court decision in theInstitute of Chartered Accountants of India v. P. K. Mukerji 1968-II S.C.W.R. 276 (Civil Appeal No. 426 of 1965), the Supreme Court has stressed the auditor's duty to the shareholders and held that a mere disclosure of irregularities to the Directors will not absolve the auditor of his responsibilities. 102. In the light of our above discussion A.S. No. 310/1965 and A.S. No. 300 of 1966 have to be dismissed. 103. No arguments were advanced before us by any of the appellants regarding the learned Judge's finding as to the ˜D' Claim. 104. Almost at the end of the hearing of these appeals, the Liquidator filed a statement, dated 26th August 1968 showing the realisations made by him in respect of the advances in Annexure I. The same shows that in respect of 52 of the items in the Annexure the actual realisations have exceeded the estimate made in Annexure I of the recoverable portion of the amounts. The total amount of the excess so recovered till date of the statement is Rs. 2,37,968. The total amount of the excess so recovered till date of the statement is Rs. 2,37,968. The liability of all the appellants in the appeals filed against the ˜A' Claim will stand reduced by this amount. 105. In the result we direct as follows:” (1) A.S. Nos. 315, 316 and 318 of 1966 preferred by respondents 1, 2 and 4 against the 'A' Claim will stand dismissed subject to the modification that the liability of the appellants in these appeals in respect of the claim will stand reduced by Rs. 2,37,968 so as to take into account the subsequent excess realisations made by the Liquidator according to his statement dated 26th August 1968; (2) A.S. No. 302 of 1966 preferred by the 3rd respondent against the 'A' Claim will also stand dismissed, subject to the above modifications; and the appeal fin so far as it relates to the ˜C' Claim will stand allowed to the extent of reducing his liability for the said claim by Rs. 5,93,191; (3) A.S. No. 301 of 1966 by the 6th respondent against the ˜A' Claim will also stand dismissed subject to the above modification directed in respect of the 'A' Claim; (4) A.S. No. 300 of 1966 by the 8th respondent against the 'A' Claim order will also stand dismissed subject to the same modification in respect of the 'A' Claim; (5) A.S. No. 306 of 1966 preferred by the 5th respondent will also stand dismissed subject to the same modification in respect of the 'A' Claim; and in so far as it relates to the 'C' Claim will stand allowed to the limited extent of reducing his liability by Rs. 8,93,931; (6) A.S. No. 305 of 1966 by the 10th respondent in respect of the 'C' Claim is allowed; (7) A.S. No. 319 of 1966 by the 7th respondent in respect of the 'C' Claim is dismissed subject to the only modification that the joint liability of the 7th respondent in respect of the 'C' Claim is also restricted to Rs. 1,14,912; (8) A.S. Nos. 325, 326 and 327 of 1965 preferred respectively by respondents 2, 1 and 4 against the 'B' Claim are dismissed; (9) A.S. No. 328 of 1965 is allowed to the extent of reducing the liability of the 6th respondent by Rs. 1,14,912; (8) A.S. Nos. 325, 326 and 327 of 1965 preferred respectively by respondents 2, 1 and 4 against the 'B' Claim are dismissed; (9) A.S. No. 328 of 1965 is allowed to the extent of reducing the liability of the 6th respondent by Rs. 5,38,518 in respect of the 'B' and ˜C' Claims, and dismissed otherwise; (10) A.S. No. 303 of 1965 by the 3rd respondent against the 'B' Claim will stand allowed to the extent of reducing his liability by Rs. 1,48,759 and dismissed otherwise; (11) A.S. No. 310 of 1965 preferred by the 8th respondent will stand dismissed; (12) A.S. No. 329 of 1965 preferred by the 5th respondent against the 'B' Claim is dismissed. 106. In A.S. Nos. 300, 301, 302, 306, 315, 316, 318 and 319 of 1966”all appeals from the 'A' Claim judgment”the Liquidator will have his costs from the appellants. 107. In the remaining appeals we direct the parties to bear their costs. 108. Before we part with these appeals we wish to place on record our deep indebtedness to all the counsel for their able assistance in taking us through a vast labyrinth of material on the facts, and through a maze of case law in regard to the legal position involved. We express our very grateful thanks for their able assistance. Balakrishna Eradi, J.” 1. The main judgment in these appeals covering all the points arising for our decision has been delivered by my learned brother Gopalan Nambiyar, J. on behalf of both of us. The 329 items in Annexure I of the points of claim are analysed and dealt with in this separate judgment. The question to be considered is whether these 329 items represent prudent and sound advances as contended for by the appellants or whether they were bad and reckless advances as claimed by the Liquidator and found by the learned trial Judge. This judgment being one only in supplementation of our main judgment, its scope will be strictly confined to a discussion of the facts and circumstances relating to each of the transactions mentioned in Annexure I and the recording of our conclusion in relation to each item of advance in the light of such discussion. 2. This judgment being one only in supplementation of our main judgment, its scope will be strictly confined to a discussion of the facts and circumstances relating to each of the transactions mentioned in Annexure I and the recording of our conclusion in relation to each item of advance in the light of such discussion. 2. We have made it clear in the main judgment that there is, in our view, no substance in the contention put, forward on behalf of the appellants that the learned trial Judge has applied his mind only to the facts and circumstances relating to the few items of advances specifically dealt with by him in his judgment and that his conclusions regarding the remaining items listed in Annexure I are based only on the results of a process of survey by sampling and not on a scrutiny of the facts relating to those items. Despite the apparent lack of co-operation and attitude of Indifference on the part of the Directors in regard to the proceedings before the learned trial Judge-they never cared to adduce any evidence or to place any material before the trial court even with respect to matters which were within their special knowledge and not even counter-affidavits were filed by any of the Directors other than the 1st and 4th respondents controverting the facts stated in the Liquidator's affidavit dated the 12th March, 1965-the learned Judge, as mentioned by him in his judgment, had examined for him self the facts and circumstances relating to all the transactions listed in Annexure I. It was only after his being satisfied on such examination that none of the remaining items stood on a better footing from the point of view of the Directors than those selected by him for discussion in the judgment that he decided to limit the detailed discussion in the judgment to the facts relationg to those items. However even though we were fully satisfied that the complaint voiced by the appellants was completely devoid of any merit or justification, we made it clear to the appellant's counsel that as a court of first appeal we were prepared to examine the facts relating to every one of the items listed in Annexure I so that there may not be any further room for parties to have any feeling or impression, however wrong, that all the items have not been individually examined by the court. We, therefore, invited counsel to take us through the documentary evidence relating to each of the 329 items mentioned in Annexure I and it was accordingly done. In regard to some of the items counsel for the appellants frankly stated that they had no serious contentions whatever to advance against the finding entered by the learned Single Judge to the effect that they evidence bad and irrecoverable advances. Accordingly no arguments were put forward before us with respect to those items and hence there is no necessity to refer to the facts relating to them in the discussion to follow. The items in Annexure I in regard to which no contentions were thus put forward before us by the counsel for the appellants are Item numbers 7, 44, 70, 71, 72, 77, 79, 80, 86, 87, 102, 103, 105, 111 to 121, 125, 126, 139 to 145, 146 to 161, 165 to 167, 169 to 178, 180, 181, 183, 189, 262 to 267, 269, 273 to 283, 298, 300, 302, 305 to 308 and 317 to 329. 3. We have indicated in the main judgment that we are in complete agreement with the conclusion of the learned trial Judge with respect to all the items of advances specifically discussed by him and it is not, therefore, proposed to deal with any of those items in this judgment since the facts relating to those advances have been fully set out in the judgment under appeal. We will now proceed to discuss the remaining items in Annexure I. 4. In the remarks column in Annexure I the Liquidator has mentioned against each item the facts relating to the particular advance so far as they could be gathered from the books and documents of the Bank. We will now proceed to discuss the remaining items in Annexure I. 4. In the remarks column in Annexure I the Liquidator has mentioned against each item the facts relating to the particular advance so far as they could be gathered from the books and documents of the Bank. The correctness of these facts has not been disputed before us on behalf of the appellants in regard to any of the items. 5. Item 1.”Item 1 comprises the amounts due to the Bank under two accounts, the first a joint account in the name of M. P. Fernandez and his wife Mrs. Annie Fernandez in which the balance outstanding as on 8th August 1960 was Rs. 17,61,952, and the second an account in the name of M. P. Fernandez alone under which an amount of Rs. 3,99,533 was due to the Bank as on the aforesaid date. The transaction with Mr. Fernandez commenced with an overdraft account opened with the Quilon Branch of the Bank in 1944 in which advances had been allowed to him by the Bank without any security. Rs. 6,99,223 was due to the Bank under this account in 1947. On 14th November 1947 this was converted into loan account in the joint names of Mr. and Mrs. Fernandez, the loan account opening with the debit balance of Rs. 6,99,223. No security was taken from the parties even at the time when this account was opened. Excepting for a sum of Rs. 30,573 which was credited to the account on 27th January 1949 by way of sale proceeds of the Bank's cash credit certificates there were no other repayments at all in the account during 1948, 1949 and 1950. In 1950 the borrowers executed a mortgage of their properties in favour of the Bank whereupon the Bank agreed to advance further amounts to them. Accordingly further advances were allowed in the overdraft account in the name of Mr. Fernandez and this is the second account forming part of Item 1 whereunder nearly four lakhs of rupees was due to the Bank as on 8th August 1960. In the first account, namely, the loan account in the joint names of Mr. and Mrs. Fernandez, an amount of Rs. 12,950 was credited by them in 1951, two credits aggregating to Rs. 1,190 were made in 1952 and during the period 1953-60 the total amount credited was only Rs. 425. In the first account, namely, the loan account in the joint names of Mr. and Mrs. Fernandez, an amount of Rs. 12,950 was credited by them in 1951, two credits aggregating to Rs. 1,190 were made in 1952 and during the period 1953-60 the total amount credited was only Rs. 425. The properties mortgaged to the Bank had been purchased by the borrowers a few years prior to the mortgage for an aggregate amount of only about Rs. 1,10,000. It has to be remembered that the opening debit in the loan account even in 1947 was very nearly Rs. 7,00,000 and further advances also were made to the party to the tune of nearly Rs. 2,00,000 after taking the mortgage. As on 31st December 1949 the amount due in the loan account was about Rs. 8,36,580. It is seen from Ext. P-4 that the value of the mortgaged properties was estimated by the Bank's advocate at Rs. 6,37,575 in December, 1954. Even if it is to be assumed that this amount represents a correct or reasonable valuation of the properties as at the time of the mortgage, considering the dormant nature of the account and the scanty repayments made by the borrowers during the period from 1944 to 1950, the security was manifestly inadequate even to cover the existing liability on which interest was accumulating day by day. There is the further circumstance that while taking the mortgage a commitment had been entered into by the Bank to allow additional overdrafts to the parties of about Rs. 1,00,000 and as a result of honouring this, additional liability under account No. 2 to the tune of nearly Rs. 4,00,000 has also become due. 6. As we have already seen, the above advances when initially made were totally unsecured and were, therefore, prima facie imprudent, reckless and bad. Counsel appearing for the appellants has not been able to point out anything in the evidence which would show that before advancing such large amounts without any security any enquiry had been made either by the Bank's head office or by the Quilon Branch regarding the financial condition and credit- worthiness of the borrowers. Counsel appearing for the appellants has not been able to point out anything in the evidence which would show that before advancing such large amounts without any security any enquiry had been made either by the Bank's head office or by the Quilon Branch regarding the financial condition and credit- worthiness of the borrowers. Even at the time when the mortgage was taken in 1950 the situation was not effectively remedied because the borrowers had no properties other than those included in the mortgage and hence it was a certainty that the further amounts which were promised to be advanced to them as well as the interest accruing due in future on the advances which had been already made would both remain totally unsecured. In 1955 when the amount due from the parties under the two accounts stood at Rs. 14,04,951, the Bank agreed to accept a sum of Rs. 9,00,000 from them in full settlement of its dues. This payment was to be spread over a period of 10 years and the total interest for the said period was fixed by the Bank at Rs. 2,00,000. This arrangement did not how- ever fructify. But what is noteworthy is that even after the Bank had realised that the full amount due could never be recovered from the borrowers the Bank continued to charge interest on the entire balance and took credit therefor in its profit and loss accounts right up till the very end. Subsequent to the winding up order, a compromise decree has been passed against the borrowers by the winding up court for Rs. 9,00,000 subject to the condition that full satisfaction will be recorded if they pay Rs. 7 ½ lakhs by 31st March 1969. 7. On the facts and circumstances mentioned above we have absolutely no hesitation to agree with the Liquidator's contention that the advances made in the two accounts mentioned in Item 1 of Annexure I were imprudent, reckless and bad transactions. 8. The facts relating to Items 2 to 5 have been discussed and considered in the judgment of the learned Single Judge. 9. Item 6: A loan account was opened in the Quilon Branch of the Bank in the joint names of Mr. & Mrs. P. V. Eapen on 15th November 1947 with a debit entry of Rs. 1,43,498. 8. The facts relating to Items 2 to 5 have been discussed and considered in the judgment of the learned Single Judge. 9. Item 6: A loan account was opened in the Quilon Branch of the Bank in the joint names of Mr. & Mrs. P. V. Eapen on 15th November 1947 with a debit entry of Rs. 1,43,498. There had been earlier advances granted by the Bank in the accounts of one Mr. P. V. Eapen and of a Company byname Premier Planters Ltd. These accounts which were unsecured had become dormant and the debit in the newly opened loan account represented the balance due under these earlier accounts. A registered mortgage of all the properties of the borrowers (Mr. and Mrs. Eapen) was taken by the Bank at the time of opening the loan account. The value of these properties as estimated by the Bank's lawyer in 1954 was only Rs. 70,000, though as per an earlier valuation made by the Bank in 1951 it was estimated at Rs. 75,000. As such it is clear that even in 1947 when the loan account was opened with a debit of Rs. 1,43,498 the said account was to a very large extent unsecured. There were no repayments at all in the account ever since it was opened in 1947 and the amount due from the parties as on 8th August 1960 was Rs. 3,77,047. There being nothing in the records of the Bank to indicate that any inquiry whatever had been made about the nature and extent of the assets of the borrowers and their financial condition before large unsecured advances were given to them. We hold that this was a bad and imprudent advance. 10. The next item to be considered is Item 9, under which an amount of Rs. 1,75,944 was due to the Quilon Branch of the Bank as on 8th August 1960 from the borrower one Sri P. Raghavan Pillai. A loan account was opened in the name of this party on 10th October 1949 with a debit of Rs. 1,03,000 which amount represented the aggregate of the balances due from him in different accounts in which advances had been allowed to him earlier. No security was taken from him even at the time of the opening of the loan account. In Ext. 1,03,000 which amount represented the aggregate of the balances due from him in different accounts in which advances had been allowed to him earlier. No security was taken from him even at the time of the opening of the loan account. In Ext. P-63 dated 1st March 1955 the Bank's lawyer reported that the aggregate value of all the properties standing in the name of the borrower amounted to only about Rs. 5,700 and that party was also indebted to another Bank jointly along with his wife to the extent of Rs. 50,000. He accordingly advised the Bank to accept Rs. 20,000 from the debtor in full settlement, as in his opinion there was no possibility of realising any larger amounts from him. Nothing further transpired pursuant to this suggestion. Interest continued to be charged in the account even though there had not been any repayment in the account by the party and the Bank knew that there was little possibility of recovering from the party even the principal amount originally advanced in the loan account. In 1958 an amount of Rs. 25,000 was accepted by the Bank in full settlement from the party and in consideration thereof certain attachments effected by it over the properties of the debtor were withdrawn and an insolvency proceeding initiated against the party was also dropped. The amount of Rs. 1,75,944 mentioned by the Liquidator in Annexure I represents the loss suffered by the Bank after giving credit to the above payment of Rs. 25,000. On the facts disclosed by the records we feel no doubt that this was a manifestly imprudent and reckless advance. 