The Bank of Bengal v. The East India Company (United Kingdom)

BANK OF BENGAL v. EAST INDIA COY. [1834] 11 KNAPP, 244

zeniindar to contract a del&, or for any other native to take an obligation from a

zemindar without the consent of trhe oacers of revenue. Such an obligation, i f

founded on a, valuable consideration, would have been equally binding upon the

consc~ence of the z e i ~ i i ~ ~ d a ~ , and the de ina~~d and the payment would be equally

legal as if such consent had been olhined and registered, though no court of justice

might have jurisdiction to enforce the right. Whatever may have been the notions

of public policy upon which the native courts were for some time r ~ t r a ~ n e d from

taking cognizance of such traiisactj~ns, those notions have not been deemed, upon

experience, to have been well founded, sirice those parts of the 20th ariicles of the

Regulations of 1781 and 1787, upon which the Court of Sudder Devanny Adatvlut

rely, have been expressly rescinded by the R e ~ u l a t i o ~ f the 29th of October 1790.

The title of a Regulation passed in 1793, No. 38, has been referred to, which

co~mences in these terms : “A regulation for re-enacting, with modifications, such

parts of the rule passed on the 27th of June 1787 as p r o ~ ~ ~ b ~ t s covenanted civil

servants of the Company employed in the adn~~nistration of justice, or the coilection

of public revenues, lending money to zemindars, iridependant talookdars, or other

actual proprietors of Iand.”

The language of this title appears to treat the restrictions contained in the

Regu~ations of the 27th of June 1787, as a m o u n t ~ n ~ to pro~iibit~ons, and, in a

popular sense, the Iaw which deprives a creditor of h is remedy may be considered

as proh~biting him from taking an ob~igation to pay him ; but unKess such be the

true c o ~ s t r u e t ~ o ~ ~ of the R e g u ~ a ~ ~ o x ~ itself, that sense cannot be imposed upon

it by the language of a subsequent, Regulation not expressly declaratory, much less

by the title of a Regulation only. The Regulation of 1793, in iuodifyiiig that of

1787, prohibits, in express terms, mhatever is intended to be forbidden; those of

1181 and 1787 are only restrictive of jurisdiction, and if they were construed as

amounting tu proh~bit~on, the extent of transactions which they embrace- would

lead to consequences highly ~ncon~enient and unjust. Their r,ords~lips~ therefore,

are of opinion that a report should be made to Eis Xajesty by the Judicial Com-

mittee, reco~mending that the decree o f the Sudder Deqanny Adawlut Court be

reversed, and that the: Court of Sudder Dewanny Adawlut be directed to affirni the

decision of the P~.ov~ncia,~ Court, but without costs, as a diEerence of opinion has

prevailed amongst the courts below, and that, for the same reason, ea& party

should bear his owii costs of this appeal. The order must proTide for the reim-

b u r s e ~ e n t of the costs incurred by the East India Company in prose cut in^ and

defending the appeal.

[On point (i.) ap, to whether imposition of statutory restriction on suits for loans

rendered such loans illegal, cf. M e l l i w v. S h k l e y Locrtk Board, 1885, 16 Q.B.D.

446, 481, 453, 454 ; 3fusgrotle v. C h u ~ TreorLy Toy, 1891, A.C. 272 ; Letrrnyd

v. Bracken (1891), Q.B. 114 : (ii.) as to effect of repeal, see Interpretatio~~ Act,

1889 (52 and 53 Vict. G . 63) s, 38 (2), and Indian Genera1 Clauses Act, 1897

(Act x. of 1897), S. 6.1

r z d ~ j ~ ON A ~ P ~ A ~ ~~0~ TBE s ~ ~ ~ ~ ~ E COURT AT ~ A ~ c u T ~ ~ .

The BANK QF ~ E ~ ~ A ~ , - ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ; The EAST INDIA ~ Q ~ ~ A ~ ~ , - e ~ o ? ~ -

In an action against the East India Company by the holder of a forged imita-

tion of one of their promissory notes issued by the Governor-general in

Council a t Calcutta, held that the C o ~ p a n y were not bound by the ac-

kRo~ledg~y~en~ of it as genuine by a clerk in their Accountant~~eneral’s

office, who was authorized by the ~ c c o u n ~ ~ ~ ~ t - ~ e n e r a ~ to compare all such

notes wit.21 the register, but not au~ho~ized to certify their g e ~ ~ ~ ~ i ~ e n e s s ,

aIthough i t appeared that it vas his practice to do so.

