Delhi District Court
Mata Leelawati Shikshan Sansthan vs Citi Bank N.A on 22 November, 2018
IN THE COURT OF SHRI MANOJ KUMAR: ADDITIONAL
DISTRICT JUDGE8 (CENTRAL), TIS HAZARI, DELHI
Suit No. 378/2016 (New No. 611835/2016)
Unique ID No.: DLCT010000682002
In the matter of:
Mata Leelawati Shikshan Sansthan,
A Registered Society,
Through
Its Secretary and Authorized Signatory,
Sh. J.C. Sharma, S/o Late Harish Chander Sharma,
R/o B1/618, Janakpuri,
New Delhi. ......Plaintiff
VERSUS
1.Citi Bank N.A., C.P. Delhi Branch, Through Its Branch Manager, Connaught Circus Branch, 124, 4th Floor, Jeevan Bharti Building, Connaught Circus, New Delhi110001.
2. Citi Bank, N.A. Through Citi Banking HeadIndia, Citi Bank N.A. Anna Salai, Chennai (India).
Suit No. 378/2016 Page no. 1 of 14
3. Sh. Vidur Verma,
Branch Manager,
Citi Bank N.A.
Connaught Circus Branch,
124, 4th Floor, Jeevan Bharti Building,
Connaught Circus,
New Delhi11001. .....Defendants
Date of institution : 23.9.2002.
Date of Reserving judgment : 31.10.2018.
Date of pronouncement : 22.11.2018.
For plaintiff : Mr. Praveen Suri, Advocate.
For defendants : Ms. Suruchi Suri, Advocate.
JUDGMENT :
This suit for recovery of Rs.4,04,686/, under Order XXXVII of the Code of Civil Procedure, 1908 (CPC), has been instituted by plaintiff Mata Leelawati Shikshan Sansthan against Citi Bank N.A., a Banking Company and its Branch Manager Vidur Verma.
2. Facts, as per the plaintiff's version, are that the plaintiff, a registered society, having its registered office at B1/618, Janak Puri, New Delhi110058, has been running its computer educational institute at A37A, Kirti Nagar, New Delhi; that Sh. J.C. Sharma is the authorized signatory and secretary of the plaintiff; that the defendant no. 1 is a branch of the defendant no. 2, having its head office at New York, U.S.A, and has been doing banking business; that the defendant no. 2 is controlling head of the defendant no. 1 in India and the Suit No. 378/2016 Page no. 2 of 14 defendant no. 3 is the controlling officer of the defendant no. 1; that the plaintiff is having its savings account no. 5716104224 with the defendant no. 1, and Sh. J.C. Sharma, who is the Secretary and one of the authorized signatories, has been operating the said account on behalf of the plaintiff; that on 08.3.2002, the plaintiff noticed that one cheque bearing no. 314693 was missing from the cheque book issued by the defendant no. 1 for operating the said bank account no. 5716104224; that on 08.3.2002 the plaintiff contacted the defendant no. 1 over telephone and reported about the said cheque bearing no. 314693 being missing; that in reply, the defendant no. 1 informed to the plaintiff that on 07.3.2002 the reported cheque no. 314693 had already been presented to the defendant no. 1 for payment by one Yogesh Kumar, who had withdrawn a sum of Rs.2,60,000/ from the account of the plaintiff, and it (the defendant no. 1) had debited the plaintiff's savings bank account for Rs.2,60,000/ against the payment made to said Yogesh Kumar; that the plaintiff immediately rushed to the defendant no. 1, who showed him the aforesaid cheque no. 314693; that the plaintiff noticed that his signature was forged and the defendant bank, without the mandate of the plaintiff, had made payment of Rs.2,60,000/ to Yogesh Kumar; that the defendant no. 1 was a trustee for the amount deposited in the plaintiff's saving account and had abused the trust by allowing the amount in question to be embezzled through its gross negligence; that if the defendant no. 1 would have verified the signature on cheque with the records or have Suit No. 378/2016 Page no. 3 of 14 identified the said Yogesh Kumar by way of any of the authentic document such as identity card, driving licence or PAN Card etc, the said Yogesh Kumar would, definitely, not have been allowed to withdraw the amount in question; that the purported signature of the plaintiff on cheque no. 314693 is forgery, therefore, the payment made by the defendant no. 1 to the said Yogesh Kumar, in fact, was made without the mandate of the plaintiff, thus, from the negligence on the part of the defendants it may be inferred that the defendant bank in collusion and conspiracy with some, said to be Yogesh Kumar, had authorized an illegal withdrawal of Rs.2,60,000/ out of the funds of the plaintiff; that on 09.3.2002, the plaintiff lodged an FIR no. 87 with Police Station Kirti Nagar, New Delhi110015 and the defendant