JUDGMENT
Sivasubramaniam, J.
1. The unsuccessful defendant in O.S. No. 3807 of 1977 on the file of the IV Additional Judge, City Civil Court, Madras, is the appellant in this regular appeal. The respondent herein was the plaintiff in the said suit which was filed for recovery of a sum of Rs,47,882.96.
2. The material allegations in the plaint are as follows; – One B.K. Shetty purchased a draft for Rs. 20/- bearing Rs. 581439 dated 27.3.1974 from the Arnbur Branch of the Indian Bank, the plaintiff. One B. Ramaswami had purchased another draft for Rs. 30/- bearing Rs. 726112 dated 2.4.1974 from the Vaniyambadi Branch of the Indian Bank. One S. Ramanathan who has got an account with the South Tambaram Branch of the defendant Bank, namely, Vysya Bank Ltd., appears to have got into possession of these two drafts and these two drafts were materially altered. The name of the payee, the amount, the name of the branch on which the drafts were issued were all altered. Though the drafts were purchased for payment by the Salem Main Branch of the plaintiff Bank, the name of the Branch was altered as Harbour Branch and the amount were altered as Rs. 15,000/- and Rs. 21,000/-respectively. The name of the payee was altered as S. Ramanathan. These two drafts were put in the account of S. Ramanathan which he had with the defendant Bank. These two drafts were presented for collection in the clearing house and they were paid with an endorsement that they were paid without advice pending receipt of the usual protection advice from the issuing branch. Later, on, the Harbour branch was informed by the Vaniampadi Branch by their letter dated 8.6.1976 that they did not issue any demand draft for Rs. 21,000/- So also the Ambur branch informed that they did not issue any draft for Rs.-15,000/-. A complaint was given to the Crime Branch of the North Beach Police Station and the payee could not be traced as it was reported that he was dead. But for the endorsement made by the South Mambalam Branch of the defendant Bank, payments would not have been made for these two demand drafts by the plaintiff Bank. The plaintiff supposes’ that S. Ramanathan, the customer’ of the defendant Bank, is a bogus person who has no permanent address. The defendant Bank acted with gross negligence in the matter of opening an account in the name of Ramanathan without proper introduction or making proper enquiries. The immediate withdrawal of substantially the whole amount covered by the two drafts ought to have raised suspicion in the minds of the persons who dealt with the drafts when they were remitted with the defendant bank. So,, the defendant is, not entitled to the protection under Section 131-A of the Negotiable Instruments Act. Hence, he praintiff has filed the suit for recovery of the total sum of Rs. 36,000 covered by the two drafts together’ with interest of Rs. 11,882.96 all totalling to Rs. 47,882.96.
3. The appellant defendant resisted the suit and filed a written statement raising the following contentions: – On the basis of the. allegations made in the Rlaint, an inference is fairly possible that the drafts were infact issued for the sums of Rs. 15,000/- and Rs. 21,000/- respectively in favour of a genuine person bearing the name of S.Ramanathan. For over 10 weeksj the plaintiff Bankfailedto intimate the defendant casting any doubt on. the. genuineness’ of the drafts. So, it is likely, that something must have happened at the plaintiff’s’ Bank branches-at Ambur – and Vaniambadi in. respect of the alleged alterations. The plaintiff acted negligently’ and without reasonable care and caution in having made the payment without the protection advice from the issuing Bank. Since, it is alleged by the plaintiff-Bank themselves that the alterations of the name of the. payee, the amount and. the name of the drawee Bank were not visible to the naked eyes and they are not capable of arousing any suspicion, there cannot be any justification for the defendant Bank to suspect that its customer was not a true owner, of the drafts or that the drafts. were not genuine. The T. Nagar branch of the defendant Bank was opened on 18.3.1974. Thiru S. Ramanathan opened the Current Account on 21.3,1974 by making a cash deposit. A week later, he deposited the draft for Rs. 15,000/- for collection and the amount was withdrawn by 4 different cheques. The second draft for Rs. 21,000/-was deposited on 3.4.1974 and a major portion of the amount was withdrawn in 4′ different cheques and there was a balance of Rs. 1,310/- in the account. Since the’ account was opened with cash, there was nothing suspicious about the manner in which the account was opened. There was no heed or circumstances necessitating any special enquiries to be made, aboutthe customer who was duly introduced – by another customer of the Branch. Since, the first draft was deposited a week later, it cannot be suggested that there was any connection. between the opening of the account and the issue of the draft. So, the defendant is entitjed to the protection under Section 131-A of the Negotiable ” Instruments Act.