The facts of this case are so fully stated in the judgment as to render any re-

dents [January 6 and 8, 18341.

473

11 KNAPP, 266 BANK OF BENGAL 21. EAST INDIA COY. [I8341

capit~ilation of them ~iIi~~ecessary.

the respondents.

It n’as decided without hearing the counsel for

The Solicito~~-general {Sir J. ~ a m ~ ~ b e l l ) , Maute, (9. C.) and Cress-wcII, for the

~ppellants.

The Attorney-general (Sir Wm. ~ o r n e ) ) Sir 3. Scarlett, (I(. C.), Spartkie, (Serjt.),

~ i g r a m , and Idoyd, appeared for the Respondents.

The Chief Judge of the Court of Bankruptcy [Tbe Eon. Thomas Erskincl.-This

is an appeal from the judgment of the Supreme Court of Judicature in Bengal,

in an action of a ~ s ~ ~ ~ s ~ ~ brought by the Bank of Bengal against the East India

C o m p ~ n ~ , to rwover the interest alleged to be due to the ~laintiffs, as ~ n d o r s ~ s

and holders of three proniissory notes, made and issued by the ~ o v e r ~ ~ o r - g e ~ e r a ~ in

Council, as agent for the defendanta.

The ~ ? l a ~ n t ~ ~ s were n o n s u i ~ d at the trial ; and upon motion to set that nonsuit

aside, and to enter a verdict for the p ~ a i n t ~ ~ s , the Court held, the nonsuit right,

and judgment was entered for the defendants accordingly. The p l ~ i n t ~ f f s have

appealed to the King in Council, f2@] and the question is, whether the p l a ~ ~ ~ t i f f s

were ent~tled to recovert It was proved a t the trial, that the i n s t r ~ ~ i ~ e n t s deelared

on were forged in~i ta t ion~ of g e n u ~ ~ e notes, issued by order of the ~ovc~nor- genera^

in Council, to secure to the holders the r e p a ~ e n t of monies raised by way of loan

for the public service of the Company, and the p a ~ n c ~ ~ t of interest quarterly in

the meantime: that upon these notes being brought to the plaintiffs for discount,

they sent them to the office of the Aecountant-genera17 where the Company’s notes

are prepared and registered, for the purpose of a s c e r t a ~ i ~ ~ n ~ whether they were

genuine, and that Mr. Oxborou~h, w. olerk in the ~ccoun tan t~g~nera~’ s oEce, whose

duty it was to make and keep the register of the Company’s notes, examined the

notes in question, and being deceived by their appeai’anc~, and their coi.res~onding

with the entries in the register, wrote his initials on the ~ a r g ~ n to indicate that

they were genuine, and that the p la in t i~s) relying upon Mr. Uxborough‘s ce r t~~ca te ,

discounted the notes. The appellants therefore contend, that such certificate

amounted to an acknowledginent by the Company that the notes hrtd been issued

by their authority; and that, as the a p p e ~ ~ a ~ ~ t s advanced their money upon the

faith of that acl~no~~ledg~nent, they were e n ~ ~ t ~ e d t o recover a ~ a ~ n s t tho defendants,

as makers of the notes, whether they had been originals issued by their authority

or not.

The respondents, on the other side, insist, lst, that Mr. Oxboroug~i had no

authority from the Company to vouch for the authenticity of these notes ; 2dly,

that no authority could by law be conferred on Mr. Oxborough to give effect to

an ~nstrument, as a pro~issory note of the ~ompany, which was not so in fact;

and 3dly, that even if the notes had been genuine, the [24?] Supreme Court has

no jurisdiction to entertain the presenti action against the respondents, for the

re~sons tated in their printed case, and combated by the counsel for the appel~ant.

