Rajesh Gupta vs Central Bank Of India
2013 Latest Caselaw 5761 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                         Date of decision: 13thDecember, 2013.

+                                  RFA 497/2004

       RAJESH GUPTA                                             ..... Appellant
                              Through:     Mr. Sugriva Dubey, Advocate.

                                           Versus

       CENTRAL BANK OF INDIA                  ..... Respondent
                   Through: Mr. O.P. Gaggar, Advocate.

                                           AND

                                   RFA 299/2012

       RAJESH GUPTA                                             ..... Appellant
                              Through:     Mr. Sugriva Dubey, Advocate.

                                           Versus

       CENTRAL BANK OF INDIA                    ..... Respondent
                   Through: Mr. O.P. Gaggar, Advocate.

CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

RAJIV SAHAI ENDLAW, J.

1. Both appeals arise from the common judgment and decrees dated 24th

May, 2004 of the learned Additional District Judge (ADJ) in Suit

No.138/2003 (old Suit No.157/1999) filed by the appellant Mr. Rajesh

Gupta and in Suit No.59/2002 (old Suit No.175/2000) filed by the

respondent Central Bank of India. The appellant Mr. Rajesh Gupta had

instituted the suit for declaration that he had received the Bank Draft dated

7th April, 1999 for Rs.2,45,000/- drawn by the respondent Bank against a

bona fide sale effected by him and the amount of the said Bank Draft

encashed by him belonged to him. The respondent Bank had filed the suit

for recovery of the said sum of Rs.2,45,000/- from the appellant on the

ground that the said Bank Draft had been stolen from the Bank in 1998 and

its signatures thereon were forged and the payment made to the appellant

thereunder in the year 1999 was thus liable to be refunded by the appellant.

2. The learned ADJ vide judgment and decree (supra) dismissed the suit

filed by the appellant and decreed the suit filed by the respondent Bank for

recovery of Rs.2,45,000/- with proportionate costs and future interest @

12% per annum from the date of decree till realisation.

3. RFA No.497/2004 was filed claiming the relief of setting aside of the

judgment and decree "in the suit filed by the appellant".

4. Even though RFA No.497/2004 sought setting aside only of the

judgment and decree "in suit filed by the appellant" which had been

dismissed but when RFA No.497/2004 came up first before this Court,

while issuing notice thereof, vide ex-parte ad interim order dated 15th

September, 2004, subject to the appellant furnishing security to the extent of

the decretal amount to the satisfaction of the Registrar of this Court, the

operation of the judgment and decree was stayed. In compliance thereof, a

Fixed Deposit Receipt (FDR) of Rs.2,68,960/- has been deposited by the

appellant in this Court.

5. RFA No.497/2004 came up before this Court for hearing on 24 th May,

2012, when the issue, that the same was only against dismissal of suit filed

by the appellant and not against the decree against the appellant in the suit

filed by the respondent Bank came up and whereafter RFA No.299/2012

impugning the money decree against the appellant came to be filed along

with an application for condonation of delay in filing the same. Vide

detailed order dated 31stJuly, 2013, the delay was condoned and hearing of

both the RFAs commenced. The respondent Bank was then represented by

different Advocates in the two RFAs and during the hearing, a contradictory

stand was taken by the two Advocates as noted in the order of that date and

on request, the hearing was adjourned to enable the respondent Bank to be

represented by one Advocate in both the appeals. Thereafter, the counsels

were heard further and judgment was reserved.

6. The appellant, on 1stOctober,1999, had instituted the suit claiming the

relief of declaration supra, pleading:

(i) that he is carrying on business of trading in Ropes and Niwar in

the name and style of M/s. Rajesh & Co;

(ii) that on 1st April, 1999, one person namely Shri Suresh Kumar

Gupta of Patna approached him with a purchase order for Niwar of

4780 Kg. and 490 gms.,worth Rs.2,45,000/-, on credit basis;

(iii) that the appellant refused to deliver the aforesaid goods on

credit basis and demanded the whole payment in cash or by Bank

Draft;