11. Item 10 relates to advances made by the Quilon Branch of the Bank to one Yoonus Kunju in two accounts. Both the accounts were unsecured. The party was a chitty foreman and he was allowed overdrafts in these two accounts without any security whatever. The balance due in the accounts as on 31st December 1949 stood at Rs. 75,569. Although the Bank filed a suit against the debtor and obtained a decree in O.S. 36 of 1125 of the District Court, Quilon nothing could be realised in execution. As seen from Ext. P-72(a), a letter sent to the Bank by its advocate in Quilon, the judgment-debtor had many other creditors who had also obtained decrees against him and attached all his properties. As seen from Ext. P-72(a), a letter sent to the Bank by its advocate in Quilon, the judgment-debtor had many other creditors who had also obtained decrees against him and attached all his properties. Subsequently the party was adjudged an insolvent in LP. 10 of 1125 and his properties were brought to sale by the Official Receiver. Notwithstanding this, very strangely, the Bank continued to charge interest to the account and regularly took credit therefor in its profit and loss accounts right up to 1959. Even after the Bank had filed a claim with the Official Receiver in the insolvency proceedings no part of the advance was treated by it as bad or doubtful of recovery for the purposes of its annual balance sheet. The pro rata share received by the Bank from out of the realisations made by the Official Receiver by sale of the properties of the insolvent amounted only to Rs. 13,033. The balance due in account No. 1 as on 8th August 1960 after giving credit to the above was Rs. 1,33,495 and that in account No. 2 was Rs. 3,691. No reasonable or prudent person would advance such large sums to a party without any security except after making full enquiries about the borrower's creditworthiness and being satisfied that he is a person possessed of sufficient properties and of undoubtful business honesty and integrity. The records do not disclose that any such enquiry at all had been conducted before this transaction was entered into. We are clearly of the view that this advance was also a bad and reckless transaction and that the balance remaining due as on the date of winding up is irrecoverable. 12. Item 11 is yet another instance where loan account was opened in the Quilon Branch with a debit representing the balance due in respect of unsecured advances made earlier in other overdraft accounts. In this case the loan account was opened on 23rd December 1947 in the joint names of one N. Sreenivasa Iyer and his son Balasubramonia Iyer with a debit of Rs. 41,374. On the date of opening this account besides the amount covered by the debit entry a further amount of about Rs. 15,000 was also due from the parties under another account. The balance in the two accounts together stood at Rs. 56,119 as on 31st December 1949. 41,374. On the date of opening this account besides the amount covered by the debit entry a further amount of about Rs. 15,000 was also due from the parties under another account. The balance in the two accounts together stood at Rs. 56,119 as on 31st December 1949. When the loan account was opened the Bank obtained a second mortgage over certain immovable properties belonging to the borrowers which were already subject to a prior encumbrance. The value of these properties was estimated by the Bank at only Rs. 40,000 in 1951. Hence it is clear that even at the time when the loan account was opened the security was absolutely inadequate to cover the amounts due to the Bank from the borrowers, because even if the above valuation of the properties made by the Bank is regarded as a correct estimate the claim of the prior encumbrances had to be first satisfied before the Bank could have the benefit of the security. At a court auction sale conducted after the winding up order those properties fetched only Rs. 39,250 out of which Rs. 15,000 had to be paid to the prior mortgagee and only the balance of Rs. 24,250 was available to the Bank as against the aggregate amount of Rs. 1,20,022 due as on 8th August 1960. The advances when they were initially made were given without any security. No prior enquiry into the financial condition or the assets of the borrower appears to have been made before the amounts were advanced to them without any security. Even at the time of converting the outstanding balance into a new loan account the Bank does not appear to have taken any steps to ascertain the value of the properties over which the mortgage was executed in its favour. It was only in 1950 more than three years after the opening of the loan account and the acceptance of the mortgage that an attempt was made for the first time to value the mortgaged properties and then it was discovered that the total value of those properties was only about Rs. 40,000 and there was already a prior encumbrance to the extent of nearly Rs. 15,000. The only conclusion possible on these facts is that this item also represents a bad and imprudent advance. 13. 40,000 and there was already a prior encumbrance to the extent of nearly Rs. 15,000. The only conclusion possible on these facts is that this item also represents a bad and imprudent advance. 13. Item 12 has been considered by the learned Single Judge and hence we will pass on to Item 13. Item 12 has been learned by the single Judger and hence we will pass on to Item 13. A loan account was opened in the Quilon Branch on 19th December 1947 in the joint names of one Rs. 43,634 representing the balance outstanding in two other accounts in which advances have been allowed to them earlier. Even at the time of the outstanding liability converting into a new loan account no security whatever was taken from the parties. Excepting for a small amount of Rs. 533 which was credited to the account in 1950 by transfer from the current account of the party there was no other repayment whatever in the loan account. In February 1951 the manager of the Quilon Branch reported to the head office of the Bank that the borrowers had no assets whatever and that therefore a major portion of the advance would have to be written off and he suggested that the outstanding balance should be classified as doubtful of recovery. In spite of this, however, the Bank continued to charge interest to the account and to credit the same in its profit and loss account right through treating the advance as fully realisable for the purpose of the annual balance sheet. In Ext. P-84 dated 24th September 1958 the Branch Manager again reported to the head office that the only property owned by Mr. Vasudevan Nair consisted of 6 parahs of paddy land at Kayamkulam which was already mortgaged to the Cochin Nayar Bank Ltd. for Rs. 18,000. It was further stated that the party had other debts also and that his wife had no assets of her own. The Bank filed O.S. 36 of 1958 against the borrowers and though a compromise decree was passed no portion of the decree amount could be realised from the judgment-debtors. Vasudevan Nair filed D.R.P. No. 1 of I960 claiming protection under the Kerala Agriculturists Debt Relief Act stating that his debts far exceeded his assets. We hold that this advance which was also one made without any enquiry was absolutely reckless and imprudent. Vasudevan Nair filed D.R.P. No. 1 of I960 claiming protection under the Kerala Agriculturists Debt Relief Act stating that his debts far exceeded his assets. We hold that this advance which was also one made without any enquiry was absolutely reckless and imprudent. 14. The facts relating to Item 14 are similar. There was an overdraft account with the Quilon Branch in the name of one P. P. C. Mohamed which had become dormant in 1948. It was an unsecured account and in 1953 the Bank converted the balance outstanding in that account into a new loan account in the name of the same party, the loan account being opened with a debit entry representing the balance outstanding in the overdraft account. Even at the time of such conversion no security was obtained from the party. Excepting for a paltry sum of Rs. 13 credited to the account on the 8th December, 1950, there had been no repayments whatever in the overdraft account since 1950. Further, even in Februaryl951, the Branch Manager had reported to the head office that the party had no assets and that the chances of realisation were very meagre and he had therefore recfuested for the sanction of the head office to treat the outstanding balance as doubtful of recovery. It was in this background that the Bank chose to convert the outstanding balance into a new loan account in 1953. In 1957 insolvency proceedings were initiated against the borrower and he was adjudicated insolvent on the 9th September, 1958. In spite of this the Bank continued to charge interest to the account right till the very end and credit was taken for the interest so charged in preparing the profit and loss accounts during all these years. The advance was throughout treated as full realisable for balance sheet purposes. The borrower who had been adjudged insolvent was found to have no assets and was subsequently discharged. We feel no doubt that this item of advance has to be regarded as an unsound and reckless transaction. 15. Item 15 is yet another instance where the balance due under earlier unsecured accounts of a party which had become dormant was converted into a fresh loan account, the new account starting with a debit representing the outstanding balance under the earlier accounts. 15. Item 15 is yet another instance where the balance due under earlier unsecured accounts of a party which had become dormant was converted into a fresh loan account, the new account starting with a debit representing the outstanding balance under the earlier accounts. In this case the loan account was opened in the Quilon Branch on 8th June 1950 with debit of Rs. 28,000 representing the amount due by the party in an overdraft account in which advance had been allowed earlier the account having become dormant from the year 1948. At the time of opening this loan account a second mortgage was taken by the Bank over . certain properties belonging to the borrower which were subject to a prior encumbrance to the extent of Rs. 36,500. The Bank subsequently instituted a suit against the borrower as O.S. 11 of 1956 of the Sub Court, Quilon. It ended in a compromise decree dated the 15th September, 1958, under which the Bank agreed to accept Rs. 28,000 in full settlement of its claims. The amount dud in the account as on 8th August 1960 was Rs. 67,269. The advances consisting of large amounts of the Bank's funds were initially made to this party without any security and even at the time of conversion of the earlier account into a loan account the security that was taken was wholly inadequate with the result that the Bank has suffered a loss of more than Rs. 36,000, an amount of Rs .30,581 having been realised by the Liquidator in full settlement of the Bank's claims under the compromise decree subsequent to the judgment of the learned trial Judge. We have no hesitation to hold that this transaction is yet another instance of a bad and reckless advance 16. Item 16 relates to an unsecured loan account opened by the Quilon Branch in the name of J. L. Pemanda and Sons on the 27th April, 1946, with a debit of Rs. 20,000 which amount obviously represents the balance outstanding in prior unsecured accounts which had become dormant. There were no repayments at all in the loan account. There was also another clean overdraft account in respect of the same party which also had become dormant after 1947. 20,000 which amount obviously represents the balance outstanding in prior unsecured accounts which had become dormant. There were no repayments at all in the loan account. There was also another clean overdraft account in respect of the same party which also had become dormant after 1947. The Bank sued the debtor by instituting O.S. 154 of 1951 in the District Court, Quilon and obtained a decree and two items of properties belonging to him were attached but as seen from Ext. P-94 they were already subject to a prior attachment by another creditor. Ultimately a compromise was entered into in 1957 under which a sum of Rs. 20,566, inclusive of Rs. 13,000 being the value of certain properties transferred by the debtor to the Bank, was credited to the account in full settlement of the due and the decree was struck off. The balance outstanding dues in the account at that time was more than Rs. 65,000. Strangely enough, even after such acceptance of a such smaller amount in full settlement the outstanding balance due as per the accounts continued to be shown as still outstanding and due to the Bank for the purposes of annual balance sheet. The above facts taken along with the circumstance that the advances had been made without taking the least care to ascertain the creditworthiness of the borrower and the nature and extent of his assets and liabilities lead us only to the conclusion that this was not a prudent transaction but was on the other hand a bad and reckless one. 17. Item 17 has been considered by the learned Judge and has been held to be not a bad transaction. Item 18 partakes of the same pattern as most of the advances already discussed above. Here, a loan account was opened in the name of one Scaria John on 26th November 1949 with a debit entry of Rs. 23,000 but unlike in the other instances the earlier account was not closed with the opening of the new loan account, but instead what was done was to credit the sum of Rs. 23,000 debited in the loan account to an overdraft account of the party which was also kept current. Both these accounts were completely unsecured. 23,000 but unlike in the other instances the earlier account was not closed with the opening of the new loan account, but instead what was done was to credit the sum of Rs. 23,000 debited in the loan account to an overdraft account of the party which was also kept current. Both these accounts were completely unsecured. There is nothing in the records of the Bank to show that before making the advances any enquiries had been made about the financial condition of the borrower. There were no repayments in the loan account. The Bank filed O.S. 154 of 1954 in the District Court, Kottayam and obtained a decree. The only property which the borrower possessed was brought to sale in execution of this decree and was purchased by the Bank in 1959, for Rs. 8,000. The amount outstanding due in the account as on 8th August 1960 -was Rs. 48,896 and since the borrower has absolutely no other assets, no part of this is recoverable. On the facts stated above the conclusion is irresistible that this is another instance of a bad and imprudent advance. 18. Coming to Item 19, this is a case where an unsecured loan of Rs- 23,000 was advanced by the Quilon Branch of the Bank to one A.X.S.M. Bukkary on the 23rd March, 1949. There were no repayments at all in the account after March, 1950 and the balance due as on 8th August 1960 was Rs. 47,869. It has come out in the proceedings initiated by the borrower under the Travancore Debt Relief Act as D.R.P. 6 of 1969 that the only assets possessed by him consisted of 44 cents of land, the value of which was estimated by the Bank itself at only Rs. 1,500. The lending of a large amount to such a party without any security and without making any enquiries whatever about his financial position-there is nothing in the records of the Bank to show that any such enquiry had been made cannot but be characterised as a culpably negligent and reckless transaction. 19. Item 20 has been considered by the learned Single Judge. Hence I pass on to Item 21. The borrower, namely one Sri K. S. Karunakaran Pillai had an unsecured overdraft account with the Quilon Branch of the Bank. 19. Item 20 has been considered by the learned Single Judge. Hence I pass on to Item 21. The borrower, namely one Sri K. S. Karunakaran Pillai had an unsecured overdraft account with the Quilon Branch of the Bank. On 17th May 1951 it was converted into a loan account, a demand promissory note being taken from him on that day for Rs.16,100 representing the balance due in the earlier overdraft account. No security was taken from the party even at the time of opening of the new loan account nor is any enquiry seen to have been made at least at that time about his assets or creditworthiness. There were no repayments whatever in this loan account as is seen from the ledger Ext. P-1093. A suit O. S. 112 of 1953 was filed by the Bank in the District Court, Quilon and a decree was obtained but in execution proceedings the court found that the judgment-debtor was not possessed of means and hence personal execution was refused. As is seen from the Inspection Report Ext. P-105 dated 25th January 1960 the only property possessed by him was 42 cents of paddy land which was found to be already fully encumbered and hence there was little prospect of the Bank being able to realise anything worthwhile by proceeding against that property. The balance due under this account as on 8th August I960 was Rs. 30,351. We hold that this was also a bad and reckless advance. 20. Item 22 relates to an overdraft account in the Quilon Branch in the name of one P. Veloo Pillai. The only security which the Bank had was a charge over the machinery installed in an oil mill belonging to the party. In 1949 the Branch Manager informed the head office of the Bank that the machinery if sold will not fetch even half of the amount which was then due to the Bank under the said account. In 1952 in execution of the decree which the Bank obtained against the borrower (O. S. 100 of 1950) the charged property was brought to sale and it was purchased by the Bank itself for Rs. 4,277. It is, however, noteworthy that when the same machinery was subsequently sold by the Liquidator it fetched only Rs. 1,058. The borrower has no other assets. 4,277. It is, however, noteworthy that when the same machinery was subsequently sold by the Liquidator it fetched only Rs. 1,058. The borrower has no other assets. The balance due to the Bank as on 8th August 1960 was Rs. 24,809 and there is no scope for realising any portion thereof. Here again our attention has not been drawn by the appellants' counsel to anything in the records and documents of the Bank which would show that any enquiry whatever had been made about the financial condition of the borrower before the amounts were advanced to him without any substantial security. The only conclusion possible on the facts and circumstances relating to the transaction is that it was clearly a bad and reckless advance. 21. Item 23 relates to an overdraft account in the name of one A. Alexander. It was completely unsecured. The account had become dormant after 1946 and the Bank's claims against the party had become barred by limitation in September, 1949 as is seen from the report Ext. P-109 dated 29th March 1949 sent to the head office by the Manager of the Quilon Branch wherein it is stated that the borrower was dead, that the Bank did not have even a promissory note as collateral security and that the account would become time-barred by September, 1949. In 1951 the Branch Manager again wrote to the head office suggesting that the outstanding balance in the account should be treated as bad. Nevertheless the Bank continued to charge the interest to the account till June, 1956 and took credit for it in its profit and loss account. In this connection, reference may also be made to Ext. P-776 which is a letter dated 21st July 1956 sent to the Managing Director by the Manager of the Quilon Branch wherein he has furnished to the head office details regarding 5 accounts which were in his view absolutely irrecoverable debts. The present transaction is the first item mentioned by him and in relation to that it is reiterated by the 4 Manager that the party (Alexander) had died in 1948, that he was a bankrupt at the time of his death. It is further stated that there was not even any document in the Bank's possession in support of the account and that the account had already become time-barred. It is further stated that there was not even any document in the Bank's possession in support of the account and that the account had already become time-barred. The Manager recommended that the entire amount may be written off as it was completely irrecoverable. The facts mentioned above are absolutely revealing and lead only to the conclusion that this was a bad and imprudent advance. 