The insolvent had the right to make a bargain with his subsequent salary, and there was no completed assignment or charge on the future salary.

Somayya, J.

1. This application has been taken out by the Official Assignee under Section 7, Presidency Towns Insolvency Act, for an order directing the Secretary, the M. & S.M. Railway Employees Co-operative Urban Bank, Ltd., to refund to him all sums recovered by the said Bank by way of deduction from the salary of the first insolvent towards refund of the loan taken by the said insolvent from, the bank. The facts are briefly as follows:

The first insolvent who was employed as a chargeman in the M. & S.M. Railway workshops, Perambur, was adjudicated on 29th April 1936. He was at that time drawing a salary of Rs. 202-8-0. Some time prior to his adjudication, i.e., on 19th October 1935 he obtained a loan of Rs. 1500 from the bank during the pendency of a prior insolvency proceeding. The insolvent undertook to repay the loan in 36 monthly instalments of Rs. 41-10-0 each out of his salary and authorized and requested the M. & S.M. Railway Co., to pay the said instalments to the bank out of his salary and the bank was so recovering the loan from the monthly salary of the insolvent until April 1939, when the loan account was closed and the sureties discharged.

2. The Official Assignee by his letter dated 8th October 1935, Ex. D-2, in the case, permitted the raising of the loan and by his letter dated 15th November 1937, Ex. D-1, addressed to the bank permitted it to recover the amount of the loan from the salary of the insolvent. The terms on which the loan was granted by the bank were, inter alia, that it should be guaranteed by two sureties and that the amount was recoverable from the borrowers salaries or any other money which might be due to him from the M. & S.M. Railway Co., who were authorized and requested to deduct the amount from out of his salary and to pay it over to the bank. Exhibit D-3, which is a form of Loans Passed Register, provides:

I...the borrower hereby authorize and request the M. & S.M. Railway Co. Ltd., to deduct from my monthly salary or any other money that may be payable to me by the M. & S.M. Railway Co. Ltd., such instalment or instalments of principal of the loan, or interest due on such loan, or, any other sum or sums which the M. & S.M. Railway Employees Co-operative Urban Bank, Ltd., Adams Park, Madras, may claim as due from me to the said bank.

3. Exhibit D-5 which is the application for loan also contains a similar clause. The service agreement Ex. D-4 also contains a similar provision:

I also agree to deductions from my salary or any other moneys payable to me by the company being made on account of dues to the M. & S.M. Railway Co-operative Society and the M. & S.M. Railway Employees Co-operative Urban Bank for the use of railway schools and railway institutes for services rendered by railway medical officers and for diets supplied in railway hospitals.

4. Rule 44 of the bye-laws of the bank, Ex. D-6, provides:

It shall be competent for the board of directors to refuse to grant a loan unless the applicant shall agree in writing to permit the officer disbursing the pay to deduct instalments from his monthly pay to discharge the whole or part of the loan.

5. Rule 48 provides:

The amount of paid up share capital, deposit and any other money to the credit of a member or a past member shall be subject to a first charge in favour of the bank in respect of any moneys due to the bank from such member or past member.

6. The loan in question was not recovered as provided by this rule. On the above facts the questions that arise for consideration are : (1) What is the nature of the transaction between the insolvent and the M. & S.M. Railway Employees Co-operative Urban Bank Ltd.? Whether the transaction amounts to an equitable charge or assignment in favour of the said bank, in respect of so much of the future salary of the insolvent as is necessary for the payment of the monthly instalments? (2) What, if any, is the effect of the insolvency of the debtor on the said transaction? (3) Whether in any event the