4. On the pleadings of the parties, the trial Court found as many as six issues and decreed the. suit holding that the defendant Bank did. not act in’ good faith ano without negligence and so they are not entitled to the protection under Section 131-A of the Negotiable Instruments Act. Aggrieved against this decision, the defendant has filed the above appeal.
5. The following points would, arise for consideration in this appeal:
1. Whether the defendant Bank has acted in good, faith and without negligence and is entitled to protection under Section 131-A of the Negotiable Instruments Act.
2. Whether the plaintiff-Bank is guilty of contributory negligahce in passing the Drafts for payment?
6. Point, Nos. 1 and 2 : – The plaintiff-Bank has come forward with the present suit for recovery of the suit amount on the basis that the. two Drafts Exs. A-7 and A-9, which were. issued, by their Ambur Branch and Vaniyambadi Branch respectively for Rs. 20/- and Rs. 30/- respectively, were’ tampered and materially altered with Rs. 15,000/- and Rs. 21,000/- respectively. The said Drafts were originally issued in the name of B.K. Shetty and B. Ramasiwamy respectively and they have materially altered the names as S. Ramanathan. Though, ah issue was raised by the trial Court as to whether the Demand Drafts are genuine or not and considered elaborately by the trial Court, it is unnecessary for the purpose of the present appeal since both the parties have agreed that the Drafts Ex. A-7 and A-9 have been materially altered. Therefore, it is unnecessary to go into that aspect now. and the short question that has to be decided in this appeal is regarding the liability of the defendant Bank to reimburse the plaintiff-Bank who were made to pay the said sums found in the altered drafts on the basis of the protective endorsement made by the defendant-Bank on behalf of its customer. We shall, now deal with the two Drafts Ex. A-7 and A-9 as per the manner in which they were issued and materially altered.
7. Ex. A-7 is the first Draft issued by the Arnbu’r Branch of the Indian Bank on 27.3.1974. It was issued originally in the name of one B.K. Shetty for a sum of Rs. 20/- and it was addressed to the Salem Main Branch of the Indian Bank. It is now found altered in respect of. the material particulars, excepting the signature of the Office of the issuing Bank. The payee’s name has been altered from S.E. Shetty to S. Ratnanathan and the amount was altered as Rs. 15,000/-. Similarly, instead of Salem Main Branch, it is altered as Harbour Madras. These alterations, according to both the parties, have been done erasing the original writings by a technical process. S.B. Shanmugham, who was the then Agent of the Bank at Ambur Branch of the Indian Bank, was examined is P.W. 1 in the suit. He proved the fact that the Draft was originally issued for a sum of Rs. 20/-in the name of one B.K. Shetty and addressed to the Salem Main Branch. He has explained the procedure in detail regarding the issue of Draft in that Bank. According to him, a chalan is prescribed by the Bank in which the name of the person in whose favour the Draft has to be issued, the Branch in which the payment is to be made and other particulars have to be filled up. Then the applicant will present the chalan along with the required amount to the Cashier and thereafter, the chalan will be passed on to the Clerk in the draft section who is expected to verify the particulars furnished in the application Draft. After such verification, the Clerk in the Draft section will prepare a Draft and send it along with the chalan to the officer concerned. After obtaining the signature of the concerned officer, the Draft will be delivered to the applicant. The Bank is maintaining a register in respect of the issue of Drafts wherein necessary particulars are noted in respect of each Draft isued by the Bank. He filed the regiseter Ex. A-6 wherein the particulars relating to the Draft Ex. A-7 are entered. According to him, except the signature, all other particulars have been altered in the Draft. P.W. 4 one R.S. Mani, who is the signatory for the Draft Ex. A-7, was the then Accountant of the Ambur Branch of the Indian Bank. He has corroberated the evidence of P.W. 1 regarding the procedure for issuing Drafts in their Bank. During the course of his evidence, he has stated that according to the relevant entry in Ex. A-6 register, the, Draft Ex. A-7 was purchased by one Rarnu for payment to one B.K. Shety. Therefore, the evidence of P.Ws. 1 and 4 proves the fact beyond any doubt that actually the Draft was issued only for Rs. 20/- in favour of one B.K. Shetty and the name was subsequently altered as S. Ramanathan and the amount altered as Rs. 15,000/-.
