{"id":180662,"date":"1989-11-07T00:00:00","date_gmt":"1989-11-06T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989"},"modified":"2016-05-15T12:55:25","modified_gmt":"2016-05-15T07:25:25","slug":"indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989","title":{"rendered":"Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989<\/div>\n
Equivalent citations: 1989 SCR, Supl. (2) 27 1990 SCC (1) 484<\/div>\n
Author: K Saikia<\/div>\n
Bench: Saikia, K.N. (J)<\/div>\n
           PETITIONER:\nINDIAN OVERSEAS BANK\n\n\tVs.\n\nRESPONDENT:\nINDUSTRIAL CHAIN CONCERN\n\nDATE OF JUDGMENT07\/11\/1989\n\nBENCH:\nSAIKIA, K.N. (J)\nBENCH:\nSAIKIA, K.N. (J)\nFATHIMA BEEVI, M. (J)\n\nCITATION:\n 1989 SCR  Supl. (2)  27  1990 SCC  (1) 484\n JT 1989 (4)   334\t  1989 SCALE  (2)1014\n\n\nACT:\n    Negotiable Instruments Act--Section 131--Bank can  avail\nof immunity as collecting banker--Opening of account--Duties\nof bank.\n\n\n\nHEADNOTE:\n    The\t plaintiff--respondent filed original suit No.\t7667\nof  1975 against the appellant-Bank in the City Civil  Court\nMadras for recovery of Rs.26,383.49 p. together with  inter-\nest  and costs, being the amount of loss suffered by  it  on\naccount of the negligence and conversion on the part of\t the\nappellant who negligently allowed one Sethuraman, Manager of\nthe  plaintiff's firm to open a \"fictitious account\" in\t the\nname  of  \"Industrial Chain Concern\" as its  proprietor\t and\nhelped\thim  to pay in stolen drafts and  cheques  drawn  in\nfavour\tof  the plaintiff, and by collecting  the  same\t and\npaying\tthe proceeds thereof to Sethuraman, and closing\t the\naccount\t thereafter.  The plaintiff's case was that  it\t was\ndoing extensive business in steel Roller chains and  sprock-\nets with leading Industries and Government undertakings\t and\nhad  supplied goods to seven parties who sent to  it  drafts\nand  cheques  for  Rs.26,383.49 p. which  were\treceived  by\nSethuraman,  its Manager, who opened fictitious\t account  in\nthe name of the firm with the bank, and withdrew the  amount\ndefrauding  the\t plaintiff. According to the  plaintiff\t the\nBank  was negligent and guilty of conversion in opening\t the\naccount\t as  also in collecting the cheques.  Hence  it\t was\nliable to make good the loss suffered by it. The  appellant-\nBank  denied the allegations of negligence levelled  by\t the\nplaintiff. It stated that Sethuraman, who was a\t Collegemate\nof  the Manager of the Bank was known to him earlier and  at\nthe  time of opening the account he had represented  to\t the\nBank  that he, as proprietor, had started a firm  under\t the\nname  and style of \"Industrial Chain Concern\" and had  shown\nin  that  connection some business papers on  the  basis  of\nwhich  the Manager gave the introduction necessary  to\topen\nthe  Account  but the manager declined\tto  grant  overdraft\nfacility  asked for by him. The bank asserted that it  acted\nin  good faith throughout the dealings till the\t closure  of\nthe account.\n    The\t Trial Court held that the appellant bank had  acted\nin  good  faith but not without negligence  in\topening\t the\naccount and operating the same in the process of  collection\nof cheques\/drafts and that it was not\n28\nentitled  to protection of section 131 of the Negotiable  of\nInstruments Act. Accordingly it decreed the plaintiff's suit\nBank's\tappeal to the High Court against the decree  of\t the\ntrial  Court  was dismissed. Hence this\t appeal\t by  Special\nLeave.\nAllowing the appeal, this Court,\n    HELD:  As  a general rule a banker\tbefore\taccepting  a\ncustomer, must take reasonable care to satisfy himself\tthat\nthe  person  in question is of good reputation,\t and  if  he\nfails  to do so he will run the risk of forfeiting the\tpro-\ntection under section 131 of the Negotiable Instruments Act.\nWhat  is  \"reasonable care\", will depend on  the  facts\t and\ncircumstances of the case. [45F-G]\n    The\t courts\t have  tended to accept\t the  practices\t and\nprocedures  which bankers lay down for themselves, but\tthat\ncan by no means be decisive. [45G]\n    Till an account is opened, no banker-customer  relation-\nship  exists  between the bank and the person  proposing  to\nopen an account. Once the account is open, the\trelationship\nis created and with it mutual rights and obligations between\nthe  banker and the customer are created under law.  Opening\nan  account  by depositing cash is slightly  different\tfrom\nopening one by a cheque as in that case, the Bank has to act\naccording to the tenor of that instrument and its collection\nand  payment  involves the Bank's avowed duty  to  its\treal\nowner if the proposer happens not to be its real owner. Even\nwhen  an  account is opened by depositing cash but  so\tsoon\nafter the opening of the account any cheque is paid into  it\nas to make it part of the same transaction with the opening,\nthe same duty may be implied by law. [34D-F]\n    One of the tests of deciding whether the Bank was negli-\ngent,  though not always conclusive, is to see\twhether\t the\nRules or instructions of the Banks were followed or not.  In\nthe instant case, Sethuraman having been known to the Manag-\ner  who gave the introduction there was no violation of\t any\ninstruction or Rules. [35E; 36D]\n    Except when circumstances of a case so justify in making\ninquiries  the bankers attitude may be solicitious  and\t not\ndetective. It is difficult to hold that the Bank was  negli-\ngent  in opening the account, accepting the deposit of\tcash\nby  a  person  known to the Manager of the  Bank  under\t the\ncircumstances. [37G; 38B]\n29\n     The  bank\tnormally has an obligation  to\tcollect\t the\ncustomer's cheques paid into his account. [42H]\n     In\t every case of opening an account bank takes a\tman-\ndate  and,  until  changed, controls the  operation  of\t the\naccount.  In  the  instant case having\talready\t opened\t the\naccount\t the Bank was not concerned to question the  custom-\ner's  title  to a cheque paid in by him, when a\t cheque\t was\ndrawn in favour of 'industrial Chain Concern'. [41A-B]\n      If a banker fails to present a cheque within a reason-\nable time after it reaches him, he is liable to his customer\nfor loss arising from the delay. A banker receiving instruc-\ntions  paid  in for collection and credit  to  a  customer's\naccount may collect solely for a customer or for himself  or\nboth.  Where he collects for the customer he will be  liable\nin  conversion if the customer has no title. However, if  he\ncollects  in good faith and without negligence he may  plead\nstatutory protection under section 131 of the Act. [41D-E]\n\t To  enable a bank to avail the immunity under\tsec-\ntion  131  as a collecting banker he has  to  bring  himself\nwithin\tthe conditions formulated by the section.  Otherwise\nhe is left to his common law liability for conversion or for\nmoney  had and received in case of the person from  whom  he\ntook  the  cheques having no title or defective\t title.\t The\nconditions are: (a) that the banker should act in good faith\nand  without negligence in receiving a payment, that is,  in\nthe  process of collection, (b) that the banker\t should\t re-\nceive  payment\tfor  a customer on behalf of  him  and\tthus\nacting\tas a mere agent in collection of the cheque and\t not\nas  an\taccount\t holder (c) that the persons  for  whom\t the\nbanker\tacts  must be his customer and (d) that\t the  cheque\nshould\tbe one crossed generally or especially\tto  himself.\nThe  receipt of payment contemplated by the section  is\t one\nfrom  the  drawee bank. It is settled law that the  onus  of\nbringing  himself  within the section rests on\tthe  banker.\nThere  is very little evidence relating to the\tdeposit\t and\nparticulars  of cheques deposited and hence it is  difficult\nto  hold that the Bank ignored obvious indications  and\t was\nnegligent at that time. [41G-H; 42A; 48G]\n      Commissioner of Taxation v. English Scottish & Austra-\nlian Bank, [1920] AC 683; Ladbroke & Co. v. Todd, [1914]  30\nTLR 433; Turner v. London & Provincial Bank, [1903] 2  Legal\nDecisions  Affecting  Bankers 33; Mariani & Co.\t v.  Midland\nBank, [1968] 2 ALL E.R. 573 at 582; Lloyds Bank Ltd. v. E.B.\nSavory & Company, [1933] AC 201; Capital & Counties Bank  v.\nGordon,\t [1903] AC 240; Barclays Bank Ltd. v. Astley  Indus-\ntrial Trust Ltd.. [1970] 1 All E.R. 719; Arab\n30\nBank  Ltd. v. Ross, [1952] 1 All E.R. 709; Karak Rubber\t Co.\nLtd.  v.  Burden (No. 2), [1972] 1 All E.R.  1210;  Penmount\nEstates Ltd. v. National Provincial Bank Ltd., [1945] 173 LT\n344;  Motor Traders Guarantee Corpn. v. Midland\t Bank  Ltd.,\n[1937] 4 All E.R. 90; Bharat Bank Ltd. v. Kishanchand  Chel-\nlaram, AIR 1955 Mad. 402; Sanyasilingam v. Exchange Bank  of\nIndia,\tAIR 1948 Bombay 1; Woodbrier v. Catholic  Bank,\t AIR\n1958 Kerala 316; Orbit Mining & Trading Co. v.\tWestminister\nBank, [1962] 3 ALL E.R. 565; Underwood v. Bank of Liverpool,\n[1924] 1 K.B. 775; Bapulal Premchand v. Nath Bank Ltd.,\t AIR\n1946 Bom. 482; Lloyds Bank Ltd. v. Chartered Bank of  India,\nAustralia  &  China,<\/a>  [1929] 1 K.B. 40 and  Ross  v.  London\nCounty, Westminister & Parr's Bank Ltd., [1919] 1 K.B.\t678,\nreferred to.\n\n\n\nJUDGMENT:\n<\/pre>\n
    CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 2842  of
\n1982.\n<\/p>\n
    From  the  Judgment\t and Order dated  1.10.1981  of\t the
\nMadras High Court in Appeal No. 516 of 1977.\n<\/p>\n
    C.\tSeetharamiah, P. Krishna Rao and K.R.  Nagaraja\t for
\nthe Appellant.\n<\/p>\n
S. Balakrishnan for the Respondent.\n<\/p>\n
The Judgment of the Court was delivered by
\n    K.N. SAIKIA, J. This defendant’s appeal by special leave
\nis  from  the Judgment of the High Court  of  Judicature  at
\nMadras\tdated  1.10.1981 passed in Appeal No.  516  of\t1977
\ndismissing  the appeal and affirming the decree in O.S.\t No.