22. Item 24.”There was an unsecured overdraft account in the Quilon Branch in the name of one C. B. Peter which had become dormant after 1947. It was converted into a loan account in May, 1949, but no security whatever was obtained from the party even then. The report sent by the Branch Manager even in April, 1949 was to the effect that the only asset possessed by the party consisted of an extent of 20 cents of land which was already subject to prior encumbrances. In February, 1951, a further report was sent by the Branch Manager to the head office stating that there was absolutely no chance of recovering any portion of the amount due by the borrower. In his subsequent report dated 7th April 1959 (Ext. P-111) the Branch Manager informed the head office that the balance then due in the account was Rs. 17,000 and that the Bank had not taken even a promissory note from the borrower as collateral security. It was also stated that the only property which was owned by the debtor was an extent of 20 cents of land which had been already successively mortgaged of two different parties for an aggregate amount of Rs. 5,500 and that the value of the property was not sufficient even to meet these charged debts. The Bank filed a suit O. S. 41 of 1959 against the party in 1959 but it was dismissed by the court on the ground that the claim had already become time-barred. It is clear from the facts set out above that this advance was also a highly imprudent and bad transaction. 23. Item 25 is one of the transactions discussed by the learned single Judge and held to be a good advance and hence we shall pass on to Item 26. This relates to an unsecured overdraft account in the name of one Mrs. Mohamuda. A reference to the ledger Ext. 23. Item 25 is one of the transactions discussed by the learned single Judge and held to be a good advance and hence we shall pass on to Item 26. This relates to an unsecured overdraft account in the name of one Mrs. Mohamuda. A reference to the ledger Ext. P-1098 shows that in January, 1948, there was only a small debit balance of Rs. 33 and odd in this account. But thereafter there were a large number of overdrawings. It is seen from Ext. P-l 14 a letter dated 19th June 1958 sent by the Manager of the Quilon Branch to the head office of the Bank that the borrower had no assets at all and that there was no chance of realising any portion of the debt from her. The balance outstanding due in the account as on 8th August 1960 was Rs. 14,811 and no portion of it is recoverable. Counsel appearing for the appellants was not able to point out anything in the records of either the Quilon Branch or of the head office which would show that any kind of enquiry regarding the borrower's financial position or assets had been made before making the unsecured advances. There can be no doubt that this was also a bad and reckless advance 24. Item 27 relates to advances made by the Quilon Branch in an overdraft account in the name of one Moideen Kutty. No security had been taken from the borrower. A perusal of the ledger Ext. P-l099 shows that on 12th January 1948 there was a credit balance of Rs. 110 in this account. Thereafter there were a number of overdrawings without any repayments whatever by the party after 1948 excepting for a very small amount of Rs. 12 and odd. The Bank filed a suit O.S. 96 of 1953 and obtained a decree against the debtor, but nothing could be realised since the whereabouts of the borrower were unknown and he had no assets. As in the case of the other advances which we have hitherto discussed, in respect of this transaction also there is nothing in the records or documents of the Bank to show that any enquiry whatever had been made into the financial position and creditworthiness of the party before he was allowed clean overdraft facility. As in the case of the other advances which we have hitherto discussed, in respect of this transaction also there is nothing in the records or documents of the Bank to show that any enquiry whatever had been made into the financial position and creditworthiness of the party before he was allowed clean overdraft facility. On the facts and circumstances disclosed by the records this transaction has also to be held to be a bad and reckless one. 25. Item 28 relates to a demand promissory note loan advanced to one Yoosuf Kunju on 23rd March 1949 without any security. The borrower was adjudged insolvent in I.P. No. 2 of 1958. According to the statements in the insolvency petition [Ext. P-116 (a)] his total debts amounted to Rs. 37,065, while the aggregate value of all his assets was estimated to be only Rs. 9,054. Hence at best only a dividend of 25 per cent can be expected to be received and the Liquidator has rightly treated the balance as irrecoverable. No further discussion is necessary to show that this was an imprudent and bad advance. 26. Item 29 relates to another unsecured demand promissory note loan advanced by the Quilon Branch jointly in favour of V. G. Mathew and V. C. Alexander. The Bank filed a suit O.S. 71 of 1950 and obtained a decree against the borrowers for Rs. 7,059-14-5. It is seen from the inspection report Ext. P-117 that the whereabouts of the first judgment-debtor, namely Mr. Mathew were unknown and that neither of the judgment-debtors was possessed of any property from out of which any portion of the decree debt could be recovered. The amount due as on 8th August 1960 was Rs. 12,287. We have no hesitation to hold that this was yet another bad advance which is wholly irrecoverable. 27. The transaction forming the subject-matter of Item 30 is a demand promissory note loan advanced to one M.J. John on 21st March 1949. He had given only two life insurance policies for an aggregate amount of Rs. 2,000 as security for the loan whereas the amount due to the Bank in this account as on 8th August 1960 was Rs. 12,262. He had given only two life insurance policies for an aggregate amount of Rs. 2,000 as security for the loan whereas the amount due to the Bank in this account as on 8th August 1960 was Rs. 12,262. The Branch Manager, Thiruvalla reported to the head office on 20th February 1951 that the borrower had no assets, that his whereabouts were not known and that the advance may therefore be treated as doubtful of recovery. This was again repeated by the Branch Manager in his subsequent report to the head office, Ext. P-118 dated 4th July 1955. Despite these reports, the Bank continued to charge interest to this account treating the advance as fully realisable for the purpose of the annual balance-sheets. Although the Bank obtained a decree against the borrower in O. S. 31 of 1953 nothing could be recovered in execution since the whereabouts of the judgment-debtor were unknown even from 1950 onwards. As in the case of the rest of the advances hereinbefore discussed, this transaction also was entered into without making any enquiry about the financial position and creditworthiness of the borrower. This advance also has to be regarded as a reckless transaction. 28. Item 31 relates to a loan account in the Quilon Branch in the name of one Shaik Davood on 24th March 1949. The loan account was opened with a debit entry of Rs. 7,080 representing the balance due in an earlier overdraft account which had become dormant. Even at the time of converting it into a fresh loan account no security at all was taken from the party. As early as on 20th February 1951 the Manager of the Quilon Branch reported to the head office that the borrower had died leaving no assets and that the advance should, therefore, be regarded as a bad debt. By Ext. P-l 19 dated 7th May 1957 the Branch Manager again wrote to the head office stating that there was not even any document to support the account and that no recovery was at all possible since the debt had also become time-barred by 1957. The amount due in this account as on 8th August 1960 was Rs. 11,285. This advance is also on a part with the other advances which we have found to be bad and irrecoverable. 29. The amount due in this account as on 8th August 1960 was Rs. 11,285. This advance is also on a part with the other advances which we have found to be bad and irrecoverable. 29. Item 32 relates to a demand promissory note loan advanced to one Geevarghese on 24th March 1949. Initially this was an unsecured transaction. Subsequently the Bank obtained a mortgage from the party over one item of immovable property which was the only asset owned by him. A suit O.S. 123 of 1957 was filed against him and in execution of the decree obtained by the Bank the mortgaged property was brought to sale and was purchased by the Bank itself. The balance outstanding in the account as on 8th August 1950, which is irrecoverable, amounted to Rs. 11,499. On the facts narrated above it is not possible to regard this transaction as a sound or prudent advance but on the contrary it has to be held to be a reckless one particularly since there is nothing in the records of the Bank to show that any enquiry whatever had been made into the financial position of the borrower at the time of making the advance and the security which was subsequently taken from him was inadequate. 30. Item 33 relates to another demand promissory note transaction whereunder Rs. 3,825 was advanced by the Quilon Branch to one Paul Francis on 21st March 1949 without any security. The Branch Manager, Quilon reported to the head office as early as in February, 1951, that the party had neither any status nor assets and that the debt should therefore be treated as doubtful of recovery. The Bank obtained a decree against the borrower in O.S. 15 of 1952 but nothing could be recovered in execution since there were no assets belonging to the judgment-debtor which could be proceeded against. The amount outstanding as on 8th August 1960 was Rs. 8,810. We are unable to see how this transaction can be regarded as anything other than an imprudent and bad advance. 31. The advance forming the subject-matter of Item 34 was made by the Quilon Branch to one Ahamed Koya against a demand promissory note dated 24th March 1949 without taking any security. The debtor was adjudged as an insolvent in IP. No. 64 of 1954 but as seen from the District Court's order Ext. 31. The advance forming the subject-matter of Item 34 was made by the Quilon Branch to one Ahamed Koya against a demand promissory note dated 24th March 1949 without taking any security. The debtor was adjudged as an insolvent in IP. No. 64 of 1954 but as seen from the District Court's order Ext. P-l23 he was subsequently discharged as the court found him to be possessed of no assets. Significantly enough, the Bank continued to charge interest to the account even after the order of discharge. There is not the slightest doubt that this was an imprudent and bad advance made without any enquiry or care and that the amount is wholly irrecoverable. 32. Item 35 relates to advances made by the Quilon Branch to one P. V. Thomas in a clean overdraft account. Though the account began with a credit entry dated 26th July 1946 for Rs. 750 there were a number of over drawings thereafter. It is seen from the ledger Ext. P-l 107 that there were no credits at all in the account after 24th September 1947. The Bank filed a suit O.S.43 of 1950 against the borrower and in execution of the decree obtained therein the only property belonging to him was brought to sale and purchased by the Bank. Since there were either creditors also who claimed rateable distribution of the sale proceeds the Bank received only its share in such distribution as is seen from the letter Ext. P-124 sent to the Bank by its Advocate where it was also stated that there was little prospect of recovering the balance amount due in the account. The balance due as on 8th August 1960 was Rs. 6,548. We hold that this was also a bad advance, since it had been made without conducting any prior enquiry about the creditworthiness of the borrower. 33. Item 36 relates to an unsecured advance made by the Quilon Branch to one C. Machado by making a telegraphic transfer of a substantial amount to Cochin without receiving any cash from the party. It is seen from Ext. P-125 that the party when contacted refused to honour his liability and the Bank took no action for the recovery of the amount from him but instead allowed the debt to become time-barred. It is seen from Ext. P-125 that the party when contacted refused to honour his liability and the Bank took no action for the recovery of the amount from him but instead allowed the debt to become time-barred. On the evidence before us it has to be held that this is another instance of a reckless dealing with the Bank's funds. 34. Item 37 relates to a demand promissory note loan transaction dated 13th October 1949 whereunder an amount of Rs. 1,862 was advanced by the Quilon Branch to one Sankaralingam Chettiar jointly with one P. A. Chettiar without taking any security. Although the Bank filed a suit O.S. 14 of 1952 and obtained a decree against the borrowers on 27th July 1952 nothing could be recovered in execution since the judgment-debtors had no assets. It was. reported by the Branch Manager in Ext. P-126 that Sankaralingam Chettiar had died and even the whereabouts of P. A. Chettiar were unknown. The balance due in the account as on 8th August 1960 was Rs. 4,610 and the Liquidator is fully justified in treating the entire amount as irrecoverable. We are of opinion that on the facts disclosed by the records this advance must be held to be an unsound and imprudent transaction. 35. Item 38 is another instance where unsecured overdraft facility was allowed by the Quilon Branch to a person who was shortly afterwards adjudged as an insolvent. The borrower in this case was one Abdul Khader and he was adjudicated as insolvent by the District Court, Quilon in LP. 6 of 1954. The Bank did not consider it worthwhile preferring a claim before the insolvency court since the party was not possessed of any means. The court also found him to be not possessed of assets and hence he was discharged. There is no doubt that the advance was made without any care or enquiry and was recklessly made. Hence it must be regarded as a bad transaction. The advance forming the subject-matter of item 39 was made jointly to K. P. Raghavan Nair and E. Bhaskaran Pillai against the purchase of certain bills. Those bills were subsequently dishonoured. The debt was completely unsecured. The Bank filed a suit O.S. 1445 of 1125 and obtained a decree against the borrowers. It is seen from Ext. The advance forming the subject-matter of item 39 was made jointly to K. P. Raghavan Nair and E. Bhaskaran Pillai against the purchase of certain bills. Those bills were subsequently dishonoured. The debt was completely unsecured. The Bank filed a suit O.S. 1445 of 1125 and obtained a decree against the borrowers. It is seen from Ext. P-129 that although the first judgment-debtor was arrested in execution he escaped from custody and his whereabouts were thereafter unknown. The second judgment-debtor was found to be a person possessed of no means whatever. The advance made to such persons without any enquiry and without taking any security has to be characterised as imprudent and bad. 37. Item 40 relates to a demand promissory note loan advanced to Shahul Hameed and Mohammed Mohideen on 15th June 1949. Excepting for a Life Insurance Policy the borrowers had not given any other security. A decree was obtained against them in O.S. 256 of 1953 and as a result of attachment and sale of certain movables an amount of Rs. 254-9-0 was realised. It was reported by the Branch Manager in Ext. P-131 that the judgment-debtors had no other assets and that therefore nothing further was realisable in execution. From the Life Insurance Policy which had been given as security the Bank was able to realise an amount of Rs. 443. The balance due on 8th August 1960 was Rs. 3,154 and it is clear that no portion of it is recoverable. It is true that the amount originally advanced was only Rs. 1,300 but some minimum degree of care and enquiry are expected of any prudent person even in the matter of advancing his own monies and it is very much more so in the case of persons charged with the administration of the funds of a Banking Company. The records do not show that any such care was taken or any kind of enquiry made about the borrowers' solvency before the amount was advanced. Hence we hold that this is also a bad and reckless advance. 38. Item 41 relates to an unsecured overdraft-allowed to one M. D. E. Moorthy. The borrowers filed a petition claiming relief under the Agriculturists Debt Relief Act. The estate of the petitioning debtor was sold by the Receiver and in the rateable distribution made amongst the creditors the Bank received only Rs. 746. 38. Item 41 relates to an unsecured overdraft-allowed to one M. D. E. Moorthy. The borrowers filed a petition claiming relief under the Agriculturists Debt Relief Act. The estate of the petitioning debtor was sold by the Receiver and in the rateable distribution made amongst the creditors the Bank received only Rs. 746. Nothing further can be realised in this account and the balance of Rs. 2,742 outstanding in the account as on 8th August I960 has been rightly treated by the Liquidator as irrecoverable. This is yet another advance imprudently made without any enquiry whatever and is a bad transaction. 39. Item 42 relates to an unsecured overdraft allowed by the Quilon Branch in favour of one Pathrose Fernandez and another person. The Bank filed O.S. 583 of 1950 and it is seen from Ext. P-133 (a) that an ex parte decree was passed in the said suit on 12th September 1950. The report of the Branch Manager, Quilon Ext. P-133 dated 4th October 1960”shows that the debtors were not possessed of any properties or assets and they had also no business. The judgment-debtors filed I.P. No. 6 of 1960 praying for being adjudged as insolvents. The amount due in this account is clearly irrecoverable. As far as is gatherable from the records this advance also was made without any care or enquiry. On the facts and circumstances mentioned above the advance must be held to be an imprudent and bad transaction. 40. Item 43 relates to a demand promissory note loan advanced to one T. J. Varghese on 29th March 1949 without any security. The Bank obtained a decree against the borrower in O.S. 114 of 1952, but could not realise any portion of the decree debt since the judgment-debtor was not possessed of any assets. No grounds have been made out to persuade us to differ from the conclusion recorded by the learned single Judge that this is a bad and irrecoverable advance. 