ORDER
1. The second defendant in the suit is the appellant herein. The plaintiff filed the suit for a direction to the defendants to pay a sum of Rs.21,669.20 with subsequent interest at the rate of 12% per annum. The suit was based on the ground that the plaintiff are the dealers in cotton yarn and they used to purchase their requirements from Madras from various parties through M/s D.S.Subramaniam & Company who are yam brokers. Towards the said purchases made by the plaintiff, they used to make payments either by drafts or by cheques to the concerned parties through M/s D.S.Subramaniam & Company, yarn Brokers at Madras. In this connection, the plaintiff got a “Crossed Account Payee” draft for a sum of Rs.19,880 on 11.10.1979 in favour of A.Venkataswami Mudaliar & Company, yarn Merchants, No.395 Mint Street, Madras-3 against supply of Yam. The plaintiff also draw a crossed cheque endorsed in favour of the same person for Rs.1,867.88. The plaintiff sent the said draft and cheque on 12.10.1979 along with a covering letter addressed to M/s D.S.Subramaniam & Company, Madras. It is the further case of the plaintiff that on 17.10.1979 when the plaintiff telephoned to the said yarn brokers at Madras to find out as to whether the draft as well as the cheque sent by them on 12.10.1979 were handedover to the respective parties they were informed by the yarn brokers that the said draft and cheque were not received by them. Thereafter the plaintiff on 17.10.1979 instructed the first defendant who issued the draft, to stop payment of the proceeds of the draft. On such instructions, the cheque was not cleared. However inspect of the draft, the Nellore branch of the first defendant Informed the plaintiff on 31.10.1979 that the proceeds of the draft were cleared by the Bank of India, Egmore Branch namely the second defendant on 19.10.1979 itself. Therefore the plaintiff filed the suit for the relief already referred to on the ground that both the defendants are liable to return the said money.
2. It was the case of the first defendant in the written statement that even though the draft was issued by the banker, they did not receive any phone message from the plaintiff as contended on 17.10.1979 for stop payment. In fact such an instruction was received by them only on 21.10.1979 and on the same day the second defendant was also informed. In the written statement filed by the second defendant it was contended that a portion of the amount was paid to A.Venkataswami Mudaliar & Company on 22.10.1979 and the balance was paid on subsequent days. The said payments were made only after getting clearance from the first defendant on 19.10.1979 itself and therefore the second defendant was not liable to repay the amount claimed in the plaint.
3. On the basis of the above averments the trial Court framed as many as eight issues more particularly in respect of the manner in which the said Venkataswami Mudaliar & Company was introduced to the second defendant to open the account and as to whether the second defendant had acted negligently in honouring the draft and to what extent the defendants are liable to repay the amount claimed by the plaintiff. The trial Court on considering the evidence dismissed the suit. However on appeal the lower appellate Court while partly allowing the said appeal modified the judgment and decree of the lower Court by decreeing the suit against the second defendant and dismissing the same against the first defendant. It is against the said judgment and decree the present second appeal has been filed.
4. When the second appeal was admitted, the following substantial questions of law have been framed for consideration by this Court:
“I. Whether the negligence imputed to the appellant by the Courts below Is legal and proper?
2. When the Courts below have held that the plaintiff’s case that he informed the second respondent (first defendant), to stop payment is not true, is not appellant the appellant estopped from contending, that the defen-dants have negligently paid the amount?”
The learned counsel for the appellant/second defendant firstly would contend that there was no negligence the part of the second defendant in allowing the A.Venkataswami & Company to open an account and they had acted in good faith more particularly the said Venkataswami Mudaliar and Company was introduced by one Pukhraj who was a valuable customer of the Bank for quite long number of years and therefore the negligence cannot be attributed to second defendant so as to disentitle the Bank for the protection given under Sections 131 and 131A of the Negotiable Instruments Act which read as follows:
Section 131: Non-liability of banker received payment for cheque – A banker who has in good faith and, without negligence received payment for a customer of a cheque crossed generally or specially to himself 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.
Section 131A: Application of Chapter to drafts – The provisions of this Chapter shall apply to any draft, as defined in section 85A, as if the draft were a cheque.
