INDIAN RELIEF BANK LIMITED Vs. P K THOMAS

JUDGEMENT

(1.) This appeal arises out of a suit, 0. S. 81 of 1953, instituted in the District court of Quilon on 14/07/1953 by the appellant, Indian relief Bank Ltd. , now under liquidation, for recovery of a sum of 52034 rupees 15 annas 4 pies with interest and costs from respondent p. K. Thomas who had been the Managing Director of the Bank for many years since its inception in 1934. The plaintiff-Bank had its head office at madras and branches at various places including Quilon. Plaintiff's case is that defendant P. K. Thomas, while he was the Managing Director, had been dealing freely with all financial matters of the Bank. Admittedly he had opened a current account in the Quilon branch of the Bank and received large sums as overdraft in his account, in addition he also used to draw money from the Bank in other persons' accounts by getting documents executed by them. In this way the defendant had overdrawn large sums of money from the Bank in different accounts. In 1951 and 1952 the auditors on inspection of the accounts of the Bank objected to these dealings by the managing Director and reported the matter to the Directors of the Bank. It was found that the defendant maintained two accounts in the Quilon branch, one in the name of P. K. Thomas and the other in the name, Kora thomas. On the instruction of the auditors, on 29/12/1951 three debit entries were made in the account in the name of Kora Thomas in partial adjustment of the defendant's liability. In this appeal we are concerned with the two accounts in the name of P. K. Thomas and Kora thomas. In October 1952 the Directors of the Bank appointed a committee consisting of three of the Directors to enquire into defendant's liabilities. The three-men committee met at Madras on 7/10/1952 in the presenceof the defendant and on inquiry found, among other things, that a sum of rs. 47,000. 00 and odd was due from the defendant in his current account at Quilon in the name of Kora Thomas. On 13/10/1952 the defendant sent two signed blank cheques with a letter addressed to Shri Krishnamoorthy, agent of the Bank at Quilon, for settling the defendant's liability in the account of Kora Thomas, and one of the cheques was filled in by Kriahnamoorthy and utilised for that purpose. The cheque was drawn in favour of kora Thomas for 47,228 rupee I anna I pie. The account covered by the cheque was transferred from the account of P. K. Thomas to that of Kora thomas. A sum of 49,765 rupees 9 annas 3 pies was still due from the defendant in his current account in the name of P. K. Thomas on December 30, 1952 besides his liabilities in other accounts. The sum for which the suit was brought represents, according to plaintiff, the defendant's liability as on June 30, 1953.

(2.) The defendant in his written statement denied liability and asserted that if proper accounts were taken it would be found that he was entitled to recover a considerable sum of money from the Bank. He instituted a suit, 0. S. 113 of 1954, against the Bank for settlement of his accounts. Both the suits were heard by the Additional District Judge, Quilon; part of the evidence recorded in the two suits is common and the suits were disposed of by the trial court and on appeal by the High court by one judgment. This appeal arises out of suit 0. S. 81 of 1953 brought by the Bank against P. K. Thomas

(3.) The Additional District Judge decreed the suit. He held that the three debit entries made on 29/12/1951 in the account. Ex. P-9, were "unauthorised" because the debit slips were not "supported by the defendant's endorsement". However, he found on a consideration of the evidence that the defendant was estopped from denying the validity and correctness of these entries. The facts upon which the trial court reached this conclusion are these. These debit entries had been made on 29/12/1951 when the defendant was the Managing Director of the Bank and he admitted, deposing as DW I, that he used to go to the various branches of the Bank three or four times every year to inspect the accounts. The entries showed that the debits were made according to the instructions of the auditors. The accounts of the Bank used to be audited every year and the balance-sheet was prepared every year under the direct supervision and guidance of the managing Director on the basis of the auditors' report. The balance-sheet of 1951 was prepared prior to the defendant's service as Managing Director was terminated. On a consideration of these facts the trial court held that it was "impossible to believe that the defendant was not aware of these three disputed entries". The following circumstances also weighed with the trial court in rejecting the defendant's case that the debit entries were made on 29/12/1951 without his knowledge. The defendant was admittedly present when the Directors of the Bank met on 7/10/1952 and passed a resolution to the effect that the account in the name of Kora Thomasshould be transferred to the account in the name of P. K. Thomas. A few days later, on 13/10/1952, the defendant sent two signed blank cheques with a covering letter (Ex. P-20) to Krishnamoorthy (Public Witness 1) who was the agent of the Bank at Quilon. After the cheques were received, one of them (Ex. P-21) wai filled in by Public Witness 1 and the sum drawn was Rs. 47,228.11. The trial court accepted the evidence of Public Witness 1 that the cheques were not signed on the reverie when he received them. On 16/10/1952 the bank wrote to the defendant : ". . we have closed Kora Thomas account and debited Mr. P. K. Thomas for the entire sum of Rs. 47,042.77 together with interest accrued till date amounting to Rs. 47,228.11. Your cheque no. 13765 is drawn for Rs. 47,228.11 in favour of Kora Thomas and credited to Mr. Kora Thomas account as a transfer entry. As you have not signed on the reverie of the cheque we could not treat it as a cash entry. " the trial court also accepted the case of the plaintiff that the defendant was present in Quilon on the day the letter was addressed to him and that he came and signed on the back of the cheque the same day. In these circumstances, it was held, the defendant could not dispute that the sum of ra. 47,228-1-1 was validly debited in his account in the name of P. K. Thomas. The trial court found on evidence that the debit entries had been made with the full knowledge and consent of the defendant and that his subsequent conduct also showed that he acquiesced in these entries being made. Clearly, therefore, the further finding recorded by the trial court that the debit entries were unauthorised but the defendant was estopped from challenging them, was not only inconsistent and unnecessary but also wrong.