T t i s obvious, from this statement, that the found~tion of the appellant’s claim

rests upon the assumption that the respondents have, through Mr. ~ x ~ o r o u g ~ ~ as

their agcnt, admitted that the notes in question mere made and issued by them;

and indeed, while i t has been argued with great ability that the respondents are

excluded by such a c k n o w ~ e d ~ e n t from setting up any defence on the plea of

forgery, it has been conceded that, without such acknow~edgment, the p l a ~ n t ~ f f s

made out no case a t the trial. Their ~ o r ~ s h i ~ s , therefore7 have though^ i t right to

consider this point in the first instance; and f have been desired to declare their

opinion, that Mr. Oxborough’s authority has not been sufficiently proved, and

therefore that they forbear to call upon t,he counseI for the respondents to support

their objections to the a~pcl~ant ’s claim.

The notes in question purport to have been made for and on behalf of the re-

~pondents by the Governor-general in Council, and to have been signed, by his

author~ty, by Mr. 1Esolt ~aekenzie, as Seeretary to the ~ v e r n m e n t ; and this appears

from the evidence to have been the ~nvariable form of all prom~~sory notes issued by

the Company in India. ~ r i ~ ~ o u t disc~ssing? therefore, the questio~, whether i t

was competent for the Company to have made such a contract through the agency

o f any other persons, it i s enough to say, that there is no evidence of their having

474

BANK OF BENCWL P. EAST INDIA COP. 118341 XI KNAPP, a48

ever exercised such a power ; and therefore, looking a i the respo~~dents in the tight

in which they have been viewed by the counsel for the appellants? s ~ ~ ~ ~ ~ ~ ~ y as a

coimercial [2:248] firm, the ~ O v e r I ~ o r - ~ e n e r a ~ in Founcil niust be c ~ ~ s i d e ~ e d as the

only agent authorized to make and issus promissory notes 011 behalf of the Company

in India, and the sec~etary to the ~0~7ernment as the only agent appointed to sign

them, until some express authority to others be proved. It has been assumed, how-

emr, that the Company has delegated to other and to iizferior officers the duty and

power of ascertaining and certifying the authent~city of notes s u ~ ~ i ~ i t t e d to their

examination, and that they have thereby indirectly authorized another department

to pledge the Co~npany’s responsibi~ity upon notes not originally made and issued

by the overn nor-general in Council. Conceding, for the sake of the arguxnent.,

that it was competent for the C o ~ p a n y , like any other comi~erc ia~ 6rm, to delegate

such a power to whom they pIeased, and that the fact of Cheir h ~ v i ~ ~ done so may

in this, as in other cases, in the absence of direct proof of authority be collected

from c ~ ~ e u ~ ~ ~ s t a n e e s , it should requiro clear and cogent eyidence to prove the im-

probable fact that they had reposed in an inferior ofticer the power of involving

them in unlimited responsibi~ity, not only by a fraudulent ~ i s r c p r e s e ~ i t a t ~ o ~ ~ ~ but

by an honest mistake or a carelms ~ ~ a ~ c u r a c y , -hen they had guarded &e original

issue of the notes by such high and formal sanciions. I n order to t ry the truth

of this a ~ u m p t i o n ~ i t i s material to consider the time when, and the c i rcu~s tanGe~

under which this authority is supposed to have been conferred, and the nature of

the evidence by which it is a t t e ~ ~ t e d to be proved.

Mr. Oxborough professes to have derived i t through Mr. Wood, the Accountant-

general in 1824. It will be right, therefore, to examine his evidence upon this

subject. In s ~ i ~ ~ s t a n c e ~

he says, it was his duty to register the nurnlser, date, and amount of each certi6c:its

broug~it to the office; and that thereupon a note, c o r r e s p ~ ~ i d ~ ~ g with the register

and certificate, was drawn out, vhich, hwing been first compared and attested by

the deputy or sub-acco.cmtant-genera1, was sent to the Secretary of the ~ o v e r ~ ~ m c ~ i t ,

for his signature, and was afte~~wards returned to the Accou~itan~genera~’s oEce,

to be delivered out to the party entitled. Nr. ~xbo~oug1~’s duty, therefore, was to

make and keep a register of the number, date, and amount of every note iswed by

the C o ~ ~ a n ~ ; but there is not the s ~ i g ~ ~ t e s t s u g ~ ~ t ~ o n in the evidence that, prior

to Mr. Wood’s i ~ s t r u c t i o ~ s , in 1824, he Xiad any thing to do with the making, signing,

or & t t e s ~ ~ n g the note itself. It appears from other parts of tile evidence, that about,

the year 1824, it was ~ i s c o ~ ~ i ” e d that forged j ~ ~ t a t i o n s of the ~ o n i ~ a ~ y ’ ~ paper had

got into ciroulation (not, as in the present instance, in the form of exact copies of

genuine notes, but in that of notes similar in appearance, but varying in date,

number, and a ~ o u n t ) , and the holders of notes became desirous of compar~x~g their

securities with the entries in the register ; and it was a t this crisis that Mr, Wood i s

stated to have given the ~ ~ s t r u c t ~ o n s upon which the a~pel lants p r ~ n c i ~ a l ~ y rely.

