Delhi District Court
State Bank Of India vs Shri Ashok Kumar Koul @ A K Sultan on 30 July, 2018
IN THE COURT OF PRAVEEN KUMAR: ADDITIONAL
DISTRICT JUDGE-05 :NEW DELHI DISTRICT, PATIALA
HOUSE COURTS, NEW DELHI.
(TEN YEAR OLD CASE)
Civil Suit No. 58320/16
In the matter of :
State Bank of India,
Service Branch
11, Sansad Marg,
New Delhi-110001 ..................Plaintiff
Versus
1. Shri Ashok Kumar Koul @ A K Sultan
(since deceased, through his legal heirs)
impleaded vide order dated 28.11.2005.
(i) Smt. Lalita Sultan
W/o Late Sh. Ashok Kumar,
R/o D-35, Pocket-F, GTB Enclave,
Dilshad Garden, Delhi-110095.
(ii) Mrs. Sonika Chawla
Daughter of late Sh. Ashok Kumar
Wife of Sh. Shailender Chawla,
R/o D-155, Pocket-A,
Dilshad Garden, Delhi-110095.
2. The Senior Manager,
The Jammu and Kashmir Bank Limited,
Rohtas Nagar, Shahdara,
Delhi-110032.
Date of institution of the case : 13.10.2003
Date of filing written arguments : 18.07.2018
Date of judgment : 30.07.2018
CS No.58320/16 Page 1 of 27
State Bank of India v. Ashok Kumar Koul through LRs and another
JUDGMENT :
1. The plaintiff has filed the suit against the defendants for recovery of an amount of Rs.25,01,000/- with pendente lite and future interest.
2. The case of the plaintiff, in brief, is that the plaintiff-bank is a body corporate constituted under the State Bank of India Act, 1955 having its central office at Madama Cama Road, Nariman Point, Mumbai. It is a body corporate with perpetual succession. It can sue and be sued in its own name. It is engaged in the business of banking. Sh. R K Jain, has signed and verified the present plaint and has instituted the present suit on behalf of the plaintiff-bank. He is well conversant with the facts of the case on the basis of records of the plaintiff-bank maintained in its regular course of business. Sh. Ashok Kumar Kaul @ A K Sultan (since deceased) previously defendant no.1 (hereinafter referred to as deceased defendant) was an employee of the plaintiff-bank and committed fraud with the bank. The defendant no. 2 is a Scheduled Bank, Government Company and Bankers to the Jammu and Kashmir Government and is duly registered with the Reserve Bank of India. It is the case of the plaintiff-bank that deceased defendant opened an account impersonating himself as A K Koul/Ashok Kumar Koul with defendant no.2-bank and lodged 34 demand drafts for a total amount of Rs.13,40,000/- allegedly drawn on State Bank of India, Service Branch, New Delhi. The CS No.58320/16 Page 2 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another real name of deceased defendant is A K Sultan. Deceased defendant deposited these demand drafts in his account maintained with the defendant no.2 bank. Plaintiff-bank, in the normal course of business, honoured these demand drafts and paid a sum of Rs.13,40,000/- to defendant no.2 in good faith for credit in the clearing account through the clearinghouse.
2.2 It is further the case of the plaintiff that payments of the aforesaid demand drafts were collected by defendant no.2 for deceased defendant. Vide communication dated 13.10.2000 plaintiff-bank came to know that the aforesaid 34 demand drafts were never issued during the ordinary course of business for use by any of the Branch of the State Bank of India. As per plaintiff, the said 34 demand drafts were taken from one booklet of 100 blank drafts illegally removed by deceased defendant who was the Incharge of State Bank of India, NDMC Extension Counter, New Delhi. Deceased defendant had removed the said booklet without entering the same in the security register thereby making the said demand drafts invalid. As per plaintiff, the payment of Rs.13,40,000/- made by the plaintiff-bank on respective dates qua the alleged forged drafts to the defendant no.2 bank was wrongly withdrawn and used by deceased defendant and, thus, the defendants are liable to repay the same to the plaintiff bank with interest @ 16.75 % per annum. It is further stated that the said demand drafts were encashed during the period 31.03.1998 to 01.09.2000.
CS No.58320/16 Page 3 of 27State Bank of India v. Ashok Kumar Koul through LRs and another 2.3 It is further the case of the plaintiff that plaintiff bank also lodged a complaint with Police Station Connaught Place, New Delhi against the deceased defendant and FIR No.45/20001 u/s 409/468/471 r/w S.120B IPC was also registered against him. During investigation all the original drafts were seized by the police from the plaintiff- bank. Accordingly, plaintiff-bank issued legal notices dated 25.6.2003 & 24.09.2003 to the defendants for refund of the amount of the forged demand drafts with interest. Reply to the said notice was sent by defendant no.2 bank. However, no payment was made to the plaintiff bank by any of the defendants. Plaintiff has prayed that suit of the plaintiff be decreed.
