G.K. Malvankar v. Credit Bank Of India Ltd.

Macleod, J.:— This is a summons taken out by one G.K Malvankar, the agent of the Ahmedabad branch of the above bank against the liquidator calling upon him to show cause why he should not be directed to hand over the amount of the security deposit placed by the said G.K Malvankar and lying with the Credit Bank of India in liquidation.

2. On 2nd July 1910 Jaffer Jusab, the Manager of the bank, wrote to Malvankar informing him that he had been appointed Branch Manager at Ahmedabad on a salary of Rs. 75 a month subject to the approval of the head office, and that he would have to give as security Rs. 5,000 to be deposited with the bank and also further security from the bank of Bombay for Rs. 10,000 and if the head office Manager thought it necessary a fidelity guarantee policy for Rs. 15,000.

3. Malvankar thereupon deposited Rs. 4,500 with the bank and acted as Branch Manager until the winding up order was made. According to his affidavit after he had sent Rs. 4,500 to Bombay, the Manager wanted to place the amount in fixed deposit. Whereupon Malvankar came to Bombay to protest. He was eventually given a receipt as follows on 10th July 1912:

“Received from G.K Malvankar Rs. 4,500 only as a security deposit subject to the service regulations of this bank bearing interest at the rate of 6 per cent per annum.”

4. He now contends that he is entitled to be paid the said sum in full in preference to the creditors of the bank, as he paid the said sum to the bank as his employee and did not pay it to the bank as customer.

5. His story is not quite accurate in detail. Prom the affidavit of the liquidator it appears that as a matter of fact Malvankar paid to the bank Rs. 2,000 on 8th July 1910, Rs. 2,000 on 9th July 1910 and Rs. 500 on 17th December 1910. The said sums were entered in the fixed deposit ledger to the credit of Malvankar as fixed deposits for twelve months at 6 per cent interest. Subsequently the whole amount of Rs. 4,500 was transferred to the security deposit account and a receipt given as above on 10th July 1912. Interest was paid from time to time to Malvankar up to 30th June 1913. In the half-yearly balance sheet the said sum was included in the item of current savings bank and other deposits. The said sum was not kept separate or invested in any particular securities, but was mixed with the other moneys of the Bank Mr. Jinnah argued that the Rs. 4,500 was paid to the bank to be held by them upon trust, that his client was entitled to follow the trust fund in the hands of the bank, and that if the bank had mixed the trust money with its own moneys, whatever moneys were found with the bank at the date of liquidation up to Rs. 4,500 must be considered as trust money.

6. That argument, I think, is perfectly sound. If Malvankar had given Rupees 4,500 to the bank to be held by the bank during the period of his employment as security for his honesty and fidelity, the bank would have been bound to keep that sum separate, and if they mixed it with their own moneys, he would be entitled to recover it out of the cash balance of the bank at the termination of his employment. But unfortunately for him this was not the arrangement he made with the bank. He agreed in effect that the bank should treat his Rs. 4,500 in the same way as money deposited by a customer. He was to receive interest on it at 6 per cent as long as he remained in the employment of the Bank. If that ceased he would be entitled to recover the principal with interest to date, provided that the bank had no claim against him in respect of defalcation or otherwise. The bank was entitled to invest the money in any way they pleased as no stipulation was made regarding the method of investment. Supposing, for instance, it had been agreed that the money should be invested in Port Trust bonds and at the date of liquidation the bank bad Port Trust bonds for that amount, Malvankar would be able to claim those as belonging to him, but as the case stands lean see no difference between him and an ordinary depositor, except that the deposit was not for a fixed period but for the time he remained in the employment of the Bank. I discharge the summons, but under the circumstances without costs. The liquidator can have his costs out of the estate.

JUDGMENT

7. The appellant's claim is that he should be paid in full by the liquidator of the Bombay Credit Bank the amount deposited by him in 1910 as security for the faithful discharge of his duties as the agent of the bank's branch at Ahmedabad.

8. The money was originally placed by the Bank Manager to an ordinary fixed deposit account bearing interest at 6 per cent but upon objection being made by the appellant it was transferred in 1911 to the security deposit Account bearing interest at the same rate as before. There was a separate ledger kept by the bank for such accounts, and after 1911 a counterfoil receipt book, specially made out for security deposit accounts, was prepared and from it a receipt was given to the appellant for his money held at interest. The Liquidator contends, and the learned Chamber Judge has held, that the appellant can only rank as an ordinary creditor in the liquidation. The appellant contends that the money is earmarked and must be treated as trust property in the liquidator's hands. That in the case of a going bank, the bank is entitled to treat a security deposit as earmarked for a particular purpose and refuse to deal with it for any other purpose cannot be disputed, but in a liquidation of an insolvent bank the question is whether security fund can be identified and followed by the giver if the occasion for realizing the security has not arisen. If the money has, with the consent of giver of the security, been received by the bank and mixed with its funds in consideration of an agreement to pay interest on it, the bank is only a debtor and not a trustee.

9. We have no doubt that this is the position in the present case. The appellant agreed that the bank should receive and hold the money, paying interest at 6 per cent for its use, the money being repayble, if not forfeited for losses occasioned through the appellant's default, upon his ceasing to be the bank's agent. So thoroughly did the parties realize that the bank and the appellant were debtor and creditor, that the appellant at the desire of the bank's Manager used in rendering his accounts of his management to debit the bank with the interest on his deposit. This has been admitted by the appellant himself.

10. The appellant therefore can only rank as an ordinary creditor. We affirm the order of the learned Judge, which was without costs, and dismiss this appeal also without costs, as it is a test case governing several others in this liquidation.

G.P/R.K

11. Appeal dismissed.