TRIVANDRUM PERMANENT BANK LTD Vs. K. KRISHNA IYER

JUDGEMENT

(1.) Unnikrishna Kurup J. The plaintiff in O.S. No. 11 of 1961 on the file of the Sub Court of Trivandrum, a bank in liquidation, is the appellant. The Bank filed the suit out of which this appeal arises for recovery of Rs. 54,362/- with interest at 6% from defendants 1 to 5 and the assets of one deceased Arumugham Asari whose legal representatives are defendants 6 to 9. The first defendant was the cashier of the plaintiff bank, the second defendant the agent and the third defendant the assistant cashier, during the relevant period. The 4th defendant was the teller of the bank and deceased Arumugham Asari was the jewel appraiser. The 5th defendant was a long standing customer of the plaintiff bank and he was operating a gold re-pledge cash credit account with the bank having a sanctioned credit limit of Rs. 75,000/-. The plaintiff's case was that defendants 1 and 5 with the active connivance and cooperation of defendants 2 to 4 and deceased Arumugham Asari defrauded the bank and made illegal gains for themselves. It would appear that defendants 1 and 5 with the knowledge of the other officers of the bank systematically overvalued the jewels brought by the 5th defendant for pledging and made excess advances for the benefit of the 5th defendant. The first defendant was running a medicine shop and a stationery shop and he had also other business and he was also utilising the monies unlawfully appropriated from the bank for the purposes of the said business. In August 1959 the bank was inspected by an inspector and he noticed serious irregularities in respect of repledge accounts. On suspicion being thus roused, the inspector examined all the bags relating to the repledge accounts of the 5th defendant and it was found that out of 477 items outstanding on 29-8-1959 there were serious irregularities and fraud in respect of 158 items. Explanations were called from defendants 1 to 3 and the jewel appraiser, Argumugham Asari. From the explanation filed, it became clear that they had been grossly negligent in the discharge of their duties and that these large number of transactions could not have been made unless they had the deliberate dishonest intention of defrauding the bank. The first defendant was found liable for Rs. 63,210, which was admitted by him and he executed a promissory note for the amount on 7-11-1959. Similarly the 5th defendant admitted his liability for a sum of Rs. 55,230/- and he also executed a promissory note for the said amount. Subsequently defendants 1 and 5 paid various amounts and the balance is now claimed in this suit with 6% interest. The lower court decreed the suit as prayed for with costs against defendants 1 and 5 but dismissed the suit as against the other defendants with costs. The plaintiff challenges the dismissal of the suit against defendants 2 to 4 and 6 to 9. Defendants 1 and 5 have not filed any appeal.

(2.) The second defendant was the agent of the bank during the relevant period. The duties of the second defendant in his capacity as the agent of the bank have been detailed in the plaint and it seems to us unnecessary to reproduce them here. As agent of the bank he had overall control over the entire transactions, and he had to exercise due diligence, proper care and caution in the due performance of his duties as an agent. In the matter of advance on the pledge of jewels he was bound to exercise an effective control at various stages of the transaction and the ultimate sanction for the loan had to be given by him. The bag containing the jewel had to be examined by the agent and he had to verify the details with the pledge notes. The jewels had thereafter to be kept in the safe of the bank which was operated by two sets of keys, one set to be kept by the agent and the other by the cashier. The safe could be opened only by using the keys kept in the custody of both the agent and the cashier. According to the plaintiff bank, under the circulars, Ex. P-44 and P-45, issued by the bank, the agent had to regularly and systematically hold periodical verifications of the securities and he should check and verify the contents of at least 10% of the total number of items every month. The fact of checking was to be noted in the particulars or remarks column of each ledger account and this system assured all the items being checked and verified in the course of the year. The definite case of the bank was that the second defendant in the matter of pledge accounts had not complied with the directions in the circulars and by his gross negligence he had allowed defendants 1 and 5 to defraud the bank. A decree against the second defendant was, therefore, sought on the basis that the second defendant was responsible for the loss sustained by the bank and, therefore, liable for damages.

(3.) The lower court in Para.27 of its judgment observed as follows: