Delhi District Court
In The Matter vs State Bank Of India on 18 August, 2007
(1)
IN THE COURT OF PAWAN KUMAR JAIN
ADDITIONAL DISTRICT JUDGE, FAST TRACK COURT, DELHI
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Old Suit No. : 752/97
New Suit No. : 228/2006
Date of institution of case : 10.04.97
Date of transfer of case : 04.09.06
Judgment reserved on : 16.08.07
Date of decision : 18.08.07
IN THE MATTER :
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M/s Rajinder Industries Ltd.
Through Sh. Rajender Sharma, Partner.
Having its office at 537/7,
Gali no.8, Friends Colony Industrial Area,
Shahadara, Delhi-110032.
.........Plaintiff
Versus
1. State Bank of India,
A Body Corporate duly constituted
under Banking Companies (Acquisition and transfer of
undertaking) Act. -1970.
Having its Head Office at Banglore
and Branch Office amongst others
at Rajouri Garden, New Delhi-110027
through the Chief Manager,
Rajouri Garden Branch,
New Delhi.
2. M/s Gautam Budha Trade Links Pvt. Ltd.
through its Managing Director
Sh. Rajesh Vinay Kumar Bhasin
having its registered office at A/10/4,
Rana Pratap Bagh,
(2)
Delhi-1100007. .......Defendants
SUIT FOR INJUNCTION & RECOVERY OF Rs. 8.75 LAKH
Present : Sh. Rajneesh Ranjan, Ld. Counsel for plaintiff.
Sh. Sanjeev Kakra and Amit Punj, , Ld. Counsels for
defendant no.1.
Defendant no.2 is exparte.
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JUDGMENT
1. Initially the suit was filed against three defendants including Canara Bank but vide order dated 03.05.06 the Canara Bank was deleted from the array of defendants. Presently the suit is against the above defendants.
2. Succinctly, the facts as set out in the amended plaint are that plaintiff is a Proprietorship concern and the present suit had been filed through its sole proprietor Sh. Rajinder Sharma. Defendant no.1 i.e State Bank of India is a Nationalized Bank who had issued a banker's cheque in dispute. Defendant no.2 had (3) given the said banker's cheque to the plaintiff.
(i) It is averred that on 10.10.96 in due course of its business plaintiff company had received a banker's cheque of Rs.8.75 lakh drawn on defendant no.1 from defendant no.2.
Accordingly, plaintiff firm had deposited the said banker's cheque with its banker Canara Bank for collecting the payment but failed to verify from the banker whether the same was encashed or not as believed that the banker's cheque would never return unpaid. However, in the month of November, 2006 an Account Officer of the plaintiff firm came to know that said banker's cheque was not encashed. Accordingly, plaintiff had again deposited the said banker's cheque for encashment but it was again returned unpaid. Subsequently, plaintiff had sent a letter to the defendants on 13.03.97. In response to that letter defendant no.1 informed the plaintiff vide letter dated 19.03.97 that the banker's cheque was returned unpaid as banker's cheque was reported lost by the purchaser.
(ii) It is averred that banker's cheque /draft is equivalent to cash and the same cannot be returned unpaid but defendant no.1 (4) had returned the same with connivance of defendant no.2. It is further stated that if there was any doubt to the defendant no.1, bank should verify the same either from the plaintiff or from its banker but defendant no.1 had no authority to return the banker's cheque as unpaid. It is averred that defendants had acted illegally and unlawfully, hence are liable to pay the amount to the plaintiff.
(iii) With these averments plaintiff had filed the present suit for the recovery of Rs. 8.75 lakh alongwith interest @ 24% per annum from 10.10.96 till the realization of amount.
3. Though Canara Bank had filed the written statement yet the same is not discussed here as its name had already been dropped vide order dated 03.05.06.