5. The learned counsel for the appellant further contended that inasmuchas the amounts have been paid only after getting clearance from the first defendant on 19.10.1979 itself and that too the said amounts have been paid not in lumpsum but on more than one occasion the negligence and the consequent liability cannot be attributed to the second defendant.
6. On the contrary the learned counsel for the respondent would contend that for opening an account certain guidelines are framed by the Bank themselves. As per paragraph 75 in Chapter II of the Manual of instructions issued by Bank of India, the branch should invariably insist upon the prospective depositors to furnish introduction for opening any type of account irrespective of their nature and the mode of operation permitted therein. It is further stated that the introduction should be treated as a substantive step having real significance and not merely a formality. It is further stated that the branches should take effective steps to satisfy themselves about the identity of the depositors. In paragraph 76 of the said Instructions. It is further stated that obtaining proper introduction is necessary because failure to do so will be construed as the bank not having acted in good faith and without negligence and the bank will be deprived of the protection under Section 131 of the Negotiable Instruments Act. Paragraph 77 of the instructions states that mere introduction from another account holder is not enough and that before accepting such-an introduction, the Bank must be satisfied that the account of the introducer in well-conducted and his dealings are satisfactory and the authenticity of the introduction should be established beyond doubt. It is further stated in paragraph 79 that when an account opening form duly completed in all respects with, the introducer’s signature is presented for opening an account the Bank must try to contact the introducer on telephone, if he is a local person and has a telephone, and also send him a letter of thanks thereby giving him an opportunity to confirm or disclaim the knowledge-about the account holder. The learned counsel therefore submits that while allowing A.Venkataswami Mudaliar & Company to open an account, the said second defendant had miserably failed to follow the above instructions which by itself establishes the negligence on the part of the second defendant. If that be so, the second defendant is not entitled to the protection under Sections 131 and 131A of Negotiable Instruments Act and consequently the plaintiff is entitled to the relief.
7. In so far as the above submissions, it should be borne in mind that the instructions issued by the Bank is binding on the Bank themselves. These instructions are meant to be followed. These instructions have been formulated only in order to safeguard the interest of the customers and also to ensure the genuine transactions of the Bank. As per paragraph 79 of the instructions it is very clear that a person can be allowed to open a Bank account only when he approaches the Bank with an account opening form duly completed in all respects with the introducer’s signature. Admittedly in this case when the application form was presented by A. Venkataswami Mudaliar to the Bank the same was hot filled up except a signature of one Pukhraj without the name elaborated therein, who according to second defendant, is an old customer. In the normal course of business the second respondent-Bank ought not to have accepted the said application at all as the same was not presented to the Bank in confirmity with the instructions contained in paragraph 79 of the Manual of instructions. Strangely A.Venkataswami Mudaliar was allowed to fill up the said form in the Bank’s office itself. Further, no sanctity could be attached to the signature of the introducer inasmuch as the same has been signed in an unfilled application form thereby suggesting that the introducer did not know at the time when he signed the application form as to who he was introducing to the Bank. Further on perusal of the application form I find there is one more signature which had been subsequently scored off. When such an application was produced for opening an account it was the bounden duty of the Bank to be more vigilant by strictly following the instructions contained in the Manual of instructions. If those instructions were not followed and thereby A.Venkataswami Mudaliar was allowed to open an account the negligence on the part of the Bank is automatically established more particularly in terms of paragraph 76 of the instructions. Therefore I am of the clear view that the Bank was negligent in allowing A.Venkataswami Mudaliar & Company to open the account and consequently the second defendant-Bank is not entitled to the protection under Sections 131 and 131A of the Negotiable Instruments Act. Accordingly I hold that the appellant is not entitled to the protection under Section 131 and 131A of the Act.