Mr. Oxborough, in. his evidence, s a p , (‘ I was authQri~ed by the ~ c c o u n t a ~ ~ t ” g e i ~ e ~ a ~

to examine all notes sent by ind~v~duaIs, the Bank of Bengal, or others, and to put

my initials on them when examined. I was first so a~thorized in the end of 1824.

Mr, Henry Wood was then Accoun~a~~t~generaI. He is now i n ~ i ~ g l a n d . I was so

authorized by conversations, s o ~ e t i ~ e s by chits (a Hindostanee word for notes).

I do not recollect the words he used ; but, [ZbQ] as fa r as I recollect, i t was to exaniine

the notes, to see that they agreed with our register, and t o see that they were yoocl

notes. It was in the latter end of 1824 that I first. began to exaniine paper in that

way.’? Looking a t the c~rcumstances under which these directions were given, and

the manner in which they were conveyed, and the nature of the instructions them-

selves, it i s impossible to believe, without further evidence, that Mr. Wood intended

that his clerk should, by affixing his initials to these notes, do more than certify

that, upon c o ~ p a r ~ s o n , they corresponded with the entries in the register j for,

according to Mr. M ~ r l e y ’ ~ evidence, there was no susp~c~on a t that time that this

c Q ~ ~ a r i s o n would not afford a s~iffic~ent test ; and although it appears that, in 1828,

it was discovered that by the fabrica~ion of fae-similes of genuine notes a closer

inspect~on of the instruments had been rendered necessary, and that it was usual

for Mr, Oxborough to subject. them to other tests besides the c o ~ ~ ~ p a r ~ s o i ~ with the

register, yet it is not pretended that he received any more extensive general authority

418

First, Iet us see what were his duties before E2491 this time.

IL ~ N ~ P , aei BANK OF ~ ~ N ~ ~ A ~ U. E:AYT INDIA COY. [ 18343

from Xr. Wood; for he says, “From the first orders 1 received from Mr. Wood to

examine papers in the way 2 have mentioned, there w’rts no variation of that order

until after the discovery of the late forgeries in 1829.”

But i t has been argued, that the extent of Xr, ~ ~ o o d ~ s ~i structior~s may be

c o l ~ ~ t ~ from acts of particular reference by him, and especially from a memo-

randum written across a note from Parker, in which Mr. Parker speaks of the

authentication of certain notes ; an r. Wood writes, “ The e x ~ i n ~ n a t ~ o n of these

notes i s essential to protect the Company from loss. Do them without fee: )) from

which expressions, coupled with the language of Mr. Parker’s note, i t i s inferred,

that [25l] s o ~ ~ i e t h ~ ~ ~ g more tiia;n comparison with &e register was required, and

that Wood ev~dent~y conte~plated the liability of the ~ o ~ p a n y in the event

of a ~ ~ s ~ a k e n o~ in ion ;but when it i s r e ~ e m ~ e r e d that tbe notes referred to in this

~ e I ~ o r a i i d u ~ ~ ~ were sent on behalf of the Salt Board, a part of the Company’s

e ~ t a b l ~ s ~ ~ ~ ~ ~ e ~ ~ t ) and therefore that the ~ o ~ r ~ p a n y would be the losers i f they took

in payment notes that turiied out to be forged, the whole foroe of the argument

vanishes ; and the c ~ r ~ u ~ s t a i ~ c e only proves, that a servant of the C o ~ p a n y in ono

d e p a r t ~ e n t was required to eserciso, in ~ r ~ t e c t i o n of another department of his

e~npIoyers’ business, the peculiar ~ n o ~ l e d g e which his oBcial duties conferred ;

and the other ~nstances are open to the same explanation. I believe I have nom

alluded to alf the direct evidence of Xr, Oxbaro~gh’s a u ~ h o r ~ t ~ from Mr, ~ o o d ; for

he deziies &at the letter, under the sairct~on of which he took his fee, was the warrant

under which he acted in giving out the certi~cates. And it appears to tlieir Lord-

ships, that the only authority given, or intended to be given, to Mr. Orborough by

