ANANTANARAYANAN, J.

This appeal is instituted by the third defendant in the court below, the Nadar Bank Ltd., Madurai, against the judgment and decree of the learned Subordinate Judge of Madurai in O.S. No. 155 of 1952, which was a suit instituted by the Canara Bank Ltd. [plaintiff] for recovery of a sum of Rs. 21, 017-6-0, from two merchants, first and second defendants, which was decreed with costs. As the appeal involves certain interesting questions of law and fact relating to the priority of what are known in mercantile and banking practice as loans upon the security of goods under the "open credit" system, as against similar advances under the "key loans" system, we shall first set forth the broad and indisputable facts, before formulating the points that arise for our determination

The facts are that defendants Nos. 1 and 2 are members of an undivided Hindu family carrying on business in grains and cereals under the name and style of "V.M. Sankarapandia Nadar" at Madurai. The Madurai branch of the Nadar Bank Ltd. [hereinafter termed the appellant bank] was giving credit facilities to defendants Nos. 1 and 2, as regular customers, for the past nearly 15 years. The accounts show that the last cash credit transactions of defendants Nos. 1 and 2 with the appellant bank were closed on 22nd February, 1952. From about 1949, defendants Nos. 1 and 2 were also having a current account with the Canara Bank Ltd. [hereinafter termed the plaintiff bank]. They took "key loans" from the plaintiff bank of Rs. 19, 500 on 4th January, 1952, and Rs. 14, 500 on 20th February, 1952. While matters stood thus, the appellant bank gave cash credit accommodation to the limit of Rs. 40, 000 to defendants Nos. 1 and 2 for the year commencing from 1st March, 1952. Under exhibit B-7, which is a vital document in the case, the cash credit was obtained upon security of goods under the "open credit system" in the following four godowns, namely, 31, Chintamani Road, 5, Gurusadi Lane, 11, Panthadi 7th Lane, and 9, Panthadi 1st Lane, and also upon the security of certain immovable property [2, Ponnammal Road]. On 20th march, 1952, the appellant bank split the credit facilities of defendants Nos. 1 and 2 into two categories, namely, Rs. 20, 000 on "open credit" and Rs. 20, 000 upon "key loans" [exhibit B-15]On 27th March, 1952, the defendants Nos. 1 and 2 also approached the plaintiff bank for a "key loan" of Rs. 6, 600 on pledge of their goods in door No. 9, Panthadi 1st Lane [exhibit A-14]. On 4th April, 1952, defendants Nos. 1 and 2 took a "key loan" of Rs. 14, 350 from the plaintiff bank on pledge of goods in Godown 11, Panthadi 7th Lane and another godown. Under the "open credit" system and the terms of the agreement, exhibit B-7, the defendants Nos. 1 and 2 were bound to submit returns of stock periodically, by the week, and they did not do so after exhibit B-17 dated 2nd April, 1952. On 15th April, 1952, a godown clerk of the appellant bank is said to have demanded the statement from defendants Nos. 1 and 2 who promised to send it the next day. As they did not do so, the clerk [D.W. 1], went and inspected the godowns, and found the doors of Nos.9 and 11 locked with the locks of the plaintiff bank. Subsequently, disputes for priority arose between the two banks, and the appellant bank also filed a criminal complaint against the first defendant [C.C. No. 1101 of 1952, Sub- Magistrate, Madurai]. After the plaintiff filed the present suit, a receiver was appointed by the court for sale of the goods in the three godowns, and certain realisations have been made, admittedly far below the value of the goods as originally shown

Before proceeding to enunciate the points in controversy, it is necessary to have a clear ideas of the features of the "open credit" system and the terms of the agreement, exhibit B-7, as well as the features of the "key loan" system. Exhibit B-7, in particular, is of great importance, for this document and the subsequent retu