3. Defendant no.2 was duly served in the present case on 19.10.2004. However, report regarding service of defendant no.1 returned with the remarks that Sh. Ashok Kumar Kaul @ A K Sultan has expired. Accordingly, LRs of Sh. Ashok Kumar Kaul @ A K Sultan were brought on record vide order dated 28.11.2005 passed by the High Court of Delhi (where the suit was earlier pending).
4. LRs of deceased defendant and defendant no.2 have filed separate written statements in the present case. In the written statement, LRs of the deceased defendant have taken the preliminary objections that suit of the plaintiff is liable to be dismissed against them as deceased defendant had left behind no heritable assets. Secondly, it is averred that suit of the plaintiff is barred by limitation. Thirdly, it is averred that deceased defendant was suspended from his services on 20.10.1998. On merits, it is averred that deceased CS No.58320/16 Page 4 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another defendant did not commit any fraud with the plaintiff bank. It is admitted that deceased defendant opened an account with defendant no.2 bank. It is denied for want of knowledge as to whether the deceased defendant lodged the alleged demand drafts with defendant no.2 or not. Legal heirs of deceased defendant have again taken the defence that they have not inherited any movable or immovable property from deceased defendant, as such, they are not liable to pay any amount to the plaintiff bank. It is further averred that the police case stood abated on the death of the deceased defendant on 7.4.2004. It has been prayed that suit of the plaintiff is liable to be dismissed against them.
5. In its written statement, defendant no.2 has taken several preliminary objections inter alia that plaintiff-bank has not disclosed in its plaint (i) how and in what manner the deceased defendant had impersonated himself while opening the account with the answering defendant; (ii) how and when the alleged demand drafts were paid by the plaintiff bank through collection to the answering defendant to the credit of deceased defendant's account; (iii) how and when the main branch of the plaintiff bank came to know for the first time with regard to the drafts in question being forged etc. It is averred that no cause of action accrued against defendant no.2 as it is only a collecting bank and it has in good faith, without negligence in the due course of business collected the proceeds of the drafts on behalf of its customer- deceased defendant. It is further averred that a credit balance of Rs.3,124/- was found as on 14.10.2000 in the account No. 2623 of the CS No.58320/16 Page 5 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another deceased defendant. The account of the deceased defendant was opened on 01.05.1994. No withdrawals were permitted in the said account w.e.f 18.10.2000 after receipt of the communication from the plaintiff bank in this regard. It is also averred that the suit of the plaintiff is barred by limitation. On merits, it is again averred that defendant no.2 had acted in good faith, without negligence, bonafide, in due course of business, as a collecting agent. Defendant no.2 bank sent the drafts deposited with it to the plaintiff bank for realization and on realization, the proceeds of the same were credited in the account of the deceased defendant who withdrew the same from time to time prior to 18.10.2000. As per defendant no.2, it immediately stopped the operation of the account of the deceased defendant on receipt of communication from the plaintiff bank. Hence, defendant no.2 is not liable to pay any amount to the plaintiff bank. Defendant no.2 has prayed that suit of the plaintiff is liable to be dismissed.
6. Plaintiff has filed separate replications to the written statements filed by LRs of defendant no.1 as well as defendant no.2.
7. On the pleadings of the parties, following issues were framed on 22.03.2006:
i) Whether the plaint has been signed and verified and the suit instituted by duly authorized person ? OPP
ii) Whether the suit is within the prescribed period of limitation ? OPP
iii) Whether defendant no.2 as the collecting banker is protected against any claim on the ground that the proceeds of the forged drafts were collected in good faith without negligence and in due course of CS No.58320/16 Page 6 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another business ? OPD
iv) Whether the plaintiff is entitled to any amount ? If so, the extent thereof. OPP
v) Whether the plaintiff is entitled to interest ? If so, on what amount, at what rate and for which period ? OPP
vi) Relief.
