Oriental Bank Of Commerce vs Pawan Kumar Aggarwal & Anr.
2011 Latest Caselaw 1596 Del

*         IN THE HIGH COURT OF DELHI AT NEW DELHI
%                             RFA 524/2004
+                                  Date of Decision: 21st March, 2011



#      ORIENTAL BANK OF COMMERCE          ...Appellant
!                     Through: Mr. H.C. Kundra &
                               Mr. Bal Ram Singh, Advs.

                                 Versus

$      PAWAN KUMAR AGGARWAL & ANR.         ...Respondents
                  Through: Mr. Rajesh Katyal, Adv. for R-1
                           Mr. S.L. Gupta and
                           Mr. Ram Gupta, Advs. for R-2
                                  AND

%                             RFA 54/2005
#      STATE BANK OF SAURASHTRA             ...Appellant
!                      Through: Mr. S.L. Gupta &
                                Mr. Ram Gupta, Advs.

                                 Versus

$      PAWAN KUMAR & ANR.                              ...Respondents
                  Through:              Mr. Rajesh Katyal, Adv. for R-1
                                        Mr. H.C. Kundra and Mr. Bal
                                        Ram Singh, Advs. for R-2


       CORAM:
*      HON'BLE MR. JUSTICE P.K.BHASIN

1.     Whether Reporters of local papers may be allowed to see the
       judgment? (No)
2.     To be referred to the Reporter or not? (No)
3.     Whether the judgment should be reported in the digest? (No)



RFA Nos. 524/2004 & 54/2005                                Page 1 of 13
                                  JUDGMENT

P.K.BHASIN, J:

Two nationalized banks have filed separate appeals feeling

aggrieved by the judgment and decree dated 02.07.2004 passed by the

Court of Additional District Judge in a suit filed against them by

respondent no.1-plaintiff whereby a joint and several decree for a sum

of Rs.2,62,036/- alongwith interest thereon @ 9 % p.a. from the

date of filing of the suit till the date of the decree and @ 5% p.a. from

the date of the decree till realization in full was passed against both of

them. Though both the banks had filed separate appeals but the same

were heard analogously and so are being disposed of also together by

this common judgment.

2. The case of the appellant-plaintiff(who shall hereinafter be

referred to as „the plaintiff‟) was that his proprietorship firm by the

name of M/s Bansal Industries had supplied certain goods to The

National Small Industries Corporation Ltd.,a Government of India

Enterprise(hereinafter to be referred to as „NSIC‟) and towards the

payment of price of those goods NSIC had issued an account payee

cheque no. 508735 dated 17/0498 for Rs.2,62,036/-(hereinafter to be

referred as „the cheque in dispute‟) and that cheque was drawn on State

Bank of Saurashtra(Nehru Place branch, New Delhi) which was

impleaded in the suit as defendant no.2 and hereinafter also shall be

referred to as „defendant no.2‟. The plaintiff was maintaining a current

account No. 2371 in the Azadpur branch of Oriental Bank of

Commerce, which bank was impleaded in the suit as defendant no.1

and shall hereinafter also be referred to as „defendant no.1‟. The

plaintiff had deposited the cheque in dispute with the Azadpur branch

of defendant no. 1 on 18/4/98 for collection of its proceeds from

defendant no.2 bank. Thereafter when he enquired about the realization

of the said cheque from the defendant no.1 on 22/04/98 the concerned

officer informed him that his cheque had not been received back and

he was also told by the same officer that the cheque had been

misplaced. The plaintiff became suspicious and then he went to the

office of NSIC on 22/04/98 itself for issuance of „stop payment‟

instructions to defendant no.2 but he was informed that the payment of

the cheque in dispute had already been debited to its account on

21/4/98. On 30/4/98 defendant no.1 informed him that the cheque in

dispute had been got encashed fraudulently by someone from defendant

no.2 bank. The plaintiff then lodged a complaint with the police on

05/05/98. Then the plaintiff served a joint demand notice dated 1/07/99

upon defendant no.1 as well as defendant no.2 through his advocate

and when he did not succeed in getting his money from both the banks

he filed a suit against them for recovery of Rs.3,91,604/- which sum

included the cheque amount of Rs.2,62,036/-. and interest of Rs.

1,29,568/-. In the plaint the plaintiff alleged that firstly someone in

collusion between the officials of defendant no.1 had taken away the

cheque in dispute from its Azadpur branch and then in collusion with

the officials of defendant no.2 bank had got it encahsed fraudulently

across the counter.

3. The defendant no. 1 contested the suit primarily on the ground

that the cheque in dispute was never deposited in its Azadpur branch

and that in fact the plaintiff himself in collusion with the officials of

defendant no.2 and NSIC had got that cheque encashed across the

counter.