\n7667 of 1975.\n<\/p>\n
    The\t respondent–Industrial Chain Concern  as  plaintiff
\nfiled  Original\t Suit  No. 7667 of 1975 in  the\t City  Civil
\nCourt,\tMadras for recovery of Rs.26,383.49p. together\twith
\ninterest and costs, being the total amount of loss sustained
\nby it on account of the alleged negligence and conversion on
\nthe  part of the defendant–Indian overseas Bank having\t its
\ncentral\t office\t at 151, Mount Road,  Madras-2,\t hereinafter
\nreferred as ‘the Bank’, by negligently allowing one Sethura-
\nman,  Manager  of  the plaintiff firm at Madras\t to  open  a
\n‘fictitious  account’ in the name of ‘Industrial Chain\tCon-
\ncern’  as  its proprietor and helping him to pay  in  stolen
\ndrafts\tand  cheques drawn in favour of\t the  plaintiff\t and
\ncollecting  the same and paying to Sethuraman  the  proceeds
\nthereof and closing the account thereafter. It was the\tcase
\nof  the\t plaintiff that it was doing extensive\tbusiness  in
\nSteel  Roller Chains and Sprockets with\t leading  industries
\nand Government undertakings. Its head office was situate  at
\n36, Linghi Chetti Street, Madras-1. It had supplied goods to
\nseven parties who sent to it drafts and cheques in its
\n31<\/span>
\nname amounting to Rs.26,383.49 and those drafts and  cheques
\nhad  been  received by Sethuraman, its\tManager,  who  after
\nopening the ‘fictitious account’ in the Bank’s\tNungambakkam
\nBranch\tpaid in the stolen drafts and cheques and  the\tBank
\ncollected those and allowed Sethuraman to withdraw the\tsame
\ndefrauding  the\t plaintiff. The plaintiff averred  that\t the
\nBank  was negligent and guilty of conversion in\t opening  of
\nthe account, collection of the cheques and drafts and allow-
\ning  Sethuraman to withdraw the same and therefore,  it\t was
\nliable to make good the plaintiff’s loss.\n<\/p>\n
    The\t appellant Bank as defendant resisted the suit\tcon-
\ntending,  inter alia, that it was not negligent in  allowing
\nSethuraman  to open the account inasmuch as approaching\t the
\nBank  Sethuraman  represented that he,\tas  proprietor,\t had
\nstarted a firm under the name and style of “Industrial Chain
\nConcern” and proposed to open an account in that name. Since
\nthe Manager of the Bank at Nungambakkam Branch was erstwhile
\nclassmate  of Sethuraman he (the Manager) knew him and\tgave
\nthe  introduction relying on which the current\taccount\t was
\nopened\tand  after  opening the account, which\twas  a\treal
\naccount\t and not a ‘fictitious account’ as alleged,  various
\ncheques\t and  drafts had been paid into the account  by\t the
\ncustomer  for  collection  and the Bank in  good  faith\t and
\nwithout\t negligence,  in course of its\tbusiness,  collected
\nthem  and  credited the account and Sethuraman\tas  customer
\nwithdrew  money\t from his account, and that neither  at\t the
\ntime of opening the account for at the time of paying in and
\ncollection of the cheques, nor at the time of allowing money
\nto  be withdrawn there was anything to arouse any  suspicion
\nregarding  the\tbona  fides of the  representation  made  by
\nSethuraman. Later on the customer having expressed a  desire
\nto close the account because, as he said, he was winding  up
\nhis business, the account was closed. There was,  therefore,
\nno  negligence on the part of the Bank acting in good  faith
\nand it was not liable for conversion.\n<\/p>\n
    At\tthe  trial the plaintiff firm examined\tits  Manager
\nD.R.  Murthy (PW-1) while the defendant Bank  also  examined
\nits  Manager  S.P.  Muthukrishnan (DW-1).  The\ttrial  court
\ndecreeing the suit held that the defendant Bank had acted in
\ngood faith but not without negligence in opening the account
\nand  operating the same and in the process of collection  of
\nthe cheques and drafts and it was not entitled to invoke the
\nprotection of section 131 of the Negotiable Instruments\t Act
\nand, consequently, it was liable to make good the loss\twith
\ninterest  as claimed by the plaintiff. The Bank\t having\t ap-
\npealed therefrom, the High Court agreed with the findings of
\nthe trial court and dismissed the appeal.\n<\/p>\n
32<\/span><\/p>\n
    Mr. C. Seetharamiah, the learned counsel for the  appel-
\nlant  submits,\tinter alia, that the finding of\t the  courts
\nbelow  that the defendant Bank was negligent in opening\t the
\naccount is contrary to law inasmuch as there were no circum-
\nstances\t antecedent or present to arouse any  suspicion\t and
\nthere  was no obligation on the part of the Bank to  compare
\nand  verify  the  name and address given  by  Sethuraman  as
\nproprietor, industrial Chain Concern with the address of the
\nthen  existing plaintiff’s firm of the same name;  that\t the
\nHigh Court’s finding that tile Bank was negligent in  clear-
\ning  the amounts of the cheques is equally contrary  to\t law
\ninasmuch  as there was nothing ex facie to put the  Bank  on
\nguard  and there was no warning or indication  of  defective
\ntitle on the race of the cheques and drafts to arouse suspi-
\ncion  of  the Bank and it was not necessary for it  to\tmake
\nthorough  enquiry about the cheques and drafts to have\tbeen
\nentitled  to  invoke the protection of section\t131  of\t the
\nNegotiable Instruments Act: and that even assuming, but\t not
\nadmitting that the Bank was negligent, the plaintiff  itself
\ncontributed  to it by entrusting Sethuraman to\treceive\t the
\ncheques and drafts and to deal with them for a long time and
\nthat even when the complaint was made to Deputy Commissioner
\nof  Police on 19.2.1975 it was about two cheques  only,\t and
\nthere was still no complaint about other cheques and drafts.
\n    The first question to be decided, therefore, is  whether
\nthe Bank was negligent in opening the account in the name of
\nSethurarman, as proprietor, Industrial Chain Concern. Mr. S.
