Karnataka High Court
Gerald C.S. Lobo vs Canara Bank on 30 September, 1988
Equivalent citations: [1991]71COMPCAS290(KAR), 1989(1)KARLJ182
JUDGMENT P.K. Shyamsundar, J.
1. This is an appeal by the plaintiff in O. S. No. 346 of 1972 on the file of the Munsiff, Mangalore, and is directed against the divergent decrees of the courts below in that the trial court decreeing the plaintiff's suit and the civil judge, on appeal, reversing the said decree.
2. The suit was for recovering a sum of Rs. 2,350 with costs, etc. The claim was made against one of the branches of the defendant, Canara Bank, at Mangalore, where, admittedly, the plaintiff had a S.B. account bearing No. 201 which account was in existence for quite some time (parties will be referred to as plaintiff and defendant).
3. It is common ground that the plaintiff credited to the defendant- bank a cheque for Rs. 3,003.50 on February 20, 1968, for realisation and ultimately for crediting to his account. That was an outstation cheque drawn on a bank at Bangalore and, consequently, it was in due course sent by the defendant-bank to one of its branches in Gandhinagar, Bangalore, for collection. It is again common ground that the Gandhinagar branch of the Canara Bank at Bangalore realised the cheque amount on February 24, 1968 and sent the requisite advice to the defendant on the very same day, but due to intervening public holidays, the advice reached the defendant-bank only on February 29, 1968. The bank made an entry on February 24, 29, 1968, in its books pertaining to the realisation of the cheque in question.
4. In the meanwhile, there was a development to the detriment of the defendant, in that somebody, to whom the plaintiff owed money had filed a suit in the Court of the Munsiff, Mangalore, in O. S. No. 265 of 1968 and had obtained a garnishee order on February 28, 1968, ordering the bank not to pay out to the plaintiff a sum of Rs. 2,250 and freezing the account of the plaintiff to that extent.
5. The plaintiff, undaunted by this prohibitory order, presented a series of cheques subsequently, with a view to draw the cash reserves to his account following encashment of the cheque referred to supra. He presented one cheque for Rs. 450 which was turned down by the bank in view of the prohibitory order of the court. On July 8, 1968, he presented another cheque which was once again turned down by the bank. After a long interval of four years, he presented another cheque for Rs. 250 on April 19, 1972, and when this was turned down he filed the suit , out of which this appeal arises, seeking a decree against the bank alleging wrongful denial by the bank of the facility of appropriating his own funds. That suit came to be decreed.
6. But the decree having stood reversed on appeal, the plaintiff assails the said decree of the lower appellate court in this appeal.
7. At this juncture, I must refer to the endeavour by the plaintiff made in combating the suit in O. S. No. 255 of 1968. It was in that suit that the prohibitory order referred to supra had been issued. It is not known whether any attempts were made by him to move the court to lift that order. But what is very clear is that he lost the battle, suffered a decree in that suit, which was subsequently affirmed on appeal culminating in a second appeal being preferred to this court in R. S. A. No. 1399 of 1974. This court granted stay of the decree passed by learned munsiff in O. S. No. 255 of 1968. That stay order was also communicated, but the complaint of the plaintiff is that, despite receipt of the stay order, the court none the less went on to pursue the execution proceedings that were already afoot resulting in the freezing of money standing to the credit of the plaintiff in his S. B. account ; later, the defendant-bank being called up by the court to deposit the money also resulted in compliance. It has transpired that, subsequently, the decree- holder also received the money with full satisfaction being entered in the execution case. I am to mention further that later on, the plaintiff's second appeal R. S. A. No. 1399 of 1974 came to be dismissed.
8. In this appeal, the following substantial questions of law have been raised and formulated for consideration :
1. Whether, on the facts and circumstances of the case, the plaintiff's suit it barred by limitation ?
2. Whether, on the facts and circumstances of the case, the defendant-bank was obliged to deposit Rs. 2,250 pursuant to the prohibitory order of the executing court, exhibit P-9, dated January 30, 1975 ?
9. I shall now advert to the same. The first question presents little difficulty and in fact even Mr. Rao, for the defendant in this court, does not any longer contend that the plaintiff's suit was barred.
10. I am to notice that it is the civil judge who took the view that the plaintiff's suit was barred and he did so on the basis of what had transpired in the year 1968 wherein two of the plaintiff's cheques dated April 8, 1968, and June 8, 1968, had been dishonoured. The learned civil judge thought that the suit claim when computed or reckoned with reference to dates on which the cheques referred to supra stood dishonoured, the suit filed in the year 1972 was clearly barred by time. If the learned judge was right in computing the period of limitation tracking it back to the rejection of those two cheques in the year 1968, he was certainly justified in holding the suit to be statute- barred.
