The Official Assignee Of Madras … vs The Oriental Government Security … on 28 September, 1909

Madras High Court
The Official Assignee Of Madras … vs The Oriental Government Security … on 28 September, 1909
Equivalent citations: 5 Ind Cas 200
Author: Munro
Bench: Munro, A Rahim


Munro, J.

1. This is an appeal by the Official Assignee from an order of the learned Chief Justice sitting as Commissioner in Insolvency. The material facts are not in dispute and may be briefly stated. A sum of Rs. 970 was due to one Marian Chandy by the Oriental Government Life Assurance Company Limited, the respondents; Marian Chandy asked the respondents to remit the money direct to her by a cheque drawn on Arbuthnot & Co. By an oversight the respondents sent to Arbuthnot & Co. a cheque for Rs. 970 drawn on the National Bank of India and asked them to place the amount to the credit of Marian Chandy. The latter had at the time no account with Arbuthnot & Co. Arbuthnot & Co. informed Marian Chandy that the amount was at her credit. She then on the 5th October 1906 asked Arbuthnot & Co. to remit the money. Arbuthnot & Co. sent her a form of receipt for signature. This receipt she duly signed and returned and the receipt cached Arbuthnot & Co. before they suspended payment. The respondents took from Marian Chandy an assignment of her right against Arbuthnot & Co. On those facts the learned Commissioner held that from the 5th October 1906, Arbuthnot & Co. held the money as Marian Chandy’s agent to remit the money and that they did not hold it as her bankers. He, therefore, directed the Official Assignee to pay the whole amount to the respondents.

2. I think the order of the learned Commissioner is right. As the receipt and demand for payment reached Arbuthnot & Co., before they suspended payment, the result was the same as if Marian Chandy had attended in person at the Bank, handed over the receipt and asked for payment. In that case Arbuthnot & Co., would have been bound to pay her at once. But as she did not attend in person, it was their duty to remit the money at once as requested, and failing to do so they thereafter held the money in a fiduciary capacity–Vide my judgments in O.S. Appeals Nos. 27 and 50 of 1908. I would, therefore, dismiss the appeal with taxed costs to be paid out of the estate.

3. The appeal is dismissed accordingly.

Abdur Rahim, J.

4. The facts of this case to my mind come within the rule of In re Hallet’s Estate, vaughan v. Halliday 9 Ch. A. 516 at p. 568 : 30 L.T. 741 : 22 W.R. 886. What happened was The Oriental Life Assurance Company, which owed Rs. 970 to one Marian Chandy, sent on the 20th September 1906 to Arbuthnot & Co., a cheque for that amount drawn on the National Bank of India in favour of Arbuthnot & Co., requesting the latter to place the sum at the credit of Marian Chandy, at the same time informing Marian Chandy of the fact. On the 24th September Arbuthnot & Co. wrote to Marian Chandy advising her of the receipt of the remittance and that it would be placed to her credit in due course. On the 5th October, Marian Chandy asked Arbuthnot & Co. to remit the amount to her suggesting to them several modes of transmission. In reply Arbuthnot & Co., on the 9th October, wrote to her that they held the money in her account and enclosed a form of receipt for her signature informing her that they would remit the amount by postal money order less per cent, commission on receipt and per cent, on payments.

5. Marian Chandy, it appears, took objection to the amount charged for commission which she considered to be excessive but as she was willing to leave this matter to Arbuthnot & Co.’s sense of justice, she sent them on the 17th October the receipt form duly filled up and signed requesting them to remit the money in the manner mentioned in their letter dated the 9th October. The money was not, however, remitted before Arbuthnot & Co. stopped payment. Marian Chandy, subsequently, assigned her claim to the Oriental Life Assurance Company. It should be borne in mind that neither the Oriental Life Assurance Company nor Marian Chandy had an account with Arbuthnot & Co. at the time of the above transaction.

6. On these facts it seems to me that Arbuthnot & Co received the money from the Oriental Life Assurance Company for the purpose of paying the amount to Marian Chandy Arbuthnot & Co. were not entitled, therefore, to appropriate the money to their own use nor did they purport to do so and the fact that they charged commission for their services strengthens this inference. Nor can it be said that they had any authority afterwards from Marian Chandy to treat the money as their own and the correspondence clearly shows that they held the money for the use of Marian Chandy. The learned Counsel for the Official Assignee, however, relies upon Lord Romilly M.R.’s ruling in Massy’s case 39 L.J. Ch. 635 : 22 L.T. 853 : 18 W.R. 818 already referred to. Even if that decision lay down the law correctly, think that when Arbuthnot & Co. wrote to Marian Chandy that they held the money on her account in accordance with the instructions which they had received, that was sufficient as an act of appropriation to bring the case within that rule. But it must be borne in mind that Massy’s case 39 L.J. Ch. 635 : 22 L.T. 853 : 18 W.R. 818 was decided before the case of In re Hallet’s Estate 9 Ch. A. 516 at p. 568 : 30 L.T. 741 : 22 W.R. 886 in which the equitable rule as to following trust money was for the first time clearly recognised in all its modern developments and it seems to me, as remarked in Mr. Heber Hart’s Law of Banking see p. 146, footnote that the decision in Massy’s case 9 Ch. A. 516 at p. 568 : 30 L.T. 741 : 22 W.R. 886 must be held to be of very doubtful authority as to the present day. I think the words of Millish L.J., in Vaughon v. Halliday 9 Ch. A. 516 at p. 568 : 30 L.T. 741 : 22 W.R. 886: “Then the rule of law is applicable, that if a remittance is sent for a particular purpose, whether it be a remittance by bill or a remittance in money, the person who receives the remittance must either apply it for the purpose for which it was sent, or else return it,” and of North, J. to the same effect in Gibert v. Gonard 54 L.J. Ch. 439 : 52 L.T. 54 : 33 W.R. 302 quoted above, correctly express the equitable rule as now enforced in England and the rule being founded on broad consideration of justice should be followed by this Court.

7. For these reasons, I hold that the learned Commissioner’s order is right in this case and would dismiss the appeal with costs.

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