Gujarat High Court
State Bank Of India vs Gujarat State Bij Nigam Limited on 12 November, 2025
NEUTRAL CITATION
C/FA/450/2020 JUDGMENT DATED: 12/11/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 450 of 2020
With
R/FIRST APPEAL NO. 880 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE MRS. JUSTICE M. K. THAKKER
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Approved for Reporting Yes No
NO
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STATE BANK OF INDIA
Versus
GUJARAT STATE BIJ NIGAM LIMITED
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Appearance:
AISHWARYA REDDY(9713) for the Appellant(s) No. 1
PARITOSH R GUPTA(7583) for the Appellant(s) No. 1
MR PINAKIN M RAVAL(2495) for the Defendant(s) No. 1
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CORAM:HONOURABLE MRS. JUSTICE M. K. THAKKER
Date : 12/11/2025
COMMON ORAL JUDGMENT
1 The present appeal is filed under Section 96 of the Code of Civil Procedure, 1908, challenging the judgment and decree passed by the learned Principal Senior Civil Judge, Gandhinagar in Special Civil Suit No.56 of 2010, whereby the suit came to be decreed in favour of the plaintiff for recovery of an amount of ₹77,58,277/- from the appellant-Bank. The Corporation has also preferred First Appeal No.880 of 2020 challenging the very same judgment and decree, to the limited extent that the learned Trial Court has directed the Bank to pay only 50% of the decretal amount instead of the entire 100%.
Page 1 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined 2 It is the case of the plaintiff-Corporation before the learned Civil Court that corporation was maintaining a current account with the appellant-Bank at its Udhyog Bhavan Branch, Gandhinagar, which was being operated by the Manager and Assistant Manager of the said branch. On 01.09.2009, an employee of the Punjab National Bank informed the plaintiff-Corporation that one cheque bearing No.115993, purportedly issued in favour of Tough Enterprise, contained discrepancies in the figures, the amount in numerals was mentioned as "₹3,70,00,000/-", whereas in words it was written as "Thirty Seven Lakhs." The said employee, therefore, sought confirmation as to whether the cheque was genuinely issued by the plaintiff-Corporation.
2.1 On verification, it was revealed that the said cheque was a duplicate and that certain unknown persons had fabricated the same with an intent to defraud the Corporation. The plaintiff immediately informed the appellant-Bank to stop further transactions. During the subsequent inquiry, it was discovered that approximately seven cheques had been fraudulently used by employing a duplicate cheque book, and the same were issued in favour of seven different traders. Consequently, alleging forgery and cheating, an FIR being I-C.R. No.481 of Page 2 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025 NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined 2009 came to be registered at Navrangpura Police Station against the employee of the plaintiff- Corporation and the seven payees who had derived wrongful benefit from the forged cheques.
2.2 The plaintiff-Corporation thereafter instituted a suit for recovery, contending that due to the gross negligence of the appellant-Bank in discharging its duties and in clearing bogus cheques without due verification, the Corporation suffered a loss of ₹77,58,277/-.
2.3 The appellant-Bank, in its written statement filed below Exhibit 13, denied the allegations and contended that the suit suffered from misjoinder and non-joinder of necessary parties, as the individuals in whose favour the forged cheques were cleared were not impleaded as defendants. It was further contended that the incident occurred solely due to the gross negligence of the Corporation's own employee and the lack of proper care in safeguarding the cheque book. The appellant-Bank asserted that the cheques were cleared through the Central Clearing Process Unit at Ahmedabad, following all requisite banking procedures and verification norms, and hence, it could not be held liable for any negligence.
Page 3 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined 2.4 After framing the issues and appreciating the oral and documentary evidence on record, the learned Trial Court held the appellant-Bank partly liable and directed it to pay 50% of the claimed amount, i.e., ₹38,79,138.50, along with interest at the rate of 6% per annum from the date of filing of the suit till realization. The said judgment and decree are under challenge in the present appeal.
3 Heard learned advocate Ms.Aishwarya Reddy for the appellant and learned advocate Mr.Pinakin Raval for the defendant.
4 Learned advocate Ms. Reddy submits that the appellant-Bank had duly provided the details of all eight payees in whose favour the cheques were issued and cleared, and who were the actual beneficiaries of the forged transactions. Learned advocate Ms. Reddy submits that despite having complete knowledge of these individuals, the plaintiff-Corporation chose not to implead them as party defendants and, instead, filed the suit for recovery solely against the appellant-Bank.
4.1 It is further submitted by the learned advocate Ms. Reddy that the employees of the plaintiff- Corporation, who had misused the cheques, were Page 4 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025 NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined already arraigned as accused in the criminal proceedings, and separate departmental inquiries were also initiated against them. Learned advocate Ms. Reddy points out that even the Assistant Manager, who was authorized to sign the cheques, was subjected to disciplinary proceedings and was ultimately punished by way of reduction of one stage in his pay scale.
4.2 Learned advocate Ms. Reddy submits that it was never the case of the plaintiff-Corporation that the signatures on the disputed cheques were forged or that the Bank had cleared cheques bearing forged signatures. On the contrary, as per the guidelines and circulars issued by the Reserve Bank of India, the Bank is statutorily bound to honour and clear cheques that are found to be in proper form and order.
