Running account debt and custodian payment: local law governed the obligation and payment discharged liability under the ordinance.

A running account debt arising from continuing dealings was held to be governed by the law of Lyallpur, because the relationship, delivery of goods, account keeping, and repayment obligation were all localized there and the transaction had its closest and most real connection with that place. Under the Pakistan Ordinance, debts of evacuees vested in the Custodian as actionable property, and payment to the Custodian operated to discharge the debtor to the extent of that payment. The debt was not treated as a mere bank deposit, and the argument that the legislation was confiscatory or contrary to public policy was rejected. The debt therefore stood transferred to the Custodian and the defendant's liability was released.

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Issues: (i) Whether the running account debt arising out of the parties' dealings was governed by the law of Lyallpur as the proper law of the contract or by the lex situs principle. (ii) Whether payment of the debt to the Custodian under the Pakistan Ordinance discharged the defendant's liability to the plaintiffs.

Issue (i): Whether the running account debt arising out of the parties' dealings was governed by the law of Lyallpur as the proper law of the contract or by the lex situs principle.

Analysis: The dealings were not a fixed contract for supply of a specified quantity of goods but a continuing course of transactions on a running account. The parties dealt with each other in their special capacity as Government nominees at Lyallpur, the goods were to be delivered there, the accounts were kept there, and termination of the relationship and the corresponding obligation to repay the balance were localized there. On either approach, the transaction had its closest and most real connection with Lyallpur, and the applicable law was the law in force at that place as a living and changing system.

Conclusion: The governing law was the law of Lyallpur, and the debt was localized there.

Issue (ii): Whether payment of the debt to the Custodian under the Pakistan Ordinance discharged the defendant's liability to the plaintiffs.

Analysis: Under the Pakistan Ordinance, debts were treated as property of evacuees and vested in the Custodian. The Ordinance required surrender of such property and provided that payment made under it would discharge further liability to the extent of the payment. The debt in question was not a mere cash deposit in a bank but an actionable debt within the Ordinance, and the defendant in fact made the required payment to the Custodian. The contention that the legislation was confiscatory or contrary to public policy was rejected.

Conclusion: Payment to the Custodian operated as a valid discharge of the defendant's liability.

Final Conclusion: The plaintiffs' claim was barred because the debt stood transferred to the Custodian and payment made in accordance with the Ordinance released the defendant from further liability.

Ratio Decidendi: Where a contract or running account is most closely connected with a particular place, the law of that place governs the obligation, and if local legislation validly vests the debt in a custodian and provides discharge on payment to that custodian, such payment extinguishes the debtor's liability.

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