4. Defendant no. 2 contested the suit primarily on the ground that it

had rightly made the payment of the cheque in dispute across the

counter to one Rinku Bansal on 21/04/98 after the concerned officials

had satisfied themselves that the cancellation of „account payee‟

endorsement on the cheque was done by the correct persons on behalf

of NSIC and further that the branch officials had before making the

payment to that Rinku Bansal had enquired from him about the reasons

for the cancellation of the crossing of the cheque and he had informed

that since he did not have any bank account in the name of his firm

NSIC had at his request cancelled the crossing and then payment was

made to that Rinku Bansal. It was also pleaded that there was no privity

of contract between the plaintiff and defendant no. 2.

5. On the basis of the above pleadings the following issues were

framed by the learned trial Judge:

1.Whether the suit is not maintainable against the defendant no.1 because of having no cause of action as alleged in the written statement? OPD 2 .Whether the suit is bad for misjoinder and non joinder of necessary parties as alleged in the written statements of the defendants? OPD

3.Whether the plaintiff is beneficiary of the cheque in dispute, if so, what is its effect?OPP

4. Whether the defendant no.2 has committed the negligence and deficiency of the services if so, what is its effect?OPP

5. If issue no.3 ,is proved, whether the defendant no.2 has discharged its obligations/ duties in making the payment in the ordinary course of its banking business, if so, what is its effect?

6. Whether the plaintiff is entitled a decree of the suit amount as claimed along with the interest ,is so, at what rate?

7. Relief.

6. The learned trial Court after evaluating the evidence adduced by

the parties decided all the issues in favour of the plaintiff and decreed

the suit vide impugned judgment against both the banks, as noticed

already.

7. During the course of arguments before this Court it was not

disputed by the learned counsel for both the banks that the plaintiff‟s

proprietorship firm by the name of Bansal Industries was supposed to

receive the payment in respect of the cheque in dispute (Ex. PW-2/1).

However, learned counsel for defendant no. 2(State Bank of Saurashtra)

vehemently contended that the payment in respect of the cheque in

dispute had been rightly made across the counter by its concerned

officials posted at the Nehru Place branch since that had been done by

them after taking due care of the fact that the cheque in dispute had

been rightly converted into a bearer cheque by the two authorized

signatories of NSIC by comparing their signatures appearing on the

cheque with their specimen signatures available with the bank. It was

also contended that NSIC could have cancelled the "A/c Payee"

endorsement on the cheque in dispute and made it a bearer cheque

authorizing the bearer of that cheque to receive the payment from

defendant no. 2 bank and since nothing suspicious was found by the

officials of the bank the payment was made in due course in accordance

with the apparent tenor of the cheque and in good faith and without any

kind of negligence on the part of the officials of the bank before whom

the cheque in dispute was placed by the bearer of the cheque. The

learned trial Judge after noticing the fact that the rubber stamp of NSIC

affixed on the cheque in dispute on top while cancelling the "A/c

Payee" endorsement was not similar to the one which had been used by

the authorized signatories of NSIC at the bottom of the cheque where

they had originally put their signatures and so defendant no. 2 could

not be said to have made the payment across the counter in normal

course of banking business and its concerned officials should have been

vigilant enough to confirm from NSIC, before making the payment, if

the "A/c Payee" cheque in dispute had been converted by their officials

into a bearer cheque but no such precaution was taken. Therefore,

according to the learned trial Judge,the protection available to

defendant no. 2 under Section 10 of the Negotiable Instruments Act,

1881 was not available to it and also because this specimen signature

card having the specimen signatures of the two officials of NSIC was

not produced which should have been done since both the authorized

signatories, who were examined as PWs 3 and 4,had denied having

converted the a/c payee cheque into bearer cheque . After examining

the cheque in dispute I find myself in full agreement with the said

conclusions of the learned trial Court. The cheque in dispute is dated

17th April, 1998. Initially it was an "A/c Payee" cheque made payable

to Bansal Industries, Delhi. Subsequently, on the top of front side of

the cheque it was written "Cross in cancel" and this endorsement

purports to have been made by the two signatories of NSIC who had

initially signed that cheque(PWs 3 and 4). These officials were

examined by the plaintiff as his witnesses(PWs 3 and 4) and both of

them denied having made any such endorsement. It appears that

whosoever had written the words "Cross in cancel" wanted to write

"Crossing cancelled" Any bank officer authorised to clear the payment

of cheques would and acting in good faith have become suspicious with

this kind of endorsement on a cheque which does make any sense and

would have made an enquiry from NSIC. That was not done.

Another circumstance making the cancellation of the "A/c Payee"

endorsement on the cheque in dispute highly doubtful is that on the

back side of the cheque it was written "The party M/s. Bansal Industries

may be paid in case the signature of M/s. Bansal Industries is attested

below". By making such an endorsement on the back side of the

cheque the maker thereof wanted to convey to the bank that the

payment of the cheque may be made in cash but it was written „in case‟.

