Bangalore District Court
Canara Bank vs The Federal Bank on 12 January, 2017
IN THE COURT OF XVII ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE, BENGALURU (C.C.H.16)
Present: Sri. Ravindra Hegde,
M.A., LL.M.
XVII Addl. City Civil & Sessions Judge.
Dated this 12th Day of January, 2017
O.S.No. 4900/2013
Plaintiff/s : 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-
Defendant/s : 1. The Federal Bank,
Basavanagudi Branch,
Bengaluru - 4
Rep. by its Senior Manager
2. City Bank, Bengaluru
No.301, Level III,
Prestige Meridian, 2/30,
Bengaluru - 1
Rep. by its Senior Manager
[D1 - By Sri. V.V. - Adv.]
[D2 - By Sri. R & P. - Adv.]
2 OS.No.4900/2013
Date of institution of the suit 06.07.2013
Nature of the suit Money Suit
Date of commencement of 14.10.2015
recording the evidence
Date on which the judgment 12.01.2017
was pronounced
Total duration Years Months Days
03 06 06
(Ravindra Hegde),
XVII Addl. City Civil & Sessions Judge.
*********
JUDGMENT
This suit is filed by the plaintiffs for recovery of Rs.2,26,301.49 Ps. from the 1st defendant with interest at the rate of 18% p.a. from the date of suit till realization.
2. The case of the plaintiff in brief is that, the Plaintiff Canara Bank is a Body Corporate and 1st plaintiff is Kollam Branch of Canara Bank and 2nd plaintiff is branch at Bengaluru. The 1st plaintiff had issued a D.D. bearing No.3236654 dated 18.6.2008 for Rs.1,20,053.49 Ps. on Canara Bank, Bengaluru favoring 'Citi Bank NA A/C City Any where' payable at Bengaluru, and sent the D.D. to the 2nd defendant M/s Citi Bank through French Express Courier. Said D.D. has been reported as lost in transit and not received by the 2nd defendant. On request of 2nd defendant, 3 OS.No.4900/2013 plaintiffs issued duplicate D.D. after ascertaining about the non-payment of the original D.D. by the 2nd plaintiff Account section. The duplicate D.D. was paid on 25.11.2008. During reconciliation process by Canara Bank Head office on 2.7.2010, it was informed to the 1st plaintiff that on 4 D.Ds. double payments are made. On enquiry it was noticed that through the 1st defendant Federal Bank, original D.D. was encashed. The 2nd defendant has confirmed that original D.D. has not been paid to the Citi Bank. It came to the knowledge of the plaintiffs that original D.D. bearing No.323654 dated 18.6.2008 which was reportedly lost has been fraudulently altered and found to have been encashed by the 1st defendant Federal Bank on 21.7.2008 for the credit of their customer S.Sandeep Kumar who was maintaining his account with the 1st defendant. On looking to the original D.D. it is found that name of the payee 'Citi Bank NA A/C City Any where' has been fraudulently altered as S.Sandeep Kumar and signature of the officers, authenticating the said alternations, had also been forged. The said forged D.D. was collected by the 1st defendant and sent for clearing and so cleared by the 2nd plaintiff. Immediately when the fraud has come to the knowledge of the plaintiff bank on 7.10.2010, it was informed to the 1st defendant and 1st defendant was 4 OS.No.4900/2013 requested to give copy of the account opening form and other relevant documents and personal details of account holder S.Sandeep Kumar and regarding the introducer. In spite of repeated requests, the 1st defendant did not respond to the same. Plaintiffs believe that the 1st defendant was deliberately hiding the same, as it was grossly negligent in not only allowing the said S.Sandeep Kumar to open his account, but also in collecting the said forged demand draft. Therefore, the 2nd plaintiff has claimed refund of the said amount of Rs.1,20,053.49 Ps. from the 1st defendant by sending letter dated 12.10.2010, for which the 1st defendant rejected the claim. 1st defendant was not cooperative and has failed to adhere to the direction of 'Know Your Customer' as enumerated by the Reserve Bank of India while opening the account. The plaintiff got issued legal notice to the defendant on 26.7.2012 and it has not been replied by the 1st defendant. The plaintiff has also lodged complaint with the police. As 1st defendant in spite of request of the plaintiffs, has failed to furnish the details of its customer S.Sandeep Kumar, the plaintiffs could not make him as party in the suit. The action of the 1st defendant as collecting banker in collecting the amount of the forged D.D. from the plaintiff bank in high value clearing and in allowing S.Sandeep 5 OS.No.4900/2013 Kumar to open his account without ascertaining his credentials, is grossly negligent act and 1st defendant has failed to comply with the request of the plaintiffs and the act of the 1st defendant is opposed to the normal banking practices. Therefore, the plaintiffs are seeking recovery of the loss and damage suffered by the plaintiffs bank. Amount of the forged D.D. with interest at the rate of 18% p.a. comes to Rs.2,26,301.49 and for recovery of this amount, the plaintiff has filed this suit.
