SYNDICATE BANK Vs. UNITED COMMERCIAL BANK

JUDGEMENT

(1.) AT the stage of admission, we directed the records from the trial court to be secured. Accordingly, we had the benefit of perusing the records of the proceedings before the trial court and we have also heard learned counsel for the appellant -bank.

(2.) THE short point for consideration in the appeal is whether the appellant -bank was entitled to the benefit of the provisions of section 131 of the Negotiable Instruments Act, 1881 (in short,'the Act'). The facts are not in serious controversy. Respondent No.1 - bank had made payment of Rs.50,079.04 to respondent No.3 on a cheque issued by the second respondent - customer in favour of the Aryan Brush Company. From the evidence on record, it is seen that the section respondent issued a cheque dated December 2, 1975, for a sum of Rs.579.04 in favour of one of its customers by name Aryan Brush Company. This cheque was subsequently encashed by respondent No.3 carrying on business under the name and style of Arjun Brush Company. The words and figures as originally found in the cheque which is produced as exhibit P -1 before the trial court and also the amounts were altered so as to read as Rs.50,079.04, the payee's name was altered so as to read as 'Arjun Brush Company' and the date was also changed from December 2, 1975, to December 13, 1975. The first respondent -bank, on the strength of the endorsement made by the appellant -bank, i.e.,'payee's account credit', made the payment on this cheque and, accordingly, it credited the account of the appellant -bank in a sum of Rs.50,079.04. That amount was subsequently withdrawn by the third respondent, Arjun Brush Company. The second respondent bona fide believed that it had issued a cheque for Rs. 579.04 in favour of Aryan Brush Company. However, it transpires from the statement of accounts sent from the first respondent to the second respondent for the period ending December 31, 1975, that this cheque dated December 2, 1975, was made payable to the third respondent for a sum of Rs. 50,079.04 on December 13, 1975, and the same was debited to the account of the second respondent on December 15, 1975. Immediately, after receiving the statement, the officer of the second respondent took up the matter with the first respondent and they exchanged a number of letters in order to clarify as to how a cheque issued for a sum of Rs. 579.04 could have been encashed and the amount debited to the second respondent's account in a sum of Rs.50,079.04. From the exchange of correspondence, it is established that this cheque exhibit P -1 had been materially altered, i.e., the date of issue of cheque, the amount mentioned therein in words and figures and the payee's name and thereby the third respondent in whose favour that cheque had not been issued by the second respondent, stood to gain in a sum of Rs. 50,079.04. The first respondent called upon the appellant -bank being the collecting bank to reimburse that amount. The appellant -bank took cover under the provisions of section 131 of the Act and resisted the claim of first respondent. Hence, the suit by the first and second respondents claiming a sum of Rs. 50,079.04 and interest thereon and in that suit they prayed for a decree jointly and severally against the appellant and respondent No. 3.

(3.) LEARNED counsel for the the appellant -bank submitted that, in the absence of any issue relating to forgery of the cheque in question, viz., exhibit P -1, the trial court had wrongly come to the conclusion that the appellant -bank was liable for the suit amount; (i) that there had been a misjoinder of parties in that respondent NO.2, i.e., customer of respondent No. 1 should not have been made a party to the proceedings before the trial court; (ii) that the trial court had wrongly construed the applicability of the defence opened to the collecting bank under section 131 of the Act and, therefore the interpretation of that section raises a question of law which has to be considered by this court.