41. The next item to be considered is Item 47. Unsecured overdrafts had been allowed by the Quilon Branch of the Bank to N. P. A. Nadar and another from August, 1945. It is seen from the ledger Ext. P-1119 that the party had an account even previously which had a credit balance of Rs. 420 as on the 1st January, 1945. Unsecured overdrafts had been allowed by the Quilon Branch of the Bank to N. P. A. Nadar and another from August, 1945. It is seen from the ledger Ext. P-1119 that the party had an account even previously which had a credit balance of Rs. 420 as on the 1st January, 1945. A scrutiny of the accounts further discloses that the party used to draw cheques without having sufficient credit balance and on many occasions interest had to be debited to the account for delay in payment of cheques. It was against this background that regular unsecured overdrafts were allowed to the party from August, 1945. On the 5th April, 1946 a sum of Rs. 27,559 was debited to the account being the amount of several cheques purchased from him by the Bank but which had been returned unpaid. The borrowers were unable to provide any credit against this debit and thus failed to meet their commitments. Nevertheless the Bank continued to make further advances to them. The outstanding balance in the account as on 22nd November, 1952 was Rs. 1,32, 175. A mortgage was got executed on that date in favour of the Bank whereupon the account was converted into a loan account, the balance amount then outstanding due in the overdraft account being treated as an advance against lands and buildings. There were no repayments thereafter. A decree was obtained against the debtors in O.S. 6 of 1957. It is seen from Ext. P-150 that the Bank's Advocate estimated the value of the mortgaged properties only at Rs. 1,15,000 as on 1st June 1960, whereas the amount outstanding in the account as on 8th August 1960 was Rs. 2,60,926. The advances at the time when they were made were given without any security and without making any prior enquiry regarding the financial position of the borrowers and the nature and extent of the assets owned by them. Even at the time of converting the balance in the overdraft account into a fresh loan account against lands and buildings no steps were taken to value the properties offered to be mortgaged and the security was grossly insufficient. On the above facts we have no hesitation to hold that the Liquidator is justified in his claim that this was a bad and reckless advance. 42. On the above facts we have no hesitation to hold that the Liquidator is justified in his claim that this was a bad and reckless advance. 42. Item 48 is yet another instance where unsecured overdraft facilities were allowed to a party who had already an unsatisfactory history in regard to the operation of his current account with the Bank. In this case the current account of the party ” one Mohamed Kunju ”showed a credit balance of only Rs. 2 as on the 1st January, 1945. From March, 1945 outstation cheques began to be credited in that account of which several were cheques drawn by the borrower himself on his accounts with other Banks- None of the ten cheques presented by him during March to June 1945 was honoured by the drawee Banks. It was with this record that the party was allowed unsecured overdraft facilities from July, 1945. The amount outstanding in the account as on 8th August 1960 was Rs. 2,38,483. It is seen from the report Ext. P-151 dated 21st May 1957 sent to the head office by the Kottayam Branch regarding the assets and liabilities of the borrower that the total value of his assets amounted to only Rs. 13,800. There is no case before us for the appellants that the borrower had any other assets at the time when the Bank started making large unsecured advances to him. The advances had been made in a most reckless manner without conducting any verification about the creditworthiness of the borrower and his assets and liabilities. The Bank obtained a decree against the debtor by filing O.S. 110 of 1951 but when execution proceedings were commenced the judgment-debtor filed D.R.P. 7 of 1958 seeking relief under the Debt Relief Act and it was allowed by the court. The only conclusion possible on the facts mentioned above is that this is also a clear instance of a reckless and bad advance. 43. The learned Trial Judge has dealt with items 49 to 51 and hence we will pass on to item 52. This is also a case where a party who had already an unsatisfactory record of operation in the existing current account where several cheques presented by him had to be kept pending for many days for wanton funds, was subsequently allowed ovedraft facility notwithstanding his previous bad history. This is also a case where a party who had already an unsatisfactory record of operation in the existing current account where several cheques presented by him had to be kept pending for many days for wanton funds, was subsequently allowed ovedraft facility notwithstanding his previous bad history. The Bank had, however, taken a mortgage of the immovable properties belonging to the borrower but this security was totally inadequate to cover the advances. It is seen from Exts. P-178 and 180(a) that the Bank's Advocate at Kottayam had advised the head office on 2nd November I960 that the security will not realise more than Rs. 30,000 whereas the amount due as on 8th August 1960 was Rs. 1,60,174. The party has been declared an insolvent in I.P. No. 22 of 1957 and excepting the mortgaged property he was not possessed of any other assets. This advance must in the circumstances be held to be an imprudent and bad transaction. 44. One P. K. Kumaran Nair had opened a current account with the Ponkunnam Branch of the Bank on the 4th March, 1946 with a cash deposit of Rs. 100. Two bills purchased from him on the 7th March 1946 and on the 5th April, 1946 for an aggregate value of Rs. 14,500 were dishonoured by the drawee. Despite this, further advances by way of overdrafts were allowed to him from April, 1946 without any security. Another bill for Rs. 7,650 was purchased by the same Branch on the 17th April 1946 from his brother P. K. Bhaskaran Nair and that was also dishonoured. The account had become dormant after December 1947. The outstanding balance of Rs. 25,472 due on account of the three dishonoured bills was combined into a loan account in the joint names of Kumaran Nair and Bhaskaran Nair on 18th November 1947. There were no repayments either in the overdraft account or in the loan account. The Bank filed a suit O.S. 216 of 1950 against the parties and obtained a decree. Some items of properties belonging to the judgment-debtors were attached but as is seen from Ext. P-182 the value of those properties was estimated by the Bank at only Rs. 34,500 whereas the amount due to the Bank even on 31st December 1949 was Rs. 57,081. In spite of the attachment some of the attached properties were sold away by the borrowers. P-182 the value of those properties was estimated by the Bank at only Rs. 34,500 whereas the amount due to the Bank even on 31st December 1949 was Rs. 57,081. In spite of the attachment some of the attached properties were sold away by the borrowers. The amount due to the Bank as on 8th August 1960 was Rs. 1,36,460. On the facts and circumstances narrated above we have no hesitation to uphold the Liquidator's contention that this was a manifestly bad and reckless transaction. 45. Item 54 relates to two accounts in the name of one Ismail Rowther. The first is an unsecured loan account under which an amount of Rs. 15,000 was advanced to the party on 18th May 1946. There was no repayment at all in this account and the balance due as on 8th August 1960 was Rs. 35,066. The second is an unsecured overdraft account allowed to the same party from August 1946. This account became dormant after 31st July 1947 when the debit balance stood at Rs. 38,171. In April, 1954 when the total balance in the overdraft account stood at Rs. 82,463 the Bank accepted from the party a sum of Rs. 31,500 in full settlement of its dues under this account. The loss incurred in this account alone was, therefore, Rs. 51,173. The loan account remained unsettled. The party is not possessed of any assets and the balance in both the accounts which aggregated to more than Rs. 86,000 as on 8th August 1960 is, therefore, irrecoverable. The records of the Bank do not contain anything to show that any enquiry had been made about the creditworthiness or the financial position of the borrower before large amounts were advanced to him without any security. On the facts and circumstances disclosed by the records we uphold the Liquidator's case that this is also a bad and imprudent advance. 46. Item 55 relates to a loan account opened in the Ponkunnam Branch of the Bank in the joint names of Thommy Joseph and Joseph Thomas on 28th February 1950 with a debit of Rs. 32,200. Unsecured advances had been allowed to these parties earlier in two other accounts in the same branch and it was in respect of the balance due in those accounts that this debit was made in the newly opened loan account. 32,200. Unsecured advances had been allowed to these parties earlier in two other accounts in the same branch and it was in respect of the balance due in those accounts that this debit was made in the newly opened loan account. There has been no repayment whatever in the loan account. At the time of opening of the loan account a mortgage was taken over certain properties belonging to the borrowers. But these properties were already subject to prior encumbrances and it is seen from Ext. P-186 a letter dated 23rd July 1956 sent to the Bank by its lawyer that the value of the mortgaged properties was insufficient even to meet the claims of the prior mortgagees. Notwithstanding this report, the Bank continued to charge interest to the account and to take credit for it in its profit and loss account treating the advance as fully realisable for the purpose of the annual balance sheet. The amount due to the Bank in this account as on 8th August 1960 was Rs. 81,044. The borrowers have no assets other than the properties forming the subject-matter of the mortgage from which as already noticed the Bank cannot expect to realise anything whatever. The advances when they were made were given without any security and without making any enquiry regarding the financial condition, etc. of the borrowers. The security taken at the time of the subsequent conversion of the outstanding balance into a fresh loan account in 1950 was absolutely illusory as the properties were already fully encumbered. In our view, the only conclusion that is possible from the above facts is that the Bank had acted recklessly in making this advance. 47. In Item 56 we have another glaring instance where a party with a very discreditable previous history in regard to his dealings with the Bank was nevertheless allowed clean overdraft facilities and was advanced large amounts. Several bills purchased by the Bank from one Mathai Esthappan the borrower in this case, were all subsequently dishonoured during the period December 1945 to September, 1946. The party did not make good the amount. In spite of that overdrafts were allowed to him without any security from October, 1946. There was no repayment in the account and it became dormant after 31st December 1948. The balance due as on 8th August 1960 was Rs. 78,411. The party did not make good the amount. In spite of that overdrafts were allowed to him without any security from October, 1946. There was no repayment in the account and it became dormant after 31st December 1948. The balance due as on 8th August 1960 was Rs. 78,411. The borrower died leaving no assets and the entire amount is, therefore, irrecoverable. We feel no doubt that this item has to be classified as a reckless and unsound advance. 48. In Item 57 an unsecured loan of Rs. 11,000 was advanced by the Ponkunnam Branch to one Nedakantan Sankaran on the 23rd December 1947. Excepting for some repayments aggregating to Rs. 531 made during the year 1948 there had not been any further credits into the account. It is seen from Ext. P-190 that the Branch Manager at Ponkunnam had reported to the head office in November 1959 that the borrower had no assets at all in his name and that he was in great financial difficulties. The entire amount of Rs. 35,934 which was the balance outstanding in the account as on 8th August 1960 has to be regarded as irrecoverable. This advance also has, in our opinion, to be characterised as imprudent and bad. 49. The facts relating to Item 58 are also substantially similar. It relates to an unsecured advance of Rs. 10,000 given by the Ponkunnam Branch to one Ismail Rowther in 1947. Although a decree was obtained against the borrower in 1950, his whereabouts were not known and no assets belonging to him could be traced (See Ext. P”191). Hence nothing could be recovered in execution. The balance due as on 8th August 1960 was Rs. 30,767. We feel no difficulty in holding that this advance was also a highly imprudent and reckless one. 50. One Gnanakannu Nadar was allowed by the Ponkunnam Branch to overdraw in his current account very substantial amounts from January 1946 onwards without any security. This forms the subject-matter of item 59 under which an amount of Rs. 30,609 was due to the Bank as on 8th August 1960. Exts. P-193 and P-194 which are letters sent to the head office by the Managers of the Ponkunnam and Nagercoil Branches in 1957 and 1958 disclose that the party was not possessed of any properties or assets in his own name. 30,609 was due to the Bank as on 8th August 1960. Exts. P-193 and P-194 which are letters sent to the head office by the Managers of the Ponkunnam and Nagercoil Branches in 1957 and 1958 disclose that the party was not possessed of any properties or assets in his own name. It was, however, reported that he was likely to get a 1/3 share in his father's property and that the value of such share was likely to be about Rs. 13,000 and odd. The Liquidator has treated only the balance amount as irrecoverable. Just as in the cases considered by as earlier there is nothing in the records of the Bank to indicate in respect of this transaction also that any kind of enquiry had been made by the Bank regarding the creditworthiness of the party before substantial amounts were allowed to be overdrawn by him without any security. The transaction must in the circumstances be held to be imprudent and bad. 51. The subject-matter of Item 60 is an unsecured overdraft account in the Ponkunnam Branch in the name of one Vasudevan Nair under which a balance of Rs. 29,410 was outstanding as due to the Bank as on 8th August 1960. The Bank had filed a suit against the party as O.S. 257 of 1,124 in the District Court, Kottayam and obtained a decree. No amount has, however, been realised in execution. The judgment-debtor died without leaving behind any assets and his widow offered to the Bank only Rs. 1,500 in full settlement of its claim. On the materials available before us the only conclusion possible is that the Bank had acted recklessly in making this advance to a person who is seen to have been possessed of no tangible assets. 52. Item 61 also relates to an unsecured overdraft account whereunder large amounts were advanced by the Ponkunnam Branch to one Nallathampi Nadar who is stated to have been conducting some business in jaggery, coir, etc. at Ponkunnam and Kanjirappally. There was no repayment in the account after 21st September 1948 and it is seen from Ext. P-199 that the Manager of the Ponkunnam Branch had reported to the head office that the party had stopped his business and left the locality. It is seen from Ext. at Ponkunnam and Kanjirappally. There was no repayment in the account after 21st September 1948 and it is seen from Ext. P-199 that the Manager of the Ponkunnam Branch had reported to the head office that the party had stopped his business and left the locality. It is seen from Ext. P-198 that the total value of the borrower's assets was estimated by the Bank in 1959 at only Rs. 2,500 whereas the amount outstanding in the account' as due to the Bank on 8th August 1960 was Rs. 27,761. We agree with the Liquidator's contention that this was an imprudent and bad advance. 53. The transaction forming the subject-matter of Item 62 is an unsecured advance made to one Thapasimuthu Nadar by way of demand promissory note loan on the 6th March, 1948, the sum advanced being Rs. 8,750. There was no repayment at all in the account and by application of interest the liability owed to the Bank by the borrower as on 8th August 1960 stood at Rs. 26,708. Ext. P-200 is a report submitted to the head office by the Manager at Kottayam on 7th January 1959 from which it is seen that the total value of the debtor's assets was estimated by the Bank at only Rs. 3,800. Although a decree had been obtained against the borrower in O. S. 194 of 1955 of the District Court, Kottayam it has not been possible to recover any amounts in execution. This advance also has to be held to be a reckless and bad transaction. 54. Unsecured advances were made jointly to one V. K. Ammoo and N. Mustafa by the Ponkunnam Branch of the Bank and these form the subject-matter of Item 63. As the parties did not make any repayments, the Bank filed a suit against them as O. S. 10 of 1125 and obtained a decree. Although some properties were attached in execution they were found to be already subject to prior encumbrances, having been mortgaged by the debtors to some other Banks to whom about Rs. 30,000 were due by them. It is also seen stated in Exts. Although some properties were attached in execution they were found to be already subject to prior encumbrances, having been mortgaged by the debtors to some other Banks to whom about Rs. 30,000 were due by them. It is also seen stated in Exts. P-201 and 202 which are reports made by the Manager of the Kottayam Branch to the Bank's Head Office in 1954 and 1956 that there were other creditors of the judgment-debtor who had also obtained decrees and who would also be entitled to rateable distribution in case the attached properties were brought to sale. It was also stated that the borrowers had no other assets. In 1957 the Bank accepted a sum of Rs. 6,500 in full satisfaction of its dues and the decree was struck off on 9th September 1957. As a result, a sum of about Rs. 25,819 has been lost to the Bank. In this case also there is nothing in the records of the Bank to show that any enquiries had been made into the financial position and creditworthiness of the borrowers before very substantial amounts were advanced to them and no scrutiny of any kind appears to have been exercised in the matter by the head office also. We accept the contention put forward by the Liquidator that this was an imprudent and bad advance. 