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Matter No. 14 of 1952, decided on 16th August 1965.
‑ Banking Company ‑ Definition ‑ Scheduled Bank registered before Independence having branches in both Pakistan and India‑Branches in Pakistan continuing business after Independence‑Whether a "foreign company" in terms of S. 2‑A, Companies Act (VII of 1913).
"Dicey's Conflict of Laws", Seventh Edn., p. 488, rule 81 ref.
In re: Noakhali Union Bank Ltd. 2 D L R 181; New Zealand Loan and Mercantile Agency Company Limited v. Christian Morrison 1898 A C 349 and Sheikh Amin‑Uddin v. Lahore Electric Supply Co. Ltd. P L D 1951 Lah, 293 distinguished.
‑Settlement of debts‑Every branch of bank entitled to share in assets of banking company‑Debt being an asset not exclu sively realisable at registered office of banking company.
‑Indivi sibility of mortgage ‑ Property mortgaged with Bank before Independence‑Mortgagee Bank and mortgaged property falling into two parts after Independence, one in Pakistan, other in India --Question of mortgagor's consent does not arise in circumstances-- Original mortgagors holding joint interest in property selling out their entire interest in property in Pakistan‑Rule of indivi sibility in respect of such property in Pakistan, held, not available.
‑Foreclosure of mortgage‑Mere inability to give back title deeds‑Does not take away right of foreclosure.
Ruhul Islam for Petitioner.
S. R. Paul with Syed Azizul Hug and Sultan Hossain Khan for Respondent.
Date of hearing t 6th August 1965.
This is an application under section 63, subsection (2) of the Banking Companies Ordinance, 1962 for settlement of the list of debtors which in this case is with respect to only one debtor. The circumstances alleged in the petition are that one Babu Promode Chandra Dhar and Beni Madhab Roy took a loan of Rs. 2,00,000 (Rupees two lacs only) from the Calcutta National Bank on the 6th of September 1944 at an interest of Rs. 6 % per annum with half‑yearly rest. In order to secure the above loan, the debtors mortgaged the Pallathal Tea Estate now in Pakistan and Aylabari Tea Estate including Latu Pahar Tea Estate now in India. The mortgage was effected by deposit of the title deeds with regard to the said properties in the Head Office of the said Banking Company at Calcutta. It appears that the memo randum of deposit was also registered and contains the terms of the mortgage. Subsequently Promode Chandra Dhar sold out his entire four annas of his properties to one Pulin Behari Roy. After partition the Roys sold the Pallathal Tea Estate, which is in Pakistan to the opposite‑party Mrs. Pushpa Rani Chowdhury by a sale‑deed executed on 31‑3‑54 subject to the aforesaid mortgage.
The Calcutta National Bank Ltd. with respects to its branches in Pakistan was wound up on an application by the State Bank of Pakistan by an order dated 2.12‑52 and the State Bank of Pakistan was appointed the Official Liquidator.
The Official Liquidator states in paragraph 5 of the present petition:
"That the records of the Bank in possession of the Official Liquidator do not however reveal any information about the mortgage mentioned above. But on getting information and obtaining certified copies of the deeds, the Official Liquidator has traced the mortgaged properties as mentioned above."
The said Pushpa Rani Chowdhury and the Official Liquidator carried on some correspondence. Ultimately the said Pushpa Rani Chowdhury agreed to pay a sum of Rs. 16,000 to the petitioner in cash for final settlement of the debt. The Official Liquidator not being able to have the amount raised further sought the directions of this Court on 20th August 1957, for accepting the said sum of Rs. 16,000 in full and final settlement of the debt or any other direction as the Court might deem fit and proper.
