Panchabakesa Ayyar, J.-These are three connecte appeals against the orders of Rajagopalan, J., passed on the Original Side and raise an important and interesting question regarding the rights of a person who has entrusted a bank with collecting his dues and remitting them to him by demand drafts where the bank has gone into liquidation and the drafts are, therefore, left uncashed. The question is whether a person in such a case will be entitled to get his full dues as a preferential creditor or must rank only with the other creditors and be content to receive the dividends given in liquidation; in other words, whether the fiduciary relationship of principal and agent or the jural relationship of creditor and debtor will obtain, and in what circumstances each of these relationships will obtain.

The facts are briefly these: O.S.A.No.85 of 1949 is an appeal against the order in Application No.454 of 1949. There the claimants were Suganchand & Co. They made a claim against the Hanuman Bank in liquidation, praying that they be treated as persons to be paid in full in preference to the ordinary creditors of the bank. Hanuman Bank had its headquarters in Tanjore, and branches in several places in the Madras State, like Madras, Kumbakonam, Thiruthuraipundi, Madurai, etc. It crashed, and the headquarters suspended payment on 15th July, 1947. The Madurai, Kumbakonam, Thiruthuraipundi and other branches of the Bank suspended payment only on 16th July, 1947. Suganchand & Co. sold some goods to Messrs. Swami Foundry, Madurai, for Rs.3,235-2-6 in April, 1947, and, as directed by the vendees, sent the railway receipt with the bill for the above amount through the Madurai branch of the Hanuman Bank, Ltd., for collection of the said amount from Swami Foundry, Madurai and for remitting to them the amount so collected through a demand draft. The entire amount of Rs.3,235-2-6 was paid to the Madurai branch of the Hanuman Bank by Messrs. Swami Foundry on 10th July, 1947, and the Madurai branch issued a demand draft for the entire amount of Rs.3,235-2-6 on their Madras branch for payment at Madras. This demand draft reached Suganchand & Co. and it was presented to the Hanuman Bank, Madras, on 14th July, 1947, through their bankers, the Bharat Bank, for collection. The Hanuman Bank was then about to close its doors, and the draft was returned unpaid with the endorsement, “Awaiting funds; present again”. On 15th July, 1947, the Hanuman Bank, Madras, closed its doors, and most of its branches followed suit on 16th July, 1947. Suganchand & Co. thereupon filed a claim for the payment of the full amount to the Official Liquidator, but were refused. Thereupon they filed Application No.454 of 1949 on the Original Side for full payment of the amount as preferential creditors, with 9 per cent. interest per annum, alleged to be the usual trade rate, from 10th July, 1947, till date of payment. Rajagopalan, J., held that as they had asked the Hanuman Bank to collect the amount and remit it by a demand draft payable at Madras, the position was as if they had received money in cash at Madurai from the Hanuman Bank and had then purchased the draft over counter, as the bank was made their agent for the purchase of the draft, and, so, as the law stood, they had got what they had bargained for, namely, a draft of the bank, the payment of which depended on the solvency of the head office at the time of their presentation, as held in In re Oriental Bank Corporation: Ex parte Guillemin1 and that they were entitled only to rank as ordinary creditors and not as preferential creditors, and dismissed the application with costs. Hence this appeal.

O.S.A.No.89 of 1949 was filed by the Canara Bank, Ltd., Mangalore, against a similar order of Rajagopalan, J., in Application No.1008 of 1949. The facts there were briefly these. The Canara Bank sent to the Kumbakonam branch of the Hanuman Bank a bill for Rs.1,000 drawn by one Periyasami Mudaliar on Shanmugasundaram Pillai & Sons, Ku

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