55. Items 64 to 66 relate to advances made by the Ponkunnam Branch to different parties on demand promissory notes without taking any security. In regard to the transaction covered by Item 64 the Bank obtained a decree in O. S. 36 of 1952 of the District Court, Kottayam but no amount could be realised in execution. An application for arrest of the judgment-debtor was dismissed by the court since he was found to be a person not possessed of any means. Similarly, since the party concerned in Item 65 did not make any repayments the Bank instituted a suit against him as O. S. 40 of 1957 of the Sub Court, Kottayam and obtained a decree. But the Manager of the Ponkunnam Branch reported to the head office as per Ext. P-205 that it was impossible to recover any amounts from the judgment-debtor since it had been found on enquiry that he did not possess any properties. The amount due under this account as on 8th August 1960 was Rs. But the Manager of the Ponkunnam Branch reported to the head office as per Ext. P-205 that it was impossible to recover any amounts from the judgment-debtor since it had been found on enquiry that he did not possess any properties. The amount due under this account as on 8th August 1960 was Rs. 20,959 whereas the balance due under Item 64 was Rs. 23,981. In respect of Item 66 also which loan was advanced on the 2nd August, 1951, there was no repayment at all by the borrower and the Branch Manager (Ponkunnam) reported to the head office in Ext. P-206 that the party was having no business and possessed no assets and did not have even the means for maintaining his own family. No portion of the amount of Rs. 19,262 which was due from him to the Bank as on 8th August 1960 is recoverable. It is clear from the facts that all the three items of advance dealt with in this paragraph were recklessly made in complete disregard of all accepted Banking principles and without taking the slightest care to secure the interests of the Bank. 56. Items 67 and 68 relate to advances made by the Ponkunnam Branch to two different parties against bills which were purchased by the Bank. Those bills were subsequently dishonoured and the parties did not remit back the amounts. Before advancing the moneys to them no security of any kind had been taken. The Bank instituted suits and obtained decrees against them but nothing could be recovered as the Branch Manager reported as per Exts. P-207 to 212 that the judgment-debtors were not possessed of any assets, and a perusal of these reports is sufficient to show that no prudent person whould have advanced money to such parties without taking adequate security. What happened, however, was that substantial amounts were advanced to them by the Bank without making any enquiries about their creditworthiness. These transactions have undoubtedly to be characterised as reckless advances. 57. Item 69 relates to an unsecured overdraft allowed by the Ponkunnam Branch to one P. I. Nicholas. No repayments were made by him and the Bank instituted O. S. 48 of 1954 in the District Court, Kottayam and obtained a decree. In his reports evidenced by Exts. These transactions have undoubtedly to be characterised as reckless advances. 57. Item 69 relates to an unsecured overdraft allowed by the Ponkunnam Branch to one P. I. Nicholas. No repayments were made by him and the Bank instituted O. S. 48 of 1954 in the District Court, Kottayam and obtained a decree. In his reports evidenced by Exts. P-213 and 215 the Branch Manager at Ponkunnam informed the head office that the judgment-debtor did not possess any assets and that even his whereabouts were not known. To the same effect was the report made to the Bank by its advocate at Kottayam as per Ext. P-214 dated the 28th December, 1954. As far as can be gathered from the re- cords of the Bank, such inquiry about the financial condition and assets of the debtor was made by the Bank for the first time only long after the borrower had failed to make repayments and a decree had been obtained against him and when such information has necessarily to be collected for the purposes of putting that decree in execution. An amount of Rs. 15,247 was due under this account as on 8th August 1960 and there is no prospect whatever of realizing any portion of it. This is also another clear instance of a rackless advance. 58. The next transaction to be considered is that covered by Item 73. This relates to a demand promissory note loan advanced on 17th February 1956 jointly to one Parameswaran Pillai and another without any security. The borrowers having defaulted in making any repayments a decree was obtained against them in O.S. 96 of 1955, District Court, Kottayam. Nothing could however be realised as there were no properties belonging to the judgment-debtors which thould be proceeded against in execution and an application for arrest of the judgment-debtors was dismissed by the District Judge by his order Ext. P-221 (a) holding that the judgment-debtors were persons not possessed of means and were therefore not liable to be arrested. No portion of the amount of Rs. 11,717 due under this account is, therefore, recoverable. Counsel appearing on behalf of the appellants has not been able to show to us how this transaction can be regarded as anything other than a culpably negligent and imprudent advance. 59. Items 74 and 75 relate to unsecured overdrafts allowed by the Ponkunnam Branch to two different parties. 11,717 due under this account is, therefore, recoverable. Counsel appearing on behalf of the appellants has not been able to show to us how this transaction can be regarded as anything other than a culpably negligent and imprudent advance. 59. Items 74 and 75 relate to unsecured overdrafts allowed by the Ponkunnam Branch to two different parties. There were no repayments in either of the accounts. The reports sent by the Branch Manager, Ponkunnam evidenced by Exts. P-222 to P-224 disclosed a very sad state of affairs. In regared to the borrowers in Item 74 it was said that they had left the locality, that their whereabouts were not known and that they had also no assets in their names. In regard to the borrower in Item 75 the report was to the effect that the party was going around begging since he had no occupation or means of livelihood excepting to purchase old gunny bags and tins and dispose them of for a paltry profit. It is inconceivable that any person acting with reasonable care and prudence would have advanced any sums even out of his own funds to such parties without taking adequate security 60. Item 76 relates to an unsecured demand promissory note loan advanced by the Ponkunnam Branch to one Jainy Aly. There was no repayment and even though the Bank filed O.S. 26 of 1954 in the District Court, Kottayam and obtained a decree against the borrower for about Rs. 8,000 nothing could be realised in execution since the judgment-debtor filed I.P. No. 29 of 1957 and was adjudged insolvent. It is seen from the insolvency petition Ext. P-226 that the person had no assets and tha he had several other creditors as well. The Liquidator is well-found in his contention that this was an unsound and bad advance. 61. Item 78 relates to another demand promissory note loan advanced by the same branch to one Thomman Abraham without any security. The Bank obtained a decree against him in O.S. 31 of 1957 and an item of his property was brought to sale and purchased by the Bank itself for Rs. 4,500. There being no other ass,ets belonging to the judgment-debtor there is no scope for recovering any portion of the balance amount due from him which stood at Rs. 8,220 as on 8th August 1960. 4,500. There being no other ass,ets belonging to the judgment-debtor there is no scope for recovering any portion of the balance amount due from him which stood at Rs. 8,220 as on 8th August 1960. This again is another instance of an advance being made by this branch to a party without any prior enquiry being made about his solvency or his financial creditworthiness either by the Branch or by the Head Office and as a result of such culpable negligence the Bank has sustained loss to the extent mentioned above. We agree with the Liquidator that the advance must be regarded as a bad and imprudent transaction. 62. Item 81 which is the next transaction to be considerd relates to an unsecured advance made to one Venkatachalam Asari. Though a decree was obtained against him the Manager of the Ponkunnam Branch reported to the head office by Ext. P-232 that the judgment-debtor had died and that he had not left any assets whatever in his name. During the course of the winding-up the Liquidator after getting the sanction of the winding-up court accepted a sum of Rs. 600 from the legal representatives of the deceased debtor in full settlement of the claim. The amount due in the account as on 8th August 1960 was Rs. 2,696. There can be no doubt that the advance covered by this item was a highly imprudent one, particularly since no evidence whatever has been placed before court by the appellants to show that the Bank had taken even the minimum reasonable care before advancing amount to this party without any security. 63. Item 82 relates to an unsecured demand promissory note loan advanced by the Ponkunnam Branch to one Thomas Aprem. Though a decree was obtained against him in O.S. 69 of 1957 of the Munsiff's Court, Kottayam nothing could be realised since it was found that the only properties owned by the party were already encumbered to the extent of more than their value. The advance was, therefore, wholly irrecoverable and the responsibility for making this bad advance without any enquiry must rest squarely on the Directors. 64. Item 83 also relates to a loan advanced by the Ponkunnam Branch to one T. J. Sebastian on a promissory note without any security. The party did not make any repayments. The advance was, therefore, wholly irrecoverable and the responsibility for making this bad advance without any enquiry must rest squarely on the Directors. 64. Item 83 also relates to a loan advanced by the Ponkunnam Branch to one T. J. Sebastian on a promissory note without any security. The party did not make any repayments. The Bank filed a suit O.S. 107 of 1950 in the Kanjirapally Munsiff's Court and in execution of the decree obtained therein it brought to sale an item of property which constituted the only asset of the judgment-debtor and the Bank itself purchased the property for Rs. 2,390. The balance amount has been rightly shown by the Liquidator as irrecoverable and on the facts disclosed by the records we uphold the Liquidator's contention that this was also an unsound and bad advance. 65. The next item to be considered is Item 90 which relates to advances made by the Madras Branch to one Miladys Stores in two overdraft accounts. The party was allowed to overdraw up to Rs. 1,00,000 in the first account on hypothecation of its stock-in-trade. The total amount due to the Bank in the two accounts as on 8th August 1960 was Rs. 88,979. It is seen from Exts. P-275 to P-277 which are the reports sent to the head office by the Manager of the Madras Branch that the borrower was not having any immovable assets in its name and that the firm had income-tax liability amounting to Rs. 20,000, the recovery of which was also being kept pending on account of the absence of assets. The so-called hypothecation of stocks was no security at all since the party was allowed freely to dispose of the stocks and to appropriate the proceeds without any manner of control by the Bank. In the records produced before us there is nothing to show that before allowing overdrafts of such large amounts to this party any enquiries about his financial position, assets or creditworthiness had been made by the Bank. We have no hesitation to uphold the case of the Liquidator that this was an unsound and reckless advance. 66. Item 91.”Unsecured advances were made by the Madras Branch of the Bank to one Mohanlal Kakubhai in two accounts, one in his individual name and the second in the name of Amarjothi Stores. No security of any kind had been taken from him. 66. Item 91.”Unsecured advances were made by the Madras Branch of the Bank to one Mohanlal Kakubhai in two accounts, one in his individual name and the second in the name of Amarjothi Stores. No security of any kind had been taken from him. The party was adjudged an insolvent in I. P. No. 75 of 1949 on the file of the Madras High Court. It is seen from Ext. P-280 that though the claim put forward by the Bank before the insolvency court was admitted, the matter was not pursued further since there were no assets of the insolvent available for disposal. The total amount due to the Bank in these accounts as on 8th August 1960 was Rs. 83,652 and no portion of it is recoverable. This is a very clear instance of reckless dealing with the Bank's monies. 67. Item 92 relates to another overdraft transaction allowed by the Madras Branch. Large amounts were advanced by the Bank jointly to one G. Kanakammal and others on taking a mortgage of one item of immovable property consisting of a residential house and its compound. The borrower having failed to repay the Bank instituted O. S. 1430 of 1954 in the City Civil Court, Madras and obtained a decree. When the decree was sought to be executed it was found that the mortgaged property was worth only about Rs. 30,000 and that the borrower had no other assets. The amount due in the account as on 8th August 1960 was Rs. 75,332. The Liquidator is perfectly justified in his contention that the transaction whereunder very large amounts were advanced without proper enquiry and without adequate security (no attempt appears to have made to value the security at the time of making the advance) must be regarded as an imprudent and bad advance. 68. Item 93 relates to an overdraft account under which an amount of Rs. 70,401 was due to the Madras Branch from one Sri Ratnaswamy as on 8th August 1960. The only security taken by the Bank consisted of the pledge of a life insurance policy for Rs. 10,000. It was reported to the Board of Directors by the Special Officer and Secretary of the Bank in their momorandum Ext. P-282 dated 9th April 1960 that excepting the amount of Rs. The only security taken by the Bank consisted of the pledge of a life insurance policy for Rs. 10,000. It was reported to the Board of Directors by the Special Officer and Secretary of the Bank in their momorandum Ext. P-282 dated 9th April 1960 that excepting the amount of Rs. 10,000 due under the insurance policy which had been given as security to the Bank the borrower had no other assets and that it was not therefore worthwhile filing a suit against him after spending about Rs. 5,000 on court fees alone. Subsequent to the winding-up an amount of Rs. 10,391 was realised by the Liquidator as the surrender value of the policy and a further sum of Rs. 423 has also been realised by way of refund of share capital due to the borrower from Kollegal Silk Filatures Ltd. The winding-up court granted sanction to the Official Liquidator to compromise the claim by accepting a further sum of Rs. 5,000 from the borrower. The rest of the claim amounting to Rs. 54,587 is irrecoverable. We hold that this was a negligent and imprudent advance made without any care or enquiry. 69. The position is similar in respect of Item 94 whereunder a sum of Rs. 67,439 was due to the Madras Branch of the Bank from one Nettikadan & Co. on an unsecured overdraft account in which there were no payments, whatever since 1949. Exts. P-283 to P-292 show that on enquiries made by the Bank in 1957 regarding the assets of the borrower it was discovered that the only property possessed by him was a small plot of land at Maloor near Chalakudy the value of which was estimated to be about Rs. 1,000. Significantly enough, notwithstanding that the account of the party had become dormant since 1949 and even despite the reports evidenced by Exts. P-283 to 292 the Bank continued to charge interest to the account and to take credit therefor in its profit and loss account right till the very end treating the advances fully realisable for the purposes of the annual balance sheets. The statements contained in Ext. P-283 to 292 the Bank continued to charge interest to the account and to take credit therefor in its profit and loss account right till the very end treating the advances fully realisable for the purposes of the annual balance sheets. The statements contained in Ext. P-288 which is a letter sent by the borrower to the Branch Manager explaining the full history of the transactions are sufficient to show conclusively that the advances were made most recklessly to a party who had absolutely no assets or credit for financing some speculative business adventure. On the materials placed before us we feel no doubt that the transaction has to be treated as a bad and imprudent one. 70. Items 95 to 100 relate to advances made to different parties by the Madras Branch in six overdraft accounts without taking any security and where the parties were subsequently found to be possessed of no assets. No realisations whatever could be made from the borrowers in Items 95 to 98 and Item 100. In regard to Item 99 as against the outstanding amount of Rs. 27,562 due from the borrower as on 8th August 1960 the only portion which could be recovered was a sum of Rs. 1,707 realised by the sale of a cine camera which the party had pledged with the Bank. There is no prospect of any further recovery being made in respect of any of the above items since the reports Exts. P-293 to 303 sent by the Branch Manager disclose that the parties are not possessed of any assets which can be proceeded against. The total loss to the Bank on account of these transactions as on 8th August 1960 was Rs. 2,12,244. In none of these cases is there anything in the records maintained either in the Head Office or in the Madras Branch of the Bank to indicate that the Bank had conducted any kind of enquiry into the creditworthiness of the borrowers before the advances were made. We accept the Liquidator's contention that these were bad and reckless transactions. 71. Item 101 relates to a transaction of loan under which Rs. 17,000 was advanced by the Madras Branch to one Periera in 1951 on a demand promissory note without any security. It is seen from Exts. We accept the Liquidator's contention that these were bad and reckless transactions. 71. Item 101 relates to a transaction of loan under which Rs. 17,000 was advanced by the Madras Branch to one Periera in 1951 on a demand promissory note without any security. It is seen from Exts. P-305 and P-306 that the borrower had died prior to 1959 and that his heirs were adjudged insolvents in I. P. No. 92 of 1957. After the winding-up order the Liquidator was informed by the Official Assignee, Madras that there was no scope for declaring any dividend to ordinary creditors since even the preferential creditors had not been paid in full and the insolvents had been already granted discharge. Hence no portion of the amount of Rs. 23,605 due under this account as on 8th August 1960 is recoverable. This advance was also made without any care or enquiry and must be held to be a bad transaction. 72. The transaction covered by Item 104 which is the next item to be considered is an unsecured advance given by the Madras Branch to one Veeraswamy Naidu on a demand promissory note. The Bank filed O.S. No. 91 of 1954 against the borrower and obtained an ex parte decree against him for Rs. 14,685-6-0 on the 6th December, 1954, but since whereabouts of the judgment-debtor were unknown and no assets belonging to him could be traced, it was not possible to recover anything in execution. The amount due in the account as on 8th August 1960 was Rs. 21,111 and no portion of it is realisable. This was obviously a highly imprudent transaction. 