8. Plaintiff in support of its case has examined Sh. Bir Singh, Manager, SBI as PW-1. PW-1 has reiterated the contents of the plaint. He has proved his evidence by way of affidavit as Ex.PW1/A. He has deposed that he has worked with Mr. R K Jain, Chief Manager as has seen him writing and signing and, thus, is able to identify his writing and signatures. PW-1 has stated that deceased defendant opened an account impersonating himself as A.K. Koul/Ashok Kumar Koul/A K Sultan with defendant no.2 bank and lodged 34 demand drafts from time to time aggregating to Rs.13,40,000/-. As per PW-1, deceased defendant was officer in-charge of the SBI, New Delhi Main Branch. Payments of the forged demand drafts was collected by defendant no.2 bank for deceased defendant. PW1 has further stated that the fraud came to the notice of the Service branch for the first time on 13.10.2000 on receipt of a letter issued by New Delhi Main Branch. PW-1 has proved the original letters dated 13.10.2000, 16.10.2000 & 18.10.2000 as Ex.PW1/1 to Ex.PW1/3; Fax Message received on 25.10.2000 as Ex.PW1/4, letter dated 1.11.2000 as Ex.PW1/5; letter dated 18.1.2001 as Ex.PW1/6; FIR as Ex.PW1/7; Seizure Memo as Ex.PW1/8; letter of the Bank to the Investigating CS No.58320/16 Page 7 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another Officer as Ex.PW1/9; true copy of list of documents by which the documents were seized as Ex.PW1/10; notice as Ex.PW1/11; UPC as Ex.PW1/12; postal receipts as Ex.PW1/13 & Ex.PW1/14; AD Card as Ex.PW1/15; reply by defendant no.2 as Ex.PW1/16; notice as Ex.PW1/17; UPC as Ex.PW1/18; postal receipts as Ex.PW1/19 & Ex.PW1/20, AD Cards as Ex.PW1/21 & Ex.PW1/22 and statement of account as Ex.PW1/23.
9. Defendant no.2 has also led evidence and has examined Ms. Jyoti Trisal, Executive Advance Department as DW-1. DW-1 has reiterated the contents of the written statement. She has proved his evidence by way of affidavit as Ex.PW1/A. DW-2 has identified the signatures of Sh. K S Samyal on the written statement. She has proved the account opening card of the deceased defendant as Ex.DW1/1 and statement of account of the account of deceased defendant as Ex.DW1/2. As per DW1, defendant no.2 acted bona fide, in good faith, without negligence and in due course of its business. Defendant no.2 has collected the proceeds of the demand drafts on behalf of its customer i.e deceased defendant. DW-1 has deposed that defendant no.2 did not permit the operation of the said account w.e.f. 18.10.2000 after it received a communication from the plaintiff bank in this regard.
10. Ms. Jaya Tomar, Ld. Counsel for the plaintiff has filed written submissions in the present case. She has also relied upon judgments - State Bank of India v. Punjab National Bank, 57 (1995) DLT 55 and Indian Overseas Bank v. Hari Shankar Sharma, Appeal CS No.58320/16 Page 8 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another No.42/2003, decided by Madhya Pradesh High Court on 29.11.2016. LRs of the deceased defendant as well as defendant no.2 bank have not filed any written submissions despite opportunity. None of the parties advanced oral arguments.
11. I have gone through the file. My issue-wise finding is as hereunder:
Issue No.1 :
12. The onus of this issue is on the plaintiff. In order to prove this issue, plaintiff-bank has examined PW-1 Sh. Bir Singh, Manager, State Bank of India, Service Branch, 11, Sansad Marg, New Delhi- 110001. PW-1 has deposed that Sh. R K Jain who was posted as Chief Manager and Principal Officer at the relevant time was authorized to sign and verify the present suit as per the provisions contained in the Regulations 76 and 77 of State Bank of India General Regulations, 1955 framed by Reserve Bank of India under the powers conferred on it under Section 50 of State Bank of India Act, 1955 read with Notification published in the Gazettee of India on 02.05.1987. PW-1 has identified the signatures of Sh. R K Jain on the plaint and Vakalatnama.
13. PW-1 has only stated about the provisions by which a person can be authorized to sign, verify the pleadings and institute a suit on behalf of the plaintiff bank. However, he has not brought on record and proved even a single document to show that Sh. R K Jain, Chief Manager was authorized to sign, verify and institute the present case on behalf of the plaintiff bank. No authority letter has been CS No.58320/16 Page 9 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another placed on record to show that Sh. R K Jain was authorized to sign, verify the plaint and institute the suit against the defendants. PW-1 has identified the signatures of Sh. R K Jain, however, it becomes insignificant in view of the fact that the authority of Sh. R K Jain himself to institute the present case is not proved. During his cross- examination, PW-1 has stated that he has never seen Mr. R K Jain writing and signing and he (PW-1) has never worked with him.
