JUDGMENT

1. The suit out of which this appeal arises was brought by one Atul Chandra Sen against a lady named Kannammal and the Assam Bengal Railway Co. Ltd. The plaintiff's case was that a man named S.Y.L Iyer had been a telegraph inspector in the employ of the. Assam Bengal Railway at Chittagong. The plaintiff himself was also an employee of that railway. It was alleged that Iyer used to borrow money from the plaintiff and that upon an adjustment of accounts being made between them it was found that Iyer was indebted to the plaintiff to the extent of Rs. 6,200 which sum Iyer promised to pay out of his Provident Fund money in deposit with the Assam Bengal Railway or, more accurately, in the Provident Fund Institution established in connection with the railway. It appears that in the month of March 1931 Iyer was proceeding on leave preliminary to retirement from service and that while on his way to his home in Madras he died in the train. After his death there were two claimants to the Provident Fund money then standing to, his credit. The plaintiff claimed in this suit a declaration that he is the surviving nominee of a certain portion of the Provident Fund money standing to the credit of Iyer in the Provident Fund account. It is necessary that one should refer to the chronological history of the matter in order to ascertain whether the decision arrived at by the Courts below is correct. There is, no doubt, that the present plaintiff gave adequate notice to the Railway Company that he was a nominee in respect of the fund standing to the credit of Iyer. On 21st January the Chief Auditor of the Assam Bengal Railway, Ltd. (defendant 2 in the suit) wrote a letter to Atul Chandra Sen which reads as follows:

I beg to advise you that in respect of the Provident Fund money of the late S.V.L Iyer, which is in deposit in this railway, there have appeared several claimants as noted in the margin. The wife of the deceased has also produced a succession certificate granted by the District Judge, Trichinopoly, as a token of her claim to the Provident Fund money of her deceased husband. I am holding the money in trust for the person who in a Court of law and in the presence of the rest of all the claimants will be able to prove his title to the same. I would therefore request you to bring a suit at once in order to arrive at a final settlement. If no claim is established within a reasonable time, action will be taken to dispose of the property in such manner as the law of the land will demand.

2. It is apparent from that letter that the fact was that the widow of Iyer had previously obtained a succession certificate in the Court of the District Judge, Trichinopoly. It is to be observed that, so far as one can see, that certificate was obtained on an ex parte application at any rate, without the present plaintiff being a party to the proceedings at Trichinopoly. The letter of 21st January 1932 was presumably received by Atul Chandra Sen either on the same day or on the following day. But a day or two previously, that is to say, on 19th January 1932, Atul had made an application to the District Judge at Chittagong asking that a succession certificate in respect of Iyer's Provident Fund should be issued to him. That application was opposed by a pleader acting on behalf of the widow of Iyer and the matter was argued before the District Judge on 2nd February 1932. The objection put forward on behalf of the widow (who is, as I have stated, defendant 1 in the present suit) was to the grant of any succession certificate to the present plaintiff. Apparently, the District Judge took time to consider his decision, and then on 31st March 1932 the matter was disposed of by the learned Judge refusing to grant the application made by Atul. The learned Judge said this:

The preliminary objection is raised that the matter at issue is concluded by an existing Succession Certificate issued by the District Court of Trichinopoly.

3. He added:

Having regard to the very definite terms of. Ss. 380, 383 and 386 of Act 39 of 1925, I must hold that these proceedings do not lie. I see nothing to be gained by a stay order. If the certificate is revoked by proper authority these proceedings may be renewed.

4. That decision was, as I have said, given on 31st March 1932. The next material thing that happened was that a letter, a copy of which was shown to us by the learned advocate appearing for the plaintiff respondent, was written by a pleader at Chittagong on behalf of Atul Chandra Sen to the Chief Auditor of the Assam Bengal Railway. That letter was apparently dated 3rd April 1932 and the material part of it reads thus:

It appears that the widow has managed to obtain a succession certificate concealing the fact of nomination and without making my client party to the same. Although that certificate is liable to be revoked, the District Judge of Chittagong could not grant a second certificate to my client on that technical ground and virtually asked him to apply for revocation of the widow's certificate or to institute a regular suit allowing renewal of his petition; moreover it is liable to appeal. The case has not yet been decided. I have therefore asked him to institute a suit for declaration of his title to the Provident Fund money without delay and he has entrusted me to do the same. I would like to invite your attention also to the fact that your pleader, Babu Annada Charan Dutta, appeared to support the widow's case. So his petition in this matter is likely to be partial. I therefore hope that you will hold the money as a trustee and not make any payment till the title of the rival claimants is established in a competent Court with notice to the parties concerned; otherwise you will be doing something at a great risk and against the spirit of your own previous letter.