(iv) that the said Shri Suresh Kumar Gupta again approached him

on 10th April, 1999 along with a Bank Draft bearing No.016743 dated

7th April, 1999 for Rs.2,45,000/- issued by the respondent Bank and

drawn in favour of M/s. Rajesh & Co. and asked for delivery of

goods;

(v) that the appellant still refused to deliver the goods stating that

the goods will be delivered after the said Bank Draft gets encashed

and to which Shri Suresh Kumar Gupta agreed;

(vi) that the appellant presented the said Bank Draft to his banker

i.e. the Union Bank of India for encashment and which was duly

encashed and credited in his account;

(vii) that after nearly two months therefrom the appellant delivered

the goods to the said Shri Suresh Kumar Gupta;

(viii) that on 17th September, 1999 i.e. after nearly five months from

the date of encashment of the Bank Draft aforesaid, the appellant

received letter dated 16th September, 1999 from the respondent Bank

informing him that the Bank Draft was prepared on stolen/lost Bank

Draft leaf and asking him to refund the amount thereof;

(ix) that even if it was to be believed that the said Bank Draft was

prepared on stolen/lost Bank Draft leaf, it was the duty of the

respondent Bank, not to encash the same on presentation;

(x) that the respondent Bank had not issued any notice to the

public of the Bank Draft leaves having been stolen/lost and such

notice was published only on 21st September, 1999;

(xi) that the appellant had acted as bona fide seller of goods for

consideration.

Accordingly, declaration that the appellant was the bona fide seller

and that the amount of the said Bank Draft belonged to him, was sought.

7. The Union Bank of India being the banker of the appellant and which

was defendant No.1 in the suit and which has not been impleaded as party to

these appeals, filed a written statement admitting that the appellant had

deposited the said Bank Draft in his account with it and the same was sent

for clearing to the respondent Bank and after due clearance, credit was

transferred to the account of the appellant.

8. The respondent Bank contested the suit, by filing a written statement,

on the grounds:

(a) that the appellant was not a holder in due course of the said

demand draft;

(b) that in May, 1998, a dacoity had taken place at Maripur Branch

in District Muzaffarpur, Bihar of the respondent Bank in which a

large amount of cash and 1087 blank demand draft leaves were

looted/stolen;

(c) that the subject demand draft was prepared on one of the

demand draft leaves stolen in the dacoity;

(d) that the suit was bad for non-joinder of Shri Suresh Kumar

Gupta;

(e) denying that the appellant had received and presented the Bank

Draft for encashment in good-faith;

(f) that though the respondent Bank takes utmost precaution to

ensure that only those cheques presented by persons holding in due

course are honoured but at time on account of rush of work and due

to oversight, a draft may get encashed to the holder of such a stolen

draft.

9. The appellant filed replication to the written statements aforesaid.

10. Thereafter, on 4th September, 2000, the respondent Bank filed the suit

for recovery of the amount of the Bank Draft with interest, against the

appellant/plaintiff as well as Shri Suresh Kumar Gupta, on the same

pleadings as in the written statement aforesaid.

11. Needless to state, the appellant contested the suit of the respondent

Bank on the same lines, as the pleadings in the suit for declaration filed by

him.

12. Shri Suresh Kumar Gupta was reported to be not available at his

address and was proceeded against ex parte in the suit filed by the

respondent Bank. The said Shri Suresh Kumar Gupta has not been

impleaded as party to RFA No.299/2012.

13. Though separate issues were framed in the suits as set out in the

judgment of the learned ADJ but else, the suits were consolidated for trial.

14. Though non impleadment of Union Bank of India in RFA

No.497/2004 and of Shri Suresh Kumar Gupta in RFA No.299/2012 is a

technical defect but since the counsel for the respondent Bank did not urge

so and even otherwise, is not found fatal, the appeals have been considered

15. The learned ADJ has in the impugned judgment,

found/observed/held:

(i) that the address of Shri Suresh Kumar Gupta was of Patna; he

could not have carried the goods from the shop of the appellant at

Delhi by hand; the same ought to have been sent through transport by

road or by railway; but surprisingly enough, there is no goods receipt

of road transport or railway;