3. The 1st defendant has appeared and filed the written statement stating that the suit is not maintainable either on law and facts. The defendant has stated that it is not having any knowledge about the D.D. sent by the 2nd defendant and that the said D.D. has been lost etc. The defendant has stated that S.Sandeep Kumar is one of the customer of the 1st defendant who was maintaining the account in the 1st defendant bank at Basavanagudi Branch. The defendant has denied that it did not follow KYC norms in respect of the said account of S.Sandeep Kumar. It is stated that the 1st defendant had no reasons to believe that the said D.D. was forged one. Defendant admitted that the plaintiff bank issued a letter dated 12.10.2010 which merited no 6 OS.No.4900/2013 reply. It is stated that the plaintiff has no disputed that the plaintiff's Kollam branch had issued D.D. bearing No.3236654 on Canara Bank, Bengaluru and as such, it is clear that the instrument as a whole was not a fabricated one. When the instrument was presented by the 1st defendant for realization, it was the plaintiff which ought to have exercised adequate caution and care to know if the instrument is subjected to any correction or material alteration as a bank which issued the said instrument. Having miserably failed to exercise even minimum caution and thereby failing to detect such a material alteration on the face of their own instrument, plaintiff has no right to turn around and find fault with the 1st defendant. It is stated that the defendant had no reason to doubt the genuineness of the D.D. and naturally expected the plaintiff to detect any forgery or material alternation on the face of the instrument which the plaintiff had issued when presented. It is stated that the plaintiff bank is trying to hide its own mistake and trying to put the blame on 1st defendant in order to avoid its accountability. The 1s defendant has sated that it has accepted the instrument from the customer in the normal course of business on 21.7.2008 for payment. Plaintiff honoured the instrument without initiating any action. It is 7 OS.No.4900/2013 also stated that the suit is bad for non-joinder of necessary party i.e., account holder who has received the amount. On all these reasons, suit is prayed to be dismissed with costs.
4. The 2nd defendant has not filed any written statement
5. On these pleadings, following issues are framed by my learned predecessor on 3.1.2015. Though there is another set of issues on 7.3.2015 fraud by the learned predecessor of this court, as there are two sets of issues, the issues framed on 3.1.2015 are considered for deciding the present suit.
1) Whether the plaintiffs prove that plaintiff No.1 has sent demand draft to defendant No.2 and it was lost in transit and not received by defendant No.2?
2) Whether the plaintiffs prove that plaintiff No.1 has issued a duplicate demand draft bearing No.323724 dated 22.9.2008 for 1,20,053.49?
3) Whether the plaintiffs prove that defendant No.1 has altered the demand draft by including fraudulently the name of S.Sandeep Kumar and encashed the amount through demand draft?
4) Whether the plaintiffs prove that
defendant No.1 is liable to pay
Rs.2,26,301.49?
8 OS.No.4900/2013
5) Whether the plaintiffs are entitled for
future interest? If so at what rate?
6) Whether the suit is barred by limitation?
7) What order or decree?
6. In support of the plaintiffs' case, PW.1 is examined. Ex.P1 to P12 are marked. For defendants, DW.1 is examined and no documents are marked.
7. Heard the arguments.
8. My answer to the above issues are as under:-
Issue No.1: In the affirmative Issue No.2: In the affirmative Issue No.3: In the Negative Issue No.4: In the Negative Issue No.5: In the Negative Issue No.6: In the affirmative Issue No.7: As per final order, for the following:
REASONS
9. Issue No.1 to 3:- All these issues are interlinked with each other and are taken together for discussion.
10. The case of the plaintiff is that the plaintiff had issued D.D. in favour of 2nd defendant and the said D.D. which was sent by courier was reported to have been lost and thereafter 2nd defendant asked for duplicate D.D. and that 9 OS.No.4900/2013 was given by the 1st plaintiff and then it was encashed. Thereafter, it came to the knowledge of the plaintiffs that the original D.D. was encashed through the 1st defendant by one S.Sandeep Kumar who was holding account in the 1st defendant bank by fraudulently altering the D.D. Thereafter, plaintiff though requested the 1st defendant to return the amount and also asked for information regarding the account holder, the defendant has not furnished the same and has rejected the claim of the plaintiffs. Therefore, the plaintiffs have filed this suit for recovery of this amount covered by the D.D. for Rs.1,20,053.49 along with interest which comes to Rs.2,26,301.49. The 1st defendant has denied the allegations and stated that the customer of the 1st defendant has presented the D.D. for encashment and then the 1st defendant by taking all care has sent the said D.D. for clearing to the plaintiff bank and after the plaintiffs cleared the D.D. and sent the amount, amount has been credited to the account of customer of the 1st defendant and therefore, there is no fault with the 1st defendant and it is the plaintiffs who are required to take care of the instrument and there was no occasion for the 1st defendant to suspect the D.D. 10 OS.No.4900/2013
11. For plaintiffs, Officer of the plaintiff bank has given evidence as P.W.1 and has stated the averments in his chief evidence. In the cross-examination, he has stated that he is working in Canara Bank from 37 years and admitted that there will be audit in the bank once in three month and if there is any mistake in the bank transaction, that will be noted in the audit report and admitted that in audit, the mistakes if any will be traced. He has admitted that on 18.6.2008, D.D. for Rs.1,20,053.49 was given by the bank and has stated that they came to know that the said D.D. has been lost in September, 2008. He has admitted that when a D.D. is presented to a bank, then that bank will send the D.D. to the issuing bank for verification and if there is any mistake in the D.D., that will be traced by the issuing bank and if there is any mistake, they will not make the payment and not clear the D.D. The witness has stated that they have taken steps in respect of the lost D.D. in 2010. The witness has stated that they came to know on 2.7.2010 that the disputed, forged D.D. is encashed. The witness has stated that one Ramesh was the bank officer who has cleared the D.D. and admitted that when the D.D. comes with corrections, they will verify whether the correction is endorsed by the competent officer. The witness has stated 11 OS.No.4900/2013 that if the signature of the officer to the D.D. and also to the corrections tallies, then they will pass the D.D. He has admitted that when their bank has issued the D.D. and the said D.D. comes for clearing, then it is their duty to identify any mistakes in the said D.D. The witness has stated that as the D.D. was corrected and the correction was endorsed, they have made the payment on the D.D. The witness has stated that they have seen the authentication on the correction in the D.D. and then passed the same. The witness has admitted that as per banking rules, they cannot give the details of the account holder to any person and they have to maintain the secrecy. He has admitted that only if police or income tax authorities ask or there is order of the court, they will give the details. The witness has stated that they have given complaint as per Ex.P5 and denied that they have not enquired about the action taken on their complaint.
12. Plaintiff has produced the G.P.A. given to P.W.1 as Ex.P1 and the courier dispatch register as Ex.P2 to show that Ex.P3 D.D. was sent to the 2nd defendant from the 1st plaintiff bank by courier. Fraudulently forged D.D. which is the subject matter of the dispute in the present suit on which payment has been received by the account holder in the 12 OS.No.4900/2013 Federal Bank is produced as Ex.P3. According to the plaintiff, the name of Citi Bank which was appearing has been erased and name of S.Sandeep Kumar is mentioned in this D.D. E- mails of the plaintiffs for taking action for double payment on the D.D. is produced as Ex.P4. Copy of the complaint given to the police is marked as Ex.P5 and police endorsement is marked as Ex.P6. Claim made by the plaintiffs to the Federal Bank 1st defendant in respect of the D.D. on which the amount has been paid to the account holder in Federal Bank, is produced as Ex.P7 and claim form is marked as Ex.P8. This claim has been rejected by the 1st defendant by its letter is marked as Ex.P9. Copy of the notice issued to the defendants is marked as Ex.P10 and the postal receipt and acknowledgement are marked as Ex.P11 and P12.
13. For the defendants, the Manager of the 1st defendant bank has given evidence as DW.1 and has stated their contentions taken in the written statement. In the cross-examination, the witness has stated that she has no knowledge of the transaction and she speaks on the basis of the records. She has stated that they receive cheques or D.D. and see the name of the payee and if it matches with the account holder, then they will send the same to the issuing 13 OS.No.4900/2013 bank. When issuing bank honours the cheques or D.D. and credits the amount to their bank, then they will credit the amount to the account of the persons. The witness has admitted that on behalf of the account holder they will collect the amount. The witness has stated that if the correction in the cheques or D.D. is authenticated, they will send it to the issuing bank. The witness has stated that they will not make cross-verification about the corrections or alternations on the instrument before sending to the clearing bank. They will send the cheques and D.D. to the clearing house of the issuing bank. She has stated that he had opened the account in 2005 and closed in 2010 and one Vinay Enterprises has introduced this account holder to their bank and stated that she has not verified how many transaction has been made in the account of S.Sandeep Kumar after this transaction and has stated that Ex.P3 was presented by S.Sandeep Kumar for collection and they have noted that name of payee was altered as Sandeep Kumar S. in Ex.P3 and has stated that they have sent Ex.P3 to the Canara Bank. She has admitted that after coming to know that the D.D. was forged, Canara Bank asked for refund of the amount and by that time, the account of Sandeep Kumar was closed and they made some efforts to find out the party, but they could not. She has 14 OS.No.4900/2013 stated that they have not given any notice to him or have not given any police complaint. The witness has admitted that bank has demanded KYC details, but they are not permitted to give the details unless there is court order. She has denied that her bank was required to give details to plaintiff bank and also denied that they have not followed the KYC norms and have not collected the details of the customer. She has stated that as the account is closed, she does not know whether these documents are available. She has denied that as a collecting bank, they have not acted in good faith. She has denied that as the D.D. was materially altered they would not have received the D.D. from the account holder and should have returned the same and should not have sent for collection. She has denied that they have intentionally withheld the information of the account holder and because of their fault, plaintiff bank even could not proceed against Sandeep Kumar S. She has denied that negligently collected the D.D. and are liable to pay the suit claim amount to the plaintiff and also denied that they have intentionally not taken action against Sandeep Kumar.
14. On looking to the pleadings, evidence and the documents produced, there is no dispute that the plaintiff 15 OS.No.4900/2013 bank had sent D.D. bearing No.3236654 payable to the 2nd defendant which was drawn from 1st plaintiff for Rs.1,20,053.49 which is reported to have been lost in transit. It is also not in dispute that the 2nd defendant has not received the amount and accordingly 2nd defendant requested the plaintiffs to give duplicate D.D. The plaintiff bank given duplicate D.D. to the 2nd defendant and the 2nd defendant is stated to have encashed the duplicate D.D. was 25.11.2008 and the duplicate D.D. was dated 22.9.2008. Plaintiff has contended that during the reconciliation process by the Canara Bank Head Office Demand Draft Reconciliation Section, it was found and on 2.7.2010 it was informed to the 1st defendant that four D.Ds. including the disputed D.D. of the present suit, double payments have been made. Then the 1st plaintiff approached the 2nd defendant and 2nd defendant informed that it has only received the duplicate D.D. and then on enquiry, the plaintiffs came to know that the disputed D.D. has been encashed by making fraudulent alteration and the amount has been paid to the account holder in Federal Bank. Now, the suit is filed for recovery of this amount from the 1st defendant.
16 OS.No.4900/2013
15. On looking to the entire evidence, it is admitted by the witness that when the D.D. is presented to the bank by the account holder, they will make prima facie verification and then they will send the D.D. to the issuing bank for collection. In this case, as the collecting bank is the 2nd plaintiff for the DDs of the 1st plaintiff, Kollam branch, the D.D. has been sent to the collecting branch of the Canara Bank in Bengaluru and the said bank has cleared the same and the amount has been paid to the 1st defendant and in turn, the 1st defendant has paid it to its account holder by name Sandeep Kumar. The 1st defendant contends that it has taken all the care and it has sent the D.D. to the plaintiffs and plaintiffs have cleared the payment and there is no mistake on the part of the 1st defendant. According to the plaintiffs, double payment came to the knowledge of the plaintiffs on 2.7.2010. Ex.P3 is the disputed D.D. which is fraudulently altered by showing as payable to Sandeep Kumar. Interestingly, the payment with regard to this original D.D. after making fraudulent alteration, has been made on 21.7.2008. The 2nd defendant has informed the plaintiff bank that it has not received the D.D. amount and then duplicate D.D. was sent to the 2nd defendant on 22.9.2008 and then it was encashed on 25.11.2008. Therefore, this altered D.D. 17 OS.No.4900/2013 Ex.P3 is encashed on 21.7.2008 itself. When this D.D. has been encashed on 21.7.2008, plaintiffs would be knowing that the amount covered by this D.D. is already paid. If the plaintiffs have taken minimum care, they would have avoided the double payment when the claim is made by the 2nd defendant. When the 2nd defendant informed the plaintiffs that it has not received the D.D., the plaintiffs appears to have issued the duplicate D.D. dated 22.9.2008 which was encashed on 25.11.2008. While issuing duplicate D.D., the plaintiffs appears to have not made any enquiries as to whether the original D.D. amount is already cleared. If minimum care was taken by the plaintiffs to see whether the payment in respect of the original D.D. is already made while issuing duplicate to the 2nd defendant, the plaintiffs would have come to know about the fraudulent alteration of the D.D. and encashment of the amount by the account holder in the 1st defendant bank and then would have taken immediate action. Surprisingly, the plaintiffs were not aware of this double payment, one on the basis of the original D.D. which was fraudulently altered and another duplicate D.D. long time.
18 OS.No.4900/2013
16. According to the plaintiffs, they came to know about the double payment only on 2.7.2010 when they were informed by Demand Draft Reconciliation section. After coming to know about this mistake of double payment or payment to an unauthorized person, the plaintiffs have taken steps to enquire and made a claim to the 1st defendant and the 1st defendant has rejected the claim on 14.10.2010 and thereafter notice was given on 26.7.2012 and then they filed the suit on 6.7.2013. Ex.P3 D.D. show that the name of the payee has been altered and name of S.Sandeep Kumar is entered. But this correction is attested with some signature. P.W.1 in his cross-examination has admitted that there will be audit in the bank once in 3 months and if any mistakes are found in the bank transaction, that will be noticed. In this case, according to the plaintiffs, though the payment of D.D. has been made on 21.7.2008, it has not come to the knowledge of the plaintiffs till 2.7.2010 which is surprising. P.W.1 has also stated that they came to know that the original D.D. has been lost in September, 2008, but they have not given complaint to the police immediately. Payment with regard to lost D.D. was made much prior to September, 2008, as it was encashed on 21.7.2008 as stated in the plaint. Therefore, if the minimum care was taken by the 19 OS.No.4900/2013 plaintiffs, the would have come to know about the fraudulent alterations and the payment and then they would have taken steps immediately to recover the amount from the account holder of the 1st defendant and by giving complaint to the police. Though the plaintiffs have alleged that when they have asked the information from the 1st defendant about the details of the account holder who has encashed the amount, the 1st defendant has not given the information. DW.1 in the cross-examination has stated that they are not permitted to give information of the account holder to anybody unless there is an order of the court. DW.1 in his cross-examination has admitted that they have to maintain the secrecy of the account holder and only if police or income tax authorities or the court ask for such details, they will give the details. The plaintiffs have not given any complaint when they came to know that the D.D. has been lost and they have not made any enquiry as to whether the payment in respect of the original D.D. has been made when they came to know that it has been lost, but by that time the D.D. was already encashed in July, 2008 itself.
17. P.W.1 in his cross-examination has admitted that when the D.D. comes for collection to as account in a bank 20 OS.No.4900/2013 that bank will send the D.D. to the plaintiffs bank for clearing and admitted that if there is any mistake in the D.D., they will notice the same. The witness has admitted that if there is any mistake noticed in the D.D., then they will clear the D.D. and will send the D.D. to the bank which has sent. In the present case, Ex.P3 D.D. which was submitted by S.Sandeep Kumar was sent to the plaintiff bank and plaintiff bank also cleared the same. Therefore, prima facie, to the bare eyes there is no mistake found with the D.D. Though there is alteration, there is signature approving the alteration. Whether the signature which has been put to the alteration is by the authorized person and the person who has actually issued the D.D. etc., will be within the knowledge of the Canara Bank which has issued the D.D. As admitted by P.W.1, if there is any mistake in the D.D., they will send back the D.D. to the 1st defendant. In this case, they have not sent back the same. The 1st defendant though required to take care while accepting the D.D. for encashment and sending it to the bank which has issued the D.D., by considering the D.D. and the signature for its alteration appears to have believed the D.D. and send it to the Canara Bank and the Canara Bank which had issued the D.D. has cleared the same and then the payment has been made. When the bank 21 OS.No.4900/2013 which has issued the D.D. itself is not in a position to identify the mistakes in the D.D., no fault can be found with the 1st defendant in sending the D.D. for clearance to the plaintiff bank. P.W.1 has admitted that if there is a signature on the correction, they will verify as to whether the signature of the Officer who has sent the D.D. and who has endorsed the correction are tallying with each other, then they will pass the D.D. It is not the case of the plaintiffs that duplicate D.D. has been created or fraudulent D.D. has been created. Issuance of D.D.No.3236654 by the plaintiff bank is not in dispute and that D.D. has been altered. But the alteration contains the signature which is appearing to be that of the authorized signatory and by considering the same, even the plaintiffs appear to have cleared the same.
