JUDGMENT
D.G. Deshpande, J.
1. Heard Advocates for the appellant, respondent Nos. 1 and 2 and respondent No. 3.
2. Respondent Nos. 1 and 2 were the original plaintiffs before the City Civil Court who filed a suit mainly against the present appellant/Central Bank of India (The parties are, hereinafter, referred to as the plaintiffs arid defendants) for recovering a sum of Rs. 10450/- with interest on the principal amount of Rs. 10,000/-. The case of the plaintiffs, in brief, was as follows : –
The plaintiff Nos. 1 and 2 were the partnership firm carrying on their business as merchants and commission agents at Bombay and Palanpur respectively. The plaintiff No. 2 in the course of their dealings purchased a demand draft for the sum of Rs. 10.000/- from the Palanpur Branch of Dena Bank, the defendant No. 2 in the suit. On the same day this draft was despatched by ordinary course to the plaintiff No. 1 and simultaneously plaintiff No. 1 was informed that the draft has been so despatched. It appears that after waiting for some time, the plaintiffs learnt from the Central Bank of India, when telephone call was made to them as to whether they were expecting any draft drawn in their favour. Further inquiry revealed that defendant No. 3 got hold of the Bank draft by opening an account in the Central Bank of India on 22.2.1965 and on the next day i.e. on 23.2.1965 he withdrew the entire amount of Rs. 10.000/- on the strength of the bearer cheque. In this background the plaintiffs filed a suit for recovering the amount against the Central Bank of India, Dena Bank and Kasamalli Gulamalli who is respondent No. 4 in the present appeal. The suit came to be decreed as the Trial Court found that Central Bank of India was negligent in the transaction and was liable to make good to the loss to the plaintiffs. The present appeal is against the said judgment and decree.
3. Counsel for the appellants made following submissions:-
According to him, if the plaintiffs wanted to send demand draft for Rs. 10,000/-, then the same should have been sent by registered post but sending a draft by ordinary post shows negligence on the part of the plaintiffs and if the plaintiffs were negligent then no liability can be fastened on the Central Bank of India. Secondly, it was contended that criminal prosecution has been launched against respondent No. 4 Kasamalli and therefore simultaneous proceedings of recovering of amount through Central Bank of India should not have been started by the plaintiffs. Thirdly and lastly, it was contended that the Central Bank of India is protected by virtue of provisions of Section 131 of the Negotiable Instruments Act which provides that 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 proving defective, incur any liability to the true owner of the cheque by reason only of having received such payment. Counsel for the appellant also relied upon the judgment of this Court in the case of Bapulal Premchand v. Nath Bank Ltd. AIR (33) 1946 Bom. 482 : 48 Bom. L.R. 393 wherein Justice Chagla had held that if the Bank has taken reasonable care with reference to the interest of the true owner, then the Bank cannot be held liable.
4. On the other hand it was contended by the counsel for the original plaintiffs that it has come in the evidence of plaintiffs that they were carrying on business for more than four decades before the evidence was recorded in the Court and the witness of the plaintiffs has stated that it was their usual practice to send demand draft by ordinary post. And therefore, if the draft in the instant case was sent by ordinary post, they could not be held guilty of negligence. Counsel for the respondents also relied upon the judgment of the Madras High Court in the case of K.M. Abbu Chettiar v. Hyderabad State Bank wherein it is held that a payment made without good faith and in negligence is not a due payment within Section 10 of the Negotiable Instruments Act, and also further held that the banker cannot set up either estoppel or good faith if his own conduct or negligence has occasioned or contributed to the loss, the well settled principle being that where one of two innocent parties must suffer for the fraud of a third, that party should suffer whose negligence facilitated the fraud.
As against this it was contended by counsel for the appellant that this ruling is under Section 10 of the Negotiable Instruments Act whereas the Bank is claiming protection under Section 131 of the said Act.
5. So far as first two submissions of the counsel for the appellant regarding negligence and initiation of criminal proceeding against respondent No. 3 Kasamalli are concerned, there is absolutely no force in them. If the witness of the plaintiff has on oath stated that since 40 years, before giving evidence in Court, it was their practice to send demand draft by ordinary post, then it cannot be said that sending of the demand draft in the instant case by ordinary post was an act of negligence. If at all any negligence is to be traced, the Court will have to find which out of two i.e. plaintiffs or Central Bank of India are more negligent or who are directly responsible for the loss as has been laid down by the Judgment of Madras High Court.
6. So far as criminal proceedings are concerned, the counsel for the respondent pointed that those criminal proceedings are against Kasamalli/respondent No. 3 and were initiated at the instance of Central Bank of India and not by the plaintiffs. Whatever it may be, the initiation of criminal proceedings cannot prevent a party from recovering a loss suffered by it by appropriate manner i.e. by filing of suit in that regard. The submission of the counsel for the appellant, is therefore, required to be rejected.
7. Counsel for the appellant, as stated above, also relied upon Section 131 of the Negotiable Instruments Act which gives protection to a banker who acts in good faith and without negligence. Even if it is accepted for the sake of argument that this Section can be pressed into service by appellant Bank for its protection, the burden will shift on the Bank to prove that it has acted in good faith and without negligence and it has to be pointed out that the Bank has failed to discharge its burden. The Bank examined its Manager to prove good faith and absence of negligence, but in the cross-examination the Bank Manager of the appellant Bank had to admit that when the bearer cheque of the original defendant No. 3 came to his Bank on 23.2.1965, his Officer drew attention of the Bank Manager to the fact that the accounts was opened on 22.2.1965 by original defendant No. 3, demand draft was deposited on the same day and the bearer cheque for withdrawal was presented by original defendant No. 3 on 23.2.1965, and this according to the said Officer was highly suspicious but inspite of this warning or inspite of this suggestion to the Bank Manager to act cautiously, he ordered payment of the amount against the bearer cheque.
8. The said Bank Manager i.e. the witness of the Central Bank further stated in his evidence that before clearing the bearer cheque, he had enquired from the Manager of Dena Bank and on being satisfied from the Manager of Dena Bank, then only he ordered payment under the bearer cheque. This evidence of the Manager of the appellant Bank is contradicted by the Manager of Dena Bank who in unequivocal terms stated the Manager of the appellant Bank did not contact him at all.
9. It will therefore be clear from the aforesaid evidence that the appellant Bank has not at all been successful in proving good faith and absence of negligence in the instant transaction. Consequently, the appellant Bank cannot get the benefit of Section 131. To the contrary, it has to be held that the appellant Bank did not act in good faith but acted most negligently and therefore the appellant Bank cannot claim protection under Section 131.
10. As between the negligence of the original plaintiff in sending the demand draft by ordinary post, and the negligence of the appellant Bank in allowing withdrawal of the amount in the aforesaid circumstances, it is the negligence of the appellant Bank that has resulted in causing loss to the plaintiff and therefore the appellant Bank has to be held liable to make good the loss. For all these reasons, the appeal is required to be dismissed. Consequently, the order:
ORDER
The appeal is dismissed. The judgment and decree of the Trial Court is confirmed. Parties to bear their own costs so far as appeal is concerned. Certified copy expedited.