(ii) that the goods which the appellant claims to have sold were not

chargeable to sales tax; otherwise, the appellant was supposed to have

taken ST form from the purchaser and in which event the existence of

the purchaser Shri Suresh Kumar Gupta could have been established

through Sales Tax Department;

(iii) that the appellant had kept the Court in complete darkness

about the alleged sale;

(iv) that even if the purchaser Shri Suresh Kumar Gupta was not

available, the appellant should have examined the persons from the

Branch of the respondent Bank which purportedly issued the Bank

Draft in question and which would have shown, as to whether the

draft was genuinely issued by the said Branch; the appellant

deliberately chose not to adduce the said evidence;

(v) that the appellant was thus not the holder in due course of the

said Bank Draft;

(vi) that Shri Suresh Kumar Gupta, though not a necessary party to

the suit filed by the appellant, was a necessary witness;

(vii) that since the appellant had admittedly received the amount of

the demand draft in question, the suit for recovery of that amount

could be filed against him only;

(viii) that though the respondent Bank had neither warned its other

Branches not to encash the demand draft against the stolen leaves nor

immediately given any public notice to warn the members of the

public at large but all the said facts were irrelevant, since the

appellant was not the holder in due course of the demand draft.

Accordingly, the suit of the appellant for declaration was dismissed

and the suit of the respondent Bank for recovery of Rs.2,45,000/- being the

amount of demand draft with interest, was decreed.

16. It was enquired from the counsel for the respondent Bank during the

hearing on 31st July, 2013, whether it was the case of the respondent Bank

that the appellant is in conspiracy with the person/s who had stolen/robbed

the leaves of the said Bank Draft from the respondent Bank and had the

respondent Bank complained against the appellant.

17. The answer was in the negative.

18. It was the contention of the counsel appearing for the respondent

Bank in RFA No.497/2004 on 31st July, 2013 that the subject Bank Draft

having been issued by the respondent Bank without consideration, under

Section 43 of the Negotiable Instruments Act, 1881, the respondent Bank

was not liable thereunder and the claim of the appellant could only be

against Shri Suresh Kumar Gupta. Per contra, the counsel appearing for the

respondent Bank in RFA No.299/2012 on 31st July, 2013 contended that

since the subject Bank Draft was account payee in favour of the appellant

only and negotiation thereof had been scored off, the subject Bank Draft

was not a negotiable instrument. It was further the contention of the counsel

for the respondent Bank during the hearing on 6 thAugust, 2013 that though a

Bank Draft is a negotiable instrument but upon being engrossed as „Account

Payee Only‟, loses its negotiability. On specific query put to him, whether,

without being a Negotiable Instrument, the concept of holder in due course,

on which the learned ADJ has decided against the appellant, will apply, it

was argued that the claim of the respondent Bank against the appellant was

on the principle of restitution enshrined in Section 72 of the Indian Contract

Act, 1872 and the respondent Bank is entitled to refund of the amount

mistakenly paid under the said Bank Draft to the appellant.

19. On further enquiry from the counsel for the respondent Bank, as to

why the respondent Bank could not have stopped the payment under the

Bank Drafts, leaves whereof had been stolen/robbed, he stated that it is not

possible for the respondent Bank to stop payment thereof, as it was not for

the respondent Bank to know in which Branch of the Bank, the draft would

be presented for encashment. Reliance was placed on R.E. Jones, Ltd. Vs.

Waring & Gillow Ltd. (1926) All E.R. Rep. 36 and State Bank of India Vs.

Punjab National Bank 57 (1995) DLT 55 and Section 85A and Sections

123 to 131A of the Negotiable Instrument Act.

20. The contention of the counsel for the appellant, was of negligence on

the part of the respondent Bank.

21. As would be apparent from the aforesaid, the sole point on which the

learned ADJ has decided in favour of the respondent Bank i.e. of the

appellant being not entitled to retain the money already received by him

under the Bank Draft, for the reason of not being the holder in due course of

the said Bank Draft, is not supported by the counsel for the respondent Bank

before this Court.