11. But the finding as aforesaid overlooks the fact that between 1968 and 1972, when the present suit came to be filed, there was money in the plaintiff's account with the bank aggregating to more than Rs. 2,259.42. All things being equal and in normal circumstances, money being available to his account, there could have been little objection to the plaintiff withdrawing moneys to the extent of his credit in his account. The fact that, on an earlier occasion, the bank had rebuffed his endeavour in encashing his cheques and that was because the bank was of the view that the garnishee order served on it by the court had freezed the account and hence found itself unable to permit the plaintiff to avail of the funds at his disposal with the bank, was no ground to plead that the claim now made is statute-barred.
12. While, undoubtedly, the plaintiff could have filed the suit within three years from the date of dishonouring of the two cheques in the year 1968, the present suit having been based according to the plaintiff on the dishonour of his later cheques in the year 1972, his action in seeking to recover on the basis of the cheque dishonoured in 1972 could not have been discarded on the ground that the claim was statute-barred. The refusal to honour the earlier cheques and the refusal to honour the cheques represented in the year 1972, while it may be for the same reason, the cause of action on either occasion being different, the rejection of the cheque presented in the year 1972 pleaded as the cause of action for the instant suit could not have been treated as barred by time taking into account the rejection of the two cheques in the year 1968, because as long as there was money standing to the credit of the plaintiff with the defendant- bank, he was entitled to draw cheques and present them for encashment. While it is true that every rejection or dishonouring of a cheque furnishes the customer with a cause of action, it would be wholly wrong to think that the plaintiff not having sued on the basis of the cheque dishonoured on the earlier occasion cannot found a cause of action on the later rejection. As pointed out, each rejection furnishes a cause of action and one has nothing to do with the other. The fact that the rejection on the earlier occasion had afforded the plaintiff a cause of action that had subsequently become extinguished by the statute of limitation does not mean that he could not have sued on a subsequent cause of action. The learned civil judge was clearly wrong in holding that the plaintiff's suit was barred by time because he had not availed of the cause of action that arose immediately after two of his cheques had bounced in the year 1968.
13. The cause of action herein being based on the cheque which was turned down in the year 1972, this suit filed in the year 1972 was clearly in time and could not have been discarded on grounds of limitation and hence my finding as aforesaid on the first point.
14. The second point for consideration is based on the plaintiff's case blaming the bank or the court, as the case may be, for having denuded his account by wrong withdrawal of money in spite of the stay order of this court. It seems to be that there is little substance in this contention and at any rate the passage of time and the events that have so far transpired, the chief of which being the disposal of the second appeal in which the plaintiff was disputing the tenability of the decree made against him in O.S. No. 255 of 1968 that had ultimately resulted in the moneys standing to his credit to the defendant-bank being consummated by the decree, have all led to a weakening of this argument.
15. Apart from the fact that the said decree has since been affirmed by this court, it would be proper to recall that the garnishee order made by the court in O. S. No. 255 of 1968 had continued to be operative throughout and the stay order passed by this court in R. S. A. No. 1399 of 1974 had only the effect of suspending the decree of the trial court, but otherwise did not affect the garnishee order made earlier during the course of the suit.
16. Whether it was right on the part of the munsiff to have called for the money from the bank and thereafter permitted the decree holder to take away that money is an aspect which it is not now necessary to go into. Even so, it is pointed out that the munsiff who was also the executing court does not appear to have been informed of the receipt of the stay order which may or may not be true.
17. As pointed out earlier, much of the sting in this point is lost by the fact that the munsiff's decree has since been affirmed by this court and that at no time was any attempt made at lifting the garnishee order which was operative throughout.
18. But, as a fall-out from this point, a question of some nicety has arisen and has been adverted to in this court by both sides. Mr. Hande, for the plaintiff, maintains that on February 27, 28, 1968, when the prohibitory order of the court came to be communicated to the bank, the state of his client's account was not of the order mentioned in the prohibitory order, but it was very much less. It is common ground that on February 28, 1968, in the books of the bank, the balance to the credit of the appellant was Rs. 18.80. It is only on February 29, when the Gandhinagar bank's advice was received from Bangalore following the encashment of his cheque presented on February 20, 1968, that his bank balance rose to Rs. 2,999.65. The argument of Mr. Hande is that on February 28, 1968, Rs. 18.80 only being available to the credit of the plaintiff in the bank's account as on that day, the garnishee order would be effective only in regard to that sum and not to anything in excess. He strongly sustained this argument by pointing out to a subsequent clarification issued by the court per exhibit P-4.
