O R O M SP FIRM Vs. NAGAPPA CHETTIAR

JUDGEMENT

(1.) 1. This appeal arises out of a suit filed on the Original Side of the High Court at Madras on April 29, 1933, and is brought from the decree of an Appellate Bench dated May 9, 1938, reversing a decision of Lakshmana Rao J., dated March 27, 1936, whereby the suit had been dismissed. All the parties to the suit are Nattukottai Chettiars. The appellant is a firm which is known by the letters Order RM.O.M. SP., and which carries on business at Madras as bankers and money-lenders. It was defendant No.1 to the suit and it will be conveniently referred to as the appellant bank. The plaintiff Nagappai and his younger brother Lakshmanan were the sons of one Minakshisundaram, whose brother Subrahmanyam, though not an original defendant, was added as defendant No.2 to the suit by an order dated January 24, 1934. They were members of a joint Hindu family and had a family business in "piece-goods" (cloth) at Madras and other places--the plaintiff's father's share being ten annas and Subrahmanyam's six annas. After the death of the plaintiff's father in 1914 a partition of the assets of business was effected with the aid of certain business friends and the terms of this arrangement were embodied in a yadast or note dated January 17, 1916, which the plaintiff signed on behalf of himself and his brother, who was then a minor. The main term was that the business should be taken over in its entirety by Subrahmanyam. It appears that the plaintiff's father had been interested in two religious charities, one for the supply of water to worshippers at a certain place in the hills, and one for the supply of cloth for the purposes of a temple. Before the partition a sum of Rs. 2,000 had been credited in the books of the business to the temple and it was arranged at the time of the partition that the two branches of the family should provide in all a capital of Rs, 10,000 for each of these two charities. The shares in which they were to provide the money were five-eighths and three-eighths--i.e., ten annas and six annas, according to their shares in the business. As Rs. 2,000 had already been provided for the temple, the plaintiff's branch had to find Rs. 5,000 for that and Rs. 6,250 for the water charity. The yadast by Clause 13 thereof provided that both branches of the family should manage and conduct the charities. Acting upon this arrangement the plaintiff drew and handed to his uncle, Subrahmanyam, two hundis, each dated December 1, 1916, for the money which his branch had agreed to find--that is for Rs. 5,000 and Rs. 6,2510 respectively with interest at the Madras naduppu rate from January 17, 1916, the data of the yadast. The plaintiff had a banking account with the appellant firm and the hundis were drawn on that firm. Though made payable to bearer they were headed with the name of the charity concerned under the word "credit"--that is, showing the charity as the party or account in whose favour they were intended. It is not necessary that the terms of the hundis should be here set out. They were taken by Subrahmanyam to the appellant bank and on September 11, 1917, the bank endorsed each with a statement that the amount with interest to date had been received. It is admitted that the bank credited these sums in each case to an account in the name of the charity, concerned, though Subrahmanyam had had an account with the appellant bank since January 6, 1917. The monies remained at the credit of the charities with the appellant firm until February 10, 1920, by which time they amounted in all to Rs. 15,732-151-9. On that date they were transferred to the credit of Subrahmanyam's account and the accounts in the name of the charities were closed. The transaction is clearly and simply described in the case of the appellant bank as follows:--A book entry of Rs. 15,700 was made in favour of the appellant bank thereby cancelling an overdraft of Subrahmanyam in the books of the appellant bank and the balance of Rs. 32-15-9 was paid to-Subrahmanyam in cash. At the same time Subrahmanyam in his own books in his money-lending business opened new accounts in the names of the two charities--that is Rs. 8,740-8-9 in favour of one and Rs. 6,992-7-0 in favour of the other charity.

(2.) TO challenge this transaction is the purpose of the present suit. The plaintiff seeks to make the appellant bank liable to refund to the charities the money received by it in redurtion of Subrahmanyam's overdraft on the footing that this application of the money was a breach of trust on the part of Subrahmanyam of which the appellant bank had notice and by which the appellant bank has profited.

(3.) IT is said that Subrahmanyam had received from the plaintiff authority to do what he did. Upon this question and upon the question of limitation--in their Lordships' opinion the only substantial questions in this case--it is necessary to notice some events which took place after the transfer had been made. Subrahmanyam's account with the appellant bank is in evidence and while it shows a credit balance of Rs. 4,500 in May, 1920, it continues thereafter to be in debit, the balances as struck rising in 1920 to Rs. 60,000, in April, 1921, to Rs. 1,12,680 and continuing throughout the rest of that year in the neighbourhood of half a lac. In 1924 the charities were no longer being kept up and before the end of 1925 an insolvency petition was presented in the High Court which resulted in Subrahmanyam being adjudicated insolvent on January 4, 1926. IT appears that he had engaged in speculative purchases of immovable property involving considerable sums.