22. Section 72, contained in Chapter V of the Contract Act titled "Of

Certain Relations Resembling Those Created By Contract" on which the

counsel for respondent Bank pegged his argument, provides that a person to

whom money has been paid or anything delivered by mistake or under

coercion, must repay or return it. The respondent Bank, neither in its

written statement to the suit filed by the appellant nor in the plaint in its own

suit, is found to have pleaded any mistake. Order VI Rule 4 of the Civil

Procedure Code (CPC), 1908, requires a party to a litigation relying on any

misrepresentation, fraud, breach of trust, willful default or undue influence,

to plead particulars with dates and items, if necessary. The said provision,

in my opinion, would be applicable to a plea of mistake also. Not only has

mistake not been pleaded but no particulars whatsoever of the precautions,

if any taken by the respondent Bank against encashment of drafts prepared

on stolen draft leaves or the name of the person in the respondent Bank who

committed the mistake, have been pleaded. Rather, the claim of the

respondent Bank against the appellant/plaintiff was on the ground of the

appellant not being the holder in due course of the Bank Draft and thus

being not entitled to retain the monies thereunder.

23. In my opinion, the appellant has proved receipt of the subject Bank

Draft towards sale consideration. Neither was it the plea of the respondent

Bank that the subject Bank Draft has been received by the appellant

otherwise nor has the counsel for the respondent Bank, neither in cross-

examination of the appellant nor in arguments been able to suggest any

irregularity in sale or the sale being fictitious. As far as the doubts

attributed in the impugned judgment to „the sale‟ are concerned, I am unable

to agree. It cannot be lost sight of that Bank Drafts are akin to cash. A

seller of goods may take precautions as of satisfying itself of the identity

and credentials of buyer while selling/supplying goods on credit or against

cheque yet to be encashed but a seller of goods who has already received

payment thereof by Bank Draft, as the appellant had, is not required to

observe any such caution and cannot be blamed for not having any proof of

identity of the buyer. It is not as if, voluminous goods would always be

consigned/forwarded to the purchaser through railway or road transport.

Cases of purchasers from other States personally visiting the wholesale

markets of Delhi and making purchases and taking personal delivery of

voluminous quantities against cash are not unheard of; such buyers often

have their own transporters in the same market or also carry the goods with

them in train or by road. Thus, the sale cannot be said to be suspect for said

reason.

24. Similarly, the reasoning given in the impugned judgment, of the

appellant having not examined Sh. Suresh Kumar Gupta, is found to be

erroneous. The appellant as aforesaid was not required to have proof of his

identity or credentials. Further, report on summons sent to him, having

already been received of his being not available at the address, no adverse

inference even can be drawn against the appellant. There was no need also

for the appellant to prove the Bank Draft to be genuine as the case of the

appellant was/is that since the respondent Bank had made payment

thereunder, the appellant was not liable to refund the same.

25. Even though the respondent Bank has not pleaded or built a case of

being entitled to the money on the principle enshrined in Section 72 supra of

mistake, but even if the matter is to be considered in the said perspective, I

fail to see as to how the respondent Bank can succeed on that ground as

well.

26. At the outset, it is necessary to clarify that Section 72 of the Contract

Act is not absolute and does not demand that every payment made by a

party while laboring under a mistake of fact is to be mechanically directed

to be recovered. As far back as in Shiba Prasad Singh Vs. Maharaja Srish

Chandra Nandi AIR 1949 PC 297, it was held that the provision does not

imply that every sum paid under mistake is recoverable, no matter what the

circumstances may be and that there may in a particular case be

circumstances, which disentitle a plaintiff to such relief by estoppel or

otherwise. In the same vein have been the observations of the Constitution

Bench of the Supreme Court in Mafatlal Industries Ltd Vs. Union of India

(1997) 5 SCC 536, wherein it was stated that Section 72 is a rule of equity

and it is not correct to say that equitable considerations have no place where

a claim is made under the said provision. It was further held that such

equitable considerations are not a matter of law but depend upon the facts of

each case.