14. In view of the above stated position, it would have been very easy for this Court to hold that the suit has not been instituted by a authorized person. But this Court is not oblivious of the law that court can take judicial notice of the Acts and Notifications. This Court is also aware of the judgment - United Bank of India Vs. Naresh Kumar (1996) 6 SCC 660 wherein the Apex Court has taken a view that in cases where the suits are instituted or defended on behalf of the petitioner corporation, the public interest should not be permitted to be defeated on a mere technicality. In this judgment, Apex court has further held that there is sufficient power vested in the courts under the Code of Civil Procedure to ensure that injustice is not done to any party who has a just cause. The said observations of the Apex Court came in the background of the facts of that case as there the trial court on the merits of the case found that the money was payable by the respondents therein but the suit of the bank was dismissed on the said technical ground of the plaint not being duly signed and verified by the competent person. Under Order 6 Rule 14 of the CPC a pleading CS No.58320/16 Page 10 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another is required to be signed by the party and its pleader, if any. As a company is a juristic entity it is obvious that some person has to sign the pleadings on behalf of the company. Order 29 Rule 1 of the CPC, therefore, provides that in a suit by or against a corporation the secretary or any Director or other Principal Officer of the corporation who is able to depose to the facts of the case might sign and verify on behalf of the company. Reading Order 6 Rule 14 together with Order 29 Rule 1 of the CPC it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto an de hors Order 29 Rule 1 of the CPC, as a company is a juristic entity, it can duly authorise any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient compliance with the provisions of Order 6 Rule 14 of the CPC. A person may be expressly authorised to sign the pleadings on behalf of the company, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour of any individual. In absence thereof and in cases where pleadings have been signed by one of its officers, a Corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The Court can. on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the CS No.58320/16 Page 11 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another trial come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer.
15. Thus, relying upon the judgment - Naresh Kumar (supra) and taking into consideration the record viz replications, miscellaneous applications etc available in the judicial file filed on behalf of the plaintiff bank, this Court is of the opinion that the plaintiff-bank has ratified the act of Sh. R K Jain, Chief Manager to sign, verify and institute the present suit. Hence, this issue is decided in favour of the plaintiff and against the defendants. Issue No.2 :
16. The onus of this issue is on the plaintiff. PW-1 has deposed that the fraud committed by the deceased defendant came to the notice of the Service branch for the first time on 13.10.2000 on receipt of a letter issued by New Delhi Main Branch. PW-1 has proved the original letter dated 13.10.2000 as Ex.PW1/1 in this regard.
During cross-examination conducted on behalf of defendant no.2, PW-1 has admitted that FIR dated 30.1.2001 (Ex.PW1/7) against deceased defendant was registered on the basis of letter dated 9.8.2000 issued by the plaintiff-bank. PW-1 has also admitted that deceased defendant was dismissed from service on 25.8.2000 after filing of the complaint to the police against him. PW-1 has further admitted that the plaintiff bank had knowledge about the fraud with regard to the drafts - Ex.PW1/D1 to Ex.PW1/D34 prior to the filing of the FIR. PW-1 has further admitted that the amount of the draft dated 24.03.1997 (Ex.PW1/D1) was paid on 31.3.1997 while CS No.58320/16 Page 12 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another payment of the drafts Ex.PW1/D2 & Ex.PW1/D3 was made on 21.10.1997. PW-1 has stated about the dates of payments by the plaintiff bank of all the 34 drafts obtained by deceased defendant unauthorizedly. As per PW1, the payment of the last draft- Ex.PW1/D34 was made on 1.9.2000. PW-1 has further admitted that inquiry must have been conducted by the plaintiff bank before dismissal of deceased defendant. As per PW-1, bank came to know about the fraud during the course of the inquiry.
17. In para 9 of the plaint, it is stated that FIR No.45/2001 PS Connaught Place, New Delhi u/Ss. 409/468/471 IPC was registered against the deceased defendant on 30.01.2001 on the basis of a complaint made by the plaintiff-bank. The relevant para of the FIR (Ex.PW1/7) is reproduced hereunder :
"The Dy. Commissioner of Police, New Delhi, District Parliament Street, New Delhi, State Bank of India, Main branch, Post Box No.430,11, Sansad Marg, New Delhi-110001, Telegram THISTLE dated 17.10.2000, Dear Sir, Lodging of FIR. Kindly refer to Delhi Police Crime Branch Letter No.C-954 dated 17.08.2000, forwarding therewith our letter No.NDMB/INST/2000/5135 dated 09.08.2000 lodging an FIR against Shri A.K. Sultan, Office Junior Management Grade Scale-I of the Bank, since dismissed on 25.08.2000 advising the discovery of misappropriation of funds deposited by Bank's customers in their Saving Bank Accounts and/or fraudulent withdrawals therefrom to the tune of Rs.3,46,102/-.
(Emphasis supplied)
18. It is clear from the abovesaid para of the FIR (Ex.PW1/7) proved by PW-1 that relevant date of discovery of the fraud committed by the deceased defendant was not 13.10.2000 as claimed in the plaint. Had it been so deceased defendant would not have been suspended on 20.10.1998 and, consequently, terminated on 25.8.2000.
