The main legal point established in the judgment is that while demand drafts are negotiable instruments creating ordinary debts, the established banking practice and evidence of banking practices can imply a special contract for the carriage of money, not fully embodied in the draft, and create a fiduciary relationship between the holders and the bank.

1. The Palai Central Bank Limited (in liquidation) stopped business on the evening of the 8th August 1960 on the appointment of a provisional liquidator. Before that, the various offices of the bank had, in the ordinary course, issued demand drafts, most of them on other offices of the bank, but a few on other banks with whom it had agency arrangements. These applications are by the holders of such drafts who were unable to present them and obtain payment before the bank closed down and who therefore submitted proofs to the liquidator claiming payment in full on the ground that the bank was only an agency employed by them for the transmission of money from one place to another and payable at the other end to their nominee or his order. Therefore, their relationship with the bank was not that of an ordinary debtor and creditor, but something more; and the bank held the money paid by them for obtaining the draft in a fiduciary capacity. The liquidator however held that the relationship was that of an ordinary debtor and creditor and nothing more, and, denying the applicants the preferential payment they claimed, ranked them with the ordinary creditors. Hence these applications under S.460 (6) of the Companies Act read with R.164 of the Companies (Court) Rules by way of appeal from the decision of the liquidator.

2. A demand draft is an order to pay money drawn by one office of a bank upon another office of the same bank or upon an office of a different bank for a sum of money payable to order on demand. (See S.85-A of the Negotiable Instruments Act). In the latter case, namely, where the order is on another bank, it is really a cheque but is nevertheless ordinarily called a draft). And the drafts in these cases, two of which have been marked as Exts. C-5 and C-6 by way of illustration, conform to this definition. When a draft is issued on another bank it is undoubtedly a bill of exchange as defined by S.5 of the Negotiable Instruments Act. Even if it be drawn upon another office of the same bank, I should think it is a bill of exchange whether with Rankin, C.J., with whom the four other judges constituting the Special Bench agreed (in In re Demand Drafts of the Imperial Bank of India, I.L.R. 56 Cal. 233) we hold that, unlike as in the English Law which requires that the order must be addressed by one person to another, the "certain person" of S.5 of the Negotiable Instruments Act may be the same person as the maker, or, whether preferring the view that a man does not issue an order to himself but only makes a promise (in which ease such a draft may well be regarded as a promissory note but for the complication of stamp duty), we consider that S.85A of the Negotiable Instruments Act contemplates a fiction by which one office of a bank is for this purpose to be regarded as a different person from another office of the same bank. However that might be, there is no denying that a demand draft is nothing more or less than a negotiable instrument governed by the provisions of the Negotiable Instruments Act, and on the face of it, the obligations it creates are nothing more than ordinary debts. The question is whether there is nothing more to the transaction which is technically called the purchase of a draft than what appears on the face of the draft, whether the draft embodies the whole of the contract between the parties, or whether usage, in other words the established banking practice, implies something more so that the contract is really one for the carriage of money from one place to another. It is urged on behalf of the applicants that there is this something more.

3. A large number of cases in the matter of the New Bank of India (1949 Est. Punjab 373), In re Noukhali Union Bank Ltd. 54 C.W.N. 744, Sugan Chand and Co. v. Brahmayya and Co. (AIR. 1951 Mad. 910 (2), The Traders Bank Ltd. v. Kalyan Singh (AIR. 1953 Punjab 194), Birbhum Central Co, op. Bank Ltd. v. Pioneer Bank Ltd. (AIR. 1956 Cal. 615), In re Girish Bank