27. One of such equitable defenses to a claim for restitution based on

mistake, as observed in Shiba Prasad Singh supra, is of estoppel. In the

facts of the present case, as aforesaid, it stands proved that the respondent

Bank by honouring the Bank Draft and crediting the amount thereof to the

banker of the appellant which in turn credited that amount to the account of

the appellant, caused/permitted the appellant to deliver the goods of the

value of the Bank Draft to Shri Suresh Kumar Gupta. Section 115 of the

Indian Evidence Act, 1872, enshrining the principle of estoppel, does not

allow the respondent Bank to subsequently plead that it has not issued the

Bank Draft which it has already honoured. Thus, the respondent Bank

would be disentitled/estopped from recovering the money from the

appellant, even if were to plead/prove payment by mistake.

28. I must however mention that in cases of cheques of its customers

honoured by the banks and which were subsequently found to have not been

issued by the customers and having forged signatures of the customers,

though earlier the defense of estoppel was held to be available against a

claim of the bank for recovery of the amount paid under such cheque (see

Price Vs. Neal (1762) 3 Burr. 1355 and Smith Vs. Mercer (1815) 6 Taunt.

76) but in National Westminster Bank Vs. Barclays Bank International

Ltd. [1975] Q.B. 654 it was held that a paying bank owes no duty of care to

a payee and merely by honoring an undetectably forged instrument, a bank

does not represent that the instrument was genuine, and therefore no

estoppel by representation or negligence can be raised against it.

29. Our Supreme Court, in Canara Bank Vs. Canara Sales Corporation

(1987) 2 SCC 666, in the context of relationship between a banker and a

customer, has held that when a cheque signed by a customer is presented

before a bank with whom he has an account, there is a mandate on the bank

to pay the amount covered by the cheque; however, if the signature on the

cheque is not genuine, there is no mandate on the bank to pay and the bank,

when it makes the payment on such a cheque, cannot resist the claim of the

customer with the defence of negligence on his part such as leaving the

cheque book carelessly so that third parties would easily get hold of it. The

reason for holding so was explained by stating that a document in cheque

form, on which the customer's name as drawer is forged, is a mere nullity. A

discussion on this aspect is also to be found in UCO Bank Vs. D. Nath &

Co. MANU/DE/0162/2011 and Steel Authority of India Vs. Punjab & Sind

Bank MANU/DE/6261/2012.

30. State Bank of India supra relied upon by the counsel for the

respondent Bank is also a case of payment by the State Bank of India to

another bank namely Punjab National Bank on a cheque drawn by the Land

Acquisition Collector and which was subsequently discovered to be bearing

the forged signatures of the Land Acquisition Collector. Section 72 of the

Contract Act was invoked by the State Bank of India. Punjab National Bank

raised a plea of estoppel. A Single Judge of this Court relying on National

Westminster Bank supra held the plea of estoppel to be not available

against the State Bank of India. In addition, support was drawn from Sales

Tax Officer Vs. Kanhaiya Lal Mukundlal Saraf AIR 1959 SC 135 holding

that if it has been established that payment has been made under mistake,

the party receiving, is bound to return it and no question of estoppel can

arise where both parties are laboring under mistake and one party is not

more to blame than the other; and that there can be no estoppel in regard to

position of law.

31. However Kanhaiya Lal Mukundlal Saraf supra was dissented from

by the Constitution Bench of the Supreme Court in Mafatlal Industries Ltd

(at page 612) supra. It was held that there was inconsistency in Kanhaiya

Lal Mukundlal Saraf in, on the one hand observing that Section 72 of the

Contract Act is subject to question of estoppel, waiver, limitation or the like

and on the other hand, holding that equitable considerations cannot be

imported because of the clear and unambiguous language of Section 72. The

Constitution Bench as aforesaid held that equitable considerations cannot be

held to be irrelevant where a claim for refund is made under Section 72.

32. At the same time, it may be noticed that both Kanhaiya Lal

Mukundlal Saraf and Mafatlal Industries Ltd were not cases relating to

banks.

33. A Division Bench of the Calcutta High Court in United Bank of

India Vs. A.T. Ali Hussain & Co. AIR 1978 Cal 169 was also concerned

with the claim of a bank for realization of money paid on a cheque drawn by

the customer and which was subsequently discovered to be not bearing the

signature of the customer, on the basis of a mistake. The defendant therein

took the defense of estoppel. The judgments of the English Courts holding

the defense of estoppel to be not available against a bank were held to be not

applicable to India for the reason of claim under Section 72 of the Contract

Act having been held in Shiba Prasad Singh supra to be subject to the

defense of estoppel or otherwise.