"Case called. Sri G. K. S. for Sri U. R. K. prays for time. Attachment is made absolute to the extent the amount was available in the S. B. account of the defendant at the time of attachment order. Both parties to close evidence on 16/9."
19. Reliance is also placed on the evidence of the bank manager, DW- 1, stating that on February 28, 1968, the plaintiff would not have been allowed to draw any amount in excess of what was actually available and standing to his credit in the books of account. Basing himself on these facts, he contended that the excess amount having come to the plaintiff's account only on the 29th by which time the garnishee order had already fastened on to his account, it is submitted by Mr. Hande that only the amount at his client's credit on February 28, could be attached and not what came into his account subsequently on the 29th. This argument is sought to be strongly buttressed by the evidence of the bank manager who said that anything beyond what was actually standing to the plaintiff's credit on the 28th, the bank would not have permitted to be drawn. The argument led is that the plaintiff could not have drawn anything more than Rs. 18.80 on the 28th instant, the garnishee order must be held to affect only that amount and nothing more because as on the 28th, the plaintiff could not have called anything more than Rs. 18.80 as his own. It is hence urged that the refusal by the bank to encash the cheque of Rs. 2,000 odd subsequently was clearly improper and the bank must, therefore, make abundant reparation in that behalf by acceding to the suit claim.
20. This argument was pressed with great vigour in the court below but did not find favour with it although it did click with the munsiff. Sri Rao, appearing for the defendant-bank and his learned junior, Smt. Surya Prabha, who deputized for Mr. Rao, for the most part of the hearing of this appeal submitted that, in law, a bank which collects money on behalf of another bank is to be treated as an agent of the former and consequently, the moment a cheque sent for collection by the other bank had been realised by the latter, the realisation must be treated as having accrued to the principal bank and in this case, the cheque having been realised by the Gandhinagar bank, Bangalore, on the 24th instant, that realisation must be treated as realisation by the defendant bank itself. It is urged that, in law, such an assumption is possible and hence on the 24th of February itself, the money realised by the outstation bank had stood notionally transposed to the defendant-bank's account and was consequently available not merely for the customer, but in this case, to his detriment, by virtue of the garnishee order. It is, therefore, urged that the defendant-bank had no option except to decline to honour the plaintiff's cheques as long as the garnishee order was in force and consequently the bank could not be faulted at all. Adverting to the duties of a banker with reference to a customer, the High Court of England in the very recent case of Bhogal v. Punjab National Bank [1988] 2 All ER 296 (CA) through Dillon L. J. has made the following enunciation (at page 300) :
"In the banking field there are clear rules of law. (1) It is the duty of the banker to pay within a reasonable time of presentment all cheques drawn by the customer in accordance with the mandate given to the banker provided that the banker has money in his hands belonging to the customer. As Lord Cairns L. C. stated in Gray v. Johnston [1868] LR 3 HL at 11, it would be a serious matter if bankers were to be allowed, on grounds of mere suspicion or curiosity, to refuse to honour a cheque drawn by their customer. He added on the facts of that case : '...even although that customer might happen to be an administrator or an executor.' (2) As Scrutton L. J. pointed out in Bradford Old Bank Ltd. v. Sutcliffe [1918] 2 KB 833 at 847 (CA) sums paid by a customer into his current account cannot be used by the bank in discharge of the customer's loan account without the consent of the customer, since no customer could otherwise have any security in drawing a cheque on his current account if he had a loan account greater than his credit balance on current account." (emphasis [Here printed in italics] supplies).
21. Thus, the principle regulating a banker's dealing with a constituent appears to be that a banker cannot refuse to pay if money wa available to the credit of the customer, but can refuse payment only on grounds justifiable in law. By declining to pay on any other ground, he does so on peril of being sued for neglect of the banker's occurred herein by the defendant-bank.
22. As regards duties and liabilities of a banker in clearing a bill, the following statement in Halsbury's Laws of England, fourth edition, para 106, volume 3, page 81, may be noticed in the context with profit :
"Money received on a bill by a sub-agent is in law received by the banker, apart from any question of account between him and the sub-agent. A banker receiving bills for collection from another banker is agent for the remitting banker, not for that banker's customer unless, therefore, the banker has distinct notice that the bills are the property of the customer, they may be treated as the property of the remitting banker, and are subject to a lien for any balance due from the latter".
