CANARA BANK Vs. VIJAYA BANK

JUDGEMENT

(1.) THIS appeal by the plaintiff-Canara Bank is against the dismissal of its suit O. S. No. 6148 of 1979, on the file of the Fourth Assistant Judge, City Civil Court, Madras, claiming a sum of Rs. 46, 486. 25 from the defendant--Vijaya Bank. The plaintiff's averments are briefly as follows : The defendant presented to the plaintiff's branch at Madras a draft bearing No. 970, dated June 2, 1975, drawn by the plaintiff's Vaniyambadi branch, purported to have been drawn in favour of one N. Krishnamurthy, for Rs. 14, 500, for clearance. Since the said draft was presented for payment by a banker, notwithstanding the fact that the advice had not been received by the plaintiff from its branch, the payment was made to the defendant by the plaintiff on June 3, 1975, without further scrutiny, according to the apparent tenor of the instrument. When the plaintiff did not receive any advice, it made enquiries with its Vaniyambadi branch and came to know that the said branch had not issued any such draft. On further enquiry and screening of the draft, it was found that the draft with No. 910 issued by the said Vaniyambadi branch for Rs. 40 in favour of one N. Krishnan, drawn on Bangalore, and not on Madras, was materially altered and forged through chemical process. In a similar manner, the defendant presented at the plaintiff's branch at Madras, another draft bearing No. 6152, dated June 9, 1975, drawn by the plaintiff's Tirunelveli town branch, purported to be in favour of one N. Krishnamurthy, for a sum of Rs. 16, 570, for clearance. Since the draft was presented for payment by a banker, notwithstanding the fact that the advice had not been received by the plaintiff from its Tirunelveli town branch, the payment was made to the defendant, without proper scrutiny, according to the apparent tenor of the instrument, on June 11, 1975. On enquiry, it transpired that the draft was dated June 7, 1975, for Rs. 50 drawn on Madurai in favour of one Krishnaswamy, and it has been forged materially by chemical process. The plaintiff by its letter dated July 1, 1975, enquired of the defendant about the above-said facts and pointed out the negligence of the defendant in opening a current account in the name of Krishnamurthi without proper introduction and demanded the return of both the above-said sums, that is, in all Rs. 31, 070. The defendant denied negligence on its part. But the defendant had been negligent in allowing the opening of a current account by an unknown person with out proper introduction and it was found later that the place of address mentioned by the said person was not of the place of his residence. Since the payments were received under forged instruments, which are void, no right is created under the said instruments in favour of the defendant. Consequently, the defendant is bound to return the above-said sums with interest at 16. 5 per cent.The averments in the written statement of the defendant may be summarised as follows :

(2.) THE loss sustained by the plaintiff could have been averted and it would not at all have occurred if the plaintiff had exercised the elementary and obligatory precaution of screening the draft with the available sophisticated instrument before payment and awaited the receipt of advice from its Vaniyambadi and Tirunelveli branches. THE loss in question is not in any way due to the negligence on the part of the defendant. If the drafts in question had been so clearly forged as to defy detection by the plaintiff, it is equally so for the defendant who was a collecting banker. THE defendant was not negligent in allowing the opening of the current account when there was nothing to evoke any suspicion. If the plaintiff had acted prudently and alerted the defendant, the loss would have been averted. THE plaintiff is not entitled to claim any interest on damages. On the above pleadings the following issues were framed : (1) Was the loss sustained by the plaintiff due to any negligence or misconduct of the defendant" (2) Could not the plaintiff have averted the loss in question by taking precautions set out in para 3 of the written statement" (3) Was not the loss due to negligence and/or non-diligence of the plaintiff" (4) Is the defendant liable as a collecting banker" (5) Is the plaintiff entitled to interest" (6) To what reliefs"

(3.) IN the above-referred case of INdian Bank, 1981 AIR(Mad) 129, a Division Bench of this court held that where a bank : (i) allowed a customer to open an account on the recommendation of a customer who could not be said to be respectable and without testing the credentials of the person desirous of opening the account, and (ii) sent a crossed demand draft drawn on another bank for a big amount in favour of the new customer and put into account only a few days after the opening of the account, for realisation, and (iii) in consequence, the bank on which the draft was drawn was put to loss as the draft was a forged one, the bank opening the account could not be considered to have acted without negligence even if it might have acted in good faith and consequently, the bank was not entitled to the benefit of sections 131 and 131A and the paying bank which honoured the draft could not be said to be guilty of contributory negligence merely because it failed to make enquiries from its branch which issued the draft, before the same was cleared and the amount thereof was credited to the account of the new customer and he withdrew it.Learned counsel for the appellant further relied on the following passage in Paget's Law of Banking, Ninth Edition, at page 325 :