5. Now this letter, although the copy bears the date 3rd April, is no doubt the letter acknowledged and dealt with in the letter written on behalf of the Railway Company to Babu Chittaranjan Das and dated 7th April 1932. The letter of 7th April says this:

With reference to your letter dated the 5th instant (this must be a mistake for 3rd instant) I regret the Railway Company have no power to withhold the payment of the Provident Fund money of the late Mr. S.V.L Iyer to his widow in accordance with the Succession Certificate and the orders of the District Judge, Chittagong, obtained by her. The money is therefore being, paid to her.

6. It is significant and is indeed a feature of paramount importance in this case that there was in that letter no repudiation of the allegation that one and the same pleader had been acting both for the rival claimant, the widow and for the Railway company, who ought however to have stood aside and remained strictly impartial and to have maintained the sort of attitude that is proper to a stakeholder or a trustee. It would seem therefore that the complaint made by the pleader Chittaranjan Das with regard to the employment of the widow's pleader, by the Railway Company was wholly justified. The position therefore was this: There was (1) a warning given by the present plaintiff's pleader that the decision of the District Judge of Chittagong with regard to the matter in the succession certificate was an appealable one and by implication that an appeal was in fact likely to be preferred by Atul (2) the statement that a suit was about to be instituted in conformity with the invitation of the railway company's letter of 21st January 1932 (3) the definite warning contained in the last paragraph of the plaintiff's pleader's letter of 7th April 1932. In spite of all these on the very date on which the company's letter was written a sum of Rs. 400 was paid out to the widow. On the following day, the 8th April, a suit was duly instituted as notified in the letter of the plaintiff's pleader. It appears therefore that the initial sum of Rs. 400 was paid by the company with the full knowledge of the fact that there-was a nominee in existence and that nominee was taking all proper and reasonable steps to establish his title and that he was doing what he had been expressly invited-to do by the Railway Company itself, namely, to bring a suit to have his claim properly established in a competent Court. In spite of all that, on 25th April 1932 the Railway Company proceeded to hand over to Iyer's widow the bulk of the rest of the provident fund money. On that date a sum of Rs. 6,000 was paid out. It was not without significance perhaps that it was on that very date the summons in the present suit was served upon and received by the Railway Company. By the 2nd May 1932 a total sum of Rs. 6,970 had been paid to the widow. Now Atul Chandra Sen duly appealed against the decision given by the District Judge of Chittagong on 31st March 1932. That appeal came up to this Court and was heard by Mukerji, J. with S.K Ghose, J. The case is reported in 39 CWN 1171 under the title of Atul Chandra Sen v. Sreemutty Kaunammal. We find in the judgment (at p. 118) this passage:

It appears that there is no provision in the Act laying down that no certificate shall be granted in respect of assets for which a previous certificate has been obtained. Section 385 of the Succession Act, merely says that a certificate subsequently granted would be invalid under certain circumstances. Moreover the effect of Section 4 of the Provident Funds Act, is that in a competition between two persons it is the nominee who holds the certificate who is entitled to the money. We therefore think it would be reasonable to hold that the former meaning should be attributed to the sub-section in question. The result is that in our judgment the appeal should be allowed and the order complained of being set aside the case will go back to the Court below and that the application for certificate, if it is otherwise in order, should be granted.

7. We are informed that in pursuance of that order the District Judge subsequent to 9th August 1934 did issue a certificate to the present plaintiff. In the meantime the suit instituted on 8th April 1932 had pursued its course. Eventually it was tried by the Subordinate Judge, first Court, Chittagong, who gave judgment on 27th May 1933. The conclusion he came to was this:

No doubt defendant 2 could legally make payment to defendant 1 who produced the succession certificate. But this defendant could also await farther developments in view of the correspondence with the plaintiff and the claim laid by the latter to the money. The question of liability or otherwise of defendant 2 does not fall within the purview of this suit. It is sufficient for the purpose of this suit to observe that the plaintiff can question the validity of such payment in a proper suit instituted for the purpose. The present suit being merely a declaratory one regarding the plaintiff's title and no sufficient materials having been supplied in this suit to enable this Court to decide a question of the validity of the payment I refrain from deciding this question in this suit. It does not also, strictly speaking, arise in this suit.

8. The learned Subordinate Judge accordingly gave the plaintiff a decree for a sum of Rs. 6,200 which was in deposit with the second party and declared that the first party defendant was not entitled to the same.