CS No.58320/16 Page 13 of 27State Bank of India v. Ashok Kumar Koul through LRs and another It is crystal clear from the abovesaid para that the bank had made the complaint to the police on 9.8.2000 with regard to the alleged fraud on the basis of which the FIR was registered on 30.1.2001. Moreover, during his cross-examination, PW-1 has also admitted the fact of FIR (Ex.PW1/7) being registered on the basis of the letter dated 9.8.2000 issued by the plaintiff bank. The letter dated 03.10.2000 begins with the words "Enquiries reveal that draft was fraudulently issued by Shri A.K. Sultan". The words "Enquiries reveal" itself shows that the fraud committed by the deceased defendant had already come to the knowledge of the plaintiff-bank prior to 13.10.2000.
19. S. 17 of the Limitation Act, 1963 provides that where, in the case of any suit or application for which a period of limitation is prescribed by this Act, the suit or application is based upon the fraud of the defendant or respondent or his agent, the period of limitation shall not begin to run until plaintiff has discovered the fraud or the mistake or could, with reasonable diligence, have discovered it.
20. Though not referred to or relied upon, in judgment - LIC Vs. Raghunath Prasad, 44(1991) DLT 521, it has been observed that Legislatures in their wisdom have used and incorporated the words 'with reasonable diligence' in the newly framed S.17 of Limitation Act. Thus, theory has given a bigger scope to the opposite party to contend that the date of the knowledge of the mistake or discovery pleaded is not the correct date of such discovery of a mistake or fraud. It further gives a handle in the hands of the opposite party to establish that it was possible for the plaintiff to have discovered the mistake had CS No.58320/16 Page 14 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another he been reasonably diligent. Thus, plaintiff is not permitted to plead mechanically any date of the alleged discovery of the mistake whichever he deems fit and proper in the circumstances of a particular case.
21. Thus, from the above discussion it is clear that the plaintiff-bank had knowledge about the alleged fraud on 9.8.2000 and it has been manipulated in the plaint that plaintiff bank came to know about the fraud only on 13.10.2000 after it received the communication in this regard. It appears that enquiry report of the deceased defendant has deliberately not been filed with the plaint nor the same has been proved by PW-1 in order to extend the period of limitation. Complaint to the police against the deceased defendant was made on 9.8.2000. Deceased defendant was suspended on 20.10.98 and terminated on 25.8.2000 meaning thereby, the fraud allegedly committed by the deceased defendant had come to the knowledge of the plaintiff bank much prior to 13.10.2000. If the one branch of the bank delays in communicating the fact of fraud to the other branch, it will not extend the period of limitation at all.
22. Though not referred to or relied upon, in judgment - Ashok Kumar Khurana Vs. Steelman Industries, AIR 2000 Delhi 336 it was held as under :
"Mere reading of S.3 of the Act shows that it is mandatory and absolute in nature. It enjoins upon the court to dismiss any suit instituted, appeal preferred or application made after the prescribed period of limitation, although limitation has not been set up as a defence. Courts have no discretion or inherent powers to condone the delay if the suit is filed beyond the prescribed period of limitation, rather a duty is caste on the CS No.58320/16 Page 15 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another court to dismiss the suit, appeal or application, if the same is barred by limitation unless matter is covered by S.4 to 24 of the Act."
23. Thus, in view of the abovesaid facts and the law laid down by the High Court of Delhi, as the present suit has been filed on 13.10.2003 ie after the period of limitation of 3 years as provided under Article 113 of the Limitation Act, this Court is of the view that the suit filed by the plaintiff is barred by limitation. Hence, this issue is decided against the plaintiff and in favour of the defendants. Issue No.3
24. The onus of this issue is on the defendant no.2 bank. Plaintiff-bank has taken the plea that there is a general practice in the banking industry for a payee bank to make payment against a draft to the collecting bank in good faith before the receipt of the advice from its concerned branch. It is averred that the payments against the drafts in question were made by the plaintiff in good faith under a mistaken belief of the said drafts to be genuine. However, later on, it was found that the said drafts were forged one.
25. In the written statement, defendant no.2 has taken the defence of the protection u/S 131 and 131A of the Negotiable Instrument Act. Though not referred to or relied upon, the law with respect to the liability of the collecting banker, considering the provisions of Sections 131 and 131A of the Negotiable Instrument Act, 1881 is contained in the judgment of the Supreme Court reported as Kerala State Cooperative Marketing Federation vs. State, RFA CS No.58320/16 Page 16 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another No.490/2004 & RFA No.491 /2004. Relevant para of the judgment where the law has been stated is para 11 and the same reads as under:
"11. The principles governing the liability of a collecting banker have also been extracted in the impugned judgment. They read as follows:
"(1) As a general rule the collecting banker shall be exposed to his usual liability under common law for conversion or for money had and received, as against the „true owner‟ of a cheque or a draft, in the event the customer from who he collects the cheque or draft has no title or a defective title.