8. As regards the Draft Ex. A9 dated 2.4,1974 it was issued by Vaniambady Branch of the Indian Bank to one B. Ramaswami for a sum of Rs. 30/-. The original writing of the figure Rs. 30/-and the name of the payee B. Ramaswami and the payee Bank as Salem Main Branch have been altered. In respect of this Draft. P.W. 3 by name Noordein, who was the Officer of the Vaniambadi Branch at the relevant time, has been examined. He has spoken about the procedure for the issue of a Draft in his Branch, as spoken to by P.Ws. 1 and 4. He proved the register Ex. A-8 and the relevant entry found therein as Ex. A-8(a). According to him, the Draft was originally purchased by one Ranganathan in favour of Ram as warn i as per the entry found in Ex. A-8(a).
9. As already noticed earlier, there is no dispute between the parties regarding the alteration of the Drafts Ex. A-7 and A-9, and it is nobody’s case that the said Drafts are genuine as they stand now. However, the Drafts were sent to the Forensic Expert for his examination and report. One K. Ramakrishnan, a document expert has been examined as P.W. 6 in this case. He is attached to the Tamil Nadu Forensic Science Laboratory, Madras. In. his evidence, he has given details about his examination of these documents in detail. According to him, his Office received Ex. A-16 along with the disputed Drafts Ex. A-7 and A-9. He has examined the disputed writings in Ex. A-7 and A-9 with a magnification lens and also with special light. He has also stated that he examined the documents under microscope using various lights and also under violet light. He has taken enlargements of the photographs which are marked as Ex. A-20 and A-21, and has submitted report marked as Ex. A-17. He is of the opinion that an attempt has been made to chemically erase the original writing in these Drafts. He gave a definite opinion to the effect that the ink used for the two writings is different. According to him, the present writing was written with a ball point pen, while the original writing was written with an ordinary pen. However, it was elicited from him that he was not asked to examine whether the original writer could have written the substituted writing. It is also in evidence that no other documents ware given to him for examination or comparison. He was cross-examined at length as to the manner of the eraser by chemical process and the method adopted by him for finding out the tampering of the Drafts. He stated that’ he did not do any chemical fuming. According to the I learned Counsel for the appellant, only if “a chemical fuming is done, the original writing as well as the present writing will be visible. P.W. 6 has given a categorical opinion by stating that since the photographs taken in respect of both the drafts furnished all materials to find out the original writing, he Aid not fume the documents. According to him, depending on the nature of fuming in some cases the’ writing will fade away and in some cases it will not. Ultimatelly, he gave the opinion in re-examination stating that depending on the chemicals used,, erasere and the ink used for writing, the original writing will become visible after the lapse of a period ranging from one day’ to many years. On the basis of this opinion, both the parties proceeded on the basis that the original writing, which was admitedly erased by using chemicals, started becoming visible after a lapse of time and till then for naked eyes of all the employees of the Banks in this case, the original writing would not have been visible and only the altered writings would have been visible. So, the evidence of this witness has established the fact that originally the two Drafts were issued only for Rs. 20/- and Rs. 50/- respectively in the rnames of B.K. Shetty and B. Ramaswami and they have been materially altered in the name of one S. Ramanathan and the amounts have been altered as Rs. 15,000/- and Rs. 21,000/- respectively. It is also not in dispute that the plaintiff Bank has paid these amounts on the basis of the altered Drafts with the protective endorsement of the defendant-Bank.
