Karnataka High Court
City Union Bank Ltd vs Karnataka Sahakari Sakkare on 24 July, 2025
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RFA No. 100221 of 2020
IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH
DATED THIS THE 24TH DAY OF JULY, 2025
PRESENT
THE HON'BLE MR. JUSTICE R.NATARAJ
AND
THE HON'BLE MR. JUSTICE RAJESH RAI K
REGULAR FIRST APPEAL NO. 100221 OF 2020
BETWEEN:
1. CITY UNION BANK LTD
NO.4620, J.C.NAGAR,
3RD CROSS, HUBBALLI-580020,
REPRESENTED BY ITS
BRANCH MANAGER
SRI. RAMASUNDARAM T.
AGE: 37 YEARS,
2. AMIRTHA GANESH T.S.
Digitally signed
AGE: 51 YEARS,
by YASHAVANT
YASHAVANT
NARAYANKAR
Location: HIGH
COURT OF
BRANCH MANAGER,
KARNATAKA
NARAYANKAR DHARWAD
BENCH
DHARWAD
Date:
CITY UNION BANK LTD.,
2025.07.24
14:14:56 +0530
NO.4620, J.C.NAGAR,
3RD CROSS, HUBBALLI-580020.
...APPELLANTS
(BY SRI. SURESH S.GUNDI, ADVOCATE)
AND:
1. KARNATAKA SAHAKARI SAKKARE
KARKHANE LIMITED, SANGUR,
TQ: HAVERI-581148,
REPRESENTED BY ITS
MANAGING DIRECTOR.
2. SADASHIVA S/O. CHANABASAPPA BELLAD,
AGE: 59 YEARS, OCC: AGRICULTURE
AND BUSINESS AND EX-PRESIDENT,
KSSK LTD, SANGUR,
-2-
RFA No. 100221 of 2020
R/O: AKKI-ALUR, TQ: HANGAL,
DIST: HAVERI-581102.
...RESPONDENTS
(BY SRI. ARAVIND D.KULKARNI AND
SRI. L.M.KURAHATTI, ADVOCATES FOR R1;
SRI. SHRIKANT T.PATIL AND
SRI. ROHIT S.PATIL, ADVOCATE FOR R2)
THIS RFA IS FILED UNDER SECTION 96 READ WITH
ORDER 41 RULE 1 OF CPC AGAINST THE JUDGMENT AND
DECREE DATED 27.01.2020 PASSED IN O.S.NO.20/2013 ON
THE FILE OF THE ADDITIONAL SENIOR CIVIL JUDGE AND
JUDICIAL MAGISTRATE FIRST CLASS, HANGAL, DECREEING
THE SUIT FILED FOR RECOVERY OF MONEY.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 30.06.2025 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, JUDGMENT WAS
DELIVERED THEREIN AS UNDER:
CORAM: THE HON'BLE MR. JUSTICE R.NATARAJ
AND
THE HON'BLE MR. JUSTICE RAJESH RAI K
CAV JUDGMENT
(PER: THE HON'BLE MR. JUSTICE RAJESH RAI K)
The defendants No.2 and 3 in O.S. No.20/2013 on the file
of the Addl. Senior Civil Judge and JMFC., Hanagal, (henceforth
referred to as 'the Trial Court') filed this regular first appeal
challenging the judgment and decree dated 27.01.2020 by
which the suit in O.S. No.20/2013 was decreed with cost and
ordered that plaintiff is entitled to recover an amount of
Rs.20,00,000/- from defendants No.1 to 3 with interest @18%
per annum from 15.02.2008 till its actual realization. Further, it
is ordered that defendants No.1 to 3 are jointly and severally
liable to pay the amount to the plaintiff within 3 months from
the date of judgment, failing which, the plaintiff is at liberty to
recover amount along with interest from the defendants by
following due procedure of law.
2. The parties shall henceforth be referred to as they
were arrayed before the Trial Court.
3. Brief facts, leading raise to the filing of this appeal
are as follows:
The plaintiff filed the suit for recovery of Rs.20,00,000/-
from defendants No.1 to 3 with interest @ 18% per annum.
The plaintiff is a Co-operative Society running a Sugar Factory
in the name and style of Karnataka Sