Delhi High Court
Canara Bank vs M/S J.R. Exports & Ors. on 31 January, 2012
Author: Valmiki J. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA 854/2003
% 31st January, 2012
CANARA BANK ..... Appellant
Through : Mr. Atul Kumar, Advocate.
versus
M/S J.R. EXPORTS & ORS. ..... Respondents
Through : None.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
1. This matter is on the Regular Board of this Court since 16.1.2012.
Today, it is effective item No. 14 on the Regular Board. No one appears for
the respondents. I have heard counsel for the appellant and after perusing
the record am proceeding to dispose of the matter.
2. The challenge by means of this Regular First Appeal (RFA) filed
under Section 96 of Code of Civil Procedure, 1908 (CPC) is to the impugned
judgment of the trial Court dated 25.1.2003 decreeing the suit of respondent
RFA No.854/2003 Page 1 of 6
No.1/plaintiff against the appellant/defendant No.4 as also against defendant
No.1.
3. The facts of the case are that respondent No.1/plaintiff filed a suit
making averments that under the agreement dated 10.12.1982 entered into
between it and defendant No.1, a sum of `3,00,000/- was deposited in one
particular bank account of defendant no. 1 with the appellant-bank. It is
argued that this amount which was deposited in one particular bank account
of defendant No.1/respondent No.2 was withdrawn therefrom and
transferred to a loan account so as to wipe off the liability of defendant No.1
in the said loan account. It was further pleaded in the plaint that the
agreement dated 10.12.1982 was breached by defendant No.1/respondent
No.2 and therefore respondent No.1/plaintiff became entitled to refund of
`3,00,000/-. It was further pleaded that this amount of `3,00,000/- was
sought to be paid by defendant No.1/respondent No.2 to respondent
No.1/plaintiff by means of a pay order of `3,00,000/- bearing No. 261/83
dated 4.5.1983 of the appellant-bank. It was pleaded that, however, when
this pay order was presented for payment, the same was returned with the
remarks "Genuineness disputed hence payment refused". The subject suit,
therefore, came to be filed for recovery of the amount of the pay order.
RFA No.854/2003 Page 2 of 6
4. The appellant/defendant No. 4 contested the suit and pleaded that the
pay order in question was issued unauthorizedly by its officer/defendant
No.2, who was the then Manager of the appellant-bank, by removing a leaf
from the pay order book. The appellant-bank argued that on account of
fraud a departmental action was taken against defendant No.2 and a criminal
complaint of fraud and forgery was also lodged against defendant Nos.1,2 &
3. It was pleaded that the amount which was credited to the loan account of
defendant No.1, had the effect of wiping off the liability and therefore there
was no question of the appellant/defendant No.4-bank refunding the amount,
once it was discovered that the pay order in question which was presented
for payment was not a genuine pay order.
5. The trial Court, after completion of pleadings, framed the following
issues:-
"1. Whether the suit of the plaintiff is not maintainable
in view of para 1 of the preliminary objection of
the WS? OPD-4.
2. Whether the suit of the Plaintiff is not
maintainable, in view of para 36 of the WS? OPD-
1.
3. Whether the agreement defendant 10.12.1983
became a dead document and incapable of being
acted upon between the Plaintiff and the deft. No.1
RFA No.854/2003 Page 3 of 6
and Plaintiff failed to perform his part of his
contract? OPD-1
4. Whether the Plaintiff is entitled to the suit amount
as claimed? OPP
5. Whether the Plaintiff is entitled to interest, if so, at
what rate and for which period? OPP
6. Whether the deft. No.1 to 3 obtained the pay order
from the deft. No. 4 in collusion and conspiracy
with the plaintiff? OPD-4.
7. Whether the deft. No.4 is not bound by the acts of
the deft. No.2 who issued the pay order? OPD-4.
8. Relief."
6. Learned counsel for the appellant argued that the trial Court has fallen
into an error while arriving at a finding with respect to issue No. 4 in holding
the appellant-bank to be liable. It is argued that the amount which
respondent No.1/plaintiff claimed was based upon a forged pay order and
fraud nullifies everything, and the trial Court cannot give a sustainable legal
finding promoting a fraud and forcing the appellant-bank to pay under the
forged pay order. It is argued that so far as the amount credited in the loan
account of defendant No.1, once the transaction took place, there cannot
arise a question of turning back the transaction inasmuch the transaction
RFA No.854/2003 Page 4 of 6
took place by a proper channel whereby respondent No.1/plaintiff did make
a payment of `3,00,000/- to defendant No.1/respondent No.2 under the
agreement dated 10.12.1982. May be, the agreement dated 10.12.1982 was
breached, however, that cannot mean that this appellant-bank will be liable
to pay the amount because it is based on account of breach of contract and
for such breach, it would only be the defendant No.1/respondent no.2 who
received the amount of `3,00,000/- be bound to refund the amount.
7. I completely agree with the arguments as advanced on behalf of the
appellant. It is not disputed that the amount of `3,00,000/- was credited in
the account of defendant No.1 by means of a proper bank channel. Once the
amount was credited in the account of defendant No.1, defendant No.1
became owner of such moneys and therefore, the appellant-bank was fully
entitled to transfer the aforesaid moneys from the account from where
`3,00,000/- was credited to another loan account of defendant
No.1/respondent No.2 so as to square off the loan account.
8. I further agree with the argument of learned counsel for the appellant,
that fraud nullifies everything, and once it has been established on record
that the pay order which was issued was not authorised, and infact was
found to be a forged and fabricated document, such fraud nullifies
RFA No.854/2003 Page 5 of 6
everything and the appellant-bank cannot be forced to pay under a forged
pay order. I agree with the arguments urged on behalf of the appellant
because it is not the legal position that a bank is forced to make payment
under a forged pay order merely because one officer has issued the same
though it is found that such instrument is a forged and fabricated instrument.
9. In view of the above, the present appeal is accepted. The impugned
judgment dated 25.1.2003 is set aside. The suit of respondent No.1/plaintiff
against the appellant-bank/defendant No.4 shall stand dismissed. Parties are
left to bear their own costs. Trial Court record be sent back.
10. The amount deposited in this Court by the appellant be released to the
appellant, through counsel, and the FDR given by the appellant/bank be
discharged in favour of the appellant. The appellant-bank had also furnished
a pay order in favour of respondent No.1, and which pay order the
respondent No.1 did not take as it failed to furnish security for the same.
This pay order be also discharged and returned to the appellant-bank. The
present appeal is disposed of accordingly.
VALMIKI J. MEHTA, J.
JANUARY 31, 2012/AK