(2) The banker, however, may claim protection from such normal liability provided he fulfils strictly the conditions laid down in Section 131A of the Act and one of those conditions is that he must have received the payment in good faith and without negligence.
(3) It is the banker seeking protection who has on his shoulders the onus of proving that he acted in good faith and without negligence.
(4)The standard of care to be exercised by the collecting banker to escape the charge of negligence depends upon the general practice of banker which may go on changing from time to time with the enormous, spread of banking activities and cases decided a few decades ago may not probably offer an unfailing guidance in determining the question about negligence today. (5) Negligence is a question of fact and what is relevant in determining the liability of a collecting banker is not his negligence in opening the account of the customerbut negligence in the collection of the relevant cheque unless, of course, the opening of the account and depositing of the cheque in question of therein from part and parcel one scheme as where the account is opened with the cheque in question or deposited therein so soon after the opening of the account as to lead to an inference that the depositing the cheque and opening the account are interconnected moves in a integrated plan.
(6) Negligence in opening the account such as failure to fulfill the procedure for opening an account which is prescribed by the bank itself or opening an account of, an unknown person or non existing person or with dubious introduction may lead to a cogent, though not conclusive, proof of negligence particularly if the cheque in question has been deposited in the account soon CS No.58320/16 Page 17 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another after the opening thereof.
(7) The standard of care expected from a banker in collecting the cheque does not require him to subject the cheque to a minute and microscopic examination but disregarding the circumstances about the cheque which on the face of it give rise to a suspicion may amount to negligence on the part of the collecting banker. (8) The question of good faith and negligence is to be judged from the stand point of the true owner towards whom the banker owes no contractual duty but the statutory duty which is created by this section and it is a price which the banker pays for seeking protection, under the statute, from the otherwise larger liability he would be exposed to under common law.
(9) Allegation of contributory negligence against the paying banker clause provide no defence for collecting banker who has not collected the amount in good faith and without negligence."
26. A reference to the aforesaid principles culled out by the Supreme Court in the judgment of Kerala State Cooperative Marketing Federation (supra) shows that there is never any mandate to pay under a forged cheque or forged bank draft and if payment is collected under such a bank draft by a bank, such bank is liable for conversion and, therefore, is bound to make payment of the amount of the forged cheque/bank draft. The collecting banker can only avoid its liability provided it strictly fulfills the conditions laid down under Sections 131 and 131A of the Negotiable Instruments Act, 1881 i.e. it must show that the payment has been received by it in good faith and without negligence. Supreme Court has further observed that though negligence is towards collecting of the instrument, however, the opening of the account is closely related to the deposit of the instrument and encashment thereof will give indication of the lack of good faith on behalf of the collecting banker. Supreme Court has also CS No.58320/16 Page 18 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another observed that the duties of a bank has changed over a period of time and the duty of a collecting banker has to be seen from today's standpoint of the requisite facts for opening of account and collection of the instrument inasmuch as there is a considerable development with respect to the banking practices. Finally and most importantly, Supreme Court has held that allegation of contributory negligence against the paying banker (and which is the respondent/plaintiff bank in this case) does not provide a defence for a collecting banker who has not collected an instrument in good faith and without negligence.
27. Thus, taking into consideration the above principles laid down by the Apex court, in the case in hand, the facts are that there was forgery of the demand drafts, the fact that it was presented to plaintiffbank by defendant no.2bank as collecting agent, the fact that payment was made to defendant no.2 for its principal, are fully established by statements of the witnesses. The only question is whether the defendant no.2, as collecting bank is protected by S.131 & S.131 A of the Negotiable Instrument Act or not in the facts and circumstances of the present case.
28. S.131 of the Negotiable Instrument Act, 1881 provides that 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 on of having received such payment. S.131A of the N I Act further provides that CS No.58320/16 Page 19 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another the provisions of this chapter shall apply to any draft, as defined in section 85A, as if the draft were a cheque.
29. The onus to have the protection of these provisions lies on the defendant no.2 In order to prove this issue, defendant has examined Ms. Jyoti Trisal as DW1. As per DW1, defendant no.2 bank opened the account bearing no.2623 in the name of Lalita Kumari and Ashok Kumar Kaul on 01.05.1994. The deposit of the forged drafts commenced in the said account in March 1997 ie after about more 3 years. The first payment qua the forged draft was made by the plaintiff bank on 31.3.1997. The document - Ex. DW1/1 shows that the account was opened in the joint name of Lalita Kumari and Ashok Kumar Koul. The card bears the signature of Lalita Kumari and Ashok Kumar Koul. Under the column 'parentage' it is mentioned as "D/o Sh. Triloki Nath Pandita". In the address column, it is mentioned as "21-A, S.G. Pocket, Dilshad Garden. The card is bearing the signature of the introducer. During the course of examination of DW-1, it has come on record that the account was introduced by one Ms. Rita Raina, one of the employee of the defendant no.2 bank. By looking at the signature, the name of the introducer is not ascertainable. Neither there is name nor address of the introducer nor any account number of the introducer is mentioned on Ex.DW1/1. This document also refers with tick mark and encircled portion that the account was meant to be operated 'single & Either or Survivor'. Defendant no.2 did not examine the introducer Ms. Rita Raina in its defence. Defendant no.2 bank has not brought on record the CS No.58320/16 Page 20 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another photocopies of the identity proofs of the account holders. All these shortcomings indicate that the defendant no.2-bank had not followed the guidelines of the Reserve Bank of India while opening the aforesaid account.