34. Though the dicta of Supreme Court in Canara Bank supra

superficially appears to take a different view from that of the Division bench

of the Calcutta High Court but that was a case by a customer against its

bank for recovery of the amount paid by the bank from the customer‟s

account on the basis of forged cheques. In those facts, it was held that a

forged cheque carries no mandate to pay. The same was the factual context

in D. Nath & Co. supra. Steel Authority of India supra pertained to a forged

Letter of Credit.

35. The factual context in the present case is of a different genre. Here the

forgery is not of the signatures of the customer of the bank but of the bank

itself. The respondent Bank was very well aware about one year prior to the

date of making payment under the subject Bank Draft that the Bank Draft

leaf of that number had been stolen/robbed from it. Nothing prevented it

from stopping payment under such stolen/robbed Bank Draft leaves, even if

the same were to be presented for payment. The plea that the bank could not

know at which branch the said drafts would be presented for encashment is

an eyewash. Instructions of stop payment ought to / could have been given

to all the branches. The incident is not archaic but of the year 1999-2000 by

when modes of communication and computerization were at an advanced

stage. No preventive steps at all are pleaded to have been taken in this

regard.

36. On the other hand is the appellant, who owing to such inaction of the

respondent Bank has proved to have changed his position to his detriment.

37. I see no reason why the defense of estoppel can be said to be not

available to the appellant in these facts, to the claim of the respondent Bank

on the plea of mistake. I have not come across any judgment of the Indian

Courts holding such a plea to be not available against a bank. Rather in

Canara Bank supra, the plea of estoppel by negligence of the customer was

held to be not available to a bank against its customer. Of course, the Single

Judge of this Court in State Bank of India supra held the plea of estoppel to

be not available against a bank, basing his view on the English judgments

and Kanhaiya Lal Mukundlal Saraf supra, but since Kanhaiya Lal

Mukundlal Saraf is no longer good law, I do not consider myself bound by

the judgment of the Single Judge of this Court in State Bank of India supra.

38. There is another view of the matter. The House of Lords in Lipkin

Gorman Vs. Karpnale Ltd. [1992] 4 All ER 512, held that independently of

the defense of estoppel, the defense of „change of position‟ is available

against a claim on the basis of a mistake. It was held that this defense is

available to a person whose position has so changed that it would be

inequitable to require him to make restitution. It was further held that the

defense of „change of position‟ is wider than the defense of estoppel

because it does not depend on any representation or breach of duty by the

person making the payment under mistake; it is predicated on the premise

that where an innocent defendant‟s position is so changed that he will suffer

injustice if called upon to repay, the injustice of requiring him to pay

outweighs the injustice of denying the plaintiff restitution. This was

however again not a case involving a bank.

39. However common law implied and permitted such a defense in cases

where there was no timely communication of the notice of dishonor of the

instrument under which payment was mistakenly made by the bank to the

payee. This rule known as the „Cocks Vs. Masterman Rule‟ (see Cocks Vs.

Masterman (1829) 9 B & C 902) was subsequently elaborated in London &

River Plate Bank Vs. Bank of Liverpool [1896] 1 QB 7 and was based on

the premise that the holder ought to know at once whether the instrument

which is presented for payment is going to be paid or not and if there is an

interval of time in which the position of the holder may get altered, the

money so paid upon the instrument cannot be recovered back. Although the

amplitude of this rule has been curbed by subsequent decisions of English

Courts (see Imperial Bank of Canada Vs. Bank of Hamilton [1903] AC 49

and National Westminster Bank supra), but the salutary rule, which still

survives, even in its constricted form, is found to be squarely applicable to

the facts of the present case. The Division Bench of the Bombay HC in

Raghunath Rithkaran Vs. The Imperial Bank of India AIR 1926 Bom 66

though noticing Imperial Bank of Canada supra nevertheless applied the

„Cocks Vs. Masterman Rule‟.

