Hon'ble Judges/Coram:
J.R. Mudholkar, R.S. Bachawat, Raghubar Dayal and Vaidynathier Ramaswami

JUDGMENT

R.S. Bachawat, J.

1. The respondent is a banking company now in liquidation. The appellant had a combined overdraft and deposit account with the Shillong branch of the respondent. On December 9, 1946, the appellant gave the respondent for collection two cheques for Rs. 8,200 and Rs. 600 respectively drawn on the Bharati Central Bank, Shillong. On receipt of the cheques, the respondent credited the appellant with the sum of Rs. 8,800 in the accounts. The respondent then sent the cheques to the Bharati Central Bank, Shillong for collection. Instead of paying cash, the Bharati Central Bank sent to the respondent a cheque dated December 9, 1946 for Rs. 8,800 drawn by the Bharati Central Bank on the Nath Bank, Shillong in favour of the respondent. The respondent accepted this cheque on its own responsibility without consulting the appellant. On December 10, 1946, the respondent presented the cheque to the Nath Bank for payment. The Nath Bank returned the cheque with the remark "full cover not received". The respondent orally informed the appellant of the non-payment of the cheque on the Nath Bank, and on December 11, 1946 under oral instructions from the appellant, represented the cheque to Nath Bank for payment. The Nath Bank again returned the cheque with the remark "full cover not received", and the respondent thereupon debited the appellant with the sum of Rs. 8,800 in the accounts. On the same day, the respondent wrote to the Bharati Central Bank demanding cash payment of the two cheques drawn on them and dated December 9, 1946. The respondent also contacted the appellant. Under instructions from the appellant, the respondent accepted from the Bharati Central Bank a demand draft for Rs. 8,800 dated December 13, 1946 drawn by its Shillong Branch on its Calcutta Head Office towards payment of the two cheques. The respondent presented the draft to the Bharati Central Bank, Calcutta for payment, but instead of making payment, the Bharati Central Bank wrote on December 16, 1946 requesting the respondent to obtain payment from its Shillong Branch. The respondent orally communicated this advice to the appellant. On several dates thereafter, the respondent presented the draft to the Bharati Central Bank for payment, but the draft was not paid. On January 2, 1947, the Bharati Central Bank closed its business.

2. On January 11, 1947, the respondent wrote to the appellant stating that it was holding the demand draft as also the cheque on the Nath Bank and would be glad to receive further instructions in the matter for necessary action. As the appellant refused to give any instructions, the respondent continued to hold the securities on account of the appellant. In respect of the draft, the respondent duly preferred a claim in the liquidation of the Bharati Central Bank, and was admitted as a preferential creditor for the amount of the draft. On January 28, 1947, the appellant wrote to the respondent alleging that the respondent had accepted the demand draft at its own risk and responsibility and was bound to give credit to the appellant for the sum of Rs. 8,800. The dealings between the appellant and the respondent continued, and the last entry in the combine........