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no question of insolvency need be considered. But if action were to be taken against Government in respect of a Security Deposit, the claimant might very well put forward the argument that Government, as pledgee, failed to use ordinary diligence. It might be contended that Government knew of the imminence of war with Japan and of the possibility of enemy occupation, with the probable results that did in fact ensue, and that it would only have been exercising ordinary care if it had credited these Security Deposits to a separate and distinct account. It might further be contended that if this had been done the deposits would never have been confiscated, especially in view of the fact that most of the Supreme Court Deposits, which were in fact credited to separate accounts, were untouched. There is of course no certainty whatever that even if the deposits had been placed in separate accounts they would not have been confiscated, but nevertheless the possibility exists.
11.
The Law Officers have devoted much time and consideration to this delicate question. The legal authorities have been searched, but without avail in view of the wholly unprecedented circumstances. The position in fact appears to be that by observing normal Government accounting procedure, Government has laid itself open to the charge that it has not exercised sufficient care in the custody of funds under its control. Although the Law Officers feel that Government's case, in respect of Security Deposits, is far from strong, I consider that it would be extremely unwise to yield to the argument that adherence to the normal Government accounting rules was in effect negligence.
12. I feel, therefore, that before admitting liability for the Security Deposits I ought to place the case before you in the hope that, in consultation with your legal advisers, who no doubt have access to a much more extensive law library, you may be able to give some clear guidance on this matter. I have not thought it necessary to include figures in this despatch, as the financial aspect, however important it may be, is not one that should influence the decision.
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END
I have the honour to be,
Sir,
Your most obedient, humble servant,
Mhauttam
GOVERNOR.
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