8. The learned counsel for the appellant secondly contended that even assuming that the second defendant namely the appellant was negligent, that will not automatically entitle the plaintiff to get back the money in asmuchas the plaintiff had come to the Court with a false case. To substantiate the said submissions the learned counsel drew my attention to certain dates. The draft and cheques were drawn on 11.10.1979 and the same were sent to the plaintiff on 12.10.1979 by ordinary post. When draft, to the higher value is sent, the plaintiff ought to have been vigilant in sending it through registered post. Secondly, the claim of the plaintiff that he informed the first defendant-Bank on 17.10.1979 over phone is a total false as no mention of the same had been made by the plaintiff in his letter dated 23.10.1979. Therefore, it is contended that the plaintiff came to the Court with a false case, was not vigilant to approach the Bank or the Court at the earliest point of time and that he had approached the Court with unclean hands. Therefore the learned counsel argued that the plaintiff is not entitled to the relief. The learned counsel for the respondent by way of reply argued that it is not disputed that the plaintiff got, draft and cheque as mentioned above and sent the same to the yam brokers viz., D.S.Subramaniam & Company and the draft was honoured by the second defendant and therefore the fact that the fruits of the said draft did not reach the person for whom it was intended thereby causing a loss to the plaintiff and in such event merely because the non disclosure of the telephonic conversation in his subsequent letter dated 23.10.1979 would not in any way disentitle the plaintiff of his claim and he further argued that in any event the telephonic conversation was between the plaintiff and the first defendant-Bank and the D.W.I examined on behalf of the Bank himself had admitted the fact that the Bank was informed through telephone by plaintiff on 17.10.1979 and therefore the contention of the appellant that the plaintiff has approached the Court with a false case is not true. I have considered the rival submissions on the above question. It is true that the second defendant-Bank has allowed A.Venkataswami Mudaliar & Company to withdraw the money in three or four occasions. However, once this Court comes to the conclusion that the second defendant was negligent in allowing A.Venkataswami Mudaliar & Company to open the account, the Appellant-Bank cannot be absolved of their liability since they lose their protection given under Sections 131 and 131A of the Negotiable Instruments Act. The contention of the learned counsel for the appellant that the plaintiff has also approached this Court with a false case cannot be accepted for the simple reason that the best persons to speak about the telephonic conversation between the plaintiff and the Bank are the plaintiff himself and the officers of the Bank. The plaintiff has come before the Court with a clear statement that he informed the first defendant-Bank on 17.10.1979 about the missing of the cheque and draft in transit and therefore instructed stop payment. This contention of the plaintiff is in fact accepted by D.W.I in his statement wherein he has categorically stated that there was a telephonic instruction on 17.10.1979 but the Bank could not act for want of written instructions from the plaintiff. Therefore the claim of the appellant that the plaintiff has come to the Court with a false case cannot be accepted. Now the next question to be decided is, as to who should compensate the plaintiff. Section 131 of the Negotiable Instruments Act speaks of the non-liability of the Bank on certain specified circumstances towards the true owner of the instrument. When once this Court comes to the conclusion that the protection under Section 131 and 131A of Negotiable Instruments Act is not available to the second defendant-Bank, it is needless to say that the liability of Bank is originally to the true owner of the instrument. In that view of the matter this Court comes to the conclusion that the Appellant/second defendant is liable to return the amount to the plaintiff. Therefore I do not find any error in the judgment of the lower appellate Court. Accordingly the decree in favour of the plaintiff for the sum of Rs.21,669.20 is confirmed.
9. The learned counsel for the appellant finally submitted that the second defendant in fact honoured the draft and cleared the same only after getting clearance from the first defendant. But for the said clearance the second defendant would not have paid the money to the said A.Venkataswami Mudaliar & Company. It is the case of that plaintiff that even on 17.10.1979 itself he has informed the first defendant over phone and which fact has also bean admitted by D.W.I in his evidence. If that be so, the first, defendant with due responsibility ought to have informed the second defendant of what had happened with further instructions not to honour the draft. On the contrary and strangely when the second defendant took earnest effort to find out as to whether he could clear the draft, the first defendant has given clear signal for clearance. Only on such clearance the second defendant has been directed now to repay the money to the plaintiff. In such circumstances the inaction on the part of the first defendant has also attributed to the whole episode. Therefore, the counsel submit that this Court should give liberty to the second defendant to agitate their claim against the first defendant. Even though this matter has been argued by both the counsel for the appellant and the counsel for the first respondent on more than four occasions, none appeared on behalf of the first respondent. Therefore, this Court was not in a position to bear their submissions before making order as to the above submission. However, having waited for the four hearings this Court has no other option but to observe that it is open to the second defendant to agitate their rights and to claim the amount in question from the, first defendant.
10. With the above observations the second appeal is dismissed. No costs.