BAPULAL PREMCHAND Vs. NATH BANK, LTD

JUDGEMENT

(1.) The plaintiff as the true owner of a cheque for Rs. 4,000 has filed this suit against the defendant bank for conversion of the said cheque and claiming. Rs. 4,000. The material facts are really not in dispute. On February 5, 1945, Messrs. Ramchandra Ramgopal, a firm of merchants at Akola, drew a cheque upon the Laxmi Bank, Limited, for the sum of Rs. 4,000 payable to the plaintiff or bearer. The cheque was crossed generally by Messrs. Ramchandra Ramgopal before delivery to the plaintiff. On the same day the plaintiff despatched this cheque by post from Akola to his commission agents Messrs. Chimanlal Mohanlal Suratvala for presentment and collection. This cheque never reached Messrs. Chimanlal Mohanlal Suratvala and apparently it was stolen during transit.

(2.) On January 25, 1945, the defendant bank opened a branch in Bombay, and on January 26, 1945, one Nemchand Amichand Gandhi opened an account by paying to the credit of that account Rs. 300 in cash. Although the name of the depositor was Gandhi, he signed his application form as "N, A. Gandi." On January 30, 1945, Gandhi withdrew from his account by a cheque written in Gujarati the sum of Rs. 225. On February 7, 1945, Gandhi drew a further sum of Rs. 50 by drawing another cheque -this time in English. Therefore the position was that on February 7, 1945, there was only a sum of Rs. 25 to the credit of Gandhi's account. On February 7, 1945, Gandhi paid in into his account the cheque for Rs. 4,000 which had been drawn in favour of the plaintiff and of which the plaintiff claims to be the true owner. This cheque was collected by the defendant bank and the amount credited to Gandhi's account. On February 8, 1945, Gandhi drew a cheque for Rs. 3,800 on his account. The cheque was drawn in favour of Kantilal Maganlal Shah or bearer and has been endorsed by R. H. Desai, Bapulal Premchand, the plaintiff, has given evidence and also Chimanlal Nagindas Suratvala bearing out the facts as to the cheque being given to the plaintiff by the firm of Ramchandra Ramgopal and the cheque being stolen while in transit. On this evidence there can be no doubt and it has not been disputed by Mr. Taraporewalla that the plaintiff is the true owner of the cheque; nor can there be any doubt that Gandhi ,who paid in this cheque to the credit of his account had no title to this cheque.

(3.) It is, therefore, clear that as against the true owner the defendant bank is guilty of conversion. Under the ordinary law the bank would have no answer to the plaintiff's claim. But Section 131 of the Negotiable Instruments Act, 1881, affords the defendant bank a statutory protection against the true owner in cases of conversion provided certain conditions mentioned in that section are complied with. If a banker in good faith and without negligence receives payment for a customer of a cheque crossed generally or specially to himself he shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment. In order therefore to escape the liability which the general law imposes upon a person or a party who converts the goods belonging to the true owner thereof, the banker must discharge the burden of establishing that he received payment on behalf of a customer, of his of a cheque not belonging to the customer but to someone else in good faith and without negligence. In this case it is not suggested that the bank acted without good faith, but the plaintiff's allegation is that the bank acted with negligence in collecting the cheque and thereby has lost the protection afforded to a bank by Section 131 of the Negotiable Instruments Act; and the short point that I have to determine in this case is whether on the facts established the defendants have discharged their burden of proving that they acted without negligence. Now negligence is essentially a question of fact and it must depend upon the circumstances of each case whether negligence has been proved or not. It is difficult to define " negligence," but an attempt was made by Lord Justice Scrutton in E. B. Savory & Co, V/s. Lloyds Bank, Ld. [1932] 2 K. B. 122 (This case ultimately went to the House of Lords and is reported in [1933] A. C. 201). Mr. Justice Scrutton says (p. 130): A question at once arises, as there is no negligence without a legal duty, what was the exact duty imposed on the bank, and to whom ? Before the Acts, the bank, of course, owed a duty to every owner of property not to convert it, but that duty was absolute, and independent of reasonable care. In my view, Section 83 lessened the duty of the bank by limiting it to an obligation only to use reasonable care in dealing with the cheque, or by providing that if the bank proved that it had used reasonable care in discharging its obligation to the true owner not to convert his property, it was discharged from liability though it had converted that property. Then Lord Justice Scrutton cites with approval the observations of Mr. Justice Kennedy in Hannan's Lake View Central, Limited V/s. Armstrong & Co. (1900) 5 Com. Cas. 188 (p. 191): The only question is, Did they act without negligence ? What does without negligence" mean ? It means, I take it, without want of reasonable care in reference to the interests of the true owner, the principal whose authority the customer purports to have. Therefore what I have to determine in this case is whether in collecting the cheque belonging to customer Gandhi the bank acted without reasonable care in reference to the interest of, the plaintiff, the true owner of the cheque.