Bangalore District Court
Canara Bank vs The Axis Bank on 9 April, 2015
IN THE COURT OF XVII ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE, BENGALURU (C.C.H.16)
Present: Shri. G.R. Patil, B.A., LL.B.(Spl),
XVII Addl. City Civil & Sessions Judge.
Dated this 9th Day of April 2015
O.S.Nos. 4891/2013, 4892/2013 & 4893/2013
Plaintiffs : 1. Canara Bank
Kollam Main Branch
Maheshwari Manson,
Thamarakula,
Kollam - 691 001
Rep. by its Senior Manager
And G.P.A. holder.
2. Canara Bank
Accounts Section
Krushi Bhavan,
Nrupathunga Road,
Bengaluru - 560 002.
Rep. by its Senior Manager
And G.P.A. holder.
[By Sri. K.Shashidhar Parlathaya, Adv.]
-Vs-
Defendants : 1. The Axis Bank,
Bengaluru Main Branch,
No.9, M.G.Road,
Bengaluru - 1
Rep. by its Senior Manager
2. Citi Bank, Bengaluru
No.301, Level III,
Prestige Meridian, 2/30,
2
Bengaluru - 1
Rep. by its Senior Manager
3. Sri. Manjunath
Major,
S/o not known to the plaintiffs,
R/at CLR Services, No.708,
7th Floor, South Blokc,
Bangalore - 94
[D1 by Sri. H.A., Adv.]
[D2 by Sri. K.R.G., Adv.]
[D3 - Ex-parte]
Date of institution of the suit 06.07.2013
Nature of the suit Money suit
Date of commencement of 02.12.2014
recording the evidence
Date on which the judgment 09.4.2015
was pronounced
Total duration Years Months Days
01 09 03
(G.R. Patil),
XVII Addl. City Civil & Sessions Judge.
*********
COMMON JUDGMENT
The plaintiff bank has filed O.S.No.4891/2013 against the
defendants seeking for direction to the defendant No.1 and
other defendants as may be found liable to, to pay to the
plaintiff a sum of Rs.7,90,243/- [Rupees Seven Lakhs Ninety
3
Thousand Two Hundred Forty Three only] together with interest
at 18% p.a. from the date of suit till payment and also sought
for award costs of the suit.
The plaintiff bank has filed O.S.No.4892/2013 against the
defendants seeking for direction to the defendant No.1 and
other defendants as may be found liable to, to pay to the
plaintiff a sum of Rs.5,53,276.93 [Rupees Five Lakhs Fifty Three
Thousand Two Hundred Seventy Six and Paise Ninety three
only] together with interest at 18% p.a. from the date of suit till
payment and also sought for award costs of the suit.
The plaintiff bank has filed O.S.No.4893/2013 against the
defendants seeking for direction to the defendant No.1 and
other defendants as may be found liable to, to pay to the
plaintiff a sum of Rs.2,75,058/- [Rupees Two Lakhs Seventy
Five Thousand Fifty Eight only] together with interest at 18%
p.a. from the date of suit till payment and also sought for award
costs of the suit.
2. Brief facts in all the cases are as under:-
That on 27.6.2008, the 1st plaintiff bank had issued a
demand draft bearing No.323667 [CBS No.08141300154] for a
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sum of Rs.4,17,015/- [Rupees Four Lakhs Seventeen Thousand
Fifteen only] in favour of the Citi Bank NA A/C City Any where
payable at Bengaluru, being the realization of collection
instruments of the 2nd defendant M/s Citi Bank, Bengaluru [in
case of OS.NO.4891/2013]. That on 26.6.2008, the 1st plaintiff
bank had issued a demand draft bearing No.323666 [CBS
No.081413001539] for a sum of Rs.2,92,352.53 [Rupees Two
Lakhs Ninety Two Thousand Three Hundred Fifty Two and Paise
Fifty Three only] in favour of the Citi Bank NA A/C City Any
where payable at Bengaluru, being the realization of collection
instruments of the 2nd defendant M/s Citi Bank, Bengaluru [in
case of OS.NO.4892/2013]. That on 16.6.2008, the 1st plaintiff
bank had issued a demand draft bearing No.323653 [CBS
No.081413000915] for a sum of Rs.1,45,906 [Rupees One Lakh
Forty Five Thousand Nine Hundred Six only] in favour of the
Citi Bank NA A/C City Any where payable at Bengaluru, being
the realization of collection instruments of the 2nd defendant
M/s Citi Bank, Bengaluru [in case of OS.NO.4893/2013].