18. Moreover, though this D.D. amount has been paid on 21.7.2008, plaintiffs were not aware of this payment till 2010 which is very surprising. As far as, not giving information about the account holder to the plaintiffs by the 1st defendant, as admitted by P.W.1 only if there is order of the court or demand by the police or income tax authority, such details will be given. The plaintiffs have given the complaint to the police as per Ex.P5 on 30.1.2012. As stated 22 OS.No.4900/2013 above, the payment of this D.D. has been made on 21.7.2008. After more than 3 and half years, the complaint has been given to the police and P.W.1 in his cross- examination has stated that the police have not lodged any FIR on this complaint and has stated that he do not know whether they have made any enquiry with the police after giving complaint. What happened to the said complaint, is also not clear. The plaintiffs have made a claim to the 1st defendant for payment of this D.D. amount which was encashed on 21.7.2008, on 12.10.2010 i.e., after more than 2 years of making payment on the D.D., by writing Ex.P7 and P8. This claim has been rejected by the 1st defendant on 14.10.2010 by writing Ex.P9 and the plaintiffs were asked to forward copy of the D.D. to the branch office of the 1st defendant in which the D.D. has been encashed, so that they will be able to conduct the preliminary investigation. After receiving this letter dated 14.10.2010, the plaintiffs appear to have not taken any steps except giving notice in 2012. Therefore, looking to Ex.P9, it is clear that the plaintiffs were asked to give details enabling the 1st defendant to conduct preliminary investigation with the payee of the instrument, but the plaintiffs have not even complied with the request. 23 OS.No.4900/2013
19. On looking to the entire transaction and acts of the parties, it is clear that the 1st defendant has only received the D.D. from its account holder and by looking to the D.D. Ex.P3, as it was prima facie in order, it has received the D.D. and send it to the plaintiff bank and the plaintiff bank which is required to verify the signature and also signature for the attestation of the correction, has cleared the D.D. and then it was encashed on 21.7.2008. Thereafter, the plaintiffs came to know that the D.D. has been lost and then they have even issued duplicate D.D. on 22.9.2008 to the 2nd defendant which has been encashed on 25.11.2008. At the time of issuing duplicate D.D., the plaintiffs have not enquired as to whether any payment have been made on the alleged lost first D.D. Therefore, plaintiffs themselves were not careful and are not diligent in tracing the fraud. If the plaintiffs have taken immediate steps when received the information from the 2nd defendant that the D.D. has not been received, then the plaintiffs would have come to know that the D.D. amount has already been paid and then they would have sought information from the 1st defendant and then gave complaint to the police and would have collected the information of the account holder to whom the payment has been made and in such event if the 1st defendant withholds the information 24 OS.No.4900/2013 which is required to be given to the public authorities or to the court or to the police and the 1st defendant is found to have committed negligence, the 1st defendant would have been held liable. But in this case, the entire transaction show that it was not the negligence of the 1st defendant. The plaintiff bank has made the payment on 21.7.2008 on the original D.D. and came to know about the fraud on 2.7.2010 by which time the amount has already been withdrawn by the account holder of the 1st defendant and then account was closed. Even thereafter, the present suit has been filed in 2013 after more than 3 years after receiving the information on 2.7.2010.
20. Looking from any angle, the plaintiffs have failed to show that the 1st defendant as a collecting banker has collected the amount of the forged D.D. from the plaintiff bank and has allowed the said S.Sandeep Kumar to open his account without ascertaining his credentials and bonafides and is grossly negligent and has even defaulted in giving information to the plaintiffs and thereby caused loss to the plaintiffs and is liable to pay the D.D. amount to the plaintiffs with interest. Issuing of D.D. by the plaintiffs to the 2nd defendant which is said to have been lost and not received by 25 OS.No.4900/2013 the 2nd defendant is not in dispute. Plaintiffs have also proved that it has issued the duplicate D.D. dated 22.9.2008 to the 2nd defendant and that is also not in dispute. However, by that time, amount of the original D.D. was already paid and it is not noticed by the plaintiffs very strangely. Plaintiffs have failed to prove that the 1st defendant had done fault in sending the D.D. for collection to the plaintiff bank as contended by them.