\nBalakrishnan,  for the respondent, defends the High  Court’s
\nJudgment.\n<\/p>\n
    Evidence of DW- 1 Muthukrishnan, Manager of the Bank  at
\nthe relevant time is that the account was opened by Ext.  B-
\n1,  the\t Account Opening From, on  3.10.1974  by  Sethuraman
\nunder the title Industrial Chain Concern, the sole  proprie-
\ntary  concern.\tIt was signed by Sethuraman  for  Industrial
\nChain Concern with a rubber stamp as proprietor. Muthukrish-
\nnan, DW- 1 deposed:\n<\/p>\n
\t      “This  account  was opened  by  R.  Sethuraman
\n\t      under the title Industrial Chain Concern\tsole
\n\t      proprietary  concern. Sethuraman is  the\tsole
\n\t      proprietor.  Before that date I knew  Sethura-
\n\t      man.  He\twas my college mate  in\t 1955-57  in
\n\t      Vivekananda  College.  I was  meeting  him  in
\n\t      social  gathering.  When he went\tto  open  an
\n\t      account,\the  represented\t that  he  had\tjust
\n\t      started as commission agent under the name and
\n\t      style  of\t Industrial Chain  Concern  as\tsole
\n\t      proprietary  concern.  He wanted\tto  open  an
\n\t      account  with Overdraft facility.\t I  declined
\n\t      his  request for overdraft because he  himself
\n\t      stated  that  he had just\t started  commission
\n\t      business. I
\n\t      33<\/span>
\n\t      was  able to identify him as the college\tmate
\n\t      and  to  open his account I  have\t signed\t the
\n\t      introduction    in    my\t  personal    capac-
\n\t      ity   ……………   It  was  an   ordinary
\n\t      current  deposit\taccount.  The\tintroduction
\n\t      given by me was in the normal course of  bank-
\n\t      ing  business.  Before  opening  account,\t  he
\n\t      showed  me  some business\t correspondence\t and
\n\t      orders.  Some  of the orders  were  placed  by
\n\t      India Sugars and Refineries and Madras  Ferti-
\n\t      lisers. At that time there was nothing to show
\n\t      that  the Industrial Chain Concern was  not  a
\n\t      proprietary concern or that Sethuraman was  an
\n\t      employee\tof  the firm. He opened\t an  account
\n\t      with  cash deposit of Rs. 100 as he  described
\n\t      himself  as  a proprietary concern and  as  he
\n\t      just  then started the business and as  I\t did
\n\t      not grant loan facility there was no  occasion
\n\t      for calling credit reports from other bankers.
\n\t      There  was  normal operation of  the  account.
\n\t      Cheques given in the name of the concern\twere
\n\t      deposited in the account and after realisation
\n\t      they were withdrawn.”\n<\/p><\/blockquote>\n
Comparing  the\tstatement of Account and Ext.  B1  with\t the
\nabove  evidence there is nothing to doubt this\twitness.  He
\ndenied that at any stage the Bank had acted with  negligence
\nor without good faith or that there was no proper  introduc-
\ntion  for opening an account. He clearly said that  the\t ad-
\ndress given in Ext. B1 was Nallathambi Mudali Chetti  Street
\nand  that  he  knew the location and it was  far  away\tfrom
\nNungambakkam.  That was the place of business of  Sethuraman
\nmentioned  at  the  opening of account and  the\t Mount\tRoad
\nBranch of the defendant Bank was the nearest Branch for that
\nplace.\tOpening of an account by Sethuraman with  a  trading
\nplace  at  Nallathambi Street with Nungambakkam\t Branch\t oc-
\ncurred to him as unusual but it did not create any suspicion
\nas  he asked Sethuraman why he wanted to open an account  in
\nNungambakkam Branch and Sethuraman replied: “I am a  commis-
\nsion  Agent.  I want overdraft facility. Your are  the\tonly
\nagent known to me and that is why I have come to  Nungambak-
\nkam  Branch.”  DW-1 also said that in  opening\tthe  Current
\nAccount\t he  glanced through the  order\t and  correspondence
\nshown to him by Sethuraman regarding supplies but he did not
\ncheck  up the address given in the correspondence  by  these
\ncompanies  in the name of the Industrial Chain\tConcern.  He
\ndenied\tthat he had not checked up the business\t credentials
\nfor  the  account to be opened in the name of  the  business
\nconcern\t and that he was negligent in that aspect. He  said:
\n“I declined overdraft facility. That itself shows that I was
\nnot negligent. Once I declined overdraft facility it did not
\nstrike me to refer Sethuraman to the nearest branch from his
\ntrading place. I did not refer him to the
\n34<\/span>
\nMount  Road Branch. I suggested he can go to the Mount\tRoad
\nBranch.\t He  came with another request\tthat  his  overdraft
\napplication  might be considered after the period  of  about
\none  year,  after his business had improved.  Therefore,  he
\nwanted\tto  open an account in\tNungambakkam  Branch.”\tBoth
\nCourts\tbelow  held that the Bank acted in  good  faith.  We
\nagree.\tThe  question is whether the Bank could be  held  to
\nhave been negligent while opening the account.
\n    It\tis,  however, necessary to bear in  mind  that\tthis
\nquestion is often associated with the question of negligence
\nin collecting cheques, etc. for the customers paid into\t the
\naccount. This is because till an account is opened no  bank-
\ner-customer  relationship  exists between the bank  and\t the
\nperson\tproposing  to open an account. Once the\t account  is
\nopened,\t that  relationship is created and  with  it  mutual
\nrights\tand obligation between the banker and  the  customer
\nare  created  under  law. Opening an account by\t cash  is  a
\nlittle\tdifferent from opening an account by a cheque as  in
\nthat case the Bank has to act according to the tenor of that
\ninstrument  and\t its  collection and  payment  involves\t the
\nBank’s\tduty owed to its real owner if the proposer  happens
\nnot to be its real owner. Even when an account is opened  by
\ndepositing cash but so soon after the opening of the account
\nany  cheque is paid into it as to make it part of  the\tsame
\ntransaction  with the opening, the same duty may be  implied
\nby law.\n<\/p>\n
    What  is the standard of care to be taken by a  Bank  in
\nopening\t an account? In the Practice and Law of\t Banking  by
\nH.P. Sheldon, 11th Edition, in Chapter five at page 64 it is
\nsaid:\n<\/p>\n
\t      “Before opening an account for a customer\t who
\n\t      is  not already known to him, a banker  should
\n\t      make proper preliminary inquiries. In particu-
\n\t      lar, he should obtain references from  respon-
\n\t      sible  persons  with regard to  the  identity,
\n\t      integrity\t and  reliability  of  the  proposed
\n\t      customer.\n<\/p><\/blockquote>\n
\t\t\tIf  a banker does not act  prudently
\n\t      and  in accordance with current banking  prac-
\n\t      tice  when obtaining references  concerning  a
\n\t      proposed customer, he may later have cause for
\n\t      regret.”<\/p><\/blockquote>\n
    M.L.  Tannan in Banking Law and Practice in India,\t18th
\nEdition at page 198 says:\n<\/p>\n
\t      “Before opening a new account, a banker should
\n\t      take certain precautions and must ascertain by
\n\t      inquiring from the person wishing to open\t the
\n\t      account,\tif  such person is  unknown  to\t the
\n\t      banker, as to his profession or trade as\twell
\n\t      as  the nature of the account he\tproposes  to
\n\t      open. By mak-\n<\/p><\/blockquote>\n
\t      35<\/span><\/p>\n
\t      ing  necessary inquiries from  the  references
\n\t      furnished by the new customer, the banker\t can
\n\t      easily  verify  such  information\t and   judge
\n\t      whether  or not the person wishing to open  an
\n\t      account is a desirable customer. It is  neces-
\n\t      sary  for a bank to inquire, from\t responsible
\n\t      parties, given as references by the  customer,
\n\t      as to the latter’s integrity and respectabili-
\n\t      ty, an omission of which may result in serious
\n\t      consequences  not\t only for  the\tbanker\tcon-
\n\t      cerned,  but  also for other bankers  and\t the
\n\t      general public.”\n<\/p><\/blockquote>\n
    One of the tests of deciding whether the Bank was negli-\n<\/p><\/blockquote>\n
gent,  though not always conclusive, is to see\twhether\t the
\nRules or instructions of the Banks were followed or not.  We
\nmay accordingly consult those instructions. Ext. B6 contains
\nthe general instructions regarding constituent accounts\t for
\nbank. Mark II deals with opening of accounts. It says:\n<\/p>\n
\t      “Except at large branches where the  sub-agent
\n\t      or  accountant may be authorised to open\tCur-
\n\t      rent Accounts, no new Current Account shall
\n\t      be  opened without the authority of the  agent
\n\t      manager  who  is solely  responsible  for\t all
\n\t      Current  Accounts being opened in\t the  proper
\n\t      manner. A written application on the appropri-
\n\t      ate  form must be submitted and will be  init-
\n\t      ialled  by  the agent at the top\tleft  corner
\n\t      after he has satisfied himself of the respect-
\n\t      ability  of the applicant(s). It is  important
\n\t      that  every  party must be introduced  to\t the
\n\t      Bank  by\ta respectable person  known  to\t the
\n\t      Bank,  who must normally call at the Bank\t and
\n\t      sign in the column specially provided for\t the
\n\t      purpose  in the account opening form.  In\t all
\n\t      cases his signature must be verified with\t the
\n\t      specimen\tlodged\tand attested. The  agent  or
\n\t      accountant  may introduce constituents to\t the
\n\t      Bank provided they are known to him personally
\n\t      and in such cases he should sign the  applica-
\n\t      tion  form  at the appropriate  place  in\t his
\n\t      personal\tcapacity. When the  introduction  of
\n\t      any other member of the staff is accepted, the
\n\t      agent must invariably make independent inquiry
\n\t      and record his findings on the account opening
\n\t      form   for  future  reference  if\t  the\tneed
\n\t      arises ………”\n<\/p><\/blockquote>\n
Mark  IV  deals with accounts of  proprietary  concerns.  It
\nsays:\n<\/p>\n
\t      “An individual trading in the name of  concern
\n\t      should fill in form F.S. 5 and sign it in\t his
\n\t      personal name and also affix his signature  on
\n\t      behalf  of  the concern as proprietor  in\t the
\n\t      space provided.”\n<\/p><\/blockquote>\n
36<\/span><\/p>\n
if  the Banker was negligent in following up the  references
\ngiven  at opening of account and subsequently  cheques\tetc.