4. Defendant no.1 State Bank of India contested the suit by filing its written statement wherein preliminary objection was taken that the present suit had not been filed by duly authorised person. It is further stated that on the request of defendant no.2, defendant no.1 had issued a banker's cheque of Rs.8.75 lakh and (5) the same was handed over to the defendant no.2 on 10.10.96 in the morning hours. However, in the afternoon defendant no.2 informed the defendant no.1 that the said banker's cheque had been lost in transit and requested to stop the payment. Defendant no.2 also furnished the copy of police report lodged at 2.00 p.m. at P.S. Model Town. It is averred that on the representation of defendant no.2, defendant no.1 believed that banker's cheque had been lost before reaching in the hands of payee and accordingly stopped the payment. It is further stated that there was no reason for the defendant no.1 to believe that the banker's cheque had already been reached in the hands of actual payee i.e plaintiff. Accordingly, defendant no.1 had returned the banker's cheque on 11.10.96 to the banker of plaintiff with remarks that the banker's cheque had been reported lost. The returning memo was duly received by the banker of plaintiff on 11.10.96, who further informed the plaintiff on 12.10.96. Despite that plaintiff had not raised any kind of objection. However, after the period of 5 months plaintiff again presented the cheque for encashment on 21.03.97 which was returned with the same reason. It is stated that plaintiff had never informed the defendant that defendant no.2 had delivered the said banker's (6) cheque on 10.10.96 itself or at any other date.
(i) It is further averred that had plaintiff informed the defendant in time that defendant no.2 had delivered the said banker's cheque on 10.10.96 itself or at any other date, defendant could have frozen the bank account of defendant no.2 but plaintiff informed the defendant, bank when defendant no.2 had withdrawn all amounts from its account.
(ii) It is averred that on 12.10.96 defendant no.2 requested the bank to cancel the banker's cheque and credit the same in its account. Accordingly, amount of banker's cheque was credited in its account after taking the indemnity bond. It is alleged that plaintiff was in collusion with defendant no.2.
5. Plaintiff filed the replication to the written statement filed by the defendant no.1 wherein he denied the defendant's version and reasserted and reaffirmed the averments made in the plaintiff. It is stated that defendant no.2 issued a banker's cheque in lieu of its liability as plaintiff had supplied the Copper Wire vide invoice no.20 dated 10.10.96.
(7)
6. Defendant no.2 was proceeded exparte vide order dated 12.12.2002.
7. Vide order dated 11.07.2006 following issues were framed :-
(1) Whether the plaintiff is entitled to a sum of Rs.8,75,000/- against the defendants jointly and severally ? OPP (2) Whether the plaintiff is entitled to any interest, if any at what rate and for what period ? OPP (3) Relief.
8. To prove its case, plaintiff has examined Sh. Rajender Sharma as PW1. In counter defendant no.1 has examined Sh. A.K. Bidani as DW-1.
9. I have heard ld. Counsel for the plaintiff, ld. Counsel for defendant, perused the record carefully and gave my thoughtful consideration to their contentions. My issue-wise findings are as under :
(8)10. ISSUE No. 1
Onus to prove the said issue was upon the plaintiff.
(i) Ld. Counsel for the defendant vehemently contended that the present suit is not maintainable as the present suit had not been instituted by any duly authorized person. It is urged that no resolution passed by the Board of Directors of the plaintiff is on the record. It is further contended that though in the plaint it is averred that plaintiff is the proprietor concern while in the memo of parties it is mentioned that Rajender Sharma is the partner in the plaintiff firm, thus it is not clear what is the status of plaintiff, whether it is proprietorship concern or partnership concern. Ld. Counsel for the plaintiff refuted the said contention by arguing that the present suit was filed by the sole proprietor of the firm and due to clerical mistake the word partner is mentioned in the memo of parties instead of sole proprietor.
(ii) Admittedly, initially plaintiff had filed the present suit claiming itself a private limited company incorporated under (9) Indian Companies Act but subsequently moved an application to amend the plaint stating the the plaintiff firm is not a private limited company but a proprietorship concern and the said application was allowed vide order dated 23.09.05. Thereafter, plaintiff had filed the amended plaint, wherein it is mentioned that plaintiff is proprietorship concern and Rajender Sharma is the sole proprietor of the firm.
