Madras High Court
Syndicate Bank vs Indian Bank And Ors. on 9 March, 2000
Equivalent citations: AIR2000MAD363
JUDGMENT S. Thangaraj, J.
1. The unsuccessful second defendant/appellant in A.S. No. 73 of 1985 on the file of the Subordinate Judge, Madurai has filed this Second Appeal challenging the judgment and decreed passed by the said Court.
2. The first respondent/plaintiff field a suit against the defendants 1 to 3 for recovery of a sum of Rs. 5,790/- with future interest at 18 per cent per annum on the sum of Rs. 4,000/-. The 3rd defendant remained ex parte. The trial Court passed a judgment and decree as prayed for with costs against 2nd and 3rd defendants and dismissed the suit against the first defendant. The second defendant filed A.S. No. 73 of 1985 and the first defendant filed a Cross Appeal. The first appellate Court dismissed the appeal filed by the second defendant and allowed the cross appeal filed by the first defendant. The second defendant has filed the second appeal challenging the judgment and decree of the first appellate Court.
3. The substantial questions of law framed in the Second Appeal are -
"(1) Whether, the appellant is not protected under Section 131 of the Negotiable Instruments Act ?
(2) When the entire negligence and absolute liability is on the 1st respondent/plaintiff who passed a forged cheque of its own customer, can the appellant (collecting banker) be made liable?"
4. The 3rd defendant one Natarajan opened a S.B. account on 7-1-1978 in the appellant bank by depositing a cash of Rs. 10/-. Within 5 days on 12-1-1978, he deposited an order form for collection of Rs. 4,000/- purported to have been issued by the first defendant A. Padma who was having S. B. A/c No. 1517 in the Indian Bank, Town Hall Road Branch, Madurai, the plaintiff/first respondent herein. Then Ex. A-2 order form was presented in the appellant Syndicate Bank, Madurai who in turn sent the same to the first respondent-bank for collection of the amount, the first respondent-bank honoured Ex. A-2 and paid a sum of Rs. 4,000/- by making deduction from the account of the first defendant. The appellant bank after collection brought a sum of Rs. 4,000/- into the account of the 3rd defendant who withdrew a sum of Rs. 3,800/- on 16-1-1978. When the fact was made known to the first defendant, she wrote a letter objecting deduction of a sum of Rs. 4,000/- from her account as she has not issued Ex. A-2. Immediately, the first respondent bank complained to the Inspector of Police, Crime Branch, Madurai, the copy of which is Ex. A-5. In the meantime, the first respondent bank issued a notice through its lawyer to the appellant bank bringing out the facts. The appellant bank issued a reply notice Ex. A-9 stating that it was done in the usual course of business and there was no negligence on its part. As no action was taken by the police, the first respondent bank filed the present suit.
5. The appellant who is the collecting bank has claimed protection under Section 131 of the Negotiable Instruments Act and further contended that there was no negligence on their part and on the contrary, it was the first respondent/plaintiff who was negligent in passing the forged cheque of its own customer and the liability is entirely on them only.
6. When we consider the negligence on the part of the appellant or the first respondent we have to see certain facts. The third respondent Natarajan opened the S. B. account with the appellant bank on 7-1-1978 by depositing a cash of Rs. 10/- only. Ex. A-2 is dated 6-1-1978 i.e., one day earlier to the opening of the account by the 3rd respondent in the bank of the appellant. The fact remains that he has deposited the minimum amount of Rs. 10/- to open the said account. On 12-1-1978 within 5 days, he has deposited Ex. A-2 for collection and it is not a cheque as contended by the appellant bank. A perusal of Ex. A-2 shows that it is only an order form commonly known as withdrawal slip, it has got the necessary characteristic features for a bill of exchange and definitely it is not a cheque. When it was produced within 5 days and especially when Ex. A-2 was dated 6-1-1978 a day prior to the opening of the account, the appellant bank without taking Into consideration of those facts sent Ex. A-2 for collection to the first respondent bank. The opening of an account is entirely a different transaction and the negligence In collection on the part of the collecting bank is a fact which has to be considered separately. In certain circumstances the opening of an account and the negligence of the collecting bank in collecting the cheque go together. The Court, below have considered the same to arrive at the decision.