\nare  collected for the customer paid into that\taccount\t and
\nthose happened to be of someone else the Bank may be  liable
\nfor  conversion,  unless protected by law.  In\tthe  instant
\ncase,  Sethuraman having been known to the Manager who\tgave
\nthe introduction, there was no violation of any\t instruction
\nor Rules.\n<\/p>\n
    It\twas  held  in Commissioner of  Taxation\t v.  English
\nScottish  and Australian Bank, [1920] AC 683, that a  negli-
\ngence  in  collection  is not a question  of  negligence  in
\nopening an account, though the circumstances connected\twith
\nthe  opening  of an account may shed light on  the  question
\nwhether there was negligence in collecting a cheque.
\n    In Ladbroke & Co. v. Todd, [1914] 30 TLR 433, the plain-
\ntiff  drew  a cheque and sent it to the payee by  post.\t The
\nletter was stolen and the thief took it to the defendant,  a
\nbanker,\t and used it for the purpose of opening an  account-
\nfor the purpose of which he forged the payee’s\tendorsement.
\nThe defendant accepted believing him to be the payee. He was
\nnot introduced to the Bank and no references were  obtained.
\nThe defendant opened the account and the cheque was special-
\nly cleared at the request of the thief, and he drew out\t the
\nproceeds on the next day. On the discovery of the fraud\t the
\nplaintiff  brought an action against the defendant for\tcon-
\nversion.  One of the main questions raised was\twhether\t the
\naccount having been opened by payment in all the cheques  to
\nbe  collected  the defendant could be properly\tregarded  as
\nhaving received payment for a customer. It was held that  as
\naccount\t was already opened when the cheque  was  collected,
\npayment had been received for a customer. The drawer  there-
\nupon  sent  another  cheque to the real payee  and  took  an
\nassignment of his rights in the stolen cheque and, as  hold-
\ners of the cheque or alternatively as assignees, brought  an
\naction against the bank to recover the proceeds collected by
\nthe  bank as money had and received to their  use.  Evidence
\nwas  given  that it was the general practice of\t bankers  to
\nobtain a satisfactory introduction or reference. It was held
\nthat  the banker had acted in good faith, but was guilty  of
\nnegligence in not taking reasonable precautions to safeguard
\nthe  interests\tof  the true owner of the  cheque  and\tthat
\ntherefore  he  had  put himself outside\t the  protection  of
\nsection 82 of the Bills of Exchange Act, 1882. Bailbache, J.
\nalso  said that the banker would have been entitled  to\t the
\nprotection  of the section as having received payment for  a
\ncustomer, but had lost it owing to his want of due care.  It
\nwas also held that the relation of banker and customer began
\nas soon as the first cheque was handed in to the banker\t for
\ncollection, and not when it was paid.\n<\/p>\n
37<\/span><\/p>\n
    In Turner v. London and Provincial Bank, [1903] 2  Legal
\nDecisions  Affecting  Bankers 33, evidence was\tadmitted  as
\nproof of negligence, that the customer had given a reference
\non opening the account and that this was not followed up.
\n    In the instant case there was no question of a reference
\ninasmuch as the Manager himself knew Sethuraman and gave the
\nintroduction.  The account was not opened by depositing\t any
\ncheque\tbut by depositing case of Rs. 100. The first  cheque
\nwas paid into the account later and there is nothing to show
\nthat it formed part of the same transaction. No\t particulars
\nhave been proved as to the tenor of that cheque. The Manager
\nmade several inquiries which in the facts and  circumstances
\nof  the\t case, in our view, were sufficient, for  it  is  an
\naccepted  rule\tthat  the banker may  refrain  from  “making
\ninquiries  which it is improbable will lead to detection  of
\nthe  potential\tcustomer’s purpose if he  is  dishonest\t and
\nwhich  are calculated to offend him and may drive  away\t his
\ncustomer  if he is honest,” Marfani & Co. v.  Midland  Bank,
\n[1968] 2 All E.R. 573 (582). Except when circumstances of  a
\ncase so justifies, in making inquiries the banker’s attitude
\nmay be solicitous and not detective. Sethuraman was believed
\nwhen he said that he was the proprietor of Industrial  Chain
\nConcern which he recently started. He showed some orders and
\nreferences in proof of his business. The banker believed  in
\nexistence  of his business but did not meticulously  examine
\nthe  addresses. Sethuraman was asked as to why he wanted  to
\ncome to that branch and his reply was that he expected there
\nto  have  overdraft facility and when that  was\t refused  he
\nexpressed  that after his business improved he would  expect
\nto be granted overdraft facilities after one year. There  is
\nno  doubt that Sethuraman was a rogue, but he  prepared\t the
\nplan intelligently and the banker in good faith believed  in
\nhis  statements.  We, therefore, find it difficult  to\thold
\nthat the Bank was negligent in opening the account accepting
\nthe deposit of cash by a person known to the Manager of\t the
\nBank under the above circumstances.\n<\/p>\n
    Mr.\t Balakrishnan has argued that a cheque for  Rs.2,800
\nwas  paid in on the same date which was a stolen cheque\t and
\nit ought to have aroused suspicion of the banker. But  there
\nis nothing to show that it formed part of the same  transac-
\ntion. As we have already observed, once an account is opened
\nthe relationship of banker and customer begins. Duration  is
\nnot  of the essence. As was held in Ladbroke &\tCo.  (supra)
\nthe  mere opening of an account without the actual  transac-
\ntion was sufficient to constitute the relationship and\tthis
\nview  was  followed in Commissioner of Taxation\t v.  English
\nScottish and Australian Bank (supra) and it was stated\tthat
\nthe word ‘customer’ signifies a relationship of which  dura-
\ntion is not of the essence. The contract is not bet-\n<\/p>\n
38<\/span><\/p>\n
ween a habitue and a newcomer, but between a person for whom
\nthe  bank performs a casual service  ……………  and  a
\nperson\twho  has  an account of his own at  the\t bank.\tLord
\nChorley has even expressed the view that for the purpose  of
\nestablishing  the relationship of banker and customer  there
\nappears to be no logic in the actual opening of the account,
\nand when the banker agrees to accept the customer the  rela-
\ntionship  comes into existence at that time though  the\t ac-
\ncount may not be opened until later. According to the author
\n“the  relationship being contractual should be subjected  to
\nthe  normal  rules  of contract law and the  making  of\t the
\ncontract  depends on the acceptance of the offer. This\tcon-
\ntract could clearly be effected before an account had  actu-
\nally been opened though it would state that there must be an
\nagreement to open an account before the banker and  customer
\nrelationship  can  exist.”  In the instant  case  there\t is,
\ntherefore,  no doubt that the first cheque was\tsubsequently
\npaid  in  by Sethuraman as a customer and the  Bank  was  to
\ncollect it on account of the customer. The Bank,  therefore,
\nin collecting the cheque and paying the proceed to  Sethura-
\nman acted as a Collecting Banker and can be held  negligent,
\nif  at all, only as such as it was to collect it on  account
\nof  the customer. In fact, from the statement of account  it
\nis clear that the account was opened on October 3, 1974\t and
\nwas  closed on February 1, 1975 and there were a  number  of
\ntransactions  of  deposits  and\t withdrawals.  The  detailed
\nparticulars of the cheques paid into the account are not  in
\nevidence,  it is, therefore, difficult to know whether\teach
\nindividual cheque or draft should have aroused suspicion  in
\nthe mind of the Banker before accepting the same for collec-
\ntion from its customer.\n<\/p>\n
    The\t High Court did not analyse the legal  position\t and
\ndid not consider the facts and circumstances in this  regard
\nin proper perspective. We are not inclined to hold the\tBank
\nnegligent in opening the account considered alone.
\n    The\t next question is whether the Bank was negligent  in
\ncollecting the cheques. In collecting a cheque on account of
\na  customer  the banker is protected by section 131  of\t the
\nNegotiable  Instruments Act, 188 1 (26 of 1881)\t hereinafter
\nreferred to as ‘the Act’ which reads:\n<\/p>\n
\t      “131.  Non-liability   of\t  banker   receiving
\n\t      payment\tof cheque–A banker who has in\tgood
\n\t      faith and without negligence received  payment
\n\t      for  a customer of a cheque crossed  generally
\n\t      or specially to himself shall not, in case the
\n\t      title  to the cheque proves  defective,  incur
\n\t      any liability to the true owner of the  cheque
\n\t      by  reason only of having received  such\tpay-
\n\t      ment.\n<\/p><\/blockquote>\n
\t      Explanation–A  banker receives payment  of  a
\n\t      cros-\n<\/p><\/blockquote>\n
\t      39<\/span><\/p>\n
\t      sed  cheque for a customer within the  meaning
\n\t      of this section notwithstanding that he  cred-
\n\t      its his customer’s account with the amount  of
\n\t      the cheque before receiving payment thereof.”\n<\/p><\/blockquote>\n
In  the\t section the words ‘a cheque  crossed  generally  or
\nspecially to himself’ are important to be noted. Section 131
\ncorresponded  to  section 82 of the Bills of  Exchange\tAct,
\n1882 of England which was repealed by the Cheques Act,\t1957
\nand  the protection there is now given by section 4  of\t the
\nCheques\t Act,  1957. English decisions\tcan,  therefore,  be
\nguide in this regard.\n<\/p>\n
    In\tLloyds Bank Ltd. v. E.B. Savory and Company,  [1933]
\nAC 20 1, the bank was held to be negligent (depriving it  of
\nthe  protection of section 82) not to ask a customer  though
\nrespectively introduced the name of his employer and in\t the
\ncase of a married woman the name of her husband’s  employer.
