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10. While the business of discounting the bills was continuing in this fashion, a huge fraud amounting to Rs. 22 lakhs was discovered in March 1976. D. S. Mallappa & Company had discounted bills with the State Bank of Mysore, Tiptur Branch, on a large scale by presenting bills accompanied by the lorry receipts issued by the Kerala Transport Company. They were all fake or bogus lorry receipts. The receipts issued without actually loading the goods on the trucks, On the strength of such fake receipts, D, S. Mallappa & Sons became indebted to the Bank to the extent of Rs. 22 lakhs, When the fraud was detected, business was suspended with all the three firms of Mallappa, and in addition the State Bank of Mysore ceased to accept the bills for discounting of any other client which were accompanied by the lorry receipts of Kerala Transport Company, Later, instructions were issued to all the local officers of the State Bank of India and all the subsidiary banks not to accept any lorry receipts issued by the Kerala Transport Company for the purpose of discounting any bill of any customer of the Bank. The Madras local head office brought to the notice of the Bombay Head Office the fact that Kalpaka Transport Company, the respondents in this case, were an associate of the Kerala Transport Company, and it was not desirable to accept the lorry receipts issued by Kalpaka as well. Accordingly, instructions were issued and the name of Kalpaka was removed from the list of approved transport operators. This fact of the removal of the firm's name from the list is described as blacklisting. Instructions were then issued not to deal with any bills, which were accompanied by the lorry receipts issued by the respondents-Company.

26. This takes us to the second question as to whether the State Bank was bound to hear to respondents before discontinuing them from the list of approved operators. This question also does not admit of much argument. We will indicate a little later as to how the proposition of blacklisting appears to us on further analysis, even if there were no such approved list, as we find in the present case. However, as there is already a list, let us see how it operates and what would be the consequence of removing the name of the respondent from that list. We have very briefly summarised the ISA Scheme for recommending transport operators to the member Banks. Let us, therefore, point out how that Scheme works in actual practice. Since the member Banks are following the Scheme, they maintain a list of their own regarding the transport operators. Under the normal manner in which bill discounting business was being conducted before the present Scheme, the transport operator's liability was confined to that of a public carrier. It was the credit of the Bank's own customer which mainly gave the bill discounting facility to him. While sanctioning an account of a customer, the Bank rarely looked to the transport operator. The goods could be loaded on any truck or lorry and it was felt irrelevant whether the transport operator was an owner of a single vehicle or a fleet. However, it was mainly the credit worthiness of the Bank's own customer that made the bill discounting facility available to him. However, the IBA devised the Scheme by which additional responsibility was being placed upon the shoulders of the transport operators. Only such of them as were found to be sound operators in the estimate of IBA and were further willing to give the undertaking and enter into a contract as proposed by Schedule A to the Scheme, were alone listed in the approved list of the IBA. This list again was merely a recommendatory list, and the member Banks were not bound to follow that list and may deal with others who may not have been indicated as approved transport operators on their own list. In practice, however, it appears that the recommendation of the IBA is accepted by all the member Banks. We may, therefore, take it that so far as the State Bank of India was concerned, its approved list was more or less the same as was recommended by the IBA.

27. How does this Scheme now operate? If a client of the Bank has a sanctioned limit for bill discounting, he would first look up to the Bank's list of approved transport operators. He either knows or is apprised of the Scheme. He would then look to the list of transport operators, and entrust the goods to one of them. His choice of selecting is con-trolled by the Bank's approved list. If he chooses a different transport operator, It is possible that the Manager in his discretion may discount the bill if he knows the customer too well and was satisfied that the customer's own obligation was sufficient to cover up the Bank's loss, if any. However, the Bank Manager would be within his rights in refusing to accept a bill for discounting which is not accompanied by Lorry Receipts of one of the approved transport operators.

28. We would presently point out as to how the transport operator can have a grievance against the Bank. But the Bank's reply would be that they do not accept the lorry receipts of the transport operators in whose business integrity they have no faith. The IBA devised a Scheme by which an operator may approach the Batik through the IBA and get himself placed upon the approved list, when his lorry receipt would always be accepted for discounting bills.

29. This Scheme has two effects: one is that the Bank's own client must hand over their goods to one of the transport operators on the approved list. To that extent, their volition is controlled. The other effect is that in the commercial world of transport operators, a word goes round that one has to be on the approved list of the Bank, if the lorry receipts issued by the operator are to be accepted by the Bank while discounting bills of its own clients. The transport operators, therefore, make enquiries as to who are the clients of the Bank, and approach them for entrusting the goods to them by representing to them that the operator is on the approved list of the Bank. The client, on the other hand, sees the approved list and is free to make a choice of any operator within that list. This being the nature of the Scheme, the moment a name on the list is removed, the effect is that any bill of any customer of the Bank howsoever credit worthy he may be, would normally not be discounted if it is accompanied by lorry receipts of transport operators whose names have been, removed from the list. In other words, a blacklisted transport operator has no chance to do business of transporting the goods of the Bank's clients for the purpose of making gains in his own business where the Bank's client is discounting the bills. Even if that client has faith in the transport operator and is willing to entrust the goods to him, he would still refuse to hand over the same to such operator and would prefer some other operator on the Bank's approved list, so that he could obtain advance from the Bank. In other words, the transport operator's business is adversely affected by the removal of his name from the list,