30. At the cost of repetition, principles (v) & (vi) of the Kerala (supra) provides that negligence is a question of fact and what is relevant in determining the liability of a collecting banker is not its negligence in opening the account of the customer but negligence in the collection of the relevant cheque unless, of course, the opening of the account and depositing of the cheque in question of therein from part and parcel one scheme as where the account is opened with the cheque in question or deposited therein so soon after the opening of the account as to lead to an inference that the depositing the cheque and opening the account are interconnected moves in a integrated plan.
In the present case, there may be negligence in the opening of the account of the deceased defendant but keeping in view of the fact that there is a gap of more than 3 years in between the opening of the account and commencement of the deposit of the first forged drafts out of 34, in the said account, it does not form an integrated plan or part and parcel of one transaction.
31. Now coming to the second aspect, keeping in view the principle (vii) of the abovesaid judgment which provides that the standard of care expected from a banker in collecting the cheque does CS No.58320/16 Page 21 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another not require him to subject the cheque to a minute and microscopic examination but disregarding the circumstances about the cheque which on the face of it give rise to a suspicion may amount to negligence on the part of the collecting banker. In the case in hand, undoubtedly the demand drafts (Ex.DW1/1 to Ex.DW1/34) were genuine. The same were unauthorizedly removed by the deceased defendant without making entry of the same in the concerned register. A perusal of the statement of account furnished on behalf of plaintiff bank shows that it is not that these 34 demand drafts were deposited simultaneously or in a short period of time but these drafts are scatted over a period of more than 3 ½ years from the date of the deposit of the first draft and the last 34th draft. A perusal of the statement of accountEx.DW1/2 shows that even prior to the period of 3 years in between the period of opening of the account and deposit of the first forged draft, the account was regularly operated and there are a lot of transactions in the said account. It is also clear from the Ex.DW1/2 that the full amount of the forged drafts was not simultaneously and immediately withdrawn from the said account. The 34 DDs were deposited in the said account w.e.f 24.3.1997 28.8.2000. This Court is also aware of the fact that during this period, a negotiable instrument was valid for a period of 6 months from the date of instrument as w.e.f 1.4.2012 the validity of a negotiable instrument was curtailed to 3 months. A perusal of the demand drafts shows that drafts contained the figure of Rs.20,000/ Rs.25,000/,Rs.30,000/, Rs.35,000/, CS No.58320/16 Page 22 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another Rs.40,000/ and maximum Rs.45,000/. The details of the payment of all the drafts as given in the FIR (Ex.PW1/7) also shows that there is a gap of several days in the deposit of draft in the defendant no.2 bank and the date mentioned on the bank draft itself. A perusal of the certified copies of the drafts also shows that there is no cutting, modification, alteration in the name, amount or date, month or year on the said drafts. DW1 has also furnished statement of account Ex.DW1/2 and the same bears the seal of the bank on each page and the Certificate under the Banker's Book Evidence Act is appended by the concerned bank officer on its last page. It has come on record that in the initial period deceased defendant was authorized to sign and issue the drafts in question and a perusal of the drafts shows that it bears the signatures of A.K Sultanthe deceased defendant. There was no occasion for the defendant no.2 bank to suspect the deposit of the drafts in the account. A bank operates a large number of accounts every day. It cannot subject a cheque or a draft to a minute and microscopic examination every time which in the present case, is even not apparent on the face of it. Defendant no.2 bank immediately stopped the operation of the account after receipt of the communication from the plaintiff bank.
32. This Court cannot restrain itself to state that had the plaintiff bank been vigilant even after the making of payment of initial few drafts to the collecting bank, it could have easily detected the fraud as the deceased defendant was suspended on 20.10.1998 but CS No.58320/16 Page 23 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another even after his suspension, the drafts bearing his signatures were continuously accepted and payments were made. During his cross examination, PW1 has stated that deceased defendant was having authority to issue and pay the drafts. The specimen signature book of the authorized officers is also available in every branch of the bank including that of deceased defendant no.1. As per PW1, drafts Ex.PW1/D1 to Ex.PW1/D34 are the genuine draft instruments of the plaintiff bank. PW1 has further stated that after verifying the genuineness of the instrument, the payment is released by the drawer bank to the collecting bank through RBI. PW1 has further that defendant no.2 bank collected the proceeds of the draft Ex.PW1/D1 to Ex.PW1/D34 in the due course of business. It is a common knowledge that audits are regularly conducted in the banks from time to time. It is the negligence of the plaintiff-bank who not only once but 34 times for a period of roughly about 3 years made the payment of the said drafts. Plaintiff bank had all the means and material with it to find out if signatures on the drafts were genuine or not.