no. 1 was also informed accordingly; that the defendant no. 3 was not replying to the bona fide claim of the plaintiff for crediting the plaintiff's saving account for a sum of Rs.2,60,000/ against wrongful debit on 07.3.2002 without the mandate of the plaintiff, therefore, on 10.4.2002, the plaintiff sent a detailed letter/notice to the defendant no. 2 and demanded for credit of his savings account no. 5716104224 with the sum of Rs.2,60,000/; that in reply, the plaintiff received a letter stating to the effect that the defendants were investigating the plaintiff's query regrading the cheque no. 314693 for Rs.2,60,000/ debited to the plaintiff's account on 07.3.2002 and assured that the defendants will revert to the plaintiff once the investigation completed; that since the defendant failed to revert to the plaintiff and Suit No. 378/2016 Page no. 4 of 14 three more months were elapsed, having no remedy, on 19.7.2002, the plaintiff, through his advocate sent a legal notice to the defendants demanding that they should credit his savings bank account no. 5716104224 with the amount in question; that the defendants having received the said notice, sent reply, but failed to comply with the notice. It is further averred in the plaint that due to the negligence on the part of the defendants, the plaintiff not only has suffered with loss of principal amount of Rs.2,60,000/ alongwith interest at the rate of 12% per annum with quarterly rests, but has also suffered with the consequential damages, that is minimum for Rs.1,00,000/, as whole project of the plaintiff constructing a new college has been delayed. It is further averred in the plaint that due to the acts of the defendants a cause of action arose in favour of the plaintiff leading upto the institution of the suit.
3. During its pendency, in the wake of the statement made on behalf of the plaintiff, the suit was converted into an ordinary suit for recovery of money and thereafter, it is contested by the defendants by way of a written statement of defence wherein preliminary objections are taken to effect that the suit is liable to be dismissed under rule 11 of Order VII of CPC as no cause of action ever arose in favour of the plaintiff against the defendants; that the cheque in question was presented with the defendant bank in the ordinary course of business and was cleared in good faith and without negligence; that the defendants have all times acted in good faith and exercised due Suit No. 378/2016 Page no. 5 of 14 diligence in performing its functions while dealing with the cheque in question; that it was the plaintiff to keep the cheque book in safe custody and he cannot take advantage of his own wrong and shift the burden on the defendants; that the alleged forgery of the cheque in dispute, if any, was due to the negligence of the plaintiff for which the defendants cannot be held liable; that the plaintiff is stated to be a registered society, but no document has been produced in support of the said averment; that the suit has not been instituted by an authorised person; that the suit has been signed and verified by Sh. J.C. Sharma, stated to be the Secretary and authorised signatory of the plaintiff, but no authority letter or resolution thereby establishing the designation, position and authority to file the present suit has been filed; that in view of section 131 of the Negotiable Instruments Act, 1881 the defendants are not liable towards the plaintiff as the cheque in question was honoured by the defendants in ordinary course of business in good faith and without negligence; that in the ordinary course of business, the defendants on earlier occasions also honoured the cheque presented on behalf of the plaintiff and in like manner the aforesaid cheque was also honoured by the defendants; that the plaintiff had not given any instructions to the bank that cheque of higher denomination be cleared only after seeking his instruction; that the suit has been filed with mala fide intention on the basis of false averments and incorrect facts; that a criminal complaint was also lodged by the plaintiff against several persons, including the Suit No. 378/2016 Page no. 6 of 14 defendants with the police and in the said matter, after registration of FIR no. 87/2002, a charge sheet was filed and the defendants were exonerated; that on 08.3.2002, the plaintiff contacted the defendants and reported the missing/loss of the cheque, but the