The learned Judge, however, did not grant permission to compromise with the debtor as proposed by the Official Liquidator and passed the order that "Item No. 1 of the said summons be and is hereby withdrawn". Thereafter the Official Liquidator tried to get a higher offer from the debtor but was unsuccessful and the debt remained unsettled. It appears that the said Pushpa Rani Chowdhury thereafter in an application to the Agricultural Development Bank of Pakistan, Sylhet for a long term loan mentioned the estimated liability with the Calcutta National Bank Ltd. of the Tea Estate as a sum of Rs. 16,000 to Rs. 30,000 but claimed that claim of the Bank was barred by limitation. The Agricultural Development Bank of Pakistan referred the matter to the petitioner to ascertain about the present position of the liabilities of the Pallathal Tea Estate to the Calcutta National Bank. The Official Liquidator, thereafter issued a demand notice on 18th May 1963, Annexure B' to the petition. But the debtor made no response and thereby failed to satisfy the debt. The Official Liquidator thereafter filed this petition for settlement of the list of debtor with respect to the said debt and has claimed a sum of Rs. 4,00,000 the original principal and the allowable interest. Mrs. Pushpa Rani Chowdhury has filed an affidavit‑in‑opposition in which she has more or less admitted the factual position so far as the mortgage is concerned. So far as her offer of Rs. 16,000 to the Bank is concerned, she has annexed as Annexure A' to her petition, a true copy of the letter sent by her and she claims that the offer was made "without prejudice". With regard to the acknowledgment of the debt to the Calcutta National Bank, the respondent tried to clarify her position by stating that she had stated therein an approximate idea of her liability to the Bank in India which was barred by limitation. The respondent, however, claims that the petition was barred by limitation and there was no right in law or equity to claim any amount on account of the mortgage from the respondent as the debt and the mortgage originated in India and the liability accrued there and form part of the assets of the Bank in India. She claims that the mortgage itself which was executed on 5th of September 1944, was barred by limitation and as such was not enforceable. Ultimately the respondent has submitted that at any event the entire burden cannot in law and equity be thrown on a part of the mortgaged property nor can there be any apportionment on any rational basis in the absense of necessary data and behind the back of interested persons. The respondent further annexed a copy of a plaint by which the same debt is being sought to be realised in the High Court of Calcutta by the Official Liquidator of the Bank in India. The respondent also submits that no effective order can be passed as the title deeds are not in possession of the petitioner.
Mr. Paul appearing on behalf of Mrs. Pushpa Rani Chow dhury has first sought to argue that the debt which is sought to be settled under section 63 (2) of the Banking Companies Ordinance is not realisable in Pakistan as it is payable in India as it was given in Calcutta and as such does not form the assets of the Company in Pakistan. In support of his argument he has pointed out that according to the definition of Company in section 2‑A, of the Companies Act this Company must be deemed to be a company registered and incorporated outside Pakistan. This will therefore be an unregistered company and can be wound up as such under section 271 of the Companies Act. He has argued that it has been wound up as a foreign company. The debt in question not forming part of the assets of the Bank in Pakistan, it could not be realised by a proceeding in Pakistan and he has relied on Dicey's Conflict of Laws, Seventh Edition, p. 488, rule 81, which reads as follows:
"
The winding up of a company under the Companies Act, 1948, impresses the whole of the pro perty of the company in the United Kingdom with a trust for its application in the course of the winding up for the benefit of the persons interested in the winding up.
(2) The winding up of a company under the Companies Act, 1948, is governed entirely by English law."
He has relied on the comment based on English cases that:
"It is now established that the Companies Acts do not except when express provision is made to the contrary affect assets which a company may possess which are situated outside the United Kingdom, and that in particular assets situated outside the United Kingdom do not fall under the control of the liquidator by virtue of a winding‑up order."
He also relied on the case of In re: Noakhali Union Bank Ltd. (2 D L R 181), which, however, was a case under section 153 of the Companies Act. I will come up to this case later and show that it is contrary to the contention of Mr. Paul. Mr. Paul has also relied on the case of New Zealand Loan and Mercantile Agency Company, Limited v. Christian Morrison (1898 A C 349) where it was held that the Joint Companies Arrangement Act, 1870 did not apply to the Colonies. Accordingly a scheme of arrangement thereunder sanctioned by an English Court is qua the Colonies a proceeding in a foreign Court, and cannot be pleaded by the Company in a Victorian Court as a defence to an action by a non‑assenting Victorian creditor for the full amount of her claim.