73. The next item to be discussed is Item 107. It relates to another demand promissory note transaction entered into by the Madras Branch, the borrower being a foreign national by name Lashington. No security whatever had been obtained from him. The party left for England without leaving behind any assets in this country and the Bank's claims against him have become time-barred. We feel no doubt whatever that this transaction was also an imprudent and bad advance. 74. Item 108 is one of the instances where an outstanding balance in a prior overdraft account which had become dormant was transferred to a newly opened loan account with an opening debit corresponding to the amount due in the overdraft account. We feel no doubt whatever that this transaction was also an imprudent and bad advance. 74. Item 108 is one of the instances where an outstanding balance in a prior overdraft account which had become dormant was transferred to a newly opened loan account with an opening debit corresponding to the amount due in the overdraft account. There was an overdraft account in the Madras Branch in the joint names of Messrs. Rayan and Michael clean overdrafts being allowed in a current account which they had opened with the Bank in 1943. Mr. Michael appears to have got himself heavily involved in debts and he severed his connection in the joint business in 1947. Thereafter in December, 1956, the overdraft account was closed and the outstanding balance of Rs. 10,710 was transferred to a demand promissory note loan account in the sole name of Mr. Rayan, no security being taken from the party even at the time of the opening of the new loan account. There were no payments in this account and in October, 1950 when the balance in the account stood at Rs. 12,585.89 the Manager of the Branch recommended to the Head Office that an offer made by the party to pay Rs. 5,000 in full settlement in two equal instalments of Rs. 2,500 may be accepted because the party did not own any appreciable assets and considering his financial position it was to the interests of the Bank to take advantage of that offer. The Bank accordingly agreed to receive Rs. 5,000 in full settlement, but the party paid only Rs. 1,500 pursuant to it. On the facts of the case the Liquidator is fully justified in treating the balance amount as irrecoverable and in contending that the advance had been improperly and negligently made. 75. Item 109 relates to an unsecured overdraft account in the Madras Branch in the name of one G. V. Shunmugam under which an amount of Rs. 90,057 was shown in the Bank's account as outstanding due to the Bank from the aforesaid party as on 8th August 1960. The account in question was opened prior to 1942 and there were no operations whatever from 1942. 90,057 was shown in the Bank's account as outstanding due to the Bank from the aforesaid party as on 8th August 1960. The account in question was opened prior to 1942 and there were no operations whatever from 1942. Hence the Bank's claim against the borrower had become time-barred even in 1945 but nevertheless the Bank continued to debit the account with interest treating it as an advance fully realisable for the purposes of annual balance sheet. As is seen from the report Ext. P-319 sent to the Head Office by the Branch Manager on 27th February 1960 the borrower was dead and the whereabouts of the legal representatives were not even known. There is no doubt that this transaction has to be classified as a bad and irrecoverable advance. 76. The subject-matter of Item 110 is an advance made by the Madras Branch of the Bank to one T. S. Rama Iyer on a promissory note without any security. A decree was obtained against him in O.S. 92 of 1950 but neither the borrower nor any assets belonging to him could be traced and hence nothing could be realised. This transaction was obviously an imprudent and reckless one. 77. The next item to be considered is item 127 and it will be convenient to deal with Items 128 and 129 also along with it because the transactions covered by these three items are similar. These relate to overdraft accounts under which large amounts were advanced by the Delhi Branch of the Bank to 'three different parties without any security. Though a decree was obtained in O.S. 2173 of 1949 against the borrower concerned in item 127, the Manager of the Delhi Branch reported to the Head Office as per Ext. P-374dated 29th April 1957 that the party had no assets at all which could be attached in execution. Subsequent steps taken for the issue of a warrant of arrest of the judgment- debtor did not also bring forth any results. The entire amount of Rs. 45,389 outstanding as due to the Bank in this account as on 8th August 1960 has therefore to be regarded as irrecoverable. As regards Item 128, the letters Exts. P-377 and P-377 (a) written to the Head Office by the Manager of the Delhi Branch are indeed very revealing. The entire amount of Rs. 45,389 outstanding as due to the Bank in this account as on 8th August 1960 has therefore to be regarded as irrecoverable. As regards Item 128, the letters Exts. P-377 and P-377 (a) written to the Head Office by the Manager of the Delhi Branch are indeed very revealing. They show that the advances were made to the party after January, 1950, without any security even though he was not conducting any business at that time and had no tangible assets. In Ext. P-377 (a) dated 28th August 1957 the Manager of the Delhi Branch in his report to the Head Office regarding this account stated thus: "As far as we know he (the borrower) had hardly any business in or after 1950. We have absolutely no idea as to the assets, if any, of the borrower. Ail that we know about him is that he is not having any business but pretends to be busy either in litigation or in tour.� A suit filed by the Bank against the borrower was subsequently dismissed. There is thus no possibility at all of recovering any portion of the balance of Rs. 34,326 due to the Bank in this account as on 8th August 1960. 78. The overdraft account of the party concerned in Item 129 had become dormant after 1946. In 1958 the Branch Manager reported to the Head Office as per Ext. P-380 that the borrower was only a clerk working in a private firm on a meager salary and that even if a suit was filed and a decree obtained against him there might not be any possibility of realizing any amount in execution. The balance due in this account as on 8th August 1960 was Rs. 30,741. In view of the facts narrated above we feel little difficulty in holding that these three items of advances covered by Items127 to 129 must be held to be reckless transactions. 79. Item 130 relates to a demand promissory note account under which an amount of Rs. 28,877 was due by Mr.N.C. Khanna to the Delhi Branch of the Bank as on 8th August 1960. There were no repayments whatever in the account 1951. In May, 1958 when the balance due in the account stood at Rs. 36,103.80 the Manager of the Delhi Branch reported to the Head Office in Ext. 28,877 was due by Mr.N.C. Khanna to the Delhi Branch of the Bank as on 8th August 1960. There were no repayments whatever in the account 1951. In May, 1958 when the balance due in the account stood at Rs. 36,103.80 the Manager of the Delhi Branch reported to the Head Office in Ext. P-382 that the estimated total worth of the borrower at that time was below Rs. 16,000. The Bank accepted the recommendation of the Manager and agreed in July, 1958 to receive Rs. 14,000 in full settlement of its claims. This amount was to be paid in the course of seven years in quarterly instalments of Rs. 500 each. The party, however. Failed to carry out the terms of this agreement but the Bank nevertheless continued to treat the entire balance as fully realizable for balance sheet purposes. The Liquidator is, in our opinion perfectly justified in his contention that this was an imprudent and unsound advance. 80. Items 131 to 133 relate to unsecured advances made by the Delhi Branch to three different parties who were subsequently found to be persons possessed of absolutely no assets. This was so reported by the Manager of the Delhi Branch in the case of the borrower in Item 131 in his report evidenced by Ext. P-384 where it was stated that the borrower was a person without any employment and possessing no assets. His description in the letter is œhe is a good honest man with no means of meeting his commitments for quite few years now". The account in respect of Item 132 had been opened in January, 1944 and since there were no operations after 1945 the Bank's claims against the party had become time-barred even by the end of 1948. Nevertheless the Bank continued to charge interest to the account till 1956 and took credit for it in its profit and loss account. In regard to the borrower in Item 133 the Bank had not even any document in support of its claim and the account having become dormant since 1946 the Bank's right of action against the party became time-barred in 1949 itself. It is seen from Ext. P-387 that this party from whom an amount of Rs. In regard to the borrower in Item 133 the Bank had not even any document in support of its claim and the account having become dormant since 1946 the Bank's right of action against the party became time-barred in 1949 itself. It is seen from Ext. P-387 that this party from whom an amount of Rs. 16,052 was due as per the accounts as on 8th August 1960 was only a a clerk in the service of the Delhi State Electricity Board and that he had no properties of his own. In regard to none of the three advances dealt with in this paragraph is there anything in the records of the Bank to show that any enquiry whatever had been conducted by the Bank regarding the financial soundness of the parties before large amounts were advanced to them without security. On the other hand, the correspondence referred to above discloses that the advances had been made imprudently without any enquiry or circumspection. We hold that these are reckless and bad advances. 81. Items 135 to 137 are three other instances of similar unsecured advances made by the Delhi Branch in clean overdraft accounts. No enquiry whatever is seen to have been made at the time of making the advances. It was only when the parties failed to make repayments that enquiries were made about their assets. It was then found that they were persons possessed of no assets and that the whereabout of the party concerned in Item 135 was not even known. This was reported to the Head Office by the Manager of the Delhi Branch as early as on the 6th December 1956 in Ext. P-390. In regard to Item 136 the Bank obtained a decree against the borrower in O.S. 304 of 1950 on the file of the Sub Court, Delhi, but nothing could be realised in execution as the party did not have any assets. In regard to the borrower in Item 137 the Bank's claim against him had become barred by limitation long ago, no legal action having been apparently taken against him on account of his not having any assets. No further discussion is necessary to show that these were manifestly bad advances made with any care or prudence. 82. The only remaining transaction concerned with the Delhi Branch is that covered by Item 134. No further discussion is necessary to show that these were manifestly bad advances made with any care or prudence. 82. The only remaining transaction concerned with the Delhi Branch is that covered by Item 134. This relates to a demand promissory note loan advanced to one Nath Gupta. The amount due in this account as on 8th August 1960 was Rs. 11,594. However, the Bank had accepted from the party Rs. 4,000 in full settlement of its dues in March, 1959. The Liquidator has treated the balance amount of Rs. 7,594 as a loss suffered by the Bank and in our view he is fully justified in doing so. The advance was given without any security and without conducting any prior enquiries as to the financial soundness of the borrower and hence it was that the Bank had ultimately to give up a very substantial portion of its claim and agree to receive in full settlement the small amount offered by the party. We uphold the contention of the Liquidator that this was also a bad and imprudent advance. 83. The next item to be considered is Item 164. One Thomman Augusthy was advanced large amounts in an overdraft account and in a demand promissory loan account. He had mortgaged to the Bank' some landed properties. The value of these properties was estimated by the Branch Manager in 1960 at only Rs. 78,533 whereas the total liability due to the Bank by the borrower as on 8th August 1960 exceeded Rs. 1,77,000. The winding-up court after notice to the Directors granted sanction to the Liquidator to enter into a compromise by accepting a sum of Rs. 70,000 from the party in full settlement. It has not been contended before us by the appellants that anything more than this amount could have been realised by the Bank from the borrower. Hence the Bank has suffered a loss of Rs. 1,07,640 as a result of this transaction. The records did not disclose that any enquiry had been made into the creditworthiness of the borrower or the sufficiency of the security offered by him before advancing large amounts to him. We have no hesitation to accept the Liquidator's contention that this was an imprudent and reckless advance. 84. 1,07,640 as a result of this transaction. The records did not disclose that any enquiry had been made into the creditworthiness of the borrower or the sufficiency of the security offered by him before advancing large amounts to him. We have no hesitation to accept the Liquidator's contention that this was an imprudent and reckless advance. 84. Item 168 which is next transaction that falls to be considered relates to unsecured advances made to one Ramakrishna Chettiar by the Palai and Nagercoil Branches of the Bank. The total amount due from the party as on 8thAugst 1960 was Rs. 61,130. In March 1955 the Board of Directors of the Bank had agreed to accept a a sum of Rs. 27,769 in full settlement of the party's dues and this amount was payable in monthly instalments of Rs. 1,000. Subsequently, the monthly payment stipulated was reduced to Rs. 500 by another resolution dated the 6th August 1955. Under this arrangement a sum of Rs. 16,656.07 was paid to the Bank. It is seen from Ext. P-483, the inspection report of the Palai Branch for 1960, that the borrower was dead. In the absence of any assets left behind by the deceased against which the Bank can proceed in execution of the decree in O.S. 132 of 1953 obtained by it, the Liquidator is justified in treating the balance amount of Rs. 50,000 odd as irrecoverable and we uphold his contention that this was an imprudent and bad advance. 85. Although Item 179 has not been included by us in enumerating the list of transactions in respect of which no arguments were advanced before us by the appellants, counsel appearing for the appellants did not make any serious attempt to show that the Liquidator was wrong in showing an amount of Rs. 4,329 as the loss suffered by the Bank on account of its having had to accept from the legal representatives of the borrower Mr. R. V. Thomas a sum of Rs. 2,506 in full settlement of the Bank's claims when the actual amount due from the parties at the time of the said arrangement was Rs. 6,687.91. It is seen from Ext. P-490 that the borrower had died leaving debts to the extent of Rs. 40,000 while the value of the properties left behind by him was only about Rs.7,000. 2,506 in full settlement of the Bank's claims when the actual amount due from the parties at the time of the said arrangement was Rs. 6,687.91. It is seen from Ext. P-490 that the borrower had died leaving debts to the extent of Rs. 40,000 while the value of the properties left behind by him was only about Rs.7,000. It is needless to state that the advance made by the Bank was completely unsecured. In the circumstances the Liquidator's contention that the transaction was an imprudent and reckless one has only to be upheld. 86. That takes up to Item 182 which relates to a demand promissory note loan account opened by the Vaikom Branch of the Bank in the joint names of one T. K. Krishnan and one N. Pappukutty on the 14th July 1949 with a debit of Rs. 17,871. As early as in 1946 the Bank had advanced amounts to the parties against eleven bills purchased from them but those bills were all dishonoured and the amounts remained unpaid for three years. It was for the balance outstanding in this account that the new loan account was opened with the debit entry. The security which the Bank obtained at the time of opening this loan account consisted of a coir factory the value of which was estimated by the Branch Manager to be only Rs. 1,500. Though the Bank obtained a decree against one of the borrowers, namely T. K. Krishnan he filed an insolvency petition LP. No. 31 of 1954. The other person, namely K. Karunakaran was also reported by the Manager to be possessed of no assets. The coir factory on being sold by the Liquidator fetched only Rs. 546. it is seen from the facts stated above that even in 1946 the borrowers had failed to meet their obligations to the Bank and it was with full awareness of this that the loan account was opened in their names in 1949 without taking adequate security. There can be no doubt that this was a culpably negligent and imprudent transaction. 87. Item 184 relates to an unsecured advance made by the Vaikom Branch jointly to one Thomas Varkey and one Mathew Thommen on a promissory note executed by them. The parties having failed to make any repayments the Bank instituted O.S.4 of 1953 in the District Court, Alleppey and obtained a decree against them. 87. Item 184 relates to an unsecured advance made by the Vaikom Branch jointly to one Thomas Varkey and one Mathew Thommen on a promissory note executed by them. The parties having failed to make any repayments the Bank instituted O.S.4 of 1953 in the District Court, Alleppey and obtained a decree against them. It is seen from Ext. P-507 that the balance due to the Bank as on 31st May-1958 was Rs. 62,986-52 and that the Bank held absolutely no security for the same. It was, therefore, recommended to the Board of Directors by the Law Officer and Secretary of the Bank that a sum of Rs. 40,000 may be accepted from the borrowers in full settlement of the decree debt. This compromise was sanctioned by the Board and the borrowers paid a sum of Rs. 33,000 to it, the balance amount due from them under the arrangement being only Rs. 7,000. The loss suffered by the Bank on account of this transaction has been correctly estimated by the Liquidator as Rs. 30,337. Just as in the case of the other transactions which we have discussed earlier in this judgment the records of the Bank pertaining to this transaction do not show that any enquiry had been made about the creditworthiness of the borrowers before these large amounts were advanced to them without any security. In the circumstances we uphold the Liquidator's contention that the transaction covered by this item was grossly and culpably negligent and reckless. 88. The next item namely Item 185 relates to advances made by the Vaikom Branch to one V. O. Chacko in an overdraft account under which an amount of Rs. 32,832 was due to the Bank as on 8th August 1960. The overdraft account had become dormant after the 30th June 1947. The borrower had hypothecated one item of property to the Bank which constituted his sole asset and it is seen from Ext. P-508 dated the 2nd March 1951 that this property was not worth more than Rs. 6,000 whereas the balance due in the account on that date was above Rs. 16,000. Subsequent to the order for winding-up the mortgage property was sold through court and it fetched only Rs. 3,328. Inasmuch as the debtor is not possessed of any other assets the Liquidator has rightly treated the balance of Rs. 29,504 as irrecoverable. 