\nThis is a case where a fraud had arisen through an  employee
\nstealing cheques from his employer and placing them into the
\ncredit\tof  his account. Had the bank  known  his  employer,
\nenquiries would have been made.\n<\/p>\n
    The\t request for special collection as in case  of\tLad-
\nbroke  & Co. (supra) was absent in this case as the  account
\ncontinued  for\tquite  some time. Even in  case\t of  special
\ncollection  it was held that it was desired for the  purpose
\nof learning quickly whether or not the cheques will be paid.
\nThis  case was mentioned in Marfani and Co. Ltd. v.  Midland
\nBank Ltd., (supra) where the Midland Bank had make a special
\ncollection  without  being asked by their customer.  It\t was
\ndecided\t that this did not indicate that the  bank’s  suspi-
\ncions  were aroused which would require further inquiry.  It
\nwas  found that the bank took upon a special collection\t for
\nthe reasons (a) that the cheque was for a large sum, so that
\nit was in their interest to collect quickly and (b) that the
\ncustomer  about to buy a restaurant might require  the\tpro-
\nceeds quickly. In the Court of Appeal, Diplock LJ said\tthat
\nthe ‘significance’ of the special clearance depends upon the
\nJudge’s assessment of the credibility of the bank  officials
\nwho gave evidence; and he saw no reason to differ from\thim.
\nIn the instant case we have no reason to disbelieve what was
\nsaid by the Manager, DW- 1.\n<\/p>\n
    In\tthe  instant  case in the absence  of  any  evidence
\ngiving\tthe details of the cheques and their tenor,  we\t are
\nunable\tto  hold that there were notices  and  circumstances
\nwhich ought to arouse suspicion on the part of the bank. The
\nbank  normally has an obligation to collect  the  customer’s
\ncheques paid into his account. In Halsbury Laws of  England,
\n4th Edn., Vol. 3 at para 46 we read:\n<\/p>\n
40<\/span><\/p>\n
\t      “46. Customer’s title to money paid in. In the
\n\t      absence  of  notice, express  or\timplied\t the
\n\t      banker  is not concerned to question the\tcus-
\n\t      tomer’s  title  to money paid in by  him.\t al-
\n\t      though  if  a person entrusted with  a  cheque
\n\t      wrongfully  pays it to the bank to the  credit
\n\t      of someone who is not entitled to it, the true
\n\t      owner,  if he has given notice to the bank  of
\n\t      his title while the credit remains, may recov-<\/p><\/blockquote>\n
\t      er  the amount from the bank as money had\t and
\n\t      received;\t     or\t    as\t    damages\t for
\n\t      conversion  ………..\n<\/p><\/blockquote>\n
\t\t\tA banker should be very cautious  in
\n\t      accepting for a customer’s account any  cheque
\n\t      drawn  by\t him as agent upon  his\t principal’s
\n\t      account, however broad may be the authority to
\n\t      draw. If the court detects circumstances which
\n\t      should  arouse  suspicion that the  agent\t was
\n\t      abusing  his  authority, the  banker  will  be
\n\t      liable to the principal even though the cheque
\n\t      was crossed.”\n<\/p><\/blockquote>\n
This  is  because in every case of opening an  account\tbank
\ntakes  a mandate and, until changed, controls the  operation
\nof  the account. In the instant case, having already  opened
\nthe  account  the  Bank was not concerned  to  question\t the
\ncustomer’s title to money paid in by him, when a cheque\t was
\ndrawn in favour of Industrial Chain Concern.
\n    In\tCapital and Counties Bank v. Gordon, [1903] AC\t240,
\nthe  House of Lords accepted the position that a  bank\tacts
\nbasically as a mere agent or conduit pipe to receive payment
\nof the cheques from the banker on whom they are drawn and to
\nhold  the proceeds at the disposal of its  customer.  Unless
\ncrossed\t the banker himself is the holder for value. He\t may
\nbe a sum collecting agent or he may take as holder for value
\nor as holder in due course. As an agent of the customer\t for
\ncollection he is bound to exercise diligence in the  presen-
\ntation of the cheques for payment within reasonable time. If
\na banker fails to present a cheque within a reasonable\ttime
\nafter it reaches him, he is liable to his customer for\tloss
\narising from the delay. A banker receiving instruments\tpaid
\nin  for\t collection and credit to a customer’s\taccount\t may
\ncollect solely for a customer or for himself or both.  Where
\nhe collects for the customer he will be liable in conversion
\nif  the\t customer has no title. However, if he\tcollects  in
\ngood  faith  and without negligence he may  plead  statutory
\nprotection under section 131 of the Act.\n<\/p>\n
    In the instant case in the absence of evidence on record
\nwe  find  it  difficult to ascertain whether  the  bank\t was
\ncollecting the cheques merely as agent of the customer or as
\nholder\tfor  value or as holder in due course. Some  of\t the
\nentries in the statement do show deposits and
\n41<\/span>
\nwithdrawals of lesser amounts on the same date, but that  is
\nnot  enough for arriving at any conclusion whether the\tbank
\nwas  collecting as a holder for value and not merely  as  an
\nagent of the customer.\n<\/p>\n
    To enable a bank to avail the immunity under section 131
\nas  a collecting banker he has to bring himself\t within\t the
\nconditions  formulated by the section. Otherwise he is\tleft
\nto his common law liability for conversion or for money\t had
\nand  received  in case of the person from whom he  took\t the
\ncheques\t having no title or defective title. The  conditions
\nare: (a) that the banker should act in good faith and  with-
\nout  negligence\t in  receiving a payment, that\tis,  in\t the
\nprocess\t of collection, (b) that the banker  should  receive
\npayment for a customer on behalf of him and thus acting as a
\nmere agent in collection of the cheque and not as an account
\nholder (c) that the person for whom the banker acts must  be
\nhis  customer and (d) that the cheque should be one  crossed
\ngenerally  or especially to himself. The receipt of  payment
\ncontemplated by the section is one from the drawee bank.  It
\nis settled law that the onus of bringing himself within\t the
\nsection rests on the banker. In Capital and Counties Bank v.
\nGordon,\t (supra) as we have seen, the conception of  a\tcol-
\nlecting\t banker was that of “receiving the cheque  from\t the
\ncustomer,  presenting  it and receiving the  money  for\t the
\ncustomer,  and\tthen, and not till then, placing it  to\t the
\ncustomer’s  credit, exercising functions strictly  analogous
\nto  those of a clerk of the customer sent to a bank to\tcash
\nan  open  cheque for his employer.” If the  banker  performs
\nthese functions in course of his business, in good faith and
\nwithout negligence he will be within section 131 of the Act.
\n    We\thave already observed that the principle  enunciated
\nin  the\t Commissioners of Taxation v. English  Scottish\t and
\nAustralian Bank, (supra) is that the opening of the  account
\nis material as shedding light on the question whether  there
\nwas  negligence\t in collecting a cheque does bring  out\t the
\ntrue  position\tthat  there must  be  sufficient  connection
\nestablished  between  the  opening of the  account  and\t the
\ncollection of the cheque before a defence under section\t 131
\ncould  be held to be barred. The question would then be\t one
\nof facts as to how far the two stages can be regarded as  so
\nintimately  associated as to be considered as  one  transac-
\ntion.  We have already found that in the instant case  there
\nwas no evidence to show that the opening of the account\t and
\nthe collection of the cheques and drafts formed part of\t the
\nsame  transaction. Where a banker in good faith and  without
\nnegligence  receives payment for a customer of a cheque\t and
\nthe  customer  has  no title or a  defective  title  to\t the
\ncheque, the banker does not incur any liability to the\ttrue
\nowner  of the cheque by reason only of having received\tsuch
\npayment. The banker is not to be treated for purposes of the
\nprotective
\n42<\/span>
\nsection\t as  having  been negligent by reason  only  of\t his
\nfailure to concern himself with absence of, or\tirregularity
\nin,  endorsement of the cheque or other instrument to  which
\nthe section applies. This has to be so because the drawer of
\nthe cheque is not a customer of the bank while the payee is.
