CANARA BANK Vs. CANARA SALES CORPORATION

JUDGEMENT

(1.) This is an appeal by certificate, against the Judgment dated 25th June, 1972, passed by a Division Bench of the Karnataka High Court. The 1st defendant Bank is the appellant.

(2.) Original Suit No. 72 of 1962 was filed in the Court of Civil Judge, Mangalore, by the Canara Sales Corporation Ltd. through its Managing Director, V. S. Kudva. He died during the pendency of the suit and the suit was continued by the succeeding Managing Director of the Corporation. The suit was against two defendants:the appellant-Bank was the first defendant and the second defendant was one Y. V. Bhat who was the Chief Accounts Officer of the plaintiff, till 1961. He died during the pendency of the appeal before the High Court and his, legal representatives were brought on record. When the suit was filed, the appellant-Bank was called the Canara Bank Ltd. After the nationalisation of banks it became the Canara Bank which is the appellant before us.

(3.) The suit was instituted for., recovery of a sum of Rs. 3,26,047.92, with the following allegations:The plaintiff is a Private Limited Company with its head office at Mangalore. It had a current account with the appellant-Bank in its Mangalore Bunder branch, The Managing Director of the company and the General Manager of a sister concern of the company had been authorised to operate the said current account of the plaintiff with the Bank. The second defendant was attending to the maintenance of accounts of the plaintiff and was also in charge and custody of the cheque books issued by the Bank to the plaintiff. In March, 1961, the second defendant was absent from duty for some time. During that period one A. Shenoy, who was the Assistant of the second defendant was directed to bring the accounts up to date. During this process, he noticed certain irregularities in the account and brought this to the notice of the plaintiff. On verification, it was found that cheques purporting to bear the signature of Shri V. S. Kudva were encashed though they did not bear his signature. In other words the signature were forged. On 25-3-1961, a complaint was made by the plaintiff with the Superintendent of Police. The plaintiff appointed a firm of Chartered Accountants to conduct special audit of the company's accounts, for the years 1957-58 to 1960-61. This special audit disclosed that the second defendant had withdrawn, in all, a sum of Rs. 3,26,047.92 under 42 cheques. The suit was filed for recovery of the amount on the plea that the amounts as per the forged cheques were not utilized for the purpose of the plaintiff, that they were not authorized ones, that there was no acquiescence or ratification open or tacit on the part of the plaintiff, that the plaintiff was unaware of the fraud till the new accountant discovered it.