4.3 Learned advocate Ms. Reddy, therefore, submits that the learned Trial Court has committed a serious error in holding the appellant-Bank 50% liable for the alleged loss, despite there being no negligence or breach of duty attributable to it. The liability, if any, rests solely upon the employees of the plaintiff-Corporation, who were responsible for the misuse of the cheques. Accordingly, the Page 5 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025 NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined impugned judgment and decree warrant interference, and the present appeal deserves to be allowed.
5 Per contra, learned advocate Mr. Pinakin Raval for corporation submits that when the cheques in question were presented for encashment, which included forged instruments, the Bank had no authority to make payment against such cheques. Without properly verifying the genuineness of the said cheques, the appellant-Bank proceeded to encash eight forged cheques, resulting in a substantial financial loss to the plaintiff-Corporation. Hence, the learned Trial Court has rightly held the appellant-Bank liable for 50% contributory negligence.
5.1 Learned advocate Mr. Raval further submits that the relationship between a customer and a banker is contractual in nature, and it is the Bank's primary duty to exercise reasonable care and caution to prevent fraudulent or forged transactions. However, in the present case, the Bank failed to adhere to such basic precautions and, despite apparent discrepancies, honored the forged cheques. Therefore, the finding of contributory negligence recorded by the learned Page 6 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025 NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined Trial Court is fully justified.
5.2 Placing reliance on the judgments of the Apex Court rendered in the cases of Bihta Co- operative Development Cane Marketing Union Ltd. v. Bank of Bihar, reported in AIR 1967 SC 389, and Canara Bank v. Canara Sales Corporation, reported in (1987) 2 SCC 666, learned advocate Mr. Raval submits that it is a settled principle of law that a banker is not entitled to debit a customer's account for payment made against a forged cheque, as such a cheque is a nullity in the eyes of law. Accordingly, he submits that the appellant-Bank cannot escape its liability, and therefore, the appeal filed by the appellant Bank deserves to be dismissed and appeal filed by the plaintiff Corporation requires to be allowed.
6 Having considered the submissions advanced by the learned advocates for the respective parties and on a perusal of the reasoning assigned by the learned Trial Court, it emerges that the duplicate cheque books which were printed unauthorisedly had been utilized to encash eight forged cheques, bearing serial numbers 115901 to 116000. It further transpires that an FIR came to be registered before Page 7 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025 NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined the Navrangpura Police Station, which culminated into a charge-sheet against ten accused persons for the offences punishable under Sections 120B, 114, 420, 467, 468 and 471 of the Indian Penal Code. These accused included certain employees of the plaintiff-Corporation; however, no employee of the Bank was arraigned as an accused therein.
6.1 The fraudulent acts came to light only when cheque bearing No.115993 was presented for clearance and a discrepancy was noticed between the figures and the amount written in words. It is an admitted position that though the Bank Statement was received by the plaintiff- Corporation on 24.08.2009, the same was not verified promptly with respect to the impugned transactions, and the discrepancy was brought to its notice only on 01.09.2009 by the Bank Officer concerned.
6.2 It is also undisputed that the signatures on the cheques were found in order and the particulars filled therein did not exhibit any visible irregularity, except in the case of cheque No.115993. Further, Corporation Officers one of whom was a signatory to the cheque were subjected to departmental proceedings, and punishment was accordingly Page 8 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025 NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined imposed.
6.3 It is equally not in dispute that the cheque books were in the custody of the officers of the plaintiff-Corporation, from which xerox copies were taken and forged instruments fabricated for encashment. During cross-examination, Mr. Pravesh G. Sagar, examined at Exhibit 57, elaborated the entire clearing procedure, which involves multiple entities and several stages before final clearance. The evidence indicates that the impugned cheques were not presented at the home branch, but at other branches and more particularly the cheque was cleared by the clearing cell. Hence, the Bank had no opportunity to physically examine the paper cheque, which, as later revealed by the FSL report, was forged.
6.4 The FSL report further discloses that the printing quality of the forged cheques was inferior, the ink used was water-soluble, and the cheques appeared to have been printed on an HP DeskJet D2568 printer factors which could not have been detected upon cursory inspection of the scanned images during digital clearing.
Page 9 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined 6.5 The contention raised by the learned advocate for the Corporation is that cheque No.115982 was encashed twice and that the Bank failed to take necessary precautions in this regard. However, the procedure extracted from the deposition of the witness clearly indicates that the duty of the Bank Officer, while undertaking the clearing process, is confined to verifying the signatures, date, amount and other basic particulars appearing on the cheque. There is no procedure contemplated in the clearing mechanism for verifying the cheque number at the time of clearance. Additionally, it has emerged from the record that the Account Manager and the Secretary of the plaintiff- Corporation were the authorized signatories, and the Account Manager was subjected to disciplinary proceedings. It also stands established that the cheque books were in the custody of the Corporation, and it was from such custody that the cheques were taken out, in collusion with an officer of the Corporation, and thereafter colour- xerox printed instruments were used for encashment.