21. The leaned counsel for the plaintiffs has relied on the decision reported in II (2013) BC 274 - Kannur District Co-operative Bank Ltd., Vs. Kerala State Co-operative Marketing Federation, in which the Hon'ble High Court has held that, when there is negligence in permitting to open account without proper introduction, presentation of cheque and collection of amount and allowing encashment next day without verification, in such circumstances, the protection available to the banker under section 131 of N.I. Act is not available. On going through the decision, the decision is entirely on different facts and cannot be applied to the present case. In another decision of the Hon'ble Supreme Court reported in II (2004) BC 1 (SC) - Kerala State Co- operative Marketing Federation Vs. State Bank of India 26 OS.No.4900/2013 and others, wherein the appellant received a cheque from the third respondent and the cheque was drawn on the 2nd respondent and when the cheque was sent by post, it was stolen in post and was altered and read as if it was payable to Mr.K.Narayanan who had opened an account with the 1st respondent with a sum of Rs.20/- and then for obtaining the cheque book he has deposited another Rs.80/- and thereafter, within 5 days he has deposited the cheque of the appellant which was altered and the same was collected by the 1st respondent on behalf of its client and on the next date, the person account holder has withdrawn Rs.50,000/- from the account just prior to stop instructions being received. On those facts, by considering various decision, the Hon'ble Supreme Court has held that 1st respondent bank had not discharged the burden on it to show it acted in good faith and without negligence and restored the decree of the trial court. The Hon'ble Supreme Court has held that even after it was found that the cheque has been forged and stop payment was issued, no enquiry made by the bank with the introducer. By considering all these facts, the Hon'ble Supreme Court has held that the 1st respondent is liable to make payment towards the said cheque of Rs.50,000/- which was withdrawn by the account holder after honouring of the 27 OS.No.4900/2013 cheque. In the present case, the plaintiffs have paid the amount covered by the D.D. on 21.7.2008. Thereafter they have given duplicate D.D. on 22.9.2008, that is also encashed on 25.11.2008, still the plaintiffs were not aware of this payment. Then on 2.7.2010, plaintiffs came to know that there is such payment on the fraudulent alteration of the D.D. Thereafter, the plaintiffs have sent letter to the 1st defendant on 12.10.2010 and then given a notice in 2012. So, in the entire process, the plaintiffs were never diligent and they were not even aware of the honouring of the D.D. which is said to have been lost and without scrutinizing about the said D.D., they have even issued the duplicate D.D. and that was encashed. The 1st defendant is informed about such payment made on 21.7.2008 in 2010. If the plaintiffs had taken action immediately after honouring of the D.D. on 21.7.2008 or after getting information from the Citi Bank about the loss of D.D. and seeking duplicate D.D., then the 1st defendant would have taken steps to recover the amount from its account holder. After more than 2 years, plaintiffs have put forth the claim and thereafter after 3 years, plaintiffs have filed the suit. Therefore, this decision does not help the plaintiffs in the present case. Another decision reported in Volume-75, 1992 Company Cases 481 - Indian 28 OS.No.4900/2013 Overseas Bank Vs. Bank of Madura Ltd., is similar to the above decision and it does not help the plaintiffs. In III (2003) BC 117 (DB) - Govindaraj and Company and another Vs. Nedungadi Bank Ltd., and others, the Hon'ble High Court of Madras has held that, when the D.D. is materially altered and it was paid out by the drawee bank and encashed by customer of collecting bank, later found materially altered, then the draft void and without consideration and payee had no title and drawee bank entitled to recover from payee. Then the appellants who have encashed the D.D. cannot contend that the employees of the bank were grossly careless and negligent etc. This decision does not apply to the present facts, as the facts are entirely different and the account holder was the appellant in this decision and in his favour the D.D. was encashed. In AIR 1981 Madras 129 - Indian Bank Vs. Catholic Syrian Bank, it is held that, when the bank opening account, without testing credentials and without proper introduction and another bank has suffered loss due to forwarding of demand draft put into account only a few days after opening of account, bank cannot be said to be have acted without negligence. This decision is also not applicable to the present facts for the reasons stated above. The plaintiffs have not taken any legal steps to get the 29 OS.No.4900/2013 information about the account holder from the 1st defendant immediately, after making payment on Ex.P3 D.D. which was fraudulently altered or after coming to know that the D.D. has been lost and while issuing duplicate D.D. even after coming to know on 2.7.2010, the plaintiff has not taken immediate steps and have not given complaint immediately against the person to whom the amount has been paid and complaint is given in 2012 and by that time, the account holder who had opened the account with the 1st defendant has closed the account and now, as the account is closed, the details of the account holder is not available with the 1st defendant. Therefore, plaintiff has failed to prove that due to negligence of the 1st defendant, the plaintiffs have suffered loss and D.D. is encashed. Accordingly, these issues are answered.