33. In judgment - State Bank of India (supra) there was a single transaction of a forged cheque which was stolen and the signatures of the Land Acquisition Collector were forged. In said case the account was opened on 24.12.1964 and on 26.12.1964 the cheque bearing forged signature of Rs.80,605/- was deposited. In para 47 of the said judgment it is stated, "...The opening of account, the deposit and the withdrawals, thus appear to be so connected in terms of the CS No.58320/16 Page 24 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another timings that there is necessary inference that they are part of some transaction of fraud."
34. In judgment - Indian Overseas Bank (supra) there were two demand drafts which were stolen from the Mai Branch of District- Mathura. It was held that it was incumbent upon the payee bank to perform due caution. The plea of S.72 of the Indian Contract Act was also held to be of no help to the appellant-Indian Overseas Bank. It was observed that the amount has not been paid under coercion, nor the money is paid by mistake. Demand drafts were sent for collection in due course of business and, accordingly, collecting bank was exonerated. In the said case, the appeal was dismissed.
35. In view of the above discussion it is clear that the facts of the abovesaid judgments are different from the present case. Hence, I am of the view that the judgments - State Bank of India (supra) and Indian Overseas Bank (supra) relied upon by counsel for plaintiff are not applicable to the facts of the present case.
36. In these circumstances, I am of the opinion that the defendant no.2 bank has, in good faith and without negligence, received payment for the abovesaid account, and, thus, is protected by S.131 and S.131A of the Negotiable Instrument Act. Accordingly, issue no.3 is decided in favour of the defendant no.2 and against the plaintiff.
Issues No.4 & 5:
37. As these issues are interlinked, they are being decided together. The onus of these issues is on the plaintiff. PW-1 has CS No.58320/16 Page 25 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another deposed that deceased defendant had removed the blank demand draft booklet without entering the same in the register. PW-1 has further deposed that deceased defendant opened an account impersonating himself as A.K. Koul/Ashok Kumar Koul/A.K. Sultan with defendant no.2 and lodged demand drafts from time to time, aggregating to Rs.13,40,000/-. PW1 has proved the seizure memo-Ex.PW1/8 vide which the 34 demand drafts were seized by the police. PW-1 has also proved statement of account showing the details of the 34 demand drafts. The certified copies of 34 demand drafts as well as its copies - Ex.PW1/D1 to Ex.PW1/D34 are on record. After appreciation of the entire evidence of PW-1 it is clear that deceased defendant had fraudulently withdrew the demand draft booklet from the service branch without entering the same in the concerned register and also that he had used 34 drafts, aggregating to a total amount of Rs.13,40,000/-, by depositing the same from time to time in his account maintained with defendant no.2 bank. However, there is nothing on record to suggest the rate of interest prevalent and applicable to Temporary Clean Overdraft. During his cross- examination, PW-1 has also stated that, 'The interest has been claimed at the rate of 16.75% p.a. as per the prevailing rate of clean over draft. The plaintiff bank has not filed any document in this regard.' LRs of defendant no.1 have not cross-examined the PW-1 nor they have led any evidence to show that they did not inherit any movable or immovable property from the deceased defendant. As I have already decided issue no.3 in favour of the defendant no.2 and against the CS No.58320/16 Page 26 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another plaintiff, hence, this issue is decided to the extent that plaintiff-bank is entitled to recover an amount of Rs.13,40,000/- along with interest @ 9% per annum from the LRs of deceased defendant from the date of filing of the suit till its realization.
Relief.
38. As I have decided issues no.2 against the plaintiff and in favour of the defendants and issue no.3 against the plaintiff and in favour of the defendant no.2, the suit of the plaintiff is liable to be dismissed and is accordingly dismissed. No order as to costs. Decree sheet be drawn accordingly. File be consigned to Record Room after due compliance.
Digitally signed by PRAVEEN PRAVEEN KUMAR
KUMAR Date: 2018.07.30
20:11:16 +0530
Announced in open court (PRAVEEN KUMAR)
today ie on 30.07.2018. Additional District Judge-05, New Delhi District Patiala House Courts, New Delhi. (S) CS No.58320/16 Page 27 of 27 State Bank of India v. Ashok Kumar Koul through LRs and another