10. Mr. Shama Rao, learned Counsel appearing for the appellant laid much stress on the fact that the original chalane submitted by the purchasers and the applicants of the Drafts Ex. A-7 and A-9, which according to him are the basic documents which are very important, would reveal the naked truth in this case. He submits that the registers filed by the Banks in this case are only self-serving documents and no reliance can be placed on them as the concerned people in the. Banks could have fabricated the entries in order to save their skin. He has come forward with a theory that in the absence of the original chalans showing the payment of Rs. 20/- and Rs. 30/- respectively, it is not possible to come to a conclusion that the figures in the Drafts have been subsequently altered after they had passed out of the hands of the concerned Bank. He has made elaborate submissions to demonstrate how such a material alteration could have taken place within the Bank premises concerned without his knowledge of either the purchasers or the payees of the Drafts. The theory put forward on behalf of the defendant is that it is quite possible that the original purchasers of the Drafts Ex. A-7 and A-9 could have actually paid the sum of Rs. 15,000/- and Rs. 21,000/- respectively and wanted the Drafts in the name of the persons named by them, and that somebody in the Ambur Branch and Vaniyambadi Branch of the Indian Bank, who were in charge of the issue of the Drafts, could have tampered with the Drafts by making the entries as if the Drafts were issued for Rs. 20/- and Rs. 30/-respectively, and after gettinig the signatures of the concerned officer of the Banks, the figures Rs. 20/- and Rs. 30/-could have been, erased and the figures Rs. 15,000/- and Rs. 21,000/- could have been written and then delivered to the parties who had applied for the issue of the Drafts. To put it in other words, these material alterations could have been made by the employees of the concerned Branches of the plaintiff Bank without the knowledge of the parties concerned. The persons, who were responsible for the same, would have misappropriated the sum of Rs. 15,000 and Rs. 21,000 which were originally paid by the purchasers of Exs. A7 and A9. According to the learned Counsel, this possibility of tampering with the Drafts has not been overruled by the plaintiff-Bank by the production of the original chalans. In the absence of the chalans, it is not possible for the plaintiff Bank to assert that the sums of Rs. 15,000 and Rs. 21,000 were not received by the respective branches. According to him, there are certain intrinsic evidence to prove the case of the defendant in this regard. It is argued that when the defendant insisted on the production of the original chalans, the plaintiff was pound to produce the same to disprove the defence raised by the defendant. No explanation was offered by the plaintiff for the non-production of the said chalans. In such circumstances, an adverse inference has to be drawn against the plaintiff on this aspect. Apart from that, the purchasers of the two Drafts have not been traced and examined as witnesses by the plaintiff. In the absence of the chalans or the evidence of the purchasers, it is not possible to say when the fabrication had taken place. There is enough material to show that the alteration must have taken place in the Bank itself. Learned Counsel submits that P.W. 1 has categorically admitted that the rubber stamp containing the date was put in Ex. A7 in Ambur Branch itself. The date 27.8.1984 was originally written in ink on which this rubber stamp was affixed. It was elicited from the Expert P.W. 6 that if chemicals had been used for erasure of the writings, the date stamp found on Ex. A17 also should have been affected. However, it is seen that the rubber stamp has not been altered in any manner and therefore according to the learned Counsel, somebody in the Ambur Branch of the Bank should have put the date stamp after the erasure of the original writing. Further, it was contended that the original writings and the altered writings found in Exs. A7 and A9 have not been compared to trace the author of these writings. Apart from that, the writings of the concerned Bank staff also should have been compared with the disputed writings. We do not find any force in the said contentions, since the failure to make some such comparison would not automatically prove that the drafts were materially altered by the Bank staff and not by anyone else. Further, the learned Counsel attacked the Demand Draft Register Ex. A8 of Ambur Branch on the ground that it has not been maintained in the regular course of business and a close scrutiny of the said register would reveal that the entries have been made to suit their own convenience. He pointed out that in page 32 of the sale register which contains the relevant entry marked as Ex. A8(a) relating to the Draft Ex. A7, the name of one Ranganathan is written in capital letters. It was pointed out that no other name is written in capital letters. According to him, this indicates that these entries must have come into existence under suspicious circumstances indicating that there was some attempt to manipulate the records. It is no doubt true that all other names are written in ordinary letters. But by this alone, we cannot say that Ex. A8 is a fabricated register. We have carefully gone through the several entries in the various pages of the said register and we find that they ought to have been made in the regular course of business and not entered at a later point of time. Therefore, this aspect of the matter also does not advance the case of the appellant in any manner.