\nWhere the protection attaches, it covers the receipt of\t the
\ncheque and every step taken in the ordinary course of  busi-
\nness and intended to lead up to the receipt of payment. Even
\nif  there was negligence in opening of the account that\t act
\nipso facto would not result in loss to the true owner of the
\ncheque collected. While collecting the cheque for a customer
\nthe bank is under obligation to present it promptly so as to
\navoid  any loss due to change of position. When it  receives
\nthe money collected then also there is no direct loss to the
\ntrue owner. It is only when the amount is paid or  withdrawn
\nby  the customer that the loss results. During\tthis  period
\nwhat  is important to note is that at every step in  collec-
\ntion of the money and making payment the banker is bound  by
\nthe banker–customer relationship and rights and obligations
\nflowing\t therefrom. Even so, if there was anything to  rouse
\nsuspicion regarding the cheque and ownership of the customer
\nthe banker may find itself beyond the protection of  section\n<\/p>\n
131. The scope or ambit of possible suspicion will depend on
\nvarious\t situations  that  may have  prevailed\tbetween\t the
\ndrawer\tof the cheque and the customer. In the instant\tcase
\nSethuraman having been believed to have been the  proprietor
\nof Industrial Chain Concern the cheques payable to Industri-
\nal  Chain  Concern  left little scope to  have\taroused\t any
\nsuspicion  in the minds of the Bank. The position  may\thave
\nbeen  different\t if  Sethuraman was known as  acting  as  an
\nemployee  of Industrial Chain Concern and the  cheques\twere
\npayable\t to that concern, but were deposited  into  personal
\naccount\t of  the employee which was not the case  here.\t The
\nrequirement  of receiving payment for a customer  enunciated
\nclearly in Capital and Counties Bank Ltd. v. Gordon, (supra)
\nwas  extended  in Barclays Bank Ltd.  v.  Astley  Industrial
\nTrust  Ltd., [1970] 1 All E.R. 719 wherein it was held\tthat
\nthe banker may receive payment for himself and yet be  enti-
\ntled to the protection where, acting in a purely  collecting
\ncapacity,  he  has  nevertheless a lien or  is\totherwise  a
\nholder for value.\n<\/p>\n
    There  can be no doubt that the existence of  a  Current
\nAccount created relationship of banker and customer in\tthis
\ncase. Sethuraman would be a customer even if his account was
\nover drawn until that account was closed. In Halsbury’s Laws
\nof England, 4th Edn., Vol. 3 at para 103 it is said:\n<\/p>\n
\t      “If  the banker wishes to plead the  statutory
\n\t      protection, his dealings throughout must be in
\n\t      good faith and without negligence. The  alter-
\n\t      native liability arising from negligence
\n\t      43<\/span>
\n\t      renders the question of good faith practically
\n\t      superfluous,  and\t it  is\t seldom,  if   ever,
\n\t      raised.  Negligence  in  this  connection\t  is
\n\t      breach  of a duty to the possible true  owner,
\n\t      not  the\tcustomer,  created  by\tthe  statute
\n\t      itself,  the duty being not to  disregard\t the
\n\t      interests of the true owner.”\n<\/p><\/blockquote>\n
It  is\ta settled law that the test of\tnegligence  for\t the
\npurpose of section 131 of the Act is whether the transaction
\nof paying in any given cheque coupled with the circumstances
\nantecedent and present is so out of the ordinary course that
\nit ought to arouse doubts in the banker’s mind and cause him
\nto make inquiries. Lloyds Bank Ltd. v. E.B. Savory and\tCo.,
\n(supra),  Marfani & Co. Ltd. v. Midland Bank Ltd.,  (supra),
\nArab  Bank  Ltd. v. Ross, [1952] 1 All E.R.  709  and  Karak
\nRubber\tCo. Ltd. v. Burden, (No. 2) [1972] 1 All E.R.  1210.
\nare some of the authorities laying down the above rule.\t The
\nbanker is bound to make inquiries when there is anything  to
\nrouse  suspicion that the cheque is being  wrongfully  dealt
\nwith in being paid into the customer’s account. However, the
\nbanker\tis not called upon to be abnormally  suspicious,  as
\nwas  held  in Penmount Estates Ltd. v.\tNational  Provincial
\nBank  Ltd., [1945] 173 LT 344. It was held in Motor  Traders
\nGuarantee Corpn. v. Midland Bank Ltd., [1937] 4 All E.R. 90,
\nthat disregard of the bank’s own regulations may be evidence
\nof negligence. In the instant case no such regulation of the
\nbank has been produced so as to establish that in collecting
\nthe  cheque and allowing the customer to withdraw  the\tbank
\nviolated  its  own regulations. Nor has the  plaintiff\tbeen
\nable  to show that the transactions in paying in the  drafts
\nand  cheques coupled with the circumstances  antecedent\t and
\npresent were so out of the ordinary that it ought to  arouse
\ndoubts in the Banker’s mind and cause him make inquiries. As
\nwe  have observed that the Bank’s negligence in\t not  making
\ninquiries  as  to the customer upon opening  an\t account  if
\nthere  was any, could shed light in its negligence  in\tcol-
\nlecting\t the cheques for him. But we have found\t that  there
\nwas  no\t such negligence in this  case.\t Mr.  Balakrishnan’s
\nsubmission that in this case while opening the account,\t the
\nappellant should have inquired of the plaintiff’s firm\tdoes
\nnot reasonably follow in view of the fact that what Sethura-
\nman said was that he was the proprietor off the newly estab-
\nlished\tfirm “Industrial Chain Concern” and if that was\t the
\nname  of  the payee in the cheques, Sethuraman\thaving\tbeen
\naccepted as its proprietor there would be no room for suspi-
\ncion  that the firm’s cheques were being paid into the\tpro-
\nprietor’s personal account. There is no allegation and proof
\nthat  the collection and payment were made contrary  to\t the
\ntenors\tof the instruments. Carelessness could occur at\t the
\ntime  of collection especially if there was failure  to\t pay
\ndue attention to the actual terms of the mandate. The actual
\ncircumstances at the time of
\n44<\/span>
\npaying\tin for collection, if the amount was very large\t one
\nmight  raise  suspicion. But in this case the  first  cheque
\npaid  in  was of 2,800.17p. which could not be\tregarded  as
\nsuch  a large amount to have aroused  suspicion\t considering
\nthe  fact  that\t the firm was  ‘Industrial  Chain  Concern’,
\ndealing in industrial chains and pulleys.\n<\/p>\n
    Bharat  Bank  Ltd. v. Kishanchand  Chellaram,  AIR\t1955
\nMadras\t402;  Sanyasilingam v. Exchange Bank of\t India,\t AIR
\n1948  Bombay 1; Woodbrier v. Catholic Bank, AIR 1958  Kerala
\n316, applied the accepted principles to the facts. In  Orbit
\nMining & Trading Co. v. Westminister Bank, [1962] 3 All E.R.
\n565,  Harm LJ said: “It cannot at any rate be the duty of  a
\nbank continually to keep itself upto date as to the identity
\nof a customer’s employer”, though he is presumably  required
\nto  know the identity of the employer. That case is  distin-
\nguishable on facts. Underwood v. Bank of Liverpool, [1924] 1
\nK.B  775, was a case of a Director paying into his own\tpri-
\nvate account cheques in favour of the company duly  endorsed
\nby  himself as sole Director and as such distinguishable  on
\nfacts.\n<\/p>\n
    In\tBapulal Premchand v. Nath Bank Ltd., AIR  1946\tBom.
\n482,  Chagla  J, as he then was, in the facts of  that\tcase
\nexpressed  that\t in his opinion, there was no  absolute\t and
\nunqualified  obligation on a bank to make inquiries about  a
\nproposed customer and that modern banking practice  required
\nthat  a customer should be properly introduced or  the\tbank
\nshould act on the reference of some one whom it could trust.