7. In Commissioner of Taxation v. English, Scoettish and Australian Bank, 1920 AC 683, it was held that a negligence in collection is not a question of negligence in opening an account, though the circumstances connected with the opening of an account may shed light on the question whether there was negligence in collecting a cheque.
8. A Division Bench of this Court in Bharat Bank Ltd. v. Kishinchand Chellaram, , held that if the opening of the account and the deposit of cheque are really part of the same transaction or if the cheque was put into the account so shortly after the opening of the account, it may lead to an inference that the collection was part of the opening of the account, then the negligence on the part of the bank in the opening of the account must be treated as negligence in the matter of realisation of the cheques as well.
9. This view was further strengthened by a Division Bench decision of this Court in Indian Bank v. Catholic Syrian Bank Ltd., . Therefore, if the opening of the account may lead to an inference that the collection was part of the opening of the account, in such circumstances, the negligence, if any, on the part of the collecting bank In opening of the account can be also considered.
10. As already stated, Ex. A-2 was dated one day earlier to the opening of the account and the 3rd respondent has opened the account by depositing Rs. 10/- only and he has presented Ex. A-2 order form on the fifth day thereafter. He has not gone to the plaintiffs bank for collection of Ex. A-2 and on the contrary, when we see the circumstance, it will lead to the inference that he has opened S. B. account only for the purpose of encashing Ex. A-2 by making use of the appellant-bank for the purpose of collection. The appellant hank has examined D.W. 2 Assistant Manager to speak about the facts of this case and she has admitted that she never worked in the S.B. Account Section in the bank. According to the appellant, one Mr. Ramasubramaniam was the Assistant Manager and K. Thangavelu was the clerk of the S. B. Account Section of the appellant-bank during the relevant time. Admittedly, both of them were in service of the respondent bank and for reasons best known to the appellant, they were not examined in the trial Court. As held in the decisions cited supra, it is a case where the circumstances connected with the opening of the account by 3rd respondent would throw sufficient light on the negligence of the appellant-bank.
11. The appellant-bank has tried to shift the responsibility on the first respondent-bank saying that Ex. A-2 was given by the first defendant Padma who had S. B. Account No. 1517 In their bank and they were negligent in passing Ex. A-2 without verifying the facts. Learned counsel for the first respondent has argued that since Ex. A-2 was presented for collection by the appellant bank which is also having its office at Madurai, they have honoured Ex. A-2 after sufficient scrutiny and paid the amount to the appellant bank who in turn credited the same in the S. B. Account of the 3rd respondent Natarajan. In Indian Overseas Bank v. Industrial Chain Concern, , their Lordships have considered such circumstances and held-
"Except when circumstances of a case so justifies, in making inquiries the banker's attitude may be solicitous and not defective."
12. When we consider the facts and circumstances of the case, it is clear that the first respondent bank by believing Ex. A-2 sent by the appellant bank for collection paid the amount to them after observing usual procedure and in such circumstances, it cannot be said that they acted negligently and the appellant cannot fasten any liability on them alleging negligence on their part.
13. A Division Bench of this Court in United Commercial Bank Ltd. v. Reliable Hire Purchase Company (P.) Ltd., 1976 (2) Mad LJ 286 at 289 held-
"An examination of these and other cases like Bapulal Premchand v. Nath Bank Ltd., AIR 1946 Bom 482, shows that the question of good faith and negligence is a question of fact in the light of the material in each case. In the instant case, we are of opinion, in the light of the circumstances mentioned, that the obligation on the part of the second defendant to clarify itself was not fulfilled. In the circumstances, therefore, we are unable to hold that the second defendant has shown that it acted in good faith and without negligence in making the collection on the basis of the guarantee of the forged endorsements."
In the instant case also, the said decision is applicable to the first respondent Indian Bank, as they have acted in good faith and without negligence.
14. This Court in United Bank of India v. Central Scientific Supplies Co. Ltd., AIR 1999 Mad 1 has held that (at page 7)-
The finding as regards the negligence is a pure question of fact and in the second appeal, it is not possible to reappreciate the evidence."