(iii) In his examination in chief, plaintiff has categorically deposed that he is the sole proprietor of plaintiff firm. Though PW1 is cross examined in detail but even no suggestion put to him that he was not the sole proprietor of the firm. On the contrary, PW1 was cross examined on the ground that there was no clarification in his favour, htus he has no authority to institute the present suit. As plaintiff in the amended plaint already clarified that plaintiff firm is not a private limited company as alleged in the original plaint but in fact plaintiff firm is a proprietor concern, thus the question of passing any resolution in favour of Rajender Sharma does not arise. Similarly no question put to PW1 to the effect that he was not a sole proprietor firm but is a partner as mentioned in the memo of parties, thus in the (10) absence of any cross examination on the said point presumption will be drawn that defendant had not pressed that plaintiff was partner in the firm. There is no contrary evidence on record to the testimony of PW1 to the extend that plaintiff firm is a sole proprietorship concern, thus there is no reason to disbelieve the testimony of PW1. Since the present suit had been filed through sole proprietor i.e Rajender Sharma on behalf of plaintiff firm, I am of the opinion that Rajender Sharma is competent to institute the present suit.
(iv) Considering the above discussion, in my opinion there is no substance in the contention of Ld. Counsel for the defendant no.1, thus the same is rejected.
11. Ld. Counsel for plaintiff contended that plaintiff had deposited a banker's cheque of Rs.8.75 lakh with its banker for encashment but the same was returned unpaid by defendant no.1 without any reasonable ground. It is urged that defendant no.1 had not made any enquiry either from the plaintiff or from its banker to clarify whether the said banker's cheque had been presented by the actual payee or not. It is argued that defendant (11) no.1 had no authority under law to dishonour the banker's cheque and defendant no.1 is not entitled for the protection available under section 131 N.I. Act.
(i) Ld. Counsel for the defendant no.1 refuted the said contentions by arguing that plaintiff was in the collusion with the defendant no.1 and due to that reason plaintiff had not informed defendant no.1 in time that banker's cheque was handed over to the plaintiff by defendant no.2 in due course of its business transaction. It is further argued that plaintiff had informed defendant no.1 only in the month of March, 1997 and presented banker's cheque after about 5 months. It is stated that no prudent person would make eqnuiry of banker's cheque worth of Rs.8.75 after a period of 5 months. It is contended that defendant no.1 had acted bona fide and there was no negligence on its part, thus defendant no.1 is not liable to pay any amount to the plaintiff.
13. It is undisputed fact that defendant no.2 had got prepared a banker's cheque i.e Pay Order worth of Rs.8.75 lakh from defendant no.1. It is also undisputed fact that plaintiff had deposited the said cheque with its banker i.e. Canara Bank who (12) sent the same for encashment to defendant no.1. The said banker's cheque reached for encashment with defendant no.1 on 11.10.96, which defendant no.1 had returned unpaid to the banker of plaintiff with returning memo having remarks that the purchaser of banker's cheque reported that the same had been lost. Now, the question arises as to whether defendant no.1 acted diligently or there was any negligence on its part. On the said moot question, judgment Malik Barkat Ali Vs Central Board, Imperial Bank of India, AIR (32) 1945 Lahore 213 and Tukaram Bapuji Vs Belgaum Bank, AIR 1976 Bombay 185 are relevant.
14. In Malik Barkat Ali (Supra) case, it was held that "The question that falls to be decided is what are the conditions in which a bank can stop payment of a draft after it has reached the hands of the person in whose favour it is drawn, and whether it can do so at the instance of purchaser. No decision on exactly similar facts has been laid before us, but the general principles seem fairly clear.
Ordinarily, a bank cannot stop payment of a draft unless there is some doubt as to the identity of the person presenting it as being or properly representing the person in whose (13) favour it is drawn. This appears from Sheldon's Practice and Law of Banking, 1931, p. 155. the position of a bank in regard to its own drafts is not quite the same as its position in regard to cheques drawn on it, since it has taken on commitments of its own in favour of a third person at the instance of the purchaser. This seems to be in accordance with the provisions of the Negotiable Instruments Act. Section 85 A lays down that the bank is discharged as regards drafts by payment in due course, which is defined as follows in S. 10 :
"Payment in due course' means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned."
