The main legal point established in the judgment is the principle of trust for collection and the timing of receipt of money by the bank, which influenced the court's decision.

ORDER :- This is a summons taken out by the Bank of India Ltd., (hereinafter called the claimants) for an order against the Official Liquidator as the liquidator of the National Security Bank Ltd., (hereinafter called the bank) to pay to the claimants an aggregate sum of Rs. 5,000 on the ground that such sum was held by the bank in trust for the claimants. The amount represents the proceeds of three cheques for Rs. 1000, Rs. 2,000 and Rs. 2,000 respectively drawn on the Talod branch of the bank, which the claimants sent to the head office of the bank in Bombay for collection. The cheques were duly forwarded by the bank to their branch at Talod. The Talod branch debited the amounts to the account of its customer and credited them to the account of the head office and forwarded two credit notes in respect thereof to the head office. These credit notes are dated 15th and 21st February 1947, respectively; but they did not reach the head office until after they suspended payment on 21st February 1947. The earlier of these credit notes bears an endorsement that it was received on 26th February 1947. The other credit note bears no endorsement but could not obviously have been received on 21st February 1947, which is the date which it bears. On 21st February 1947, a petition for winding up was presented to this Court on which an order for compulsory winding up of the back has been made, which in law relates back to the time of the presentation of the petition.

2. Where a bank collects a cheque, it may do so as a holder for value or as a mere agent of the balder for the purpose of collection is the latter case, it is well established that the proceeds of the cheque are held by the bank as a trustee for the holder of the cheque. (See Indian Hume Pipe Co., Ltd. v. Travancore National and Quilon Bank, Ltd., 1942-2 MLJ 128 : (AIR (29) 1942 Mad 616). Where a customer pays the cheque into his account with a bank, a question may well arise as to whether the bank received it as holders for value or as mere agents for collection. See Farrows Bank Ltd., In re, (1923) 1 Ch. 41 : (92 LJ Ch 163). But inasmuch as, in the present case, the claimants had no account with the bank, no such question arises. Moreover, the letters with which these cheques were for warded to the bank for collection have been produced and they are in these terms :

"We beg to enclose a cheque for Rs. ...... for collection on yourselves and request you to remit the proceeds less your charges by a cheque drawn in our favour on a bank in Bombay."

It cannot therefore, be disputed that is the present case the bank acted as the agents for collection of the claimants in respect of these three cheques.

3. However, what is urged on behalf of the Official Liquidator is that no property representing the amount of the cheques was received by the bank, transfer from one branch to another not being receipt of money, and that, in any event, the bank did not collect the cheques before the winding up order which rotates back to the presentation of the petition on 21st February 1947.

4. The first of these contentions is based on certain observations of their Lordships of the Privy Council in Prince v. Oriental Bank Corporation, (1878) 3 AC 325 : (47 LJ PC 42). In this case Prince and Co., lodged with the Bank of New South Wales for collection a promissory note drawn by Hopkins and Gate and payable at the M. Branch of Oriental Bank Hopkins and Gate had an account not with the M. Branch bat with the Y. Branch of the Oriental Bank. The Bank of New South Wales handed over the note to the 8, Branch of the Oriental Bank for collection. The S. Branch sent it to the M. Branch where it was stamped as having been paid; and the manager of the M. Branch sent to the S. Branch a transfer draft in favour of the Bank of New South Wales. In the books of account of the M. Branch, the Y. Branch was debited with the amount. Thereafter Hopkins and Gate Stores were destroyed by fire and the manager of the M. B