FIRM BANSILAL ABIRCHAND Vs. SADASHEO GANESH BHOPATKAR

JUDGEMENT

(1.) THIS is defendant's appeal from the reversing judgment of the Second Additional District Judge, Jubbulpore, in Civil Appeal No. 8B of 1989, delivered on 28th July 1939. The appeal arises out of a suit which in its form was framed as one for rendition of accounts but which in substance involves a dispute regarding an amount of Rs. 650. The plaintiff-respondent, who is a manager of a picture house at Bombay, had for sometime resided at Jubbulpore in connexion with his business. While at Jubbulpore he opened current account with the appellant firm at Jubbulpore. As he had to leave for Bombay he left some blank cheques bearing his signatures with his assistant manager, N.S. Pasarkar, with instructions to fill in the amount when required and draw money from the bank. On 7th September 1937, the assistant manager found a cheque bearing No. 32235 missing from the cheque book. He immediately informed the cashier of the appellant bank, who, according to the usual practice, made a note in a book called "Patha book" with the remark "do not pay the amount of cheque No. 32235." The cheque was, however, presented to the appellant bank sometime in October 1937 by an unknown person and was cashed. The amount consequently came to be debited in the respondent's accounts. The plaintiff's claim was in reality to recover this sum of Rs. 650.

(2.) THE defendant bank admitted that the cashier had noted the instructions of the assistant manager but pleaded that the cashier had clearly warned the assistant manager that he would not be liable in case his instructions were overlooked in the rush of business. It was, however, agreed that to obviate any foul play in regard to the cheques which the assistant manager would issue in future he should put his initials on the left hand bottom corner to distinguish them from the missing cheque. The cheque under consideration came to be honoured as it bore the initials of the assistant manager which reasonably led the cashier of the appellant bank to believe that it was a cheque duly issued by the assistant manager. Lastly, it was averred that the false presentment of the cheque by an unauthorised person was directly due to the negligence on the part of the plaintiff and that consequently he ought to abide the loss. The suit failed in the first Court but succeeded on appeal. The lower appellate Court held that there was no contributory negligence on the part of the plaintiff and that even if there was any, it was not the proximate cause of the fraudulent presentment of the cheque. It held that the failure to detect forgery of the cheque when it was presented for payment was directly due to the negligence on the part of the cashier in his omission to look at the number of the cheque.

(3.) THE leading case on which reliance is placed on behalf of the appellant is Young v. Grote (1827) 4 Bing. 253, for the proposition that as between the customer and the banker there is a duty cast on the customer to take precautions with the cheques so as to obviate all opportunities for unauthorised persons to commit fraud on the banker. In that ease a customer of a banker delivered to his wife certain printed cheques signed by himself, but with blanks for the sums, requesting his wife to fill the blanks up according to the exigency of his business. She caused one to be filled up with the words, "fifty pounds two shillings" the "fifty" being commenced with a small letter, and placed in the middle of a line: the figures ? 50. 2s. were also placed at a considerable distance from the printed ?. It was in this state that she delivered the cheque to her husband's clerk to receive the amount; whereupon he inserted at the beginning of the line in which the word "fifty" was written, the words "three hundred and" and the figure 3 between the ? and the figure 50. On presentment the bankers paid ?350. 2s. It was held that the loss must fall on the customer. The principle of the decision was that if a drawer draws a cheque in such a form as to render it easy for a forger to make alterations, the drawer must be made liable for his negligence which made the fraud possible. The decision in Young v. Grote (1827) 4 Bing. 253 was the subject of much discussion and criticism in the English Courts. In Scholfield v. The Earl of Londesborough (1896) A.C. 514 Lord Macnaghten while delivering his judgment remarked: Young v. Grote (1827) 4 Bing. 253 is a case which has excited as much diversity of opinion as any case in the books. It has given rise to various explanations not altogether uniform or consistent. That circumstance of itself is regarded by some Judges as a badge of merit and passport to the confidence of the profession. But when you are in search of a principle, the effect is rather embarrassing. And therefore, it is with some diffidence that I venture to inquire, What, after all, is the true principle in Young v. Grote (1827) 4 Bing. 253?