1955 (12) TMI 49 - HC - Indian Laws

Court rules in favor of Official Liquidators in Fixed Deposit Receipt assignment case

The court ruled in favor of the Official Liquidators of Hanuman Bank Ltd. in a case involving the assignment of a Fixed Deposit Receipt. The court found ... - Issues Involved:1. Assignment of Fixed Deposit Receipt2. Notification of Assignment to Debtor3. Banker's Right to Set Off4. Estoppel Against the DebtorDetailed Analysis:1. Assignment of Fixed Deposit Receipt:The applicants, the Official Liquidators of Hanuman Bank Ltd., sought a direction for the respondents to pay a sum of Rs. 3759-10-9 with interest. The case involved an overdraft facility applied for by Rathnaswami Nadar, who deposited a Fixed Deposit receipt as collateral. The court examined whether the fixed deposit receipt had been validly assigned to Hanuman Bank Ltd. The court held that 'no particular form of words is necessary in order to effect an assignment if the intention is clear from the language used.' The letter from Shanmugha Nadar, the depositor, clearly indicated the intention to assign the receipt and the money it represented to Hanuman Bank Ltd., thereby effecting a valid assignment.2. Notification of Assignment to Debtor:The court scrutinized whether the K.K.D. and V.B.K. and Company, the debtor, had been informed about the assignment. Evidence indicated that Shanmugha Nadar had delivered a letter to the company on the same day the assignment was made, and the bank had also sent a letter on 4-9-1946. The court found that the company had been notified of the assignment, as corroborated by various pieces of evidence, including entries in the bank's dispatch register and letters exchanged between the parties.3. Banker's Right to Set Off:The respondents argued that a banker has a right to set off any amount due against the fixed deposit. The court clarified that a banker could not exercise this right after being notified of the assignment. The court cited cases like 'Woodhams v. Anglo Australian etc., Assurance Co.' and 'P.W. Greenhalgh and Sons v. Union Bank of Manchester' to support the view that a bank cannot adjust or set off amounts once it has been notified of an assignment. The court stated, 'a banker cannot exercise that right after the money in his hands has been validly assigned, or, in any case, after he has been notified of the fact that there has been an assignment.'4. Estoppel Against the Debtor:The court also addressed the issue of estoppel, noting that the K.K.D. and V.B.K. and Company had remained silent after being notified of the assignment, thereby inducing Hanuman Bank Ltd. to extend the overdraft facility. The court cited Mullah's Transfer of Property Act and the case 'Mangles v. Dixon' to establish that the debtor is estopped from asserting any equity against the assignee if they stood by and allowed the assignee to be defrauded. The court concluded that the company was estopped from denying the bank's claim due to their silence and inactivity.Conclusion:The court decreed in favor of the Official Liquidators of Hanuman Bank Ltd., ordering the K.K.D. and V.B.K. and Company to pay Rs. 3125 with interest from 17-6-1947 and proportionate costs. The company was also entitled to proceed against respondents 1 to 6 for the amount deducted in a related suit filed in the Sub-Court, Kumbakonam.