11. Then the learned Counsel pointed out that Exs. A11 and A14, which are the letters written to Ambur Branch and Vaniambadi Branch on 28.3.1974 and 27.5.1974 respectively do not contain any reference number and they were written to the said Branches requesting them to send the duplicate advices of the usual protection advice regarding the said two Drafts. He referred to Ex. A15 which was a letter sent by the Vaniambadi Branch to Harbour Branch on 8.6.1974 and that it does not contain any reference to the letters Exs. A11 and 14. Reliance was placed on Ex. Al letter of the Reconciliation Department of the Head Office of the Indian Bank. This also shows that the plaintiff Bank was not aware of the payment for these Drafts before 11.6.1984. Relying on Exs. A11 and A15 learned Counsel submits that Exs. A11 and A14 must have come into existence subsequently. On a perusal of these documents, we are unable to come to the said conclusion. Merely because, there is no corresponding reference in these letters, it cannot be stated that they are all fabricated documents. The Bank has committed one other mistake in Ex. B2 wherein the name of the page was mentioned as Sami Chetty by the Harbour Branch of the Indian Bank. The witnesses examined in this case are not able to explain how the name of Sami Chetty came to be mentioned in the said letter. As the name of B.K. Sheety is clearly found in Exs. A6 and A7, the name mentioned in Ex. B2 must be a bona fide mistake. On consideration of these materials, we find that such a material alteration could not have been done in the Ambur Branch and Vaniambadi Branch as, during the process of issuing the Drafts, the matter is being dealt with by a number of persons in the Bank and unless all of them colluded together and joined in the scheme the alterations could not have been done within the Bank campus itself. Apart from that, the registers maintained in the regular course of business show the receipt of actual amounts by the Bank for which Drafts were issued in the names of the respective parties. Moreover, when the officials of the Bank Branches were examined as “witnesses, no suggestion had been put to them on this aspect.
12. In the background of the evidence available in this case, we have to find out whether the defendant-Bank is liable to pay the suit amount. Learned Counsel for the appellant strenuously argued that the defendant is protected by Sees. 131 and 131-A of the Negotiable Instruments Act. Section 131 of the Act reads as follOws:
Non-liability of banker receiving payment of cheque : Banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specifically 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.
(Explanation omitted).
Section 131-A of the Act reads as follows:
Application of chapter to drafts:
The provision of this Chapter shall apply to any draft, as defined in Section 85-A, as if the draft were a cheque.
It is no doubt true that it is a salient provision made with a view to protect the interests of the banks in their day-to-day activities. In order to attract the application of the section and to avail of the protection given by it, the conditions imposed by the section must be strictly complied with, otherwise the banker’s liability for receiving payment of a customer ; with a defective title in the cheque will remain unaffected. One of the important ingredients of the said provision is that the banker must have received the payment in good faith and without negligence. The standard by which the absence or otherwise of negligence is to be determined by reference to the practice of reasonable men carrying on the business of bankers and endeavouring to do so in such a manner as may be calculated to protect themselves and others against fraud. Learned Counsel for the appellant submits that negligence is essentially a question of fact and it must depend upon the circumstances of each case whether negligence has been proved or not.
13. Learned Counsel for the appellant argued that the standard of care of a banker in collecting cheques cdhnot be put at a very high pedestal since there cannot be a rule that a Bank should not collect cheques without a thorough enquiry as to the history of such cheques. According to him, if a Bank has acted without apparent negligence, he could discharge his liability and his action must be protected under Section 131 of the Negotiable Instruments Act. In support of his contention, learned Counsel relied on the decision reported in Com missioners of Taxation v. E.S.A. Bank A.I.R. 1920 P.C. 88, wherein the following principle was laid:
Negligence is a question of fact and each case must be decided on its own merits. And the standard of care of a banker in collecting cheques is not that of an individual invited to purchase or cash such cheques for it is no part of the business or ordinary practice of individuals to cash cheques, while it is the business and ordinary practice of a bank to collect cheques.
To lay down that no cheque should be collected without a thorough enquiry as to the history of the cheque would render banking business impossible and the fact fact in this case of a cheque being paid into the account, the next day after the account was opened being in no way unusual was not such as to put the bank on enquiry and there was no negligence on the part of the bank collecting that cheque.
This principle was followed in the decision reported in Bapulal Premchand v. The Nath Bank Ltd. I.L.R. (1947) Bom. 236, wherein it was held that under Section 131 of the Negotiable Instruments Act if a banker in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself, then in case the title to the cheque proved defective, the bank was not liable to the true owner by reason only of having received such payment and that the negligence with which the Court was concerned was not in opening the account but in collecting the cheque. In that case, on the facts of the case, the Court found that there was no note of warning or alarm of the – cheque itself and therefore the bank could not be held to be negligent in collecting the amount of the cheque which on the face of it did not arouse any suspicion. Then the learned Counsel for the appellant submitted that the opening of the account by the said Rama-nathan with the defendant-bank by itself cannot amount to negligence unless it is shown that it was done as part of the fraud. In this case, the Branch of the defendant-Bank was opened at Thiaga-raya Nagar on 18.3.1974 and the account was opened on 21.3.1974 on which date the disputed Drafts did not come into existence. In support of his contentions, he relied on the decision of this Court reported in Bharat Bank v. Kishinchand Chellaram I.L.R. , wherein it was held as follows:
The question whether the Bank had acted with negligence in the opening of the account would, however, be relevant under Section 131 to this extent that, if the opening of the account and the deposit of the cheque were really part of the scheme, as where the account itself was opened with the cheque in question or where it was put into the account so shortly after the opening of the account as to lead to the inference that it was part of it, then negligence in the matter of opening the account must be treated as negligence in the matter of realisation of the cheque.