9. The effect of that is that the learned Subordinate Judge obviously came to the conclusion that in the circumstances of the case, the Railway Company ought not to have parted with the money when they did, but should have waited further developments, i.e, until the matter of title had been finally determined as between the rival claimants to the fund. The Railway Company appealed. The appeal was heard by the Additional District Judge of Chittagong who gave judgment on 29th August 1934 affirming the decision of the Court of first instance. Referring to the company's letter of 7th April 1932 the learned Additional District Judge made this comment:

The company replied to a letter of the plaintiff's pleader requesting him to withhold the provident fund money, that the payment could not be withheld as the widow of Iyer had produced a succession certificate. This reply is inconsistent with the company's letter to the plaintiff and others asking them to bring a suit at once in order to arrive at a final settlement. The Company was ill-advised to make payment of money to that widow after asking the plaintiff and others to bring a suit for establishing their claims to the same.

10. A little later in his judgment he observed:

The lawyers of the company should have advised it to have regard to the provisions of that section of the Provident Funds Act. (That is to say S. 5 of the Act.) Under Section 3, Clause (2) of the Provident Fund Act, the money vests in the nominee of the subscriber. The Railway Company was wrong in paying the money to defendant 1. The Company in making the payment to defendant 1 did not act in good faith, that is, with due care and attention and, therefore, they are not entitled to any protection under Section 16 of the Succession Certificate Act. It cannot be denied that the plaintiff has got his title to the Provident Fund money. Under the circumstances, I think that the lower Court has arrived at a correct finding.

11. It would seem that in the Court, it must have been that the Railway Company was protected by reason of some statutory provisions, and that the pleader appearing for the Railway Company may have stated that the relevant section was Section 16 of the Succession Certificate Act (which is an Act of the year 1889), otherwise it is difficult to see why the learned Judge referred to that section in his judgment and stated that the Company were not entitled to any protection under that section though the true legal position was that the whole of the Succession Certificate Act, 1889 had at that time been repealed by the Succession Act of 1925 with the solitary exception of Section 13 of the former Act. The relevant section in the Succession Act of 1925 is S. 381 and that section was relied upon by Mr. Kastgir in his argument on behalf of the appellants, the Railway Company. The section runs as follows:

Subject to the provisions of this part the certificate of the District Judge shall, with respect to the debts and securities specified therein, be conclusive as against the persons owing such debts or liable on such securities, and shall, notwithstanding an; contravention of S. 370 or other defect, afford full indemnity to all such persons as regards all payments made, or dealings had, in good faith in respect of such debts or securities to or with the person to whom the certificate was granted.

12. We are however clearly of opinion that section has no application to the present case because the subject matter of the suit with which we are here concerned was not under the law a debt. Nor can it be said that the Railway Company made any payment in respect of a debt or security. The real position of the Railway Company, or more accurately of the Railway Company's Provident Fund Institution was that it was in a sense a trustee (in one sense) of this fund on behalf of the person or persons ultimately entitled to participate in it. But apart altogether however from that aspect of the matter Mr. Kastgir has asserted to us that what was done by the Railway Company when they made the various payments to the widow on diverse dates between 7th April 1932 and 2nd May 1932 was done by them under the provisions of Section 5 of the Provident Funds Act of 1925. At any rate, they purported to act in pursuance of what they thought was the legal position arising on the provisions of that section. We need not, however, pause to consider whether what was done by the Railway Company did fall within the purview of that particular section or not. It is clear beyond any question as appears from the Railway Company's own letter of 7th April 1932 that they were undoubtedly acting or purporting to act under, the same Provident Funds Act of 1925. In our opinion, what they did was wrong. Certainly, what they did should not have been done by them when it was done. Mr. Kastgir finally conceded that in the circumstances in the case the proper section to be considered is Section 7 of the Provident Funds Act of 1925. S. 7 reads as follows:

No suit or other legal proceedings shall lie against any person in respect of anything which is in good faith done or intended to be done under this Act.

13. “The Railway Company having done something under this Act”, the only question is whether what was done was done in good faith. That is a question of fact. The learned District Judge of Chittagong against whose judgment this appeal is brought has come to a definite conclusion upon that matter. We have already quoted the passage in which he says in terms “The company in making payments did not act in good faith with due care and attention there is no doubt whatever that the question whether a person or a corporation acts in good faith is always question of fact and, therefore, on that ground alone we should be constrained to dismiss this appeal; for this being a second appeal, no mere question of fact can be re-agitated before this Court. I would refer to a case analogous to the present case, viz. AIR 1928 Mad 484,2 where Madhavan Nair, J. stated: “The question-whether a party acted in good faith is a question of fact”, and he made this comment even if the payment is made without due care and caution till if it is made honestly it will be-payment in good faith.