This section would seem to indicate that the question with regard to which a bank has to satisfy itself is that of the title of the person presenting the draft. If a draft is lost, for example a risk may arise that it will be presented by some one who is not entitled to be the holder and there may be a forged endorsement. In such case, the purchaser may reasonably ask the bank to be on its guard against presentation by the wrong persons;
and, if the bank does not exercise the necessary precautions, the purchaser may sue the bank for negligence, it is with cases of this kind that the reported decisions are mostly concerned. On the other hand, it does not appear that the purchaser is entitled to ask the issuing bank to stop payment on other grounds, such as matters relating to the consideration in respect of which the draft has been issued at his instance, for this would (14) often put the bank in an impossible position, as when the purchaser of the draft is dissatisfied with some bargain which he has made with the person in whose favour the draft has been issued."
15. In that case, bank had encashed banker's cheque in favour of the payee despite the direction of stop payment was given by the purchaser. From the said judgment it reveals that bank can stop the payment of the draft if bank has doubt regarding the identity of payee.
16. In case Tukaram Bapuji (Supra) wherein it is held in para-8 that :
"From a consideration of these authorities, in my opinion, the following propositions emerge :-
(1) The relationship of the purchaser of a draft and the bank from which that draft has been purchased is merely that of debtor and creditor;
(2) The purchaser of the draft can, therefore, call upon the bank from which he has purchased it to cancel the draft and pay back the money to him at any time before the draft has been delivered to the payee;
(3) If, however, the sole object of the issue of the draft was to transmit the money to another (15) person, a fiduciary relationship is created between the purchaser of the draft and the bank which issued it, and the purchaser of the draft can counteremand payment only if the bank has not actually parted with the money held by it as agent, thus terminating the relationship of principal and agent;
(4) Ordinarily, a bank issuing a draft cannot refuse to pay the amount thereof, unless there was some doubt as to the identity of the person presenting it as being or properly presenting the persons in whose favour it was drawn, or, in other words, unless there is reasonable ground for disputing the title of the person presenting the draft; and (5) Once the draft has been delivered to the payee or his agent, the purchaser is not entitled to ask the issuing bank to stop payment of the draft to the payee on other grounds such as matters relating to consideration, and the issuing bank can thereafter pay back the amount of the draft to the purchaser of the draft only with consent of the payee."
17. In the light of above settled preposition of law, the facts of the present case will be analysed to ascertain as to whether bank was justified in returning the banker's cheque unpaid.
18. According to defendant no.1 banker's cheque was issued (16) on 10.10.96 in the morning hour to defendant no.2. However, on the same day in the afternoon defendant no.2 lodged a complaint with request to stop the payment of said banker's cheque on the ground that same had been lost in transit. The said request letter is Ex.DW1/2. On 11.10.96 the said banker's cheque reached with defendant no.1 for encashment through plaintiff's banker but defendant no.1 returned the same unpaid on the ground that banker's cheque was reported lost by its buyer. It is undisputed fact that defendant no.1 had not made any eqnuiry from the plaintiff's banker about the credential of plaintiff. It is admitted fact that banker's cheque was in the name of plaintiff and plaintiff had presented the said banker's cheque for encashment through its banker. Thus, prima facie there was no dispute regarding identity of payee before defendant no.1. No doubt when defendant no.2 had informed the defendant no.1 about the lost of banker's cheque and produced police report (NCR) in support of its complaint, defendant no.1 had reason to believe the version of defendant no.2.
(i) However, when the banker's cheque had reached for encashment, it was the duty of defendant no.1 to make enquiry (17) whether the said banker's cheque was presented by the actual payee or by any other person. To ascertain the said fact, defendant no.1 could easily make enquiry about the plaintiff from its banker. If defendant no.1 had made any enquiry from banker of the plaintiff, he would certainly came to know that the cheque was presented by the actual payee and same had not been reached in the hands of any mischievious person. Even there was nothing on record to suggest that defendant no.1 had made any enquiry from defendant no.2 to ascertain the fact how he had alleged that banker's cheque had been lost in transit, when it was presented by payee itself. Even defendant no.1 had not informed the police about the said banker's cheque . If defendant no.1 had any apprehension that banker's cheque was not presented for encashment by the true payee and same had been presented by any person other than payee, banker should inform the police immediately to make further enquiry and till then could withhold the payment but banker had not acted so.