14. The true legal position that emerges regarding the liability of a banker and the protection available under Section 131 of the Negotiable Instruments Act from the various decisions of the Privy Council and the Courts in India are as follows:Section 131 of the Negotiable Instruments Act does not provide an absolute immunity to the collecting banker, and unless he can bring himself within the conditions formulated by this section, he is left to his common law liability for conversion or for money had and received, in the event of the person from whom he takes the cheque having no title or a defective title. Since the statutory duty contemplated under this section takes the form of a qualified immunity from a strict liability at common law, the onus of showing that he did take such reasonable care lies upon the defendant banker. Where the customer is in possession of the cheque at the time of delivery for collection, and appears upon the face of it to be the “holder”, i.e., the payee or the indorsee or the bearer, the banker is entitled to assume that the customer is the owner of the cheque unless there are facts which are known, or ought to be known, to the banker which would cause a reasonable banker to suspect that the customer is not the true owner. The essential condition, that is, the duty to take care, is purely to be imposed by the statute on the banker for the benefit of the true owner, as between whom there is no contractual relation giving rise to a duty. It is the price which the banker pays for the protection afforded by the statute. It is therefore from the standpoint of the true owner, that the question of good faith and absence of negligence has to be considered. Broadly speaking, the banker must exercise the same care and fore-thought in the interests of the true owner with regard to cheques paid in by the customer, as a reasonable businessman would bring to bear on similar business of his own. It is no excuse to say that it is probable that the exercise of care would not have enabled him to discover the defective, title of the customer, for any person, who does not exercise reasonable care is outside the section altogether. The negligence must relate to the collection of the cheque and not to any antecedent act, such as opening an account, though circumstances connected with it may Shed light on the question of negligence. Thus if a customer opens an account with cash and there is nothing suspicious about the manner in which the account is opened, the fact that the bank made no enquiries about the customer would not disentitle the bank to protection under the section. But this omission may, however, be taken with other facts, and circumstances, for the purpose of weighing the question whatever the bank has proved that it has not been negligent. Hence, where the account of a custorrier was opened without obtaining a reference and without any inquiry and the manner in which the account was operated upon was peculiar, and the name as indorsed on the demand draft collected by the bank did not tally with the name of the customer as given in the application form and the specimen signature, it was held, taking all these circumstances into account, that the bank failed to prove that it was not guilty of negligence. The question whether the bank had acted with negligence in the opening of. account will, however, be relevant under Section 131 to this extent that if the opening of the account and the deposit of the cheque are really part of one scheme, as where the account itself is opened ‘.with the cheque in question or where it. is put into the account, so shortly after the opening of the account as to lead to the inference that it is part of it, then negligence in the matter of opening the account must be treated as negligence in the matter of realization of the cheque. It might happen that even, where an account is opened without a proper enquiry it might continue to be operated upon satisfactorily for some time, but long afterwards a cheque night be put into the account which might turn out to be forged. In such a case it cannot be laid down as an inexorable rule that negligence in the opening of an account must be treated as negligence in the receipt of the amount of the cheque. The question would then be one of fact as to how far two stages. can be regarded as so intimately associated as to be considered as one transaction. The question should, however in strictness be determined separately with regard to the collection of sach cheque. The duty of care owed by the banker to the true owner of the cheque does not arise until, the cheque is delivered to him by his. customer; It is then, and then only, that any. duty to make inquiries can arise. What inquiries the danker should make, and what facts are sufficient, to cause him reasonably suspect that the customer is not the true owner, must depend upon current banking practice and change as that practice changes. Cases decided 30 years ago, when the use by the general public of banking facilities was much less widespread, may not be reliable guide to what the duty of a careful bank in relation to enquiries, and as to facts which should give rise to suspicion is to-day. If the bank has fallen short of its own requirements of care as revealed in its. written instructions, it. would go a long way to establish negligence; it cannot be taken always as a universal rule. Conversely, proof by the bank that its rules had been observed by its officers would not be an answer to a claim in conversion though that would be relevant factor to show that the bank had acted without negligence. The principle which should guide the Court in deciding the question of banker’s negligence are four in number: – (1) The standard of care required of bankers? is that to be derived from the ordinary practice of bankers; (2) The standard of care required. of bankers does not include the duty to subject an account to miscrpscopic examination. (3) In considering whether a bank has been negligent in receiving a cheque and collecting the money for it, it has presumably to scrutinise the circumstances in which a bank accepts a new customer and opens a new account and (4) The onus is upon the bank to show that it acted without negligence.