cheque in question was already encashed on 07.3.2002, and the plaintiff was informed about the said fact; that on 09.3.2002, the representative of the plaintiff came to the office of the defendants and on his request, the disputed cheque was shown to him; that it was further brought to the notice of the plaintiff that the cheque was honoured only after the signature thereon matched with the signature of the account holder, that is the plaintiff; that the plaintiff knowingly and willfully withheld the identity of the person who encashed the cheque and even after repeated requests by the defendants, the plaintiff has not extended full cooperation in the investigation carried out by the defendant bank; that the cheque was encashed only with the consent and knowledge of the plaintiff; that the plaintiff, with intention to cause wrongful gain to himself and wrongful loss to the defendants, has concocted a story. In the reply on merits, the allegations made by the plaintiff against the defendants are disputed and denied and it is stated that the suit may be dismissed.
4. On 21.5.2013, on the pleadings of the parties following issues were framed, namely:
(1) Whether the plaint is liable to be rejected under Order 7 Rule 11 of CPC? OPD Suit No. 378/2016 Page no. 7 of 14 (2) Whether the plaintiff is entitled for decree for recovery of the suit amount? OPP (3) Whether the plaintiff is entitled for pendente lite and future interest an decree amount? If so, at what rate? OPP (4) Relief.
5. In support of its claim, the plaintiff got examined PW1 J.C. Sharma, who during his examination in chief tendered his affidavit Ex. PW1/A alongwith documents Ex.PW1/1 to Ex.PW1/8 and Ex.PW1/10. PW1 J.C. Sharma was cross examined by counsel for the defendants and thereafter, evidence on behalf of the plaintiff was closed.
6. In support of their defence, the defendants got examined DW1 Jagdish Salwan, who during his examination in chief tendered his affidavit Ex. DW1/A alongwith document Ex. DW1/1. DW1 Jagdish Salwan was cross examined by counsel for the plaintiff and thereafter, defendant's evidence was closed.
7. I have heard counsel for the parties and have gone through the material on record carefully. I have also gone through the written arguments filed on behalf of the defendant. My issue wise findings are as follows:
Re: Issue No. 1.
8. Onus of proof qua this issue was on the plaintiff. The rejection of the plaint has been sought by the defendants on the ground that the suit is without any cause of action. As per clause (a) of rule 11 Suit No. 378/2016 Page no. 8 of 14 of Order VII of CPC a plaint may be rejected if it does not disclose a cause of action. The said rule nowhere provides that the plaint will be rejected if the suit is without any cause of action. A plaint disclosing no cause of action, and the suit being without cause of action are two different expression having different connotation in law. In the present case, since the plaint is disclosing a cause of action, and, as will seen in later portion of this judgment, the plaintiff is having cause of action, therefore, no ground to reject the plaint is made out. Issue no. 1 is decided in favour of the plaintiff and against the defendants. Re: Issue No. 2.
9. Onus of proof qua this issue was on the plaintiff. Before discussion on this issue, an objection raised by counsel for the defendants is required to be dealt with, although there is no issue on this point. It is submitted by counsel for the defendants that the suit on behalf of the plaintiff has not been instituted by an authorised person. In the considered opinion of the court this objection is without merit, for as per documents Ex. PW1/1 (Certificate of Registration accompanied by Memorandum of Association) and Ex. PW1/2 (copy of resolution no. 2 passed by the general body of the plaintiff) the plaintiff is a society registered under the Societies Registration Act, 1860 (Act 21 of 1860) and PW1 J.C. Sharma is its Secretary. As per section 6 of Act 21 of 1860 a suit on behalf of a society, registered under the said Act may be instituted in the name of its President, Chairman, Principal Secretary, or trustees. Since PW1 J.C. Sharma, Suit No. 378/2016 Page no. 9 of 14 who has instituted the suit is the secretary of the plaintiff, therefore, he was competent to institute the suit and no separate resolution or authority letter of the plaintiff was required by him to institute the suit.