Mr. Wood was, to certify that the notes brouwht for e x a ~ ~ n a t ~ ~ n corre~~oiided with

the entries in the register. But, if any d o u h had been left by the eoidence upon

which the ~ p ~ c l l a n ~ s rely, it would have been removed by reference to the corre-

spondence between Xr. ~ o o d and the ~overnmer~t , which clearly points to this as

the only duty c o n ~ e ~ p l a t e d by Mr. ~ ~ o o d , or sanct~oned by the Go~ernor-general.

It appears that on the 25th of June 1524, which was shortly before the date fixed

by Mr. borough for the earliest direction given to him on the subject, Mr. Wood,

in a letter to Mr. Halt ~ ~ c k e n ~ ~ e , wrote a8 follows: “ 2 take this o p p ~ r t u n ~ t y of

s u b ~ ~ ~ t t i ~ ~ g to the 12521 considerat~on of Government the propriety o f exacting

from the public some fee for searching the registers of the Go~ernment debt, when

infor~~ratio~i is required respect~ng the t r ~ n s f e r of tlis proprietary right in the

~ ~ v e ~ * ~ ~ ~ ~ e ~ ~ t ~ r o ~ i s s o y not-. The ime of the uxrco~~er~anted assistants of my

office i s often i n c o ~ ~ v e ~ ~ ~ e ~ ~ ~ ~ y ocoupi d.” In e ~ a i ~ ~ i i i ~ n g the notes to see

whether the signatures are genuine? KO ; but ‘ I in searching the registers for in-

formation connected with the G ~ v e r ~ ~ n i e ~ r t debt; and it is reasonable that the public

should pay for the trouble they cause, in the same way as they are now obliged to

pay for any ~ n f o r ~ ~ a t ~ o ~ $bey may require from the r e~ i s t r a r of the ~ u ~ r e ~ n e Court;

and X am of opixiion that a fee of one rupee for s e & r c h ~ ~ ~ ~ for esch note may not be

t h o u ~ h t oo high. Should the ~ o v e r r ~ ~ n e n t be pleased to sanction a fee of one

rupee for search^^^^ the regiskrs for each note, I would recommend its being paid

to the u n c ~ ~ e n a ~ t e d assistant who has efiarge of the re8isters.”

It is impossible to read this letter without being sat is~ed that ~ ~ o t ~ ~ ~ n g was cons

te~nplated by hfr. Wood beyond a ~emunera t~on to the assistant for increasing

labour in searching the register, and that he bad no idea of ~ ~ v e s t ~ i ~ g lrim with the

new and r~sponsible power of vouohing in any other way far the a u t h e n t ~ ~ ~ t y of the

notes e ~ a ~ i n e d ~ and the answer from the ~ o v e ~ n ~ e n t Secretary shows that the

~ o ~ e r n o r - g ~ n e x a l so u n ~ & r s t ~ o d Xr. W~od’s object. The c o n ~ l u d i n ~ ~ a r a ~ r a p ~ is

in these words : ‘( The Governor-general in Council approves and authorizes your

s~~gges t~on that a fee of one rupee be levied for searching the registers for each

note.”

But it. i s further c o ~ ~ ~ n d e d , that a ~ ~ h ~ ~ g ~ it xilay be 12533 true that Xr. ~~0~

never intended to give Hr. ~ x b o r o u g ~ i the powers he supposes t a have been conferred

upon him, yet that, in Pact, he exercised that pcmer; and, t ~ e r e € a r ~ , that &s the

~e~~~~~ Bank and others might fairly conclude that the practice h

of the ~ o ~ e r n m e n t , the Company tirust be r e s ~ o n s i ~ l e for the acts d

a3 their agent. If Mr. ~ ~ ~ o r ~ u ~ ~ i had been found in the A c ~ o u n t a n ~ ~ ~ ~ e r a ~ ’ ~

o%cs pu~~licly giving out certificates upon notes brought t o him by persons anxious