15. Bearing these principles in mind, we have to see whether the appellant-bank had acted without negligence and in good faith in acting as a banker for the said S. Ramanathan and in encashing the Drafts presented by him and paying over the proceeds to him subsequently. The evidence adduced on behalf of the defendant bank reveals that they did not even verify at the time of opening of the account that a person by name S. Ramanathan was in existence. The way. in which the instruction was done arid the account was opened in the name of the said S. Ramanathan clearly indicates the total lack of diligence on the part of the defendant bank. As we have already seen, the T. Nagar Branch was opened only on 18.3.1974 and the account was opened in the name of Ramanathan shortly thereafter on 21.3.1974. It was urged by the learned Counsel for the appellant that the address given by the said Ramanathan shows that he was residing very close by to the bank and he was introduced by one of the customers of the defendant bank, and therefore, there was no ground to hold that the Bank had acted negligently in the matter of the opening of the account. On the other hand, the evidence of O.W. 1 who was the Branch Manager in Mambalam Branch during the relevant time, shows that the bank did not even care to make semblence of an enquiry about the antecedents of the said Ramanathan in whose name the account was opened.. According to him, one Arunachalam of Electronic Traders introduced the said Ramanathan for opening an account and that he was a cocoanut merchant. It was admitted by him that at the time of opening the account, they did not go to his place to verify his place of business or residence and whether he was a cocoanut merchant or not. It is claimed that they have simply believed the words of the said Arunachalam who had introduced him. It is interesting to note that even the said Arunachalam had no personal account of his own, but he was only operating the accounts of the concern by name Electronic Traders. There is no evidence to show that the said Electronic Traders were having substantial transactions with the defendant-bank. The said Arunachalam was operating the accounts as the agent of Electronic Traders which is a proprietory concern and the proprietrix, is a lady. The following passage from his evidence is worthy of public:
I can’t remember if we have given any credit facility for the electronic traders. I don’t know if he had dealings in lakhs or in thousands. I don’t remember if Arunachalam had any personal account in our Bank. Arunachalam affixed this seal of Electronic Traders and signed as their agent at the time of introduction. Electronic Traders is a proprietor concern. It was a lady. I don’t remember her name. That proprietrix did not come personally to introduce Ramanathan. I did’t contact her, to verify about Ramanathan. Subsequent to Ex. B2, I did not go to the address given by Ramanathan since I heard that he died. I don’t remember what kind of enquiries I made. I don’t remember the name of the person who told me that Ramanathan was dead. I did not make enquiries about the financial position of Ramanathan. Arunachalam told me that Ramanathan was coconut merchant. After the incident we could not contact Arunachalam also since he had stopped doing business.
The above admissions by D.W. 1 demonstrate that the accounts were opened by the bankers in a very casual manner without realising their duties or obligations in carrying on their banking activities. Perhaps, they were anxious to open as many accounts as possible since the Branch was opened only a few days before the disputed Drafts were presented by the said Ramanathan. It is apparent that even the said Electronic Traders could have opened their account only oh 18.3. 1974 when the Branch was opened or shortly thereafter. D.W. 1 had not known previously either Arunachalam or the Proprietrix of the Electronic Traders or S. Ramanathan, before the accounts were opened. In those circumstances, the defendant Bank should have made enquiries at the time of opening of the account. Even otherwise, when the two Drafts for considerable amounts were deposited, by the said Ramanathan for encashment within a short time after the opening of the accounts, the defendant bank should have entertained a reasonable suspicion and verified the identity of the said S. Ramanathan. It is surprising to note that even after the defendant-bank came, to know about the conversion of the Drafts, they could not trade either the said Arunachalam or Ramanathan. Learned Counsel for the appellant submits that there were absolutely no grounds for suspecting the bona fides of the said Ramanathan when he opened the account with the defendant-bank, since the account was opened with deposit in cash. After the two Drafts were encashed by the defendant-bank and credited in his account he had withdrawn the amounts under various cheques. As there was no attempt on his part to draw the amount immediately in a lump sum, there was no reason for the Bank officials to suspect anything about the said transaction. We are unable to appreciate these contentions, since we have found that in the very opening of the account, the defendant-bank did not care to take even elementary precaution. Moreover, excepting the deposit of the small amount at the time of opening the accounts, there were no other transactions before these Drafts were deposited.