6.6 It is also required tobe noted herein that the different parties in whose favour the cheques were encahsed, no proceedings were initiated for Page 10 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025 NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined recovery of the amount against those party. The Bank Statement which was provided by the officer of the Bank on 24.08.2009 was also not perused cursorily by the Officer of the Bank and subsequent to that date on 29.08.2009 again the forged cheques were encashed. If some precautions were taken by the Corporation Officer then such transactions could have been stopped at material point of time.
6.7 At this stage, reference of the decision of the Apex Court in the case of Promodkumar Rasikbhai Jhaveri vs. Karmasey Kunvargi Tak and others, reported in (2002) 6 SCC 455 is required to be made wherein the Apex Court has held as under:
"8. We do not think that these two reasons given by the High Court fully justify the accepted principles of contributory negligence. The question of contributory negligence arises when there has been some act or omission on the claimant's part, which has materially contributed to the damage caused, and is of such a nature that it may properly be described as "negligence". Negligence ordinarily means breach of a legal duty to care, but when used in the expression "contributory negligence" it does not mean breach of any duty. It only means the failure by a person to use reasonable care for the safety of either himself or his property, so that he becomes blameworthy in part as an "author of his own wrong".Page 11 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025
NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined
9. Subject to non-requirement of the existence of duty, the question of contributory negligence is to be decided on the same principle on which the question of the defendant's negligence is decided. The standard of a reasonable man is as relevant in the case of a plaintiff's contributory negligence as in the case of a defendant's negligence. But the degree of want of care which will constitute contributory negligence, varies with the circumstances and the factual situation of the case. The following observation of the High Court of Australia in Astley v. Austrust Ltd. is worthy of quoting:
"A finding of contributory negligence turns on a factual investigation whether the plaintiff contributed to his or her own loss by failing to take reasonable care of his or her person or property. What is reasonable care depends on the circumstances of the case. In many cases, it may be proper for a plaintiff to rely on the defendant to perform its duty. But there is no absolute rule. The duties and responsibilities of the defendant are a variable factor in determining whether contributory negligence exists and, if so, to what degree. In some cases, the nature of the duty owed may exculpate the plaintiff from a claim of contributory negligence; in other cases, the nature of the duty may reduce the plaintiff's share of responsibility for the damage suffered; and in yet other cases the nature of the duty may not prevent a finding that the plaintiff failed to take reasonable care for the safety of his or her person or property. Contributory negligence focuses on the conduct of the plaintiff. The duty owed by the defendant, although relevant, is one only of many factors that must be weighed in determining Page 12 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025 NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined whether the plaintiff has so conducted itself that it failed to take reasonable care for the safety of its person or property."
10. It has been accepted as a valid principle by various judicial authorities that where, by his negligence, if one party places another in a situation of danger, which compels that other to act quickly in order to extricate himself, it does not amount to contributory negligence if that other acts in a way, which, with the benefit of hindsight, is shown not to have been the best way out of the difficulty. In Swadling v. Cooper AC at p. 9 Lord Hailsham said: (All ER p. 260 D- E) "Mere failure to avoid the collision by taking some extraordinary precaution does not in itself constitute negligence. The plaintiff has no right to complain if in the agony of the collision the defendant fails to take some step which might have prevented a collision unless that step is one which a reasonably careful man would fairly be expected to take in the circumstances."
6.8 As held by the Apex Court in the above decision, mere failure to avoid the collision by taking some extraordinary precaution does not in itself constitute negligence. The plaintiff has no right to complain if in the agony of the collision the defendant fails to take some step which might have prevented a collision unless that step is one which a reasonably careful man would fairly be Page 13 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025 NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined expected to take in the circumstances. In that background, it cannot be said that reasonable care has not been taken by the Bank Officer while clearing the cheques.
7 Additionally, the Bank's role was confined to routine processing in accordance with the prescribed clearing norms. The judgments relied upon by the learned advocate for the plaintiff-Corporation pertain to cases involving forgery of signatures, in which the Apex Court held the Bank liable for contributory negligence. However, the present case stands on a distinct factual footing, where the signatures were genuine and the forgery pertained to the instrument itself, which was beyond the Bank's reasonable detection in the digital clearance process.
8 In the instant case facts are not of that nature and in that background, in the opinion of this Court, the learned Court has committed an error in holding the 50% liability to the appellant Bank with regard to the loss which was caused. Therefore, First Appeal No.450 of 2020 is required to be allowed.
9 Resultantly, First Appeal No. 450 of 2020 is allowed. The judgment and decree dated 07.11.2019 passed by the learned 10th Additional Senior Civil Judge, Page 14 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025 NEUTRAL CITATION C/FA/450/2020 JUDGMENT DATED: 12/11/2025 undefined Gandhinagar in Special Civil Suit No. 56 of 2010 is hereby quashed and set aside. Consequently, First Appeal No. 880 of 2020 stands dismissed.
(M. K. THAKKER,J) M.M.MIRZA Page 15 of 15 Uploaded by M.M.MIRZA(HC01407) on Mon Nov 17 2025 Downloaded on : Mon Nov 17 21:51:07 IST 2025