22. Issue No.4 and 5 :- For the discussions made on issue No.1 to 3, the liability of the 1st defendant to make the payment of the amount claimed in the suit is not established. The negligence on the part of the 1st defendant in opening the account of S.Sandeep Kumar and then sending the D.D. to the plaintiff bank for collection, are not proved and as such, the 1st defendant is not liable to make the payment of the 30 OS.No.4900/2013 D.D. amount and also the interest as prayed. Accordingly, issue No.4 and 5 are answered in the negative.
23. Issue No.6:- The D.D. amount as per Ex.P3 has been encashed on 21.7.2008. Thereafter, according to the plaintiffs, on the letter received from the 2nd defendant, it has issued duplicate D.D. on 22.9.2008 to the 2nd defendant and that was encashed on 25.11.2008. Even at the time of issuing the duplicate, plaintiff has not enquired as to payment has already made. Without making such enquiry, the plaintiff bank has passed the D.D. Thereafter on 2.7.2010, i.e., after more than 2 years of making payment of the D.D. amount, the plaintiffs said to have come to know about the payment made to the account holder of the 1st defendant. Even thereafter, suit is not filed within 3 years. Suit is filed on 6.7.2013. The plaintiffs have wrongly made payment to the account holder of 1st defendant when the D.D. has come for encashment on 21.7.2008. If it is a wrong payment, the plaintiffs would have initiated action for recovery of the amount within 3 years. The present suit is filed in 2013 which is much after the period of 3 years. Even if it is considered that the plaintiff bank has come to know on 2.7.2010 about the double payment as stated in the plaint, 31 OS.No.4900/2013 then also within 3 years, the suit has not been filed. Without ascertaining that whether the D.D. amount is paid, the plaintiff bank has issued the duplicate D.D. to the 2nd defendant, that itself show that the plaintiff bank has not verified the papers and if it has verified the papers, would have come to know about such payment already made. If the payment on this D.D. is made on 21.7.2008 and that is wrong payment, the suit ought to have been filed within 3 years from the said date. As such, the suit is barred by limitation. The plaintiffs contended that the D.D. was fraudulently altered and then presented by the customer of the 1st defendant to its bank and then it was sent for collection to the plaintiff bank. Even if the D.D. is fraudulently altered, when the D.D. has come to the bank and it has been encashed, the date of encashment would be crucial for considering the limitation period. It is not the case that the D.D. dated 18.6.2008 has been encashed after lapse of many years by altering the date and time. The validity of the D.D. is for 6 months and within such period, D.D. has been encashed by fraudulent alteration. Such payment would be known to the plaintiff. Therefore, from the date of payment, for recovery of the amount, plaintiffs have to file the suit within 3 years. Therefore, suit is clearly barred by 32 OS.No.4900/2013 limitation. Accordingly, this issue is answered in the affirmative.
24. Issue No.7:- For the discussion made on the above issues, suit of the plaintiff is to be dismissed. Accordingly, following order is passed :-
ORDER Suit of the plaintiff is dismissed. In the circumstances of the case, there is no order as to the costs.
Draw decree accordingly.
(Dictated to the judgment writer, transcribed by him, corrected and then pronounced by me in the open court, on this the 12th day of January, 2017).
(Ravindra Hegde), 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 General power of attorney
Ex.P2 Courier Dispatch register
Ex.P3 Demand Draft
Ex.P4 Certified copy of E-mail
33 OS.No.4900/2013
Ex.P5 Certified copy of complaint
Ex.P6 Copy of receipt
Ex.P7 Copy of letter
Ex.P8 Copy of Claim Form
Ex.P9 Letter of Federal bank
Ex.P10 Copy of notice
Ex.P11 Postal receipt
Ex.P12 Postal acknowledgement
List of witnesses examined for defendants:
DW.1 Remya List of documents exhibited for defendants:
Nil XVII Addl. City Civil & Sessions Judge, Bengaluru.