16. One other point that was raised by the learned Counsel for the appellant is that the defendant-bank alone is not responsible in this case, as the paying banks which are the Branches of the plaintiff-bank, are also not absolved of their responsibility in paying the amounts shown in the converted Drafts. They have not taken proper care in issuing the Drafts and paying the amounts due under them. Usually the Drafts are written in such a way as there are carbon impressions on the back of the Drafts, ensuring the safety from forgery. Apart from that, the Drafts ” are subjected to infra redy rays for detecting forgery. Admittedly these precautions have not been taken by the paying banks and, therefore, they have substantially contributed to the negligence, if any, on the part of the defendant-bank. The plea of contributory negligence cannot, be invoked in a case of this nature. As held in the decision in Kanyalal Thankurdas v. Bombay Cycle Importing Co. , and in Bapulal Premchand v. The Nath Bank Ltd., I.L.R. M 947 Bom. 236. the contributory negligence on the part of the true owner can be no answer by the person, who converts the Article, that he should be let off from his liability because of the negligence of the true owner. The true position regarding the responsibility of a banker in opening the accounts and regarding the plea of contributory negligence by the paying banks has been elaborately considered by a Bench of this Court consisting of Natarajan and Padrnanabhan, JJ. in the decision reported in Indian Bank v. Catholic Syrian Bank Ltd. I.L.R. , and they have held as follows:
Where a bank allowed a customer to open an account on the recommendation of a customer who could not be said to be respectable and without testing the credentials of the person desirous of opening the account and sent a crossed demand draft on another bank for a big amount of new customer put into account only a few days after opening of the account for realisation and in consequence, the bank on which the draft was drawn was put to loss as the draft was a forged one, the bank opening the account could not be considered to have acted without negligence even if it might have acted in good faith. Consequently, the bank was not entitled to benefit of Sees. 131 and 131-A. In such a case, the bank which honoured the draft could not be said to be guilty of contributory negligence merely because it failed to make enquiries from its branch which issued the draft before the same was cleared and the amount thereon was credited to the account of the new customer and he withdrew it.
We are in respectful agreement with the reasonings of the learned Judges in the said decision. Therefore, we are of the opinion that the plaintiff-bank has not acted negligently in the matter of issuing Drafts and making payment for the same. It is to be noted in this connection that the paying Banks mainly acted on the protective endorsement made by the defendant bank who were acting on behalf of its customer. Therefore there was no scope for the paying banks to make an. enquiry about the genuineness of the drafts at the time of payment unless the’ forgery is apparent on the face of the Drafts themselves or there are other patent facts showing forgery.
However, in this case, it is admitted that at the time of payment, the original writings in the Drafts were not visible for a naked eye and that the same became visible only some time later. In these circumstances, the paying banks were justified in making payment for the Drafts But there is one aspect which has to be noticed in this connection. The paying banks were also not vigilant in detecting the conversion of the Drafts at the earliest point of time. If only -they had verified the reconciliation statement earlier, they could have detected the conversion without much delay. We are not able to appreciate the manner in which the Branches at Ambur and Vaniyambadi have acted in dealing with the payment for those Drafts. There is absolutely no explanation why the conversion was not detected for nearly 65 days when the banks are expected to verify the’ reconciliation statements at the earliest point of time. This is indicated by us solely with a view to warn the banks so that they may avoid recurrence of similar forgeries, in future. These points are therefore answered against the appellant.
17. We find there are no merits in the appeal and we, therefore, confirm the findings of the trial Court and dismiss this appeal. In view of the fact that the respondent-Bank was not vigilant in not noticing the conversion of the Drafts within a reasonable time and considering the peculiar facts of the present case, we direct each party to bear their respective costs in this appeal.