10. From the pleadings of the parties, on admissions, it has been proved that in the month of March, 2002, and prior to that, the plaintiff had been maintaining a savings bank account bearing no. 5716104224 with the defendants no. 1 and 2 at their Connaught Circus branch; that on 07.3.2002, a bearer cheque bearing no. 314693, purportedly drawn by the plaintiff under the signature of PW1 J.C. Sharma in favour of one Yogesh Kumar, in the sum of Rs.2,60,000/ was presented by one person for encashment, and on the said cheque payment of Rs.2,60,000/ was made and the account of the plaintiff was debited; that on 08.3.2002, the plaintiff informed the defendants that the said cheque bearing no. 314693 was stolen by some unknown person and it (the plaintiff) was informed that the payment had already been made against the said cheque on 07.3.2002. According to the plaintiff, and as deposed by PW1 J.C. Sharma during his examination, some person forged signature of PW1 J.C. Sharma, Secretary of the plaintiff, on the cheque, and the defendants, without taking due care, negligently, made payment against the said cheque, the copy of which is Ex. DW1/P3 and wrongly debited a sum of Rs. 2,60,000/ from the account of the plaintiff, whereas according to the defendants the plaintiff was negligent and the bank is not liable towards the plaintiff.
11. Although the plaintiff has not examined any expert to Suit No. 378/2016 Page no. 10 of 14 show that the signatures of the drawer on the cheque (bearing no. 314693) were forged, but from the testimony of PW1 J.C. Sharma it has been proved that he did not sign the cheque and his signatures were forged by some person without his consent. In their defence, the defendants have examined DW1 Jagdish Salwan, but from his cross examination it has been proved that he did not deal with the cheque in question and he had no personal knowledge about the facts of the case and the circumstances in which the cheque was encashed and thus, the testimony of DW1 Jagdish Salwan is of no help to the defendants.
12. It is argued on behalf of the defendants that in view of the provisions of section 131 of Act 26 of 1881 the defendants are not liable to the plaintiff. I do not see any force in this contention. Section 131 of Act 26 of 1881, which pertain to nonliability of banker receiving payment of cheque, reads as follows:
131. Nonliability of banker receiving payment of cheque.--A banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment.
Explanation I.--A banker receives payment of a crossed cheque for a customer within the meaning of this section notwithstanding that he credits his customer's account with the amount of the cheque before receiving payment thereof.
Explanation II.--It shall be the duty of the banker who receives payment based on an electronic image of a truncated cheque held with him, to verify the prima facie genuineness of the cheque to be truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care.
13. From a reading of section 131 of Act 26 of 1881 it can be discerned that the said provisions of law absolves a banker from its liability only when it receives payment for customer from other Suit No. 378/2016 Page no. 11 of 14 banker on a cheque crossed, generally or specially. In the present case no crossed cheque is involved, therefore, the provisions of section 131 of Act 26 of 1818 are not applicable.