15. When the Courts below have come to a concurrent findings regarding the question of negligence, which is the question of fact, this Court in the second appeal cannot reappreciate the evidence and come to its own conclusion. Their Lordships of the Supreme Court in Kondiba Dagadu Kadam v. Savitribai Sopan Gujar, have held (at page 2215)-
"The High Court cannot substitute its opinion for the opinion of the first appellate Court unless it is found that the conclusions drawn by the lower appellate Court were erroneous being contrary to the mandatory provisions of law applicable or its settled position on the basis of pronouncements made by the Apex Court, or was based upon inadmissible evidence or arrived at without evidence."
In Karnataka Board of Wakf v. Anjman-E-Ismail, Madras-Un-Niswan, , their Lordships of the Supreme Court have held-
"High Court's reversal of the concurrent findings of the trial and appellate Courts and substituting its subjective satisfaction in the place of" that of the lower Courts was wholly unwarranted."
16. The appellant has claimed protection under Section 131 of the Negotiable Instruments Act. According to the appellant; they have acted in good faith and, therefore, they are not liable as contemplated under the said section.
17. In Woodbriar Estate v. Catholic Bank, , it was held that the onus of proving good faith and absence of negligence as contemplated under Section 131 of the Negotiable Instruments Act is on the banker claiming protection under the said section and it is always a question of fact to be proved.
18. The same view was reiterated in Central Bank of India v. V. Gopinathan, . As we have already seen, the appellant-bank has not let in any evidence absolving them of negligence and they had acted in good faith. As already stated, they have not examined the concerned employees of their bank by name Ramasubramaniam and Thangavelu who were in service in the appellant-bank at the time when witnesses were examined in the trial Court. They have no explanation to offer regarding the date of Ex. A-2 which was one day earlier to the opening of the S.B. Account by the 3rd respondent-Natarajan and especially when the circumstances show that the said account was opened by depositing Rs. 10/- for the purpose of encashing Ex. A-2 through the appellant-bank. Ex. B-5 shows that the 3rd respondent has not transacted with the appellant-bank with such amount. The fact remains that he has withdrawn Rs. 3,800/- on 16-1-1978 out of Rs. 4,000/- collected by the appellant-bank.
19. Learned counsel for the appellant has relied on a decision of the Supreme Court in (stated supra) wherein their Lordships have held-
"To enable a Bank to avail the immunity under Section 131 as a collecting banker he has to bring himself within the conditions formulated by the section. Otherwise he is left of his common law liability for conversion or for money had and received in the case of the person from whom he took the cheques having no title or defective title. The conditions are (a) that the banker should act in good faith and without negligence in receiving a payment, that is, in the process of collection, (b) that the banker should receive payment for a customer on behalf of him and thus acting as a mere agent in collection of the cheque and not as an account holder, (c) that the person for whom the banker acts must be his cstomer and (d) that the cheque should be one crossed generally or especially to himself. The receipt of payment contemplated by the section is one from the drawee Bank. It is settled law that the onus of bringing himself within the section rests on the banker."
20. When we look into the facts and circumstances of the case, most of the conditions are against the appellant-bank and this decision cannot be taken in favour of the appellant.
21. Learned counsel for the appellant has argued that Ex. A-2 is defective and it is not at all a cheque. In support of his contention, he has relied on a decision in Bihta Coop. Development and Cane Marketing Union Ltd. v. Bank of Bihar, wherein it was held that a forged cheque is not a cheque at all. Learned counsel has pointed out the derision in also in support of his contention.
22. A perusal of Ex. A-2 shows that it is not a cheque as printed it is only an order form for withdrawal of money which is In the deposit of the customers. The fact that Ex. A-2 is forged was brought to the knowledge of the first respondent-bank on receipt of the letter Ex. A-6 on 24-6-1978 from the first defendant. In the circumstances of the case.
as already stated, no liability can be fastened on the first respondent-bank and they had acted in good faith whereas the appellant-bank was negligent and their act cannot be taken as bona fide.
23. For the foregoing reasons, the substantial questions of law framed in this appeal are decided against the appellant.
24. In the result, the judgment and decree in A.S. No. 73 of 1985 on the file of the Subordinate Judge. Madurai are confirmed and S.A. No. 635 of 1988 is dismissed with costs throughout.