6,000 whereas the balance due in the account on that date was above Rs. 16,000. Subsequent to the order for winding-up the mortgage property was sold through court and it fetched only Rs. 3,328. Inasmuch as the debtor is not possessed of any other assets the Liquidator has rightly treated the balance of Rs. 29,504 as irrecoverable. As far as can be gathered from the records of the Bank in respect of this advance also no prior enquiry whatever appears to have been made regarding the borrower's creditworthiness or even about the value of the property which he offered as security. This transaction whereunder large amounts of the Bank's fund were lent to a party having very little assets without due enquiry and without taking adequate security thereby resulting a heavy loss to the company must be regarded as a reckless and bad advance. 89. Ext. P-510, a report, dated 5th November 1959 sent to the Head Office of the Bank by the Manager of the Vaikom Branch contains the necessary details relating to the transaction covered by Item 186. The Vaikom Branch had made an advance to one Mathai Ghacko on 23rd December 1948 against a promissory note executed by him. The borrower had also hypothecated some properties by way of security for the loan. The Bank instituted a suit O.S. 15 of 1953 on the file of the District Court, Kottayam when the party failed to make any repayment in the account. In execution of the decree obtained by the Bank the mortgaged properties were brought to sale and were purchased by the Bank itself for Rs. 1,500. The balance due to the Bank at the time of the said purchase was Rs. 17,500. When execution was taken out for recovery of the balance amount the judgment-debtor filed I.P. No. 3 of 1958 and he was adjudged insolvent. According to the insolvency petition, the party was not possessed of any assets. There is, therefore, absolutely no prospect of recovering the balance amount of Rs. 17,562 due to the Bank as on 8th August 1960. At the time of making the advance no attempt had been made to value the hypothecated property or to enquire about the other assets of the borrower. We have no hesitation to uphold the Liquidator's contention that this was an improper and imprudent transaction. 90. 17,562 due to the Bank as on 8th August 1960. At the time of making the advance no attempt had been made to value the hypothecated property or to enquire about the other assets of the borrower. We have no hesitation to uphold the Liquidator's contention that this was an improper and imprudent transaction. 90. Item 187.”In 1948 the Bank discounted three cheques in favour of one T. K. Xavier and immediately paid the amounts to him without taking any security. These cheques were subsequently dishonoured but the party did not remit back the amount to the Bank in spite of demand. A sum of Rs. 12,996 was due to the Bank in this account as on 8th August 1960. A further amount of Rs. 10,287 was also due to the Alleppey Branch of the Bank from one Sri T. M. Kurien, father of the aforementioned Xavier. It is seen from Ext. P-511 and P-512 that Kurien had transferred all his properties in the name of his son Xavier under a settlement deed, dated 21st August 1957 but on enquiries made by the Bank it was found that there were encumbrances on those properties exceeding their value. Kurien was adjudicated as an insolvent. Xavier filed a petition under section 15 of the Kerala Agriculturists Debt Relief Act and according to the averments in the said petition his liabilities far exceeded his total assets which consisted only of the properties transferred to him by his father. It is, therefore, clear that there is no prospect at all of the Bank recovering any portion of the amounts due to it either from Xavier or Kurien. There cannot be any doubt that these transactions were absolutely negligent and reckless. 91. Item 188 relates to another demand promissory note loan advanced by the Vaikom Branch to one P. G. Thomas on 28th December 1948 without any security. The Bank obtained a decree against the party in O.S. 132 of 1953, District Court, Alleppey. It is seen from Ext. P-513 that the debtor did not own any immovable property and that therefore nothing could be realised from him in execution of the decree. The entire amount due in this account is irrecoverable and the Liquidator is perfectly justified in his contention that this was an unsound and improper advance made without any care or enquiry. 92. P-513 that the debtor did not own any immovable property and that therefore nothing could be realised from him in execution of the decree. The entire amount due in this account is irrecoverable and the Liquidator is perfectly justified in his contention that this was an unsound and improper advance made without any care or enquiry. 92. Item 190.”Here the Vaikom Branch of the Bank advanced a loan to one Ayyappan Raman on a demand promissory note. The borrower had also mortgaged to the Bank some immovable property belonging to him. The Bank obtained a decree against hirp in O.S. 440 of 1952 on the file of the Munsiff's Court, Vaikom. The mortgaged property was brought to sale in execution of the said decree on 17th December 1956 and was purchased by the Bank itself for Rs. 1,300. The balance due in the account as on 31st May 1960 was Rs. 2,310.28. It is seen from Ext. P-515, dated the 8th June, 1960 that the only asset then owned by the judgment-debtor was an undivided share in an item of joint family property, the value of which was estimated try the Bank to be not more than Rs. 100. In view of this circumstance the Bank agreed to accept an amount of Rs. 500 from the party in full settlement of its claims the said sum being payable in the course of three years. The liquidator has rightly treated the balance of Rs. 1,881 due in the account as on 8th August 1960 as irrecoverable. The advance was made without taking any steps to value the property given in mortgage and without making any enquiries about the borrower's other assets. We therefore hold that this was also a bad advance. 93. Not much discussion is necessary in respect of Item 191 which relates to an unsecured loan advanced jointly to one Padmanabha Sarma and his brother. Ext. P-517 shows that the parties did not possess any immovable property and had little means. Hence no steps were even taken by the Bank against the borrowers. The advance can only be described as a reckless dealing with the Bank's funds. 94. Item 193 relates to advances made by the Nagercoil Branch of the Bank to one K. T. Mani by way of clean overdraft in his current account, and also in a demand promissory note account. The advance can only be described as a reckless dealing with the Bank's funds. 94. Item 193 relates to advances made by the Nagercoil Branch of the Bank to one K. T. Mani by way of clean overdraft in his current account, and also in a demand promissory note account. No security had been taken from the party in respect of either of the accounts and when he failed to make repayments the Bank obtained a decree against him by filing O.S. 19 of 1953 in the District Court, Nagercoil. The only property which he possessed was sold away in court auction in execution of a decree passed by a Bangalore Court and hence there were no assets at all belonging to the judgment-debtor against which the Bank could proceed in execution of the decree obtained by it. The entire amount of Rs. 42,145 due from the party as on 8th August 1960 has therefore been rightly treated by the liquidator as irrecoverable. In the case of this advance also the records of the Bank do not contain anything to indicate that any enquiry had been conducted into the financial condition of the borrower or the nature and extent of the assets owned by him before large unsecured advances were allowed to him. The only conclusion possible from the facts and circumstances set out above is that this transaction was also entered into in a reckless fashion in complete disregard of the interests of the Bank. 95. Items 194 and 195 can be dealt with together as the facts relating to them are similar. These relate to loans advanced by the Nagercoil Branch to two different parties on demand promissory notes without taking any security. It was only when the parties failed to repay that enquiries appear to have been made by the Bank for the first time regarding their assets and then it was found that they were not possessed of any tangible assets and that there was little chance of realising anything from them. Exts. P-521 to P-525 evidence the correspondence that passed between the Branch Manager and the head office regarding these transactions. The amount due to the Bank under Item 194 as on 8th August 1960 was Rs. 30,864 and under Item 195 Rs. 23,872. The contention of the Liquidator that these were imprudent and bad transactions has only to be upheld. 96. P-521 to P-525 evidence the correspondence that passed between the Branch Manager and the head office regarding these transactions. The amount due to the Bank under Item 194 as on 8th August 1960 was Rs. 30,864 and under Item 195 Rs. 23,872. The contention of the Liquidator that these were imprudent and bad transactions has only to be upheld. 96. An amount of Rs. 22,978 was due to the Bank as on 8th August 1960 from one Surianarayanan Achary on account of overdraft advances and gold loan repledge facilities allowed to him by the Nagercoil Branch. This forms the subject-matter of Item 196. Exts. P-526 and P-527 disclose that the party had left the locality and his whereabouts were unknown and that on enquiries being made it was understood that he had also no assets. Although a decree was obtained against the debtor by filing O.S. 27 of 1115 in the District Court, Nagercoil nothing could be realised in execution. The Bank held no security at all in respect of these transactions since the items of jewellery which had been repledged by the party had been sold away as early as on 17th November 1939. It is, therefore, clear that the entire amount of nearly Rs. 23,000 is irrecoverable. The advances made to this party constitute reckless and irresponsible dealing with the funds of the Bank. 97. Items 197 and 198 relate to advances made by the Nagercoil Branch without any security to two parties in their overdraft accounts. Though suits were filed against them nothing could be recovered as neither party was possessed of any assets. The borrower in Item 197 had left the country and migrated to Pakistan, while the judgment-debtor in Item 198 filed an insolvency petition which the Bank considered it not worthwhile even to contest. These are undoubtedly imprudent and bad advances. 98. The next item, namely Item 199 relates to an unsecured loan advance by the same Branch (Nagercoil) to one G. M. Antony on a demand promissory note. No repayments were made in the account. The party filed an insolvency petition”I.P. 8 of 1951”and it was reported to the Head Office by the Manager of the Nagercoil Branch as per Exts. P-531 and P-532 that the party was heavily indebted and that the only asset possessed by him was one building at Kottar which was already subject to a mortgage of about Rs. The party filed an insolvency petition”I.P. 8 of 1951”and it was reported to the Head Office by the Manager of the Nagercoil Branch as per Exts. P-531 and P-532 that the party was heavily indebted and that the only asset possessed by him was one building at Kottar which was already subject to a mortgage of about Rs. 17,000. According to the Branch Manager the value of the building was not sufficient even to satisfy that mortgage. No portion of the debt due to the Bank is, therefore, recoverable and the Liquidator is fully justified in his contention that this is yet another instance of a reckless and bad advance. 99. Items 200 to 226 relate to transactions of loan advanced to different parties without any security. In spite of the Bank having obtained decrees against them recovery was found to be impossible on account of the complete absence of any assets owned by the judgment- debtors. Counsel appearing for the appellants very frankly stated that he found it difficult to contend that these transactions could be regarded as prudent or good advances. We have gone through the letters Exts. P-533 to P-566 being the correspondence that passed between the respective Branch Managers and the Head Office in relation to these debts. In our opinion, they clearly disclose that the advances had been made without any prior enquiry regarding the financial soundness or assets of the parties and that it was only when the parties failed to make repayment thatthe Bank conducted enquiries and discovered that they were not possessed of assets. We accept the contention of the Liquidator that these are all bad and reckless transactions. 100. The Peermade Branch of the Bank advanced amounts to different parties against bills purchased from them, the value of the bills being paid immediately without taking any security. Items 227 to 239 are cases of such advances made during 1948 where the bills were subsequently dishonoured and the parties failed to repay the amounts advanced to them. No steps were taken against them by the Bank for the recovery of these amounts and the Bank's claims against them became barred by limitation even in 1951. We uphold the contention of the Liquidator that these were bad and imprudent advances. 101. No steps were taken against them by the Bank for the recovery of these amounts and the Bank's claims against them became barred by limitation even in 1951. We uphold the contention of the Liquidator that these were bad and imprudent advances. 101. Item 240 is in respect of advances made by the Alleppey Branch to one P. A. Raja in two accounts, one in his personal name and the other in the name of Salim Coir Industries of which he was the proprietor. No security whatever had been obtained from the party. The total amount due to the Bank under the two accounts as on 8th August 1960 was Rs. 1,10,153. Though the Bank filed a suit against the borrower in 1-952 and obtained a decree, no portion of the decree debt could be recovered since the firm had become defunct and the proprietor was not possessed of any assets. Exts. P-567 to P-571 which are reports sent by the Branch during 1952-59 disclose that the borrower was not even solvent and that there was absolutely no prospect of realising anything from him. In spite of these reports, however, the Bank continued to charge interest into this account till the very end and to take credit therefor in its profit and loss account treating the debt as fully realisable. On the facts and circumstances disclosed by the records referred to by us we feel no doubt that this transaction of advance which was entered into without any enquiry into the solvency or financial condition of the borrower constitutes an improper and reckless dealing with the funds of the Bank. 102. Item 241 relates to an unsecured overdraft allowed to one Kanakalakshmi Coir Works under which an amount of Rs. 19,252 was due to the Bank as on 8th August 1960. The Bank filed a suit O.S. 52 of 1124 of the District Court, Alleppey against the borrower firm represented by three defendants and obtained a decree but nothing could be recovered since the 2nd defendant who alone possessed some little assets was adjudicated insolvent and the two remaining defendants were possessed of absolutely no means. It is most shocking that advances should have been made by the Bank to such parties without any enquiry as to their financial condition and assets and without even the elementary precaution of insisting on-some security being furnished by them. It is most shocking that advances should have been made by the Bank to such parties without any enquiry as to their financial condition and assets and without even the elementary precaution of insisting on-some security being furnished by them. This transaction is a manifestly bad advance. 103. Items 242 and 243 are in respect of two loans advanced by the Alleppey Branch of the Bank to one Ismail and to one Krishna Iyer on demand promissory notes executed by them. No security had been taken from either party. Just as in the case of the other transactions already discussed by us no enquiry of any kind appears to have been made regarding the creditworthiness of the borrowers before the amounts were advanced to them. Subsequently on their failure to make repayment the Branch Managers reported to the Head Office as per Exts. P-575 and P-576 that it had been found out on enquiry that the parties had absolutely no assets and that the, amounts were, therefore, not recoverable. The Liquidator is fully justified in his contention that these were imprudent and bad advances. 104. Items 244 to 259 may be dealt with together as the facts relating to them are similar. These are all cases where amounts were advanced to various parties by the Alleppey Branch of the Bank by way of clean overdrafts. Suits were filed by the Bank against those borrowers and decrees were obtained but no realisation could be made since the judgment-debtors had no assets. Several of the decrees have, therefore, been allowed to become time-barred. Exts. P-577 to P-586 are the reports sent by the Branch Managers to the Head Office stating that there were no assets belonging to these parties and that hence there was no prospect of realising the decree debts. We feel no doubt that all these advances which were made without any prior enquiry about the solvency of the parties were bad and reckless transactions. 105. Item 260.”The Kottayam Branch of the Bank had advanced large amounts to one Ismail Ali by way of clean overdraft. Subsequently the Bank obtained from him a mortgage of certain immovable properties. The amount due from the party in the said overdraft account as on 8th August 1960 was Rs. 79,709. Besides this a further sum of Rs. 105. Item 260.”The Kottayam Branch of the Bank had advanced large amounts to one Ismail Ali by way of clean overdraft. Subsequently the Bank obtained from him a mortgage of certain immovable properties. The amount due from the party in the said overdraft account as on 8th August 1960 was Rs. 79,709. Besides this a further sum of Rs. 13,039 was also due from him under a second account in the joint names of himself and one Mohamed in respect of which the Bank held no security. It is seen from Ext. P-589 dated the 17th April 1959 that the Manager of the Kottayam Branch reported to the Head Office that the market value of the mortgaged properties as on that date was estimated by him to be about Rs. 46,800. It is further stated in Ext. P-589 (a) that apart from the mortgaged property the party had no other assets. In view of the above the Liquidator has, if at all, erred only in favour of the respondents in regarding the mortgaged property as worth Rs. 60,000 and in treating only the balance amount of Rs. 32,748 as incapable of recovery. There is no doubt that the advances when they were made were unsound and improper transactions. 