The main legal point established in the judgment is that the bank has a right of set off, and its right of set off arises when it honored the bills of the first defendant.

Somayya, J.

1. The second defendant in the suit appeals against the decree of the District Judge of Ramnad making it liable to pay a sum of Rs. 4,000 and interest thereon to the plaintiff. The plaintiff-respondent had two cheques given to her by the Harvey Mills, Madura, both drawn on the Imperial Bank, one for Rs. 20,900 and another for Rs. 18,682-8-0. The plaintiff endorsed both these cheques in favour of the first defendant. We are not concerned with the cheque for Rs. 20,000. As regards the cheque for Rs. 18,682-8-0, the plaintiffs case is that she gave definite instructions that the first defendant should pay a sum of Rs. 5,000 odd due to the second defendant Bank by the plaintiff in respect of some pledge of jewels made on her behalf by the first defendant, that he should take Rs. 3,000 as a loan and execute a promissory note for that sum to the plaintiff, that a draft for Rs. 3,000 should be taken in the plaintiffs name payable on the Kulitalai Bank to be utilised for her own purposes, that Rs. 3,000 odd should be paid to the plaintiff in cash and lastly that a draft for Rs. 4,000 should be obtained from the appellant Bank in the name of the plaintiff payable in Madras. The first defendant cashed the cheque in the appellant Bank on the 10th August, 1937. Of the directions given by the plaintiff to the first defendant, all but the last were duly fulfilled. The sum due to the appellant Bank was paid and the jewels redeemed. A sum of Rs. 3,000 was taken by the first defendant and a promissory note executed for that amount. A draft for Rs. 3,000 odd was obtained in plaintiffs name payable on Kulitalai Bank and Rs. 3,000 odd was obtained and paid in cash to the plaintiff. But the direction that a draft for Rs. 4,000 payable at Madras should be obtained in the name of the plaintiff was not complied with. The first defendant admittedly got a draft for Rs. 4,000 payable at Madras but it was obtained in his own name. The plaintiff alleges that when the defendant paid her Rs. 3,000 in cash and returned her jewels he gave also the draft for Rs. 4 000, that being illiterate she did not then know that it had been taken in the name of the first defendant, that later on when she attempted to present it and get the money on it, she discovered that it had been taken in the name of the first defendant", that she thereafter made demands on the first defendant to endorse it over to her and that he refused to do so. The plaintiff then gave notice of her claim to the appellant Bank, which however gave no reply. Thereupon the present suit was filed for a declaration that the plaintiff was entitled to the beneficial interest in the draft and for such other relief as the Court may think fit.

2. Various defences were raised by the appellant who is the second defendant in the suit. The main defence is that the first defendant owes large sums of money to the appellant Bank and that the appellant is entitled to adjust the sum represented by the draft against the sums due by the first defendant. This claim was presented in the arguments before me as either one of bankers lien or a right of set off. The trial Court dismissed the suit but on appeal the District Judge of Ramnad granted a decree against the appellant. Elaborate arguments have been addressed to me by the learned advocates on the question of when the bankers lien and right of set off come into existence and how they can be exercised.

3. It would appear that the first defendant became indebted to the appellant Bank in respect of four hundis dated the 29th December, 1938. The total value of these hundies was Rs. 5,000. The amount was not paid and a suit O.S. No. 69 of 1940 on the file of the Subordinate Judges Court of Ramnad was filed in 1939 by the appellant Bank against the first defendant for recovery of Rs. 5,180-7-6. This is the principal and interest due in respect of these hundies. Before that the plaintiff had issued the notice Ex.P-2 stating that the first defendant had obtai