40. The defense of „change of position‟, so prevailing in English Law, is

found to have been alluded to by the Constitution Bench in Mafatlal

Industries Ltd supra and recognized in Pollock and Mulla, Indian Contract

and Specific Relief Acts, 12th Edition at page 1447. The same was also

applied by the Division Bench of the Calcutta High Court also in A.T. Ali

Hussain & Co. supra. Thus, howsoever incongruous it may appear that

though the defense of estoppel has been held to be not available against a

bank but the defense of „change of position‟ which is nothing else but a

narrower facet of the principle of estoppel has been held to be available

against a bank, but in the absence of any dicta of the Indian Courts holding

such defenses to be not available against bank, I am inclined to invoke the

said defenses against the claim of the respondent Bank on the basis of

mistake. I may also notice that Chitty on Contracts, 28th Edition at

paragraph 30-114 has opined that mistake, as the ground of recovery is wide

and it is important to accept a broad defense. It is further observed that if the

basis of the claim is unjust enrichment of the defendant, any available

defenses should be similarly be based on the extent of any enrichment and

should apply where the enrichment has been erased.

41. In such a situation, in my view, the party which is found to be more at

fault has to bear the burden of the loss. In the present case, the respondent

Bank is found to be more at fault, though both, the appellant and the

respondent Bank, are found to have suffered a loss. The time honoured rule

of equity formulated in Lickbarrow v. Mason (1787) 102 E.R. 1192 and

recognized by the Supreme Court in The New Marine Coal Co. (Bengal)

Private Ltd. Vs. Union of India AIR 1964 SC 152 and Bhagwandas

Goverdhandas Kedia Vs. Girdharilal Parshottamdas and Co. AIR 1966 SC

543 runs as follows:

"Whenever one of two innocent parties must suffer by the act of third, he who has enabled such person to occasion the loss must sustain it." It is evident that the claim of the respondent Bank for recovery of moneys

paid under mistake must fail on this count alone.

42. Though the counsel for the respondent Bank has not supported the

reason on which the impugned judgment upheld the claim of the respondent

Bank i.e. of the appellant being not a holder in due course but since queries

as aforesaid were raised during the hearing, it is deemed appropriate to deal

therewith also.

43. A pay order, in Punjab & Sind Bank Vs. Vinkar Sahakari Bank Ltd.

(2001) 7 SCC 721 was held to be a negotiable instrument under the

Negotiable Instruments Act. Crossing of an instrument as „account payee‟

has been held to have no effect on its negotiability in Durga Shah Mohan

Lal Bankers Vs. Governor General In Council AIR 1952 All 590 and

Tailors Priya Vs. Gulabchand Danraj AIR 1963 Cal 36. The same view

has been taken in Tannan‟s Banking Law and Practice in India, 19 th Edition,

at page 284.

44. As far as the question, whether the appellant could be said to be

„holder in due course‟ of the said Bank Draft / pay order, the Supreme Court

in U. Ponnappa Moothan Sons Vs. Catholic Syrian Bank Ltd. (1991) 1

SCC 113 has categorically held that mere failure to prove bona fides or

negligence does not negative a claim of a person being a „holder in due

course‟ and it is for the Court to decide, in a given case, whether negligence

on the part of the holder is so gross and extraordinary so as to presume that

he had sufficient cause to believe that the title conveyed to him was

defective.

45. The learned ADJ has not returned such a finding of negligence on the

appellant of such degree and scale that law could impute notice of defect of

title of the purchaser on the appellant. In the absence of such a finding, the

appellant could not have been held to be not a „holder in due course‟.

46. Resultantly, the appeals are allowed; the judgment and decree of the

learned ADJ in both the suits, is set aside. The suit filed by the appellant is

decreed with costs and the suit filed by the respondent Bank is dismissed.

47. Stay of execution as aforesaid, was granted subject to the appellant

furnishing security by way of FDR in this Court. Since the appeals have

been allowed, the said security is discharged and the FDR deposited by the

appellant in this Court, be released and returned back to the appellant.

48. Decree sheet be drawn up.

RAJIV SAHAI ENDLAW, J.

DECEMBER 13, 2013 „bs‟..