106. Item 261 relates to another transaction of the Kottayam Branch whereunder an unsecured loan of Rs. 10,000 was advanced to one K. M. Chacko in 1948. In spite of the party having made no repayments in this account, clean overdrafts were also allowed to him subsequently with the result that the amount due by him to the Bank as on 8th August 1960 had swelled up to Rs. 49,034. The Bank filed a suit against him in 1954 as O. S. 193 of 1955 of the District Court, Kottayam. It is seen from Ext. P-590 that the Branch Manager at Kottayam reported to the Head Office in August 1956 that large amounts were owed by the party to other creditors and that the chances of the Bank being able to recover its dues from him from out of his available assets were very little. In January 1960 the Board of Directors agreed to accept a sum of Rs. 25,000 from the debtor in full settlement of the Bank's claim, thereby resulting in a clear loss of Rs. In January 1960 the Board of Directors agreed to accept a sum of Rs. 25,000 from the debtor in full settlement of the Bank's claim, thereby resulting in a clear loss of Rs. 24,034 to the Bank which must be attributed solely to the reckless nature of the transaction. 107. The next item to be considered is Item 263. The Ernakulam Branch of the Bank had advanced amounts to one Alexander Palathinkal by way of clean overdraft. When account became dormant and no repayments were being made by the party the Bank converted it into a loan account by taking a promissory note from the party for the balance outstanding in the overdraft account, thereby treating that amount as a loan freshly advanced to him. No security was taken from him even at the time of such Conversion into a new loan account and there were no subsequent repayments. The Branch Manager reported to the Head Office in Ext. P-601 dated 21st May 1958 that the party had no assets. This was reported by the borrower himself in Ext. P-601(a). By Ext. P-604 dated 29th November 1958 the borrower wrote to the Bank that even though he had no property of his own he was prepared to pay the Bank a sum of Rs. 12,000 within five years from the 1st January 1959 in full settlement of all his liabilities with the Bank, the amount being remitted in monthly instalments of not less than Rs. 100. On the basis only of this offer made by him the Liquidator has treated as realizable Rs. 12,000 from out of the total liablility of Rs. 35, 065 outstanding as on 8th August 1960. We must say that we find considerable difficulty in appreciating the wisdom of this decision to treat even Rs. 12,000 as realizable. Whatever that be, there is not the slightest doubt that there is no possibility of recovering any portion of the balance amount and on the facts and circumstances placed before us we hold that this was an imprundent and bad advance. 108. Items 270 to 272 relate to unsecured advance made by the Ernakulam Branch to three different parties. Though suits were field by the Bank and decrees were obtained against them no portion of the decree debts could be recovered since the parties were found to possessed of no assests. Exts. 108. Items 270 to 272 relate to unsecured advance made by the Ernakulam Branch to three different parties. Though suits were field by the Bank and decrees were obtained against them no portion of the decree debts could be recovered since the parties were found to possessed of no assests. Exts. P-606 to 609 are the reports sent by the Branch Managers stating that the judgement-debotors were not possessed of any assets and that therefore no realization was possible. All these advances had been made without enquiry regarding the financial condition of the borrowen, and the nature and the extent of their assets. There can be no doubt that these were imprudent and reckless transactions. 109. The next item to be considered is Item 28. This relates to unsecured advances made to one Thommy Dominic. The Bank obtained two decrees against him and ultimately entered into a compromise in February 1960 whereunder it received Rs. 30,000 in full settlement. The Liquidator has rightly treated the balance of Rs. 3,564 as loss caused to the Bank by reason of the unsecured advance having been imprudently made to the party without making any prior enquiries regarding his assets or creditworthiness. 110. Item 285.”The Trivandrum Branch of the Bank had made advances to one Family Benefit Bank Ltd. against repledge of gold ornaments. The Bank had obtained from the borrower an assignment of certain decrees by way of security but as reported to the Head Office by the Branch Manager in Ext. P-636, out of the 74 decrees so assigned, only two decrees amounting to Rs. 1,312.12 were worth pursuing. The balance due to the Bank in this account as on 8th August 1960 was Rs. 33,276. The Family Benefit Bank Ltd. was dissolved in 1947 and had been struck off the register under section 305 (5) of the Travancore Companies Act IX of 1114 with effect from 24th January 1947. The entire amount mentioned above is, therefore, clearly irrecoverable and there is no doubt that this loss had been caused as the result of the imprudent and reckless nature of the transaction. 111. Item 286 relates to unsecured advances made by the Bank to one P. J. Mathew in two accounts, one in his individual name and other in the joint names of himself and his wife. 111. Item 286 relates to unsecured advances made by the Bank to one P. J. Mathew in two accounts, one in his individual name and other in the joint names of himself and his wife. Two decrees were obtained by the Bank against the borrowers but ultimately the claim was compromised by the Bank receiving only a sum of Rs. 75,000 in full satisfaction of its dues and giving up the balance of about Rs. 4,000. The Liquidator is, in our view, justified in his contention that the loss has been caused on account of the culpably negligent manner in which the amounts had been advanced without any security and without any prior enquiry regarding the financial condition or assets of the borrowers. 112. Items 287 and 288 relate to two unsecured advances made by the New Delhi Branch to one Uttamchand and Sadhu Ram Sharma respectively. The parties did not make any repayments. Exts. P-639 and P-640 disclose that subsequent enquiries conducted by the Manager of the Branch resulted in the discovery that the parties had no assets at all and that the amounts were irrecoverable. Uttamchand had left India and his whereabouts were not known. The advances had been made without making any prior enquiry regarding the financial condition of the borrowers and must be characterised as reckless transactions. 113. The facts relating to Items 289 to 292 are somewhat similar. In all these cases amounts had been advanced to different parties on demand promissory notes without taking any security from them. The advance covered by Items 289 and 290 were made by the Thodupuzha Branch, Item 291 by the Thiruvalla Branch and Item 292 by the Alwaye Branch. In respect of none of the above four advances is there anything in the records of the Bank to indicate that before making the advances any enquiry whatever had been made by the Branch concerned or by the Head Office into the financial condition of the borrowers. Decrees were obtained by the Bank against all these borrowers but as seen from Exts. P-641 to 644 nothing could be recovered in execution since the judgment-debtors were not possessed of any assets. The Liquidator is well-founded in his contention that these were all bad and improper transactions. 114. Decrees were obtained by the Bank against all these borrowers but as seen from Exts. P-641 to 644 nothing could be recovered in execution since the judgment-debtors were not possessed of any assets. The Liquidator is well-founded in his contention that these were all bad and improper transactions. 114. In 1959 the outstanding balances in a number of accounts in two Branches which had become irrecoverable were transferred from the Branches to the Head Office and these were included in a composite credit entry under the caption ''miscellaneous" in the Head Office Ledger. Item 293 relates to this credit entry of Rs. 92,719 shown in the Head Office Ledger. Out of this amount, Rs. 75,391 was by transfer from the Nagercoil Branch being the amount outstanding since 1939 in an account in the name of one D. Narayana Iyer. Ext. P-651 which is a report sent to the Head Office by the Manager of the Nagercoil Branch on the 18th February 1960 shows that even the whereabouts of the borrower Narayana Iyer were not known, that he had left no assets and that there was no scope at all for recovery of any amount in that account. It is, therefore, clear that this portion of the miscellaneous credit entry is completely irrecoverable. The remaining portion consists of balances transferred from the Delhi Branch which had become irrecoverable long ago. Whatever might have the purpose intended to be served by making such a miscellaneous credit entry and creating a wrong impression that the Bank had to its credit realisable assets to that extent, there is not the slightest doubt that the entire amount shown in this entry is irrecoverable and represents the loss caused to the Bank as a result of bad and imprudent advances made by the Branches mentioned above. 115. The next item to be considered is Item 304. Large amounts were advanced by the Bangalore Branch of the Bank to one M. A. A. Ghatala in two accounts, one in his individual name and the other in the name of a firm by name 'India Brokers' of which he was the proprietor. In respect of the account in the name of the firm the Bank had obtained a pledge of a life insurance policy for Rs. In respect of the account in the name of the firm the Bank had obtained a pledge of a life insurance policy for Rs. 1,885 by way of security and no security whatever had been taken in respect of the advances made in the individual name of the party. The amount due to the Bank as on 8th August 1960 in the account in the firm's name was Rs. 72,042 and in the other account Rs. 19,801. The Bank's claims in the former account got time-barred on 6th February 1951 itself. It was reported by the Branch Manager in Exts. P-720 and P-721 that the whereabouts of the borrower were not known and that the party did not possess any assets other than the surrender value of the insurance policy which was only about Rs. 1,885, Both the accounts had also become time-barred even on the date of the report Ext. P-720 (27th November, 1956). As a result of these advances which had been made without any enquiry or reasonable care the Bank has lost about Rs. 90,000 and this loss must be attributed to the reckless and culpable negligence with which the Bank's funds were dealt with by those in charge of its management. 116. The Bangalore Branch of the Bank had given unsecured overdraft advances to the extent of more than Rs. 3,00,000 to a party who was conducting business under the name and style "Basheer Bros.". This transaction forms the subject-matter of Item 309. No prior sanction of the Head Office was asked for or obtained before making this large advance by way of clean overdraft and as far as the records show the Branch Manager had not made any prior enquiries about the borrower's financial condition or assets before granting huge advances to him without any security. The borrower closed their business in Bangalore and migrated to Pakistan in 1948- Fortunately for the Bank it was able to get an amount of Rs. 1,55,543 which was due to the evacuees from the Central Government by way of excess profits tax refund. The balance amount due in the account as on 8th August 1960 was Rs. 36,543 and there is absolutely no scope for recovering any portion of this. The Liquidator is justified in his contention that this advance should be regarded as an imprudent and bad transaction. 117. The balance amount due in the account as on 8th August 1960 was Rs. 36,543 and there is absolutely no scope for recovering any portion of this. The Liquidator is justified in his contention that this advance should be regarded as an imprudent and bad transaction. 117. Item 310 relates to a transaction of loan advanced by the Bangalore Branch to one Venkataramalu Naidu on a demand promissory note without any security. The party failed to make any repayment and even though a decree was obtained against him in O.S. 4 of 1953 of the District Court, Bangalore, nothing could be recovered since the debtor was found to be possessed of no assets as is seen from the report of the Branch Manager, Ext. P-739. The amount due in this account as on 8th August 1960 was Rs. 32,814. This is obviously another instance of a reckless advance to a person possessed of no assets without any prior enquiry regarding-his financial condition. 118. Items 311 and 312 relate to advances made by the Bangalore Branch in clean overdraft accounts in the names of one T. K. Srinivasan and one Ghouse Mohideen respectively. The former left Bangalore in 1954 and his whereabouts were unknown. Although a suit was filed against him and an ex parte decree was obtained nothing could be realised since the judgment-debtor was not possessed of any assets. The position in respect of Ghouse Mohideen was not also different. As seen from Ext. P-741 dated 29th January 1960 the report of the Branch Manager was to the effect that no information was available about the party's assets and that the Bank's claims had become time-barred on 25th July 1947 itself. The amounts due to the Bank under those two accounts as on 8th August 1960 were Rs. 30,093 and Rs. 24,543 respectively and no portion thereof is recoverable. The Liquidator's contention that these are losses caused to the Bank on account of reckless advances has only to be upheld. 119. Exts. P-742 to P-744 relate to Item 313, the subject-matter of which is an unsecured advance made by the Bangalore Branch of the Bank to one M. A. Azeez on a demand promissory note. Exts. The Liquidator's contention that these are losses caused to the Bank on account of reckless advances has only to be upheld. 119. Exts. P-742 to P-744 relate to Item 313, the subject-matter of which is an unsecured advance made by the Bangalore Branch of the Bank to one M. A. Azeez on a demand promissory note. Exts. P-742 and P-743 show that the borrower died on 18th May 1955 without, leaving any assets and that it was not, therefore, possible for the Bank to recover any portion of the debt due to it. The amount due to the Bank in this account as on 8th August 1960 was Rs. 21,317. This transaction is on a par with the transactions discussed by us earlier because this advance had also been made without taking even the elementary care to enquire about the financial condition of the borrower or the nature and extent of the assets, if any, owned by him. 120. One K. M. Elias had been allowed clean overdraft facilities by the Bangalore Branch beginning from January 1950 and the advances so made to him form the subject-matter of Item 314. The amount due in this account as on 8th August 1960 was Rs. 17,609. A decree was obtained against the party by filing O.S. 30 of 1954 in the District Court, Bangalore but no assets belonging to the borrower could be traced and hence nothing could be recovered in execution. It is seen from Exts.P-745 and P-746 that the party had left Bangalore and was reported to be employed in a workshop at Mettupalayam on a monthly salary of about Rs. 150 only. We have no hesitation to uphold the contention of the Liquidator that on the facts disclosed by the records this advance must be regarded as an imprudent and bad transaction. 121. Item 315.”Unsecured advances had been made by the Bangalore Branch to one Seshagiri Rao in an overdraft account and in a demand promissory note loan account. The advances in both the accounts had been made without any security. The party was found to be possessed of absolutely no assets and claims of the Bank under both the accounts became barred by limitation even in 1948. The total amount lost to the Bank by reason of these transactions was more than Rs. 16,000. It does not admit of any doubt that these were thoroughly improper advances. 122. The party was found to be possessed of absolutely no assets and claims of the Bank under both the accounts became barred by limitation even in 1948. The total amount lost to the Bank by reason of these transactions was more than Rs. 16,000. It does not admit of any doubt that these were thoroughly improper advances. 122. Another unsecured advance made by the Bangalore Branch to one Mohamed Yusuff on 27th June 1959 forms the subject-matter of Item 316 which is the only item remaining to be discussed. Though a decree was obtained against the borrower in O.S. 122 of 1956, it was reported by the Branch Manager in Ext. P-749 dated the 14th December, 1956 that on enquiry it was found that the judgment-debtor had no assets, and that hence realisation of the decree amount would be difficult. A subsequent report sent to the Head Office by the Manager of the Bangalore Branch (Ext. P-750) shows that the Bank had even at that time absolutely no information regarding the means of the borrower and that he had also left Bangalore for good. The amount due on this account as on 8th August 1960 was Rs. 14,194. This is yet another instance of a culpably negligent transaction whereunder substantial amounts were advanced to a party without any prior enquiry regarding his creditworthiness or the nature and extent of the assets, if any, possessed by him and without taking any security whatever from the borrower. This advance also must, therefore, be held to be a bad and improper one. 123. That concludes the item-wise discussion of all the transactions listed in Annexure I other than those specifically dealt with in the judgment of the learned Single Judge and also those in respect of which counsel appearing for the appellants stated before us that they had no contentions to urge. It is a common feature of all the items discussed by us that in respect of none of them had any prior enquiry been made about the creditworthiness of the borrowers before the loans were advanced. It is a common feature of all the items discussed by us that in respect of none of them had any prior enquiry been made about the creditworthiness of the borrowers before the loans were advanced. Even in respect of the few instances where the borrowers had furnished some security in the shape of mortgage of immovable properties there is nothing in the records of the Bank to show that the properties were either inspected or valued by the Bank before the securities were accepted and amounts were advanced on the strength thereof. Even though the Head Office of the Branch had issued a circular Ext. P-882 prescribing a standard loan application form as early as in 1943 no such loan applications had been submitted to the Head Office in respect of any of the advances mentioned in Annexure I and the advances had been made without any scrutiny whatever either by the Branch Manager or by the Head Office regarding the solvency, reputation and financial condition of the borrower. 124. Our detailed examination of the facts and circumstances relating to all the transactions listed in Annexure I has convinced us beyond any doubt that the learned Single Judge was perfectly correct and fully justified in holding that all the advances listed in Annexure I excepting Items 17 and 25 were imprudent and reckless transactions. We hold accordingly.