14. In connection with the liability of a banker qua payment on forged cheque it has been held by the Hon'ble Supreme Court in Canara Bank v. Canara Sales Corporation and others, AIR 1887 SC1603 as follows:
Unless the bank is able to satisfy the Court of either an express condition in the contract with its customer or an unequivocal ratification it will not be possible to save the bank from its liability. The banks do business for their benefit. Customers also get some benefit. If banks are to insist upon extreme care by the customers in minutely looking into the pass book and the statements sent by them, no bank perhaps can do profitable business. It is common knowledge that the entries in the pass books and the statements of account sent by the bank are either not readable, decipherable or legible. There is always an element of trust between the bank and its customer. The bank's business depends upon this trust. Whenever a cheque purporting to be by a customer is presented before a bank it carries a mandate to the bank to pay. If a cheque is forged there is no such mandate. The bank can escape liability only if it can establish knowledge to the customer of the forgery in the cheques. In-action for continuously long period cannot by itself afford a satisfactory ground for the bank to escape the liability. The plaintiff in this case swung into action immediately on the discovery of the fraud committed by its accountant as in the case before the Privy Council.
15. In the present case, on 08.3.2002 the plaintiff informed the defendants about the missing of the cheque, and warned them against misuse of the same. Unfortunately the cheque was encashed on 07.3.2002 itself. In these circumstances no negligence can be attributed to the plaintiff, and since there is no evidence on record to suggest that the plaintiff ratified the acts of the wrongdoer, therefore, in the light of the law laid down by the Hon'ble Supreme Court in Canara Bank's case (supra), notwithstanding the fact that the defendants may not have been negligent in dealing with the cheque, Suit No. 378/2016 Page no. 12 of 14 the defendants no. 1 and 2 are liable to pay to the plaintiff the cheque amount debited from its account. In so far as the liability of the defendant no. 3 is concerned, he is only an employee of the defendants no. 1 and 2 and therefore, in the light of the provisions of section 230 of the Indian Contract Act, 1872 and the law laid down by the Hon'ble Delhi High Court in Tristar Consultants v. V Customer Services India Pvt. Ltd. and another, AIR 2007 Delhi 157 he is not personally liable for the acts of his employer.
16. Besides the cheque amount, and interest thereon, the plaintiff has claimed compensation in the sum of Rs. 1,00,000/ on the ground that due to the acts of the defendants, its new project of constructing a new college has been delayed and, therefore, it is entitled for compensation. The plaintiff, however, has not led any evidence to suggest that due to the acts of the defendants it suffered any loss or damage, therefore, the plaintiff is not found entitled to damages as claimed.
17. Further, the plaintiff has sought interest at the rate of 12% per annum with quarterly rests for the period 07.3.2002 till institution of the suit. In the considered opinion of the court, instead of interest at the said rate, it will be reasonable and in the interest of justice if simple interest at the rate of 9% per annum is granted to the plaintiff for the said period. Issue no. 2 is decided accordingly in favour of the plaintiff and against the defendants no. 1 and 2. Re: Issue no. 3.
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18. As the plaintiff has been found entitled to recover Rs. 2,60,000/ from the defendants, therefore, in view of the provisions of section 34 of CPC it is also found entitled to pendente lite interest at the rate of 9% per annum on the said sum of Rs. 2,60,000/. In view of the provisions of section 34 of CPC the plaintiff will also be entitled to future interest at the rate of 6% per annum on the decreetal amount. Issue no. 3 is decided accordingly in favour of the plaintiff and against the defendants no. 1 and 2.
Relief.
In view of above discussion and my findings on issues no. 1, 2 and 3 the the suit is partly decreed with costs against the defendants no. 1 and 2 in terms that the plaintiff is found entitled to recover Rs. 2,60,000/ alongwith simple interest at the rate of 9% per annum on the said amount from 07.3.2002 till institution of the suit. The plaintiff is also found entitled to pendente lite interest at the rate of 9% per annum on the principal amount of Rs. 2,60,000/ The plaintiff will also be entitled to interest at the rate of 6% per anuum on the decreetal amount and costs till realisation of the said amount. Decree sheet be prepared accordingly. After compliance file be sent to records.
Pronounced in the open court (Manoj Kumar) on 22th of November, 2018. Additional District Judge8 Central:Tis Hazari Courts: Delhi.
Digitally signed by MANOJ KUMAR
MANOJ KUMAR Date: 2018.11.29 14:22:08 +0530
Suit No. 378/2016 Page no. 14 of 14