(ii) Rather, from the record it appears that banker was in hurry to give the credit of the said amount to defendant no.2 without making any reasonable enquiry. According to defendant (18) no.1 on the very next day, defendant no.2 made a request to credit the said amount in its account vide letter Ex.DW1/3. On the very same day i.e 12.10.96 defendant no.2 issued a duplicate banker's cheque in favour of defendant no.2 and also taken indemnity bond from defendant no.2 in favour of banker and thereafter credited the amount in the account of defendant no2. Thus, it becomes abundantly clear that banker had not only issued the duplicate banker's cheque on the very same day but also credited the amount in the account of defendant no.2 by cancelling duplicate banker's cheque without making any enquiry whether the banker's cheque was not presented by the true payee or not.
19. As banker's cheque was in the name of plaintiff and same was presented by plaintiff itself through its banker, thus it cannot be said there was any dispute regarding the title of the payee. From the record it reveals that defendant no.2 nowhere alleged that the said banker's cheque was not issued in the name of plaintiff and even not stated that he got prepared the said banker's cheque in the name of payee inadvertently. In the absence of any such allegation, I am of the opinion that banker (19) was not justified to credit the amount of banker's cheque to defendant no.2. Banker was supposed to make enquiry from the banker of plaintiff and also from the defendant no.2 but he had not made any such enquiry and acted only at the direction and wishes of defendant no.2.
20. Ld. Counsel for the defendant contended that there was delay on the part of plaintiff as plaintiff had not informed the bank in time that the banker's cheque was given by defendant no.2 in due course of business.
(i) It is admitted case of defendant no.1 that banker's cheque was cancelled on 12.10.96 and credit of the same was given to defendant no.2 on the very same day, thus it was immaterial whether plaintiff had informed the defendant no.1 or not on 12.10.96 or at any subsequent date within reasonable period because defendant no.1 had already given the credit of said amount to defendant no.2. Plaintiff had no direct business with defendant no.1 as he was not the account holder of defendant no.1 At the utmost plaintiff could inform its banker with a request to make enquiry from banker of defendant no.2 (20) but the said default on part of plaintiff does not exonerate defendant no.1 from its liability. Because crucial point is as to whether there was any negligence on the part of defendant no.1 at the time of refusing to encash the banker's cheque or not. If there was any negligence, defendant no.1 shall be liable to pay amount to the plaintiff otherwise or not. As discussed above defendant no.1 had not made any enquiry whatsoever, which bank should make being prudent banker, thus I am of the opinion that defendant no.1 was negligent, hence liable to pay the suit amount to the plaintiff.
21. Ld. Counsel for defendant contended that plaintiff was in collusion with defendant No.2 and in pursuance of that collusion, plaintiff had not informed the defendant No.1 prior to March 97 that the banker cheque was delivered to the plaintiff by defendant No.2 on 10.10.96. It is argued that plaintiff had informed the bank only when defendant No.2 had withdrawn the entire amount from its account.
(i) Ld. Counsel for the plaintiff countered the said contention by arguing that infact defendant No.2 was in (21) collusion with defendant No.1 and in pursuance of that collusion, defendant No.1 had not only returned the banker cheque unpaid but also credited the amount of banker cheque in the account of defendant No.2 in haste without making any enquiry from any quarter.
(ii) Admittedly neither of the parties had led any evidence to prove the alleged collusion. It is undisputed fact that defendant No.1 had given the credit of the amount of banker cheque to the defendant No.2 on 12.10.96 without making any enquiry either from plaintiff or from its banker. Even defendant No.1 had not informed the police. If defendant No.1 had apprehension that the banker cheque was not presented for encashment by the true payee, bank should inform the police but bank had not done so without any reasonable explanation. It is admitted case of the defendant No.1 that intimation was received through the plaintiff only on 12.10.96 but by that time, defendant No.1 had already credited the amount in the account of defendant No.2. During the course of argument, it is pointed out by the Ld. Counsel for plaintiff that the FIR was registered against defendant No.2 and the Principal officer and Incharge of (22) defendant No.1 named Sh. S.L. Saluja and were arrested by CBI in that case. This fact is not disputed by the Ld. counsel for defendant No.1. Though the said fact is not proved during the trial yet prima facie it appears that defendant No.2 was in connivance with Mr. S.L. Saluja. In these circumstance, it cannot be ruled out that there was no collusion between the officer of defendant No.1 and defendant No.2. On the other hand, there is no evidence on record to establish that there was any collusion between plaintiff and defendant No.1. Merely fact plaintiff had not informed the defendant No.1 either on 12.10.96 or subsequently does not prove ipso facto that plaintiff was in collusion with defendant No.2. In these circumstances, in my opinion the said contention is without any substance.
