BANK OF BARODA Vs. PUNJAB NATIONAL BANK LTD

JUDGEMENT

(1.) The appellant is a company doing banking business, established in the State of Baroda, under the Baroda Companies Act, 1896-97, and having its registered office in Baroda with branches in British India. The respondent is a bank incorporated under the Indian Companies Act. Both banks have branches in Calcutta. M.P. Amin was manager of the Calcutta branch of the appellant bank. Bhagwan Das was manager of the Calcutta branch of the respondent bank. One Mitter (respondent 2) became a customer of the appellant bank at Calcutta. In May 1939, one Ghose (respondent 3) opened an account with the appellant bank on the understanding that he should be allowed "temporary accommodation from time to time." That account was guaranteed by Mitter. On 13 June 1939, Ghose's account with the appellant bank showed an opening debit balance of Rs. 1,26,339 reduced during the course of the day to rupees 89,274. On the same date Mitter's account with the respondent bank was overdrawn to the extent of about Rs.35,000. On that day Mitter brought to the respondent bank two cheques drawn by Ghose on the appellant bank both in favour of Mitter and both dated 13 June 1939; both cheques were marked on their face with the words "Harked good for payment up to 20 June 1939," and signed by Amin on behalf of the appellant bank. One cheque was for Rs.1,40,000 and the other for Rs. 1,35,000. Mitter informed Bhagwan Das that the cheques would not be paid until 20 June 1939, and asked to be allowed to draw Rs. 2,40,000 against them. Bhagwan Das said he wanted a cheque the date of which was the same as that on which payment was to be made. Mitter then took away the cheques and returned a little later on the same day with one cheque dated 20 June 1939, drawn by Ghose on the appellant bank in favour of Mitter or order, for Rs. 2,75,000. The cheque was crossed "and; Co." and on the face of it were written crosswise the words "Marked good for payment on 20-6-39. For the Bank of Baroda Limited, M.P. Amin, Manager." It has not been questioned that the signature was that of Amin. Mitter endorsed the cheque generally and handed it to Bhagwan Das, with two letters, in which he asked the respondent bank to credit Rs.2,75,000 to his account "on realisation on due date," and also requested an overdraft of Rs. 2,40,000, besides the previous balance, which he promised to adjust on 20 June 1939.

(2.) The respondent bank on the same day gave Mitter its cheques or Rupees 2,40,000, on the Imperial Bank of India at Calcutta which Mitter duly cashed. The respondent bank debited Mitter's account with the amount. Meantime the appellant bank had become suspicious of the conduct of Amin and had sent two senior officials to keep Amin under observation. On 19 June, Amin was suspended and early next day a notice was sent to the respondent and other banks that Amin's power of attorney had been cancelled and another branch manager appointed. On 20 June, the respondent bank, who, though they had not yet received the notice, had become apprehensive, sent their cashier and their accountant to the appellant bank, as soon as it opened for business that morning, to present the cheque marked as above which Bhagwan Das had endorsed generally for Rs.2,75,000, over the counter for payment. Ghose's account was then in credit to the extent of annas 7 pies 3 only. The appellant bank refused payment and returned the cheque with a memorandum attached "not arranged for." After some correspondence the respondent bank on 31 July 1939, commenced the present suit against the appellant bank, and also against Mitter and Ghose. As against the appellant bank, the respondents claimed as holders for value of the certified cheque, and also based their claim on a custom or usage, and in the alternative on estoppel. They claimed against Ghose as drawer and against Mitter as endorser. The two latter did not appear, nor did they give evidence at the trial; indeed they were then the subject, along with Amin, of criminal proceedings in connection with their part in the affair. It was not suggested that either Bhagwan Das or the respondent bank were actually party or privy to the fraud, however irregular from a banking point of view was the discounting of a post-dated cheque, quite apart from the original request to have a single cheque in place of the two brought in the first instance. It does not appear whether the cheque was post-dated at the request of the drawer, Ghose, or of Mitter. It seems that the amount of the cheque was not debited to Ghose's account and that there was no earmarking of funds or cover for it. Ghose's account, as already observed, was heavily overdrawn when the cheque was taken as security for the loan. It may be said that the respondent bank was not affected by irregularities of indoor management on the part of the appellant bank's manager, of which they had no notice, but the fact that money was lent on the post-dated cheque on 13 June, though on its face it was only payable on 20 June, and was marked for payment on that date, was a departure obvious on the face of the cheque from any practice there might be in these matters. The respondent bank however made no inquiries, and did not question the validity of the certification or marking. The effect of this will be considered later.

(3.) At the trial before Panckridge J. the evidence called included some Calcutta bankers, who deposed on the question of there being a practice in Calcutta to mark or certify cheques, but it is clear that on any view there was no satisfactory evidence that it was usual to certify post-dated cheques. Panckridge J. held the appellant bank liable on the cheque on the ground that they were acceptors because in his judgment the certification constituted an acceptance within the meaning of the Negotiable Instruments Act, though he went on to hold as a further ground that the evidence showed that bankers at Calcutta are by usage liable on cheques certified by them when presented by parties entitled thereto. He did not deal specifically with the case that the cheques were post-dated.