The 1st plaintiff has sent the above said demand drafts to
the 2nd defendant through French Express Courier and the said
demand drafts having been reported as lost in transit and not
5
received by the beneficiary the 2nd defendant and the 2nd
defendant requested the 1st plaintiff for issue of duplicate
demand drafts and the 1st defendant requested the 1st plaintiff
to issue duplicate demand drafts and the 1st plaintiff there upon
issued duplicate demand drafts on 11.10.2008 as under:
1) D.D. bearing No.323737 for a sum of Rs.4,17,015/-
[Rupees Four Lakhs Seventeen Thousand Fifteen only] in
OS.No.4891/2013
2) D.D. bearing No.323736 for a sum of Rs.2,92,352.53
[Rupees Two Lakhs Ninety Two Thousand Three
Hundred Fifty Two and Paise Fifty Three only] in
OS.No.4892/2013
3) D.D. bearing No.323723 for a sum of Rs.1,45,906
[Rupees One Lakh Forty Five Thousand Nine Hundred
Six only] in OS.No.4893/2013
after ascertaining about the non-payment of the original
demand drafts by the 2nd plaintiff. The said duplicate demand
drafts were paid on 5.11.2008 by the 2nd plaintiff Accounts
Section of the Bank at Bengaluru in the usual course of
business.
However, during the reconciliation process by the Canara
Bank Head Office Demand Draft Reconciliation Section [HDDR
Section] on 2.7.2010, informed to the 1st plaintiff that 4 demand
drafts have been made double payments. Therefore, the 1st
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plaintiff informed the 2nd defendant that during the course of
reconciliation process of the plaintiffs' bank, it found that
double payments had been made to the 2nd defendant by way of
original and duplicate demand drafts and as such, the 1st
plaintiff by its intimation through e-mail dated 24.9.2010,
requested the 2nd defendant to refund the excess amount of
Rs.9,75,326.23 [Rupees Nine Lakhs Seventy Five Thousand
Three Hundred Twenty Six and Paise Twenty Three only] and
the 2nd defendant replied to the said request that it has unable
to trace the credit for the four original demand drafts, however,
it confirmed the receipt of the payment of duplicate demand
drafts and the 2nd defendant has also requested the plaintiff
bank to provide the paid certificate for the four original demand
drafts. Subsequently, the plaintiff bank furnished the paid
certificate of all the original demand drafts and also the plaintiff
bank through its e-mail dated 25.9.2010 sought clarification
that whether the 2nd defendant has having any clearing
arrangements with the Axis Bank or Federal Bank and the 2nd
defendant intimated on 27.9.2010 that it had checked with the
Axis Bank but it do not have any credit for the for the aforesaid
demand drafts and also confirmed that original demand drafts
7
have not paid to the Citi Bank. After enquiry by the
communication dated 6.10.2010 received from the DDR Section
Head Office of the plaintiff bank, the plaintiff bank came to
know that the above said three original demand drafts were
found to have fraudulently altered and found to have been
encashed by the 1st defendant Asix Bank, Bengaluru Main
Branch on 2.7.2008, in clearing, for the credit of their customer
one S.Manjunath, A/c No.3150010100046598, the 3rd
defendant, who was maintaining his account with the 1st
defendant, Axis Bank, Bengaluru Main Branch. It is seen from
the above said original demand drafts, that the name of the
payee "Citi Bak NA A/C City any where" had been fraudulently
altered as "Manjunath S." and the signatures of the officers,
authenticating the said alterations, had also been forged. The
said forged demand drafts were collected by the 1st defendant
Axis Bank in clearing from the 2nd plaintiff and when the said
fraud came to the knowledge of the plaintiff bank through their
HDDR Section on 2.7.2010, it took up the matter with the 1st
defendant requesting for a copy of the account opening form
and other relevant documents and personal details of the 3rd
and those regarding the introducer for his opening of the
8
account. In spite of repeated requests, the 1st defendant did not
respond to the same. The plaintiff bank therefore, is of the
bonafide belief that the 1st defendant was deliberately hiding the
same, as it was grossly negligent in not only allowing the said
3rd defendant to open his account in the 1st defendant bank ,
but also in collecting the said forged demand drafts in clearing
from the 2nd plaintiff. Accordingly, the 2nd plaintiff was
constrained to claim the refund of the claim amount, from the
1st defendant by its letter dated 12.10.2010, for which the 1st
defendant rejected vide its memo dated 14.10.2010. The 1st
defendant was not co-operative and it failed to adhere to the
direction of 'know your customer' as enumerated by the Reserve
Bank of India in opening the account. The plaintiff bank has got
issued the legal notice on 26.7.2012 to the 1st defendant and
the same has been served on 27.7.2012 and the 1st defendant
issued reply on 4.8.2012 they have not denied the same. Hence,
the plaintiffs have filed the suit against the defendants.
3. In pursuance of the suit summons, the defendants 1
and 2 have appeared through their counsels and the defendant
No.3 remained absent and placed ex-parte. The defendants 1
and 2 have not filed the written statements.
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4. In order to prove the case, on behalf of the plaintiffs
bank one K.V.Gururaj the Officer of the 2nd plaintiff bank has
examined himself as PW.1 and got marked the documents at
Ex.P1 to P19 and closed the side. The defendants have not
cross-examined PW.1 and also not adduced any evidence.
5. Heard the arguments of advocate for the plaintiffs.
The defendants and their advocates remained absent, hence,
taken as no arguments.
6. The common points that arise for my consideration
in all the cases are as under:-
1) Whether the plaintiff bank proves that on
27.6.2008, 26.6.2008 and 16.6.2008 has
issued three demand drafts for sum of
Rs.4,17,015, Rs.2,92.352.53 and
Rs.1,45,906/- to the 2 defendant and same
nd
have been encashed by the 3rd defendant
through 1st defendant?
2) Whether the plaintiff bank further proves that
the 1st defendant failed to collect the address
of the 3rd defendant as per the guidelines of
RBI under KYC?
3) Whether the plaintiff bank proves that the
defendants 1 and 3 are liable to pay the
amount as prayed in the suit?
4) What decree or Order?
7. My findings on the above issues are as under:-
10
Point No.1: In the affirmative
Point No.2: In the affirmative
Point No.3: In the affirmative
Point No.4: As per final order,
for the following:
REASONS
8. Point Nos.1 to 3: The learned advocate for the
plaintiff bank has advanced arguments and vehemently
contended that the 2nd defendant is not a beneficiary, but it has
issued the cheque on behalf of the 1st defendant collecting bank.
The 1st defendant being collecting bank paid the amount to the
3rd defendant who is the customer of the 1st defendant. The 1st
defendant without verifying the address of the 3rd defendant has
per the guidelines issued by the R.B.I. under KYC, the 1st
defendant has to obtain the documents regarding address proof
of the 3rd defendant while opening the account of the 3rd
defendant. The 1st defendant bank has to obtain the introducer
of the customer for holding account in its bank, without
verifying the all these facts, the 1st defendant bank permitted
the 3rd defendant to open an account. Immediately, after
opening the account he has collected the amount of three
demand drafts and closed the account. Therefore, the 1st
11
defendant is liable to pay the amount, as there is negligence on
the part of the 1st defendant who is responsible for knowing the
customer's address. The amount of the demand drafts at Ex.P1,
P12 and P16 have been received by the 3rd defendant paid by
the 1st defendant. Therefore, they are liable to pay the claim
amount. In support if his contention, he has relied upon the
rulings reported in 1) (1992) 75 Com. Cases 481 in case of
Indian Overseas Bank Vs. Bank of Madura Ltd., 2) (2004) 2
S.C.C. 425 in case of Kerala State Co-op. Marketing Federation
Vs. State Bank of India and others, 3) AIR 1981 Madras 129 in
case of Indian Bank Vs. Catholic Syrian Bank Ltd., and 4)
(1999) 3 S.C.C. 457 in case of Iswar Bhai C. Patel Vs. Harihar
Behera and another.
9. He has also advanced arguments that since the
defendants have not been filed the written statement and
entered into witness box through they have appeared through
counsel, therefore, the court has to draw an adverse inference
against the defendants as per the provision of section 114(3)(g)
of Indian Evidence Act. In support of his contention, he has
relied upon the ruling reported in (1999) 3 S.C.C. 573 in case of
12
Vidhyadhar Vs. Manikrao and another and sought for decree of
the suit.
10. Admittedly, the 2nd defendant has received the
duplicate demand drafts and thereafter, informed the plaintiff
bank that the original demand drafts have not been received, as
it is lost during the transit. Therefore, the plaintiff bank sent the
duplicate demand drafts as per Ex.P1, P12 and P16. The 2nd
defendant being the agent of the 1st defendant as collecting
bank. The 1st defendant has paid the amount to the 3rd
defendant.