14. He stated that upon the strength of the definition of ‘good faith’ as contained in the General Clauses Act which runs in follows:

A thing shall be deemed to be done ‘in good faith’ where it is, in fact, done honestly, whether it is done negligently or not.

15. We are however of opinion that, in spite of that somewhat liberal definition, payments made in contravention of the Provident Funds Act, are by no means protected under all circumstances and the definition contained in the General Clauses Act certainly does not entitle a trustee or the holder of a fund to pay anybody and everybody without proper enquiry. In this connection, reference may be made to the case in 5 Bom LR 454.3 In that case, the depositor was an engine driver in the employ of a railway company. He had incurred large debts, which he failed to pay, and so eventually he filed his own petition in insolvency. Competition then arose between himself and the Official Assignee, who was in charge of the insolvency, as to who was entitled to a Provident Fund. The railway company received a notice from the Official Assignee claiming he was entitled to the money standing to the credit of Miller. In spite of that notice the railway company insisted on paying out or, at any rate, did pay out the money to Miller himself. The resulting case was heard by Russel, J. At p. 459 of his judgment he states:

The conclusion that I have arrived at therefore is that the B.R & C.I Railway Company were wrong in paying over so much of the sum in their hands to the said insolvent Alexander Miller as would have paid his debts after they had due notice of the Official Assignee's claim herein. Under the circumstances of this case it is clear that the B.B & C.I Railway Company are not protected by the above Section 6 of the Provident Funds Act, 9 of 1897. If I am right, in my opinion, the payments they made to Alexander Miller are contrary to the provisions of that Act.

16. Section 5 of the Provident Funds Act of 1897, is the precursor of S. 7 of the present Act and was almost in the same language as S. 7—the only difference being that instead of the final words ‘under this Act’, which appear in S. 7, the words were “in pursuance of the provisions of this Act”. As I have said, the question whether the Railway Company acted in good faith or not has already been decided by the Courts below and for that reason alone it is not competent for this Court to interfere in second appeal. But we go further than that and say that, in our opinion, the Court of appeal below was quite right in coming to the conclusion that it did on the question as to whether the Railway Company had acted in good faith or not. The circumstances of the case show quite clearly that it would be altogether wrong to afford to the Railway Company the protection given by Section 7 of the Provident Funds Act of 1925. The position was that the Railway Company had amongst their own records a nomination duly made by their employee Iyer as long ago as the year 1916. They had notice that the surviving one of the two original nominees was putting forward a claim under that nomination. They had also notice that proceedings had taken place in the Court of the District Judge of Chittagong whereby the surviving nominee, the present plaintiff, Atul Chandra Sen, was seeking to obtain a grant to him of a succession certificate in order that he might perfect his title. The Railway Company further had notice that although the District Judge of Chittagong had decided the application adversely to Atul Chandra Sen he was alive to the fact that he had a right of appeal and that he proposed to exercise that right. The Railway Company moreover had notice at an early stage and certainly before they paid over the bulk of the Provident Fund money to the widow that Atul had actually instituted a suit—a suit of the nature which they themselves had required or, at any rate, requested him to institute in, order that the conflicting claims of himself and the widow might be determined by a competent Court. It seems therefore quite clear beyond any reasonable doubt that the Railway Company were so heedless of their duty as to allow themselves to be advised and ultimately to be represented in the present suit by the identical pleader who had been acting for one of the rival claimant? thereby dethroning themselves from the position of stake-holders and putting themselves, in effect, into the position of preferring one claimant to the other. They were, in fact, adopting a partisan attitude instead of remaining disinterested and impartial. The worst aspect of the conduct of the Railway Company, in my opinion, is that they went back on their word and the promise which they had given in their letter of 21st January 1932. In that letter they had invited Atul to take legal proceedings. They had stated) quite definitely that they would hold the money until the issues raised in those proceedings had been properly determined by a competent Court. If an individual had behaved in similar circumstances in the manner this Railway Company did, one would be disposed to say that his conduct had fallen short of that expected of a man of honour and business integrity. We see no reason why any lower ethical standard should be applied to the conduct, of the Railway Company. We take the view therefore that the District Judge rightly held that the Railway Company did not act in good faith. It follows that they are not entitled to the indemnity or protection afforded by Section 7 of the Provident Funds Act, 1925. The appeal is, accordingly, dismissed with costs.

K.B/A.L

17. Appeal dismissed.