This endorsement purpoted to have been made by PWs 3 and 4 also

does not make any sense and PWs 3 and 4 denied having made that

endorsement also. Defendant no. 2 had in any case not produced the

specimen signatures of PWs 3 and 4 kept in its record nor did it ake the

services of any handwriting expert for comparison of the disputed

signatures of PWs 3 and 4 on the endorsements on the cheque in

dispute with their admitted signatures. There is another endorsement on

the back side of the cheque to the effect "Crossing cancelled. Please

pay Bansal Industries in favour of this cheque". This noting on the

cheque appears to have been made by someone other than the person

who had made the other noting and that is not even signed by anyone

from NSIC. In fact, it was the defence of defendant no. 2 itself that

when the cheque in dispute with these endorsements/notings had been

presented across the counter it was asked from the presenter of that

cheque as to why the cheque had been converted into a bearer cheque

and his reply was that since he did not have a bank account in his

Firm‟s name the cheque had been converted at his request into a bearer

one by NSIC to enable him to receive the payment across the counter in

cash. That shows that the officials had become suspicious and the

reply of the presenter of the cheque should also have aroused further

suspicion in the mind of the concerned bank official since the presenter

despite having got a cheque for huge amount in his Firm‟s name did not

have any bank account in the name of his Firm. Admittedly, NSIC is a

Government of India enterprise and such kind of endorsements/notings

on its cheque to any prudent official of the bank should have prompted

him to at least make a telephone call to the office of NSIC to verify the

exact position and had that been done no payment would have been

made across the counter in respect of the cheque in dispute. The

concerned official did not do that which shows that he had passed the

payment fraudulently in connivance with the presenter of the cheque.

Here it may be noticed that this court had sought a report from the

police regarding the fate of the FIR lodged by the plaintiff. The police

placed on record a copy of the charge-sheet showing the two officials of

State Bank Of Saurashtra were involved in the fraudulent encashment

of the cheque in dispute. This Court has, therefore, no hesitation in

affirming the findings of the learned trial Court to the effect that the

officials of defendant no. 2 bank had not made the payment of the

cheque in dispute to somebody by the name Rinku Bansal in good faith

and according to the apparent tenor of the cheque. Therefore, the

plaintiffs‟ suit has been rightly decreed against defendant no. 2, State

Bank of Saurashtra.

8. Now I come to the challenge to the impugned judgment made on

behalf of defendant no. 1, Oriental Bank of Commerce. The plaintiff

was claiming joint and several decree against both the banks on the

ground that he had deposited the cheque in dispute for collection with

his banker Oriental Bank of Commerce but that cheque was got

encashed by someone fraudulently in connivance with the officials of

both the banks and, therefore, his own bank was also equally

responsible to make the payment to him in respect of the cheque in

dispute. The defence raised by defendant no. 1 was that the cheque in

dispute was never deposited with it for the collection of its proceeds

from State Bank of Saurashtra. It is not in dispute that the counter-foil

of the deposit slip vide which the plaintiff claims to have deposited the

cheque in dispute with defendant no. 1 does not bear the initials of any

official of the bank. It only has the bank‟s stamp. The defendant no. 1

had examined one witness in support of its defence and he is DW-1

Shri S.P. Chaudhary. He had categorically deposed that whenever any

cheque is deposited by any account holder for collecting the proceeds

from some other bank the counter-foil of the deposit slip is stamped and

then initialled also by the bank official and then is given to the person

depositing the cheque. In cross-examination of this witness a

suggestion was put to him on behalf of the plaintiff that the bank

officials do not put initials on the counter-foils of the deposit slips and

only bank‟s stamp is affixed. The witness denied that suggestion.

9. The plaintiff had in his complaint to the police(Ex. PW-1/1) had

claimed that the cheque in dispute was handed over by him to one Mrs.

Usha Sudan posted at Azad Pur branch of Oriental Bank of Commerce.

However, he has not examined her to substantiate his plea in that

regard. She was the best witness who could have helped the plaintiff‟s

case. Because of her non-examination, this Court cannot accept the

bare statement of the plaintiff that it was not the practice of the bank

officials to put initials on the counter-foils of the deposit slips in respect

of cheques deposited for being sent for clearance and I see no reason to

reject the evidence of DW-1. I am, therefore, of the view that learned

trial Court was not justified in coming to the conclusion that the

plaintiff had established the deposit of cheque in dispute with defendant

no. 1. Therefore, the impugned judgment and decree qua Oriental

Bank of Commerce has to be set aside.

10. Submissions from both the sides in both the appeals were made

only on the afore-said aspects and not on other issues decided by the

trial Court in favour of the plaintiff.

11. In the result, RFA 524/04 is allowed and the impugned judgment

and decree against Oriental Bank of Commerce are set aside. At the

time of first hearing of the appeal of Oriental Bank of Commerce it

was directed to deposit the decretal amount in this Court and that

money was to be kept in a Fixed Deposit with the bank . That was

done, and now that money shall be paid back to it within four weeks

along with the interest accrued on the FDR. RFA 54/05 is, however,

dismissed and the decree passed against State Bank of Saurashtra stands

affirmed.

P.K. BHASIN,J

March 21, 2011 sh