\nTherefore, perhaps in most cases it would be wiser and\tmore
\nprudent\t for  a bank not to accept a customer  without\tsome
\nreference.  But he was not prepared to go so far as to\tsug-
\ngest  that  after a bank had been given a  proper  reference
\nwith regard to a proposed customer and although there was no
\nsuspicious  circumstances attendant upon the opening of\t the
\naccount,  it was still incumbent upon the bank to make\tfur-
\nther inquiries with regard to the customer. In that case the
\nmanager of the defendant-bank accepted.the reference of\t the
\ncashier Modi and also in fact made certain inquiries of Modi
\nas  to the position and status of the customer. It was\theld
\nthat  it was not obligatory upon the defendant-bank to\tmake
\nany  further  inquiries\t about his customer  and  in  having
\nfailed\tto make any such further inquiries in  his  Judgment
\nthey were not guilty of negligence. In the instant case\t the
\nManager himself gave the introduction.\n<\/p>\n
    As a general rule a banker before accepting a  customer,
\nmust take reasonable care to satisfy himself that the person
\nin question is of good reputation; and if he fails to do  so
\nhe  will run the risk of forfeiting the protection given  by
\nsection 131 of the Act but ‘reasonable care’ will
\n45<\/span>
\ndepend\ton  the\t facts and circumstances of  the  case.\t The
\ncourts\thave tended to accept the practices  and  procedures
\nwhich  bankers lay down for themselves, but that can  by  no
\nmeans  be  decisive. The “type of necessary inquiry  at\t the
\nopening of an account seems to be less stringent at  present
\nthan  it was a generation ago, and it is difficult to  spell
\nout  from  the cases any hard and fast rules.”\tThis  is  so
\nbecause,  in the words of Lord Chorley, the use\t of  banking
\nfacilities at the present day “has become so wide spread and
\nhas  penetrated\t so  far into social  strata  where  banking
\naccounts  were previously unknown, that precautions  at\t one
\ntime considered necessary are now difficult in the press  of
\nbusiness  to apply. One of the obvious problems is  that  of
\nthe  dishonest employee who may wish to open a bank  account
\nfor  the purpose of getting cheques collected for  which  he
\nhas stolen from his employer. If the banker is aware of\t his
\nemployment  he\twill naturally watch that those\t cheques  of
\nwhich  the  employer is payee, or in which he  is  otherwise
\ninterested, do not pass through the account. But how far can
\nhe be expected to keep himself informed of the employment of
\nall  his  customers? This is typical of the  problems  which
\nhave faced the judges, and on which their views have  tended
\nto vary from time to time, and indeed from judge to judge.”\n<\/p>\n
    The\t above\tproblem has been realised by the  courts  in
\nEngland and India. In Marfani & Co. v. Midland Bank  (supra)
\na man called Kureshy who was minded to cheat his  employers,
\nthe plaintiffs in the case went to a branch of the defendant
\nbank  and asked to open an account giving the name of  Sheik
\nEliaszade and also those of the referees. He was allowed  to
\ndo so immediately, before the references had been taken\t up,
\nand  paid Pound 50 the same day. The next day he paid  in  a
\nfurther\t Pound\t35 in cash and the  plaintiffs’\t cheque\t for
\nPound  3,000  made  payable to one Eliaszade  which  he\t had
\nstolen\tfrom them. His object in opening the account was  to
\nget this cheque collected by the defendant bank.
\n    The\t defendants in fact had this cheque  collected\tspe-
\ncially on the day it was paid in, and on the same day  wrote
\nto the referees. On the next day the defendants received the
\nproceeds of the cheque, and one of the officers of the\tbank
\non  same day had an interview with one of the  referees\t who
\nwas a customer at the same branch and who gave a  favourable
\naccount of Eliaszade which satisfied the manager–the  other
\nreferee\t never\treplied. During the following  days  Kureshy
\ndrew  out the whole of the Pound 3,000; indeed he  tried  to
\ndraw  out substantially more. On discovering the  fraud\t the
\nplaintiffs  sued  the defendant bank for the  conversion  of
\ntheir  cheque. When the defendants pleaded section 4 of\t the
\nCheques\t Act, 1957, the plaintiffs contended that  they\t had
\nbeen negligent under four heads:\n<\/p>\n
46<\/span><\/p>\n
(i) They had taken no steps to identify the proposed custom-
\ner, without which the referee’s good opinion was valueless.\n<\/p>\n
(ii) No inquiry was made as to the antecedents of Kureshy.\n<\/p>\n
(iii) Only one referee responded to the bank’s inquiry\n<\/p>\n
(iv) The cheque was in fact collected before the  references
\nhad been taken up.\n<\/p>\n
The  defendants called evidence that they had done all\tthat
\nwas usual in such a case, and claimed that this proved\tthat
\nthey  had acted with due care. It was held that the  defence
\nsucceeded.\n<\/p>\n
    It\tis thus clear that the question of negligence or  no
\nnegligence depends entirely on the facts of each  individual
\ncase and thus makes it difficult to judge in advance how any
\nparticular  litigation involving allegations  of  negligence
\nwill go. In the instant case Sethuraman had in effect opened
\nanother account in the name of the plaintiff firm and  oper-
\nated it himself as its proprietor.\n<\/p>\n
    As we have already observed, carelessness on the part of
\nthe  bank is most likely to occur at the time of  collection
\nof cheques especially in failure to pay due attention to the
\nactual terms of the mandate. It is not here a case of  play-
\ning the detective but of a careful examination of everything
\nwhich appears on the front and back of the instrument.\tEach
\nset  of\t circumstances produces its  own  requirements.\t The
\ninstruments,  crossing, type of crossing, per pro, pay\tcash
\nor order etc. are important. The banker may be negligent  in
\nacting\tcontrary to such mandate under\tappropriate  circum-
\nstances. In the instant case, however, no details  regarding
\nsuch mandates on the alleged cheques are available.
\n    The High Court took the view that if the Manager of\t the
\nBank gave the introduction of Sethuraman to open the account
\nin the plaintiff’s name showing him is its proprietor  with-
\nout making any enquiry as to its true relationship with\t the
\nconcern\t then  he was taking a risk and when  it  transpired
\nthat Sethuraman had made fraudulent representation then\t the
\nManager\t should be taken to have acted negligently.  We\t are
\nnot  inclined  to  agree inasmuch as while  dealing  with  a
\ncustomer  for collecting a cheque, there is  no\t contractual
\nrelation  between the collecting banker and the true  owner.
\nThe  duty  is implied by law. A conduct\t beneficial  to\t the
\ncustomer at the expense of the true owner when the Bank acts
\nin good faith and without negligence, is no
\n47<\/span>
\nbreach\tof that duty. It is from this position of  the\ttrue
\nowner  that question of negligence under section 131 of\t the
\nAct  has to be viewed. The formula approved in\tLloyds\tBank
\nLtd. v. Chartered Bank of India, Australia and China,<\/a> [1929]
\n1  K.B. 40, is that broadly speaking, the banker must  exer-
\ncise  the same care and forethought in the interest  of\t the
\ntrue owner, with regard to cheques paid in by customer, as a
\nreasonable  man would bring on similar business of his\town.
\nLord  Dunedin in Commissioner of Taxation (supra) said\tthat
\nthe  bank’s action must be in accordance with  the  ordinary
\npractice  of banking and bank cannot be held  liable  merely
\nbecause they have not subjected an account to a ‘microscopic
\nexamination’.\n<\/p>\n
    In\tRoss v. London County, Westminister and Parr’s\tBank
\nLtd., [1919] 1 K.B. 678, Bailhache J. took the view that the
\nclerks and cashiers of the defendant bank would be attribut-
\ned  the degree of intelligent and knowledge  ordinarily\t re-
\nquired\tof  a person in their position to fit them  for\t the
\ndischarge  of their duties but that no microscopic  examina-
\ntion  of  cheques paid in for collection was  necessary\t and
\nthat it was not expected that officials of banks should also
\nbe  ‘amateur detectives’. It could not be said\tthat  before
\nopening\t an account in the name of a firm the Bank would  be
\nrequired to enquiry always whether any firm of the same name
\nwas  already  in existence or not. What facts  ought  to  be
\nknown  to the Bank, what inquiries he should have  made\t and
\nwhat  facts were sufficient to cause the Bank reasonably  to
\nsuspect that Sethuraman was not the true owner in the  facts
\nand circumstances of the case would depend on current  bank-
\ning practice. What was the practice long time back when\t the
\nuse  of\t banking facilities by the general public  was\tmuch
\nless widespread may not be a proper guide. It should also be
\nnoted  that the duty of care owed by the Bank to the  plain-
\ntiff  as owner of the cheque did not arise until the  cheque
\nwas delivered to the Bank by the customer Sethuraman. It was
\nthen  only  that  duty to make inquiries  about\t the  cheque
\narose. Those inquiries would depend on the apparent tenor of
\nthe cheque and the knowledge of facts that earlier inquiries
\nascertained.  What we have to do is to look at all the\tcir-
\ncumstances  at\tthe time of the paying in of the  cheque  by
\nSethuraman and to see whether those circumstances were\tsuch
\nas would cause a reasonable banker possessed of the informa-
\ntion  gathered about Sethuraman to suspect that he  was\t not
\nthe true owner of the cheque. There is very little  evidence
\nrelating  to  the  deposit and particulars  of\tthe  cheques
\ndeposited  and hence it is difficult to hold that  the\tBank
\nignored obvious indications and was negligent at that  time.
\nIt  is difficult to accept so speculative a  proposition  as
\nwhat  would have happened if inquiries had been\t made  which
\nwere not made. It does not constitute any lack of reasonable
\ncare to refrain from making
\n48<\/span>
\nsuch inquiries which it was improbable to have led to detec-
\ntion of the customer’s fraud.\n<\/p>\n
    While arriving at the above conclusion we have borne  in
\nmind  the standard of reasonable care and the banking  prac-
\ntices  and its trend in a developing banking system  in\t the
\ncountry.  Any  stricter liability may not be  conducive.  It
\nwill also be observed that expansion of the banker’s liabil-
\nity and corresponding narrowing down of the banker’s protec-
\ntion under the provision of section 131 of the Act may\tmake
\nthe banker’s position so vulnerable as to be disadvantageous
\nto the expansion of banking business under the ever  expand-
\ning  banking system. This is because a commercial  bank,  as
\ndistinguished from a Central bank, has the following charac-
\nteristics,  namely  (a)\t that they accept  money  from,\t and
\ncollect cheques for, their customers and place them to their
\ncredit; (2) that they honour cheques or orders drawn on them
\nby  their  customers when presented for\t payment  and  debit
\ntheir customers accordingly; and (3) that they keep  current
\naccount\t in their books in which the credits and debits\t are
\nentered.  The receipt of money by banker from or on  account
\nof  his customer constitute it the debtor of  the  customer.
