NEW BANK OF INDIA LTD. versus PEAREY LAL

Citation: [1962] SUPP. 2 S.C.R. 217 · Decided: 20-12-1961 · Supreme Court of India · Bench: BHUVNESHWAR PRASAD SINHA · Disposal: Dismissed
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Judgment (excerpt)

2 S.C.R. 
SUPH.l<:ME COURT REPORTS 
ryl~ 
• 
I 
In our opinion the proper test to apply in this 
case is, was the payment m:ide as a matter of prac· 
ticc which affected the quantum of salary or was 
there an expectation by the employee of getting a 
gratuity or was the sum of money expended on the 
ground of commercial expediency and in order in· 
directly to facilitate the carrying on of the business. 
But this has not been shown and therefore the 
amount claimed is not a deductible item under 
s. 10(2)(xv). 
The appeal therefore fails and is dismissed with 
costs. 
Appeal dismissed. 
NEW BANK OF INDIA LTD. 
v. 
PEAREY LAL 
( B. P. SINHA, c. J., J.L. KAPUR, M. !ImAYATULLAH, 
J. c. SHAH and J. R. MUDHOLKAR, JJ.) 
Bank-Mon<y delivered by constituent-;--Special instruc-
tion to await direction for deposits-If held by the bank as 
trustee-Scheme for settlement of bank's liabilittes sanctioned-
Amount, if subject to it. 
The respondent delivered certain sums of money to the 
appellant-bank at Lahore for transmission to Calcutta, with 
instructions to await his directions regarding the opening' of 
accounts for keeping the money in fixed deposit in the Cal-
cutta Branch of the bank which was proposed to be opened 
in the near future. The respondent did not however give any 
instruction for opening any account, fixed deposit or otherwise 
in regard to the amounts after they reached Calcutta. Within 
a few days after the opening of the Calcutta branch of the 
bank it ceased making payments and a moratorium for a. 
limited period was declared under an ordinance issued by the 
Governor General restraining the bank from making payments 
to its depositors. After the expiry of the period of the mora-
torium the Calcutta branch of the bank raised objections to 
the respondent's application for withdrawal of the amount 
1961 
Gordon W11udroj/ie 
Le(Jt/ie1 
lll anuja .. Juring Co, 
v. 
The Cemmissio11er of 
Income~fa.'I: M1,.dros 
Kapur J, 
1961 
December 20, 
:!18 SUPREME COUHT REPORTS (1962] SUPP. 
1>·61 
whereupon the responde1•t filed a suit in the Calcutta High 
Ntw Bat•.J:. uf India 
Couft for a decree for refund of the amount. 
During the 
J;d. 
pendency of the suit the High Court of East Punjab sane· 
v. 
t1oned a scheme under ss. 153 and 153A of the Indian Com-
l'm•.Y L.l 
panics Act, 1913 for set!lemenr of the liabilities of the Bank 
The courts below decree.I the respondent's suit. On 
appcdl by the bank lJy speci•I k.1ve, the questions which 
arose for 
<leci~ion \Vere whether the bank was a trustee for 
transmission of the c..n1ounts to Calcutta and whether in the 
absence of auy instruction for opening a fixed deposit account 
the bank was liable to refund the full amount or a reduced 
an111u1tt according to the schc1ne sanctioned by the Punjab 
High Court. 
Held, th 1t when a person dealing with a bank delivers 
money to tl1e bank an intention to create a relation of creditor 
and debtor between him and the bank is presumed, but the 
presumption mar be reburted by proof of special instructions. 
When money b paid to a bank with special illJtr1.1ctio11s to 
retain the same pending further instructions, a trust is created 
and the presumption which ordinarily arises by reason of 
payment ol money to the IJank is rebutted. 
lle/d, f,1rthcr, that the money delivered by the Respondent 
remained in tn1st with the bank and was not held by it as a 
deposit suojcct to any scheme for the settlement of the 
liabilities of the bank sanctioned by the High Court uudcr 
the Companies Act. 
1'he Ufjicial Assignee, Madras v. Nateaam Pillai, 1.L.R. 
(19401 Mad. 845, Arbuthnot v. D. Rajan 
.4.war, I.L.R. 
( 1913) 36 Mad. 499 and Farley v. Turner, (1857) 26 L.J. 
Ch. i 10, applied. 
CrnL APPELLATE JURISDICTION : Civil Appeal 
No. 398 of HlliO. 
Appeal by special leave from the judgment 
an<l decree datc<l June 23, 1959, of the Calcutta 
High Court in App~al from Original Decree No. 50 
of 1955. 
Veda Vya&a, S. K. Kapur and B.P. Mahe&hwari, 
for the appellant. 
K. L. Gosuin and K. L. Mehta, for the respondent. 
l!Hil. 
December 20. 
The Judgment of tho 
Court was delh'ered by 
.. 
2S.C.R. 
SUPREME COURT REPORTS 
219 
SHAH, J.-Mr. Justice Bachawat c.f the High 
Court of Judicature at Calcutta <lecrebd Suit No. 
1039 of 1948 filed by one Pearey Lal-hereinafter 
called the plaintiff-for a decree for lts. l,35,0UO/-
with interest against the New Bank of India Ltd. 
The appeal of the Bank against the decree was dis-
missed by a 
Divi~ion Ben
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