100. Duties of a collecting banker.-In collecting cheques and other instruments for a customer, a banker acts basically as a mere agent or conduit pipe to receive payment of the cheques from the banker on whom they are drawn and to hold the proceeds at the disposal of his customer."
23. Regarding the effect of attachment by a garnishee order, the following statement in para 88 is useful :
"88. Attachment by garnishee order.-Money on current account can be attached by means of a garnishee order. On the service of a garnishee order nisi, made on a judgment against the customer, the whole credit balance on current account is impounded, irrespective of the relative amounts of the balance and the judgment debt (except where the order directs otherwise), and the banker cannot diminish the balance by paying out of it even cheques drawn prior to service of the order." (emphasis [Here printed in italics] supplied).
24. The Madras High Court in the case of Modern Automobiles Ltd. v. Travancore National and Quillon Bank Ltd. [1942] 12 Comp Cas 281 has held that in a case where a cheque had been sent for collection to an out-station bank, the proceeds of the cheque must be deemed to have been realised by the principal bank on the respective dates on which the cheques had been realised by the out-station bank. That was a case in which two cheques drawn on a Madras bank had been presented at Bombay and later sent for collection at Madras. The question having arisen as to when the proceeds of the cheques must be treated as having been realised so far as the Bombay bank was concerned, the Court held that vis- a-vis the Bombay branch the cheques must be held to have been realised on the date they were realised on the date they were realised by the Madras branch. This dicta is based on the theory of agency adverted to in the statement appearing in Halsbury's Laws of England supra. With respect, I am in agreement with the principle enunciated in the case referred to above.
25. Thus, it is seen that the concept of principal and agent in banking transactions appears to be well-entrenched in practice. In this case, realisation by the Bangalore branch of the defendant-bank amounted in law to realisation by the defendant- bank itself is a conclusion that follows on the doctrine of principal and agent referred to supra.
26. Mr. Hande, however, urges that as to when a customer's money could be said to have been credited to his account depended on the rules of the bank and, placing reliance on the evidence of the bank manager, that on February 28, 1968, the bank would not have encashed a cheque drawn by the plaintiff if it was more then Rs. 18.80, counsel seeks to overcome the effect of the principles noticed above.
27. We do not have the bank's rules or of any mode as to how it regulates its business and even so, assuming that the manager was right when he said that on February 28, 1968, the plaintiff could not have taken away anything in excess of Rs. 18.80 what is of materiality is the fact that by the 24th, the bank at Bangalore had realised Rs. 3,000 odd on the strength of the cheque drawn in favour of the plaintiff. Such realisation being for and on behalf of the principal, i.e., the defendant-bank, in law, realisation by the defendant must be treated as having materialised on the date when its agent realised the proceeds of the cheque. This conclusion follows not from the rules of the bank but on the principle of the law of agency. The maxim qui facit per alium facit per se is well-known. It means that one who acts by another acts by himself. When the plaintiff's cheque was realised by the Gandhinagar bank at Bangalore on February 24, 1968, in law, the defendant bank at Mangalore must be deemed to have realised it. The fact that till the 24th or the 29th, when there was a credit balance in the account of the plaintiff following the realisation of the cheque, but none the less there being some delay in those funds being placed at the plaintiffs disposal, the same does not alter the situation. It becomes clear that at the latest by the 28th, the bank held more than Rs. 2,500 to the credit of the plaintiff but by then having been prohibited by an order of the court not to pay that sum to the plaintiff, no valid grievance could be made against the bank for having refused to encash the plaintiff's cheques. The issue of the clarificatory order by the court as per exhibit P-4, is clearly besides the point.
28. What is more, as I have held, that if, on the 28th or on 27th instant, when the prohibitory order was made, the bank held to the credit of the plaintiff an amount of Rs. 2,450 odd being the sum mentioned in the garnishee order, that order would certainly be effective both in law and on facts. The clarification issued by the court as per exhibit P-4 does not militate against this conclusion. After consideration of the several aspects of the matter in the background of the submissions made by counsel on either side, I must, therefore, hold that the refusal by the bank to pay out the proceeds of the cheque in question or to transfer the same to the amount of the plaintiff's wife and the subsequent action of the bank in obeying the order of the court by depositing the money into court, cannot be said to have been indulged in in defiance of the law so as to merit the reproach of being treated as excessive or of exposing the plaintiff of hardship, incovenience and loss. This appeal which does not raise any other point, therefore, fails and is dismissed. No costs.