476

Wow?

sEmuL 3 . ~ ~ 0 0 li. ~ ~ ~ K ~ s H ~ N DOSS [1834] 11 KNBPP, m

to ascertain whether they were genuine without hczving any acknowledged duty to

perform under which such certificate could be required, it might, with some colour

of reason, be contended that the Company must be considered aa authorizing a

practice, which could not have been unknown to theni, for the only intelligible pur-

pose to which it could have been referred ; but when Mr. Oxborough's situation in

the office, and his a c k n o ~ ~ l ~ g e d duties to search the register, and t5 compam the

notes with the entries, and to certify their correspondenc~ are considered, the

practice which is supposed to imply authority from the Company to authenticate the

signatures to the notes losels all its weight. Neither can it, with justice, be urged

that the imposition of a new fee might mislead the public into the belief, that it was

required on account of some' additional security afforded, for i t appears that a copy

of the letter a~itho~izing the fee was hung up in the office, which would at once have

satisfied any one, who chose to make the inquiry, fo r what purpwe the fee was

required; and no instance1 has been proved of the Company's having recognised

Mr. Oxborougb's authority by ac-ting upon his certificate, for, according to MY.

~ ~ k e i ~ z i e ' s evidence, they never paid the interest upon [26$1 the Bote without

subjtwting it to the scrutiny of two u~icovenant~d and one covenanted assistants,

even though it might have upon it Mr. Oxborough's certificate.

TJpon the whole case, therefore, their Lordships are of opinion that no authority

was in fact given to Mr. Oxborough to authenticate the notes in question ; and that,

faakirig a t the formal manner in which tha notes were invariably drawn and issued,

the cautious examination of them, before even the interest was paid, the known

and acknowledged duties of Mr. Osborough, the form of his certificate, and the

avowed purpose for which the fee was taken, the Company are not responsible for

any erroneous opinion formed by Mr. Oxborough or the Bengal Bank a8 to the

extent of iiis auth~ri ty . Their Lordships will therefore r e c o m i ~ e ~ ~ to His Majesty

that the judgment of the Court below be affirnicd, but, in deference to the opinion

of the learned Judge * who dissented from that judgment, that it be a%rmed without

costs.

[See 2 Rul. Cas. tit. AGENCY, Sect. iv. pp. 357 et seq.; and 11 Rul. Cas. tit. ESTOPPBL,

Sect. iii. pp. 73 et seq., on point 5s to agency. On point as to jurisdiction

of Supreme Court to entertain the action (see 2 Knapp, 246-73, see 1'. nw.i

0. S. ~ ~ ~ ~ g u ~ ~ ~ Co. v. Secretary of State for Zmdiu, 1861, 5 Barn. H.C. App.

p. 9, and note to ~ o ? ~ ~ a ~ (In r e JusPices of), 1829, 1 Knapp, 59. On point as to

disallowance of costs, cf. Beuvmomt v. Barrett, 1826, 1 Moo. P.C. 59, 81.1

t255l ON APPEAL FROX BENGAL.

BABOO BENEE SUHAEE and BABOO NADHO SUHAEE, Children of Rlussuni-

maut Seetul Bahoo, by their Guardian, Ramchurn ~ a ~ , - ~ ~ ~ Z ~ ~ ~ ~ ; BABOO

~ W R ~ I S H E ~ ~ O S S , - ~ e ~ z ~ ~ ~ ? ~ e ~ ~ Feb . 7 and 8, 18343.

The Court of Sudder Dewaany Adawlut of Bengal ought not to affirm a decree

of a Provincial Court in a case respecting a balance of partnership accounts

without examining the original acccunt books of the firm, if they are ten-

dered in evidence before it, although they were not produced before the Pro-

vincial Court.

The facts of this case are so fully stated in the judgment, as to render any further

detail of them unnecessary. The arguments on the part of the appellant-12 prin-

cipaily turned upon the fact, that the decree wa8 made against Seetul Bahoo, without

inspection of tha books of accounts in respect of the balance clf which the action was

brought ; and, on the part of the respondent, it was urged, that as SeetuI Bahoo had,

* In the court below, Mr. 3. Nyan dissented from the judgments of the Chief

Justice (Sir C. Grey) and Mr. J. Pranks.

477