\nThe bank borrows the money and undertakes to repay it or any
\npart  of it at the branch of the bank where the\t account  is
\nkept  during banking hours and upon payment being  demanded.
\nThe banker has to discharge this obligation and normally the
\nbanker would not question the customer’s title to the  money
\npaid  in. Applying the above principles of law to the  facts
\nof  the\t instant case we are not inclined to hold  that\t the
\nBank  was  negligent either in collecting  the\tcheques\t and
\ndrafts or allowing Sethuraman to withdraw the proceeds.
\n    As\twe have taken the view that the bank was not  negli-
\ngent,  it  is  not necessary to deal with  the\tquestion  of
\ncontributory negligence. Let the loss lie where it falls.
\n    In the result, this appeal succeeds. The impugned  judg-
\nments  are set aside and the appeal is allowed, but  without
\nany order as to costs.\n<\/p>\n
Y. Lal\t\t\t\t       Appeal allowed.\n49<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989 Equivalent citations: 1989 SCR, Supl. (2) 27 1990 SCC (1) 484 Author: K Saikia Bench: Saikia, K.N. (J) PETITIONER: INDIAN OVERSEAS BANK Vs. RESPONDENT: INDUSTRIAL CHAIN CONCERN DATE OF JUDGMENT07\/11\/1989 BENCH: SAIKIA, K.N. (J) BENCH: SAIKIA, K.N. (J) FATHIMA BEEVI, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-180662","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nIndian Overseas Bank vs Industrial Chain Concern on 7 November, 1989 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989 - Free Judgements of Supreme Court & High Court | Legal India\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989\" \/>\n<meta property=\"og:site_name\" content=\"Free Judgements of Supreme Court & High Court | Legal India\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/LegalindiaCom\/\" \/>\n<meta property=\"article:published_time\" content=\"1989-11-06T18:30:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2016-05-15T07:25:25+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/i0.wp.com\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg?fit=512%2C512&ssl=1\" \/>\n\t<meta property=\"og:image:width\" content=\"512\" \/>\n\t<meta property=\"og:image:height\" content=\"512\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Legal India Admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@legaliadmin\" \/>\n<meta name=\"twitter:site\" content=\"@Legal_india\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Legal India Admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"50 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989\"},\"author\":{\"name\":\"Legal India Admin\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/person\\\/0bfdffe9059fb8bb24a86d094609c5ea\"},\"headline\":\"Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989\",\"datePublished\":\"1989-11-06T18:30:00+00:00\",\"dateModified\":\"2016-05-15T07:25:25+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989\"},\"wordCount\":8680,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#organization\"},\"articleSection\":[\"Supreme Court of India\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989\",\"name\":\"Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989 - Free Judgements of Supreme Court & High Court | Legal India\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#website\"},\"datePublished\":\"1989-11-06T18:30:00+00:00\",\"dateModified\":\"2016-05-15T07:25:25+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#website\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/\",\"name\":\"Free Judgements of Supreme Court & High Court | Legal India\",\"description\":\"Search and read the latest judgements, orders, and rulings from the Supreme Court of India and all High Courts. A comprehensive database for lawyers, advocates, and law students.\",\"publisher\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#organization\"},\"alternateName\":\"Free judgements of Supreme Court & High Court of India | Legal India\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#organization\",\"name\":\"Judgements of Supreme Court & High Court | Legal India\",\"alternateName\":\"Legal India\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/logo\\\/image\\\/\",\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/wp-content\\\/uploads\\\/sites\\\/5\\\/2025\\\/09\\\/legal-india-icon.jpg\",\"contentUrl\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/wp-content\\\/uploads\\\/sites\\\/5\\\/2025\\\/09\\\/legal-india-icon.jpg\",\"width\":512,\"height\":512,\"caption\":\"Judgements of Supreme Court & High Court | Legal India\"},\"image\":{\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/logo\\\/image\\\/\"},\"sameAs\":[\"https:\\\/\\\/www.facebook.com\\\/LegalindiaCom\\\/\",\"https:\\\/\\\/x.com\\\/Legal_india\"]},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/#\\\/schema\\\/person\\\/0bfdffe9059fb8bb24a86d094609c5ea\",\"name\":\"Legal India Admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"url\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"contentUrl\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g\",\"caption\":\"Legal India Admin\"},\"sameAs\":[\"https:\\\/\\\/www.legalindia.com\",\"https:\\\/\\\/x.com\\\/legaliadmin\"],\"url\":\"https:\\\/\\\/www.legalindia.com\\\/judgments\\\/author\\\/legal-india-admin\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989 - Free Judgements of Supreme Court & High Court | Legal India","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989","og_locale":"en_US","og_type":"article","og_title":"Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989 - Free Judgements of Supreme Court & High Court | Legal India","og_url":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989","og_site_name":"Free Judgements of Supreme Court & High Court | Legal India","article_publisher":"https:\/\/www.facebook.com\/LegalindiaCom\/","article_published_time":"1989-11-06T18:30:00+00:00","article_modified_time":"2016-05-15T07:25:25+00:00","og_image":[{"width":512,"height":512,"url":"https:\/\/i0.wp.com\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg?fit=512%2C512&ssl=1","type":"image\/jpeg"}],"author":"Legal India Admin","twitter_card":"summary_large_image","twitter_creator":"@legaliadmin","twitter_site":"@Legal_india","twitter_misc":{"Written by":"Legal India Admin","Est. reading time":"50 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989#article","isPartOf":{"@id":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989"},"author":{"name":"Legal India Admin","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/0bfdffe9059fb8bb24a86d094609c5ea"},"headline":"Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989","datePublished":"1989-11-06T18:30:00+00:00","dateModified":"2016-05-15T07:25:25+00:00","mainEntityOfPage":{"@id":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989"},"wordCount":8680,"commentCount":0,"publisher":{"@id":"https:\/\/www.legalindia.com\/judgments\/#organization"},"articleSection":["Supreme Court of India"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989","url":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989","name":"Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989 - Free Judgements of Supreme Court & High Court | Legal India","isPartOf":{"@id":"https:\/\/www.legalindia.com\/judgments\/#website"},"datePublished":"1989-11-06T18:30:00+00:00","dateModified":"2016-05-15T07:25:25+00:00","breadcrumb":{"@id":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.legalindia.com\/judgments\/indian-overseas-bank-vs-industrial-chain-concern-on-7-november-1989#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.legalindia.com\/judgments\/"},{"@type":"ListItem","position":2,"name":"Indian Overseas Bank vs Industrial Chain Concern on 7 November, 1989"}]},{"@type":"WebSite","@id":"https:\/\/www.legalindia.com\/judgments\/#website","url":"https:\/\/www.legalindia.com\/judgments\/","name":"Free Judgements of Supreme Court & High Court | Legal India","description":"Search and read the latest judgements, orders, and rulings from the Supreme Court of India and all High Courts. A comprehensive database for lawyers, advocates, and law students.","publisher":{"@id":"https:\/\/www.legalindia.com\/judgments\/#organization"},"alternateName":"Free judgements of Supreme Court & High Court of India | Legal India","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.legalindia.com\/judgments\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.legalindia.com\/judgments\/#organization","name":"Judgements of Supreme Court & High Court | Legal India","alternateName":"Legal India","url":"https:\/\/www.legalindia.com\/judgments\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/logo\/image\/","url":"https:\/\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg","contentUrl":"https:\/\/www.legalindia.com\/judgments\/wp-content\/uploads\/sites\/5\/2025\/09\/legal-india-icon.jpg","width":512,"height":512,"caption":"Judgements of Supreme Court & High Court | Legal India"},"image":{"@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/LegalindiaCom\/","https:\/\/x.com\/Legal_india"]},{"@type":"Person","@id":"https:\/\/www.legalindia.com\/judgments\/#\/schema\/person\/0bfdffe9059fb8bb24a86d094609c5ea","name":"Legal India Admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/4faa9d728ed1af3b73d52225c7f12901ac726fe6f7ea0a3348a1d51f3a930987?s=96&d=mm&r=g","caption":"Legal India Admin"},"sameAs":["https:\/\/www.legalindia.com","https:\/\/x.com\/legaliadmin"],"url":"https:\/\/www.legalindia.com\/judgments\/author\/legal-india-admin"}]}},"modified_by":null,"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts\/180662","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/comments?post=180662"}],"version-history":[{"count":0,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/posts\/180662\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/media?parent=180662"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/categories?post=180662"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.legalindia.com\/judgments\/wp-json\/wp\/v2\/tags?post=180662"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}