Mr. Paul wanted to rely on these cases in support of his contention and argued that the Official Liquidator could not proceed with the debt in the foreign country. Mr. Paul also relied on the case of Sheikh Amin‑Uddin v. Lahore Electric Supply Company Ltd. (P L D 1951 Lah. 293), in support of his proposition that the Company was a foreign Company. So far as the definition of section 2‑A of the Companies Act and the Registration under section 270 of the Act are concerned I can at once say that the obvious fallacy in Mr. Paul's argument is that he has omitted to consider the fact that this was a Banking Company and its Branches in Pakistan had been wound up in Pakistan by an order under the Banking Control Act, 1948. The Banking Company has been defined in that Act. (The Banking Control Act, 1948) as follows:
"(a) Banking Company' means a banking company as defined in section 277‑F of the Indian Companies Act, VII of 1913, and includes the Imperial Bank of India and any body of persons incorporated by or under any law in force in any place outside the Provinces and carrying on the business of a banking company in any Province or any Acceding State."
In the same Act secured loan or advance' has been defined as follows:
"(f) secured loan or advance' means a loan or advance made on the security of assets the market value of which is not at any time less than the amount of such loan or advance."
The rules requiring the maintenance of liquid assets and the definition of assets in the Province as given in section 9 of said Act, (that is the Banking Control Act, 1948) leaves it to the State Bank full authority to define what would be the assets of a Company in the Provinces. The State Bank has been appointed the Official Liquidator in this case and the State Bank has claimed this tea estate as an asset of this company. Without however, relying on the above interpretation altogether I would like to give an analysis of the situation and examine Mr. Paul's contention on the background of such analysis.
It appears from the application under subsection (3) of section 15 of the Banking Companies Control Act of 1948 for winding up of the Company preferred by the State Bank that the Bank immediately before the establishment of the Dominion of Pakistan was a Scheduled Bank and carried on its business from its Registered Office at Calcutta and it had 56 branches situated throughout India out of which eight branches were situated in the territories now forming the territories of East Pakistan, namely, Dacca, Chittagong, Mymensingh, Narayanganj, Khulna, Barisal, Faridpur and Brahmanbaria and four branches were situated in the territories now forming the terr:4ories of West Pakistan, viz. Karachi, Lahore, Quetta and Peshawar. Immedi ately after the establishment of the Dominion of Pakistan the said bank closed six of its branches in Pakistan and thereafter on the 1st July 1948, informed the petitioner that the said Bank was doing banking business only from two branches in Pakistan, viz. Dacca and Chittagong, and that their principal place of business in Pakistan was at Dacca. The branches at Mymensingh, Narayanganj and Khulna were closed in February 1948, and amalgamated with the Dacca branch. That thereafter on or about the 28th January 1950, the said bank also closed its branches at Dacca and amalgamated the same with its Chittagong branch, which was from that time its only branch in Pakistan. Although the Bank was functioning normally in Bharat, on or about 24th February 1950, the Bank wrongfully and illegally and without any moratorium order from any competent Court in Pakistan suspended payments from its branch at Chittagong and also stopped submitting the returns required to be submitted under the provisions of the Banking Companies Control Act, 1948. Therefore it appears that on the eve of Partition, the Bank had 44 branches in India with its Head Office at Calcutta and 12 branches in Pakistan. But from the definition of a Banking Company given in the Banking Control Act which I have quoted above the Branches in Pakistan consisted of a Banking Company. It was, therefore, not a foreign company in the sense that Mr., Paul wants to establish. Node of the orders under the Indian Independence Act exactly covers the situation. In the case In re: Noakkali Union Bank Ltd. which overruled the judgment of Ormond, J. Shahabuddin, J. held that the High Court at Dacca had jurisdiction under section 153 in respect of the petitioner‑Company though the Registered Office of the Petitioner‑Company was at Calcutta, a foreign country and the learned Judge further held that the exercise of this jurisdiction was not dependent on any orders passed by the High Court of Calcutta although those orders should in finally disposing of the matter be considered on the principle of co‑operation based on essential principles of justice and equity.
To my mind it appears that every branch in Pakistan was entitled to share in the assets of the Company on the eve of the Partition, and the shares should be considered on the principle of co‑operation based on essential principle of justice and equity as observed by Shahabuddin, J. I therefore, do not accept the argument of Mr. Paul that the debt was an asset which was exclusively realisable in Calcutta. It was an asset of each and every branch of the Bank so entitled. The respondent Mrs. Pushpa Rani Chowdhury has annexed as Annexure B', a copy of the plaint filed (in the Calcutta High Court) by the Bank which is also now in liquidation in Calcutta. The claim is for realisation of the identical debt, the ; principal sum being stated as Rs. 2,00,000 but the interest was calculated on the date of filing of the plaint to Rs. 1,45,794‑22 paisa. The material fact is that the plaint excluded the Pallathal Tea Estate. Paragraph 4 of the said plaint (Annexure B') reads as follows:
"4. On and from August 15, 1947 the said Pallathal Tea Estate mentioned in Paragraph I above and described in the Second Schedule under Lot I of the said Memorandum of Deposit of title deeds formed part of Pakistan."