22. Ld. Counsel for defendant further contended that defendant No.1 had not gained anything in the said transaction, thus defendant No.1 should be permitted to recover the said amount from defendant No.2. Admittedly in the present case, defendant No.1 had given the credit of amount of banker cheque to defendant No.2 on 12.10.96 and defendant No.1 had not gained anything in this transaction. Rather defendant No.1 had (23) acted at the instructions of defendant No.2 at the time of returning the banker cheque. Thus, defendant No.1 is entitled to recover the amount from defendant No.2 if the suit of the plaintiff is decreed.
23. Ld. Counsel for defendant further argued that since plaintiff failed to prove that defendant No.2 was liable to make payment to the plaintiff, defendant No.1 is not liable to make the suit amount to the plaintiff. Ld. Counsel for the plaintiff refuted the said contention by arguing that defendant No.1 had not returned the cheque on the ground that defendant No.2 informed the bank that he had delivered the banker cheque to the plaintiff inadvertently without any liability.
(i) Admittedly, in the present case defendant No.2 requested the defendant No.1 to stop the payment of banker`s cheque on the ground that the same had been lost. Defendant No.2 never made any prayer to stop the payment on the ground that he had delivered the banker`s cheque inadvertently despite the fact that he had no liability against the plaintiff. Further, plaintiff in his plaint categorically stated that defendant no.2 had (24) delivered the banker`s cheque in pursuance of the business transaction and in replication clarified that defendant No.2 had issued the said banker`s cheque against the bill No. 20 dated 10.10.96 through which plaintiff had supplied copper wire worth of Rs. 8.75 lac. During the trial, defendant No.2 proceeded ex- parte and the evidence led by plaintiff in this regard is not disputed by defendant No.2. Moreover, defendant No. 1 had no concerned to ascertain whether defendant No.2 had to make any payment against liability or not. Once defendant No.1 had issued a banker`s cheque in favour of payee i.e. plaintiff at the instance of defendant No.2, defendant No. 1 had no power except in special circumstances to stop the payment of the same. Thus, the contention of Ld. Counsel for defendant No.1 is not tenable, hence rejected.
24. Pondering on going discussion, I am of the opinion that defendant No.1 was not justified to return the banker`s cheque unpaid, thus defendant no.1 is liable to pay the amount to the plaintiff alongwith defendant no.2. Accordingly I decide this issue in favour of the plaintiff and against the defendant. (25)
25. ISSUE No.2 Onus to prove the said issue was upon the plaintiff. Though plaintiff had claimed interest @ 24% per annum from time to time 1996 till the realization of the amount yet plaintiff had not led any evidence to establish on what basis he had claimed the interest at the said rate. Even plaintiff had not uttered even a single word about the interest. In the absence of any evidence on record, I am of the opinion that plaintiff is not entitled to claim interest @ 24% per annum. However, it is clear that defendants had deprived the plaintiff from using the said amount as defendant no.1 returned the banker's cheque without making any enquiry at the instance of defendant no.2, thus in my opinion, defendants are liable to compensate the plaintiff by paying interest on the said amount. Keeping in view the nature of dispute between the parties, I am of the opinion that interest @ 10% per annum from the date of filing of the suit till the realization of the amount will meet the ends of justice. Accordingly, said issued is decided in favour of plaintiff and against the defendants.
(26)
26. RELIEF.
In the light of my finding on the issues above, a money decree of Rs.8.75 lakh alongwith simple interest @ 10% per annum from the date of filing of the suit till the realization of the amount with cost is passed in favour of plaintiff and against both the defendants jointly and severally liable. In case the decreed amount is paid by the defendant no.1 i.e. State Bank Of India, defendant no.1 shall have a right to claim the said amount from defendant no.2 as defendant no.1 had returned the banker's cheque as per instructions of defendant no.2. Decreesheet be prepared accordingly. File be consigned to record room. Announced in the open court on this 18th day of August, 2007 (Pawan Kumar Jain) Additional District Judge Fast Track Court, Delhi