Judgement

Appeal (No. 67 of 1939) from a decree of the High Court in its appellate jurisdiction (May 9, 1938) which reversed a decree of that High Court in its ordinary original civil jurisdiction (March 27, 1936).

In the action out of which this appeal arose the plaintiff (respondent No. 1), P. L. N. K. M. Nagappa Chettiar, sued in his capacity as trustee to recover from the appellant bank (the first defendant), O. RM. O. M. SP. (firm), trust moneys allocated to two charities which he alleged that the appellant bank had wrongly applied in reduction of a debt (overdraft) owed to the bank by the second respondent, P.

L. N. K. Subrahmanyam Chettiar, the paternal uncle of the plaintiff and co-trustee with him. The plaintiff and his uncle were Nattukottai Chettiars, and the uncle had had authority from the plaintiff to invest the trust moneys in his own business. The plaintiff alleged that his uncle had been guilty of breach of trust in utilizing the moneys in discharge of his overdraft, and he sought to make the appellant bank liable to refund to the charities the money received by it in reduction of Subrahmanyams overdraft on the footing that that 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 bank had profited.

The defence was, inter alia, that there had been no breach of trust, and that in any case the bank was not privy to it. It was also pleaded that the action was statute barred under the Limitation Act.

The facts appear fully from the judgment of the Judicial Committee.

The trial judge (Lakshmana Rao J.) found that there was no breach of trust, and dismissed the suit.

The appellate court (Leach C.J. and Krishnaswami Ayyangar J.) found that there had been a breach of trust by the uncle, and that the appellant bank was privy to it, and judgment was given for the plaintiff for the whole of the charity moneys, and interest. The appeal is reported at I. L. R. [ 1939] M. 121.

1940. July 1, 2 and 3. Sir Herbert Cunliffe K.C. and W. Wallach for the appellant. It is submitted, first, that when the hundis were handed over in the first instance on December 1, 1916, at an agreed rate of interest, that was an investment in accordance with the terms of the trust with the uncle, and, if so,

89 Law. Rep. 67 Ind. App. 448 ( 1939- 1940)

O. Rm. O. M. Sp. (Firm) V. P. L. N. K. M. Nagappa C hettiar

191

that is an end of the matter so far as this action is concerned. On September 11, 1917, the uncle deposited the two hundis with the appellant bank, who debited the plaintiffs account with them. The uncle was merely dealing, as he was entitled to do, with moneys for which he was responsible. The moneys remained with the bank, payable, it is submitted, on demand to the uncle, although the bank may be deemed to have notice that the moneys were intended for the charities concerned. The uncle went to the bank and demanded payment of Rs. 15,732 on February 10, 1920. The plaintiffs case was that the impetus of what took place on that date came from the bank, and not from the uncle. The trial judge accepted the statement of the bank that the demand for payment came from the uncle. In fact, the uncle went on doing business for six years after that. There is no breach of trust from merely doing what he was empowered to do by the conditions affecting the charity moneys. It is admitted that there was a properly constituted charity, and down to all material times there was never any revocation of the arrangement made in 1916. What was done in this case was not done at the instance of the bank; it was found as a fact that the application came from the uncle himself, and therefore the observation of Lord Cairns L.C. in Gray v. Johnston (1) that "if it be shown that any personal benefit "to the bankers themselves is designed or stipulated for, "that circumstance, above all others, will most readily establish "the fact that the bankers are in privity with the breach of "trust wh