In the prayer portion, the plaintiff claimed a declaration of title of the plaintiff as mortgagee in respect of Aylabari Tea Estate only. The debt was created on mortgage of the two Tea Estates‑one has now fallen in India and the other is in Pakistan. The area given by the Official Liquidator is that Pallathal Tea Estate contains 12 hundred acres of land while Aylabari Tea Estate and Latu Pahar Tea Estate contain only 960 acres including some zamindary, cultivated and forest lands 560 acres. Value of the Tea Estate land being more, therefore, it appears that the property in Pakistan would be of at least the same value as the property in India. Therefore, in my opinion, the Liquidator is entitled to follow 50% of the original debt.
Mr. Paul has then argued that the mortgagee cannot follow only a part of the mortgaged property. Section 67, subsection (d) of the T. P. Act reads as follows:
"Nothing in this section shall be deemed‑
. . . . .
(d) to authorise a person interested in part only of the mortgage money to institute a suit relating only to corres ponding part of the mortgaged property, unless the mortgagees have, with the consent of the mortgagor, served their interests under the mortgage."
Here the terms of section 67 (d) are not applicable. By partition by the then Paramount power the country has been divided into two parts. The mortgaged property has fallen into two parts. The mortgagee bank has also been divided into two parts. Therefore, in these circumstances, the question of consent of the mortgagor does not arise. Besides it is the admitted case that the original mortgagors who had joint interest in the property themselves sold their 16 annas interest in the property now in Pakistan to the respondent Mrs. Pushpa Rani Chowdhury. In such circumstances the rule of indivisibility of mortgage is not available. The Legislature by enacting the rule quoted had intended to protect the mortgagee from being harassed by multiplicity of suits but that question will not arise here. As stated above the suit for realisation of the debt filed in Calcutta has excluded this property and the Official Liquidator here also claims to follow only this property for realisation of his claim.
Mr. Paul has then argued that the Official Liquidator cannot demand any payment unless he is in a position to give back the title deeds as it was a mortgage by deposit of title deeds. So far as the respondent Pushpa Rani is concerned, there is no question of her getting back her title deeds as she is a purchaser who had purchased this property with the full knowledge that the said property was mortgaged as evidenced by her kabala filed by the Official Liquidator on 6‑8‑65. The original title so far as this property is concerned has merged in the present kabala, which she has obtained. Besides mere inability to give back the title deeds will not take away the right of for a closure. Can it be said that the mortgagee in a mortgage created by deposit of title deeds loses his right of foreclosure if by a vis‑major or accident the title deeds are lost Moreover in this case the question does not arise as the mortgage was by a mortgaged deed as will appear later.
The last question that remains whether there was any valid mortgage by deposit of title‑deeds. It appears that the Memoran dum of the deposit of title deeds contain details regarding the terms of the loan and is an extensive document giving all details. It was argued by Mr. Paul that this was not a valid mortgage as the document was not a proper memorandum of deposit of title deeds but in fact is the mortgage itself in which the deposit of title deeds was mentioned. I have gone through the copy of the document filed by the Official Liquidator and judged by the terms of the document, the contention of Mr. Paul cannot be brushed aside. But the fact remains that although the mortgage was created by deposit of title deed, and that fact is acknow ledged in the Memorandum itself the most crucial factor is that the Memorandum was in fact registered and fully stamped as required by law. Thus I find that this contention of Mr. Paul also fails.
In these circumstances I order that the list of debtors be settled to the effect that the respondents Mrs. Pushpa Rani Chowdhury is indebted to the Bank for the principal amount of Rs. 1,00,000 together with interest thereupon at 6% up to the statutory limit as stipulated in the mortgage document. Let the requisite certificate be issued.
Costs of and incidental to this application will come out of the assets of the Company.
A. E./S. A. H.
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