JAMMU & KASHMIR BANK LTD. versus ATTAR-UL-NISSA & OTHERS

Citation: [1967] 1 S.C.R. 792 · Decided: 07-10-1966 · Supreme Court of India · Bench: K.N. WANCHOO · Disposal: Dismissed

Judgment (excerpt)

JAM.'\1U & KASHMIR BANK LTD. 
A TI AR-UL-NISSA & OTHERS 
October 7, 1966 
A 
[K. N. WANCllOO, J.M. SHELAT AND G. K. ~rl1cR, JJ.] 
B. 
Indian Contract Act (Act 9 of 1872). s. 72- Stale Government making 
excess payml!nts into bank account of a constituent of bank-Bank wh~the.r 
can change entries to cancel such overp<.ynient without consent of consti· 
tuent. 
S tol1k a loan from the appellilllt bank on the strength of an arran8"· 
mcnt whereby the Stale Government of Jammu and Kashmir would repay 
it in instalments out of the land revenue to be collected by it from S's lands. 
Such payments on behalf of the Government were mistakenly made each 
year both by the Accountant General an.cl by the Treasury so that 
the 
.amount credited by the bank in S's account represented an over payment 
by the State. When the Accountant General realised the mistake be ask-
ed the bank to reverse the relevan! entries in S's account so as to cancel 
the over-payment, which the bank after initial objection, did. Thereafter, 
on the basis of the reversed entries the bank filed ~ suit for the recovery 
of its debt. 
It was objected by the respondents (successors-in-interest to 
S) that it w.s not open to the bank to reverse the credit entries in the ac-
count of S after they had been made in the manner it was done. 
The trial 
Court held that the amount was paid twice over by mistake and therefore 
the bank was enlitled to reversie the cn'rics at the instance of the Ac~ 
counlant General without reference to S. 
The High Court however, in 
appeal, rejected the argument on behalf of the bank that s. 72 of the Indian 
Contract Act allowed it to reverse the entries. 
In appeal 
to this Court, 
HELD : Section 72 of the Indian Contract Act will only apply when 
ii is a case of two persons one paying -the money and the other receiving 
the money on behalf of the person paying it. 
The section has no ap-
plication where money is paid by a person to a bank with instructions that 
11 should be deposited in the account of a third person who is a. constituen1 
of the bank. [795 G] 
In the present case, for the purpose of payment, Government ""·a~ rhc 
agent of S and whatever money was paid to be credited to the account of 
S, even though it was paid through Government, . became his money and 
it could not be paid out of his account which was in substance the effect 
of_ reversing the entries, withotit bis consent. 
(796 C] 
Imperial Bank of Canada v. Bank of Hamilton, L.R. (1903] A.C. 49, 
distinguished. 
Crvn. APPELLATE JURISDICTION: Civil Appeals Nos. 702 and 768 
of 1964. 
Appeals by certificate/special leave from the judgment and 
decree dated June 7, 1962 of the Jammu and Kashmir High Court in 
Civil First Appeals Nos. 1 of 1957 and 15 of 1961 respectively. 
Naunit Lal, for the appcllanl (in both appeals). 
/(. R. Chaudhuri, for the respondcnl (in C. A. No. 768/64). 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
G 
.J & K BANK v. ATTAR-UL-NISSA (Wanchoo, J.) 
793 
The Judgment of the Court was delivered by 
Wanchoo J. These are two connected appeals on certificates 
granted by the Jammu and Kashmir High Court and raise a common 
question of law. We shall therefore give .the facts of one appeal 
(No. 702) in order to appreciate the question of law which calls for 
decision. 
Sultan Mohd. Matawali Khan (hereinafter referred to as Sultan 
Mohd.), Ilaqadar of Kathai was the predecessor-in-interest of tho 
respondents. He had borrowed a sum of Rs. 40,000/- from the 
. appellant-bank on the basis of a promissory-note on November S, 
-1941. Before the bank advanood the loan, the Government of the 
then State of Jammu and Kashmir was approached and it was 
arranged that the debt would be liquidated through Government. 
For that purpose, an order was issued by the Government that 
land-revenue of certain villages from the jagir of Sultan Mohd. 
amounting to Rs. 5076/9/6 would be collected by Government a~d 
the amount credited in the treasury to the credit of the bank Ull 
the sum of Rs. 40,000/- along with interest due thereon was liqui-
dated. It was in consequence of this arrangement that the bank 
advanced the sum of Rs. 40,000/- to Sultan Mohd. After the loan 
had been taken and the pro-note executed the bank opened an 
account in the name of Sultan Mohd. which started with a debit 
of Rs. 40,000 on November 5, 1941. Thereafter whatever sum 
became due to the bank as interest and incidental charges was 
debited to the account of Sultan Mohd. and the· amount receiv

Excerpt shown. Read the full judgment & AI analysis in Lexace.