11. The defendants 1 and 2 though appeared through
their counsel, the 1st defendant has not filed the written
statement and even no cross-examined PW.1. The 2nd defendant
cross-examined PW.1 and PW.1 has stated that there is no
cause of action against the 2nd defendant and there is no prayer
also. Admittedly, the 1st defendant is the collecting bank and
paid the amount to the 3rd defendant. The 3rd defendant is the
customer of the 1st defendant bank who has opened an account
in the 1st defendant branch and got encashed the demand
drafts amount. It is mandatory duty of the 1st defendant to take
13
all the details and address and identity of the 3rd defendant
when he has opened an account in its bank as per the
guidelines of RBI under KYC and the 1st defendant has not
placed any documents to show that it has duly verified and
taken due caution while opening the account of the 3rd
defendant in its bank. The documents at Ex.P1, P12 and P16
are the demand drafts, wherein the amount has been drawn by
the 3rd defendant from the 1st defendant bank. In spite of
repeated requests and correspondence made by the plaintiffs to
the 1st defendant, it has not given any reply. All the material
placed by the plaintiffs made out a case that the 1st defendant
bank is clearing bank and paid the amount to the 3rd defendant
under Ex.P1, P12 and P16. The 1st defendant has given reply as
per Ex.P7 and taken contention that they have not received any
communication from the plaintiff bank requesting for KYC
documents and other details and they have sought for details
and copies of any previous correspondence with the bank and
they have not admitted the case. But no documents have been
put forth by the 1st defendant. The 1st defendant has given reply
to the notice of the plaintiff under Ex.P9, they have denied.
However, they have given Account number of the 3rd defendant
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and his address. But it shows that the 1st defendant has taken
the application of the 3rd defendant for opening the account
without verifying the relevant documents regarding his identity
and address. If at all the 1st defendant obtained, the same
would have supplied and given information to the plaintiffs in
this regard. But, they have not forwarded the documents. It
shows that there is negligence on the part of the 1st defendant to
open an account of the 3rd defendant and collected the demand
drafts and paid the amount to the 3rd defendant. As per the
rulings relied by the learned counsel for the plaintiffs, wherein it
clearly show that the 1st defendant is sole responsible for the
payment to the 3rd defendant, because while opening the
account of the 3rd defendant, the 1st defendant has to take
precautionary measures regarding clear address and identity of
the 3rd defendant. Therefore, the 1st defendant and the 3rd
defendant are jointly and severally liable to pay the claim
amount to the plaintiffs, since PW.1 has admitted that there is
no cause of action and no claim made against the 2nd
defendant. The 1st defendant being the collecting bank has
released the amount to the 3rd defendant, hence, both the 1st
defendant and the 3rd defendant are jointly and severally liable
15
to pay a sum of Rs.16,18,577.93 [Rupees Sixteen Lakhs
Eighteen Thousand Five Hundred Seventy Seven and Paise
Ninety Three only]. So far as, suit against the 2nd defendant is
concerned, it is dismissed. Hence, I answer the above points in
the affirmative.
12. Point No.4:- In view of the above discussion, I
proceed to pass the following :-
ORDER
The suits filed by the plaintiff in OS.Nos.4891/2013, 4892/2013 and 4893/2013 are hereby decreed with costs.
The defendants 1 and 3 in all the suits are jointly and severally liable to pay the claim amount of Rs.16,18,577.93 [Rupees Sixteen Lakhs Eighteen Thousand Five Hundred Seventy Seven and Paise Ninety Three only] with simple interest at the rate of 18% p.a. from the date of suit till the realization.
Suits against the 2nd defendant in all the cases are hereby dismissed.
Draw decree accordingly.
16The original of this judgment shall be kept in OS.No.4891/2013 and copies shall be kept in other suits.
(Dictated to the judgment writer, transcribed by him, corrected and then pronounced by me in the open court, on this the 9th day of April, 2015).
(G.R. Patil), XVII Addl. City Civil & Sessions Judge, Bengaluru.
ANNEXURE List of witnesses examined for plaintiffs:
P.W.1 K.V.Gururaj List of documents exhibited for plaintiffs:
Ex.P1 Original demand draft Ex.P2 Copies of e-mail communication Ex.P3 Claim dtd.12.10.2010 Ex.P4 Claim reject memo Ex.P5 Legal notice Ex.P6 Postal acknowledgement Ex.P7 Reply Ex.P8 Rejoinder Ex.P9 Reply Ex.P10 Police complaint Ex.P11 Acknowledgement 17 Ex.p12 Original demand draft Ex.P13 Claim form Ex.P14 Legal notice Ex.P15 Postal acknowledgement Ex.P16 Original demand draft Ex.P17 Claim form Ex.P18 Legal notice Ex.P19 Postal acknowledgement List of witnesses examined for defendants:
Nil List of documents exhibited for defendants:
Nil XVII Addl. City Civil & Sessions Judge, Bengaluru.18
(Judgment pronounced in open court vide separate judgment) ORDER The suit filed by the plaintiff is hereby decreed with costs.
The defendants 1 and 3 are jointly and severally liable to pay the claim amount of Rs.2,75,058/- [Rupees Two Lakhs Seventy Five Thousand Fifty Eight only] with simple interest at the rate of 18% p.a. from the date of suit till the realization.
Suit against the 2nd defendant is hereby dismissed.
Draw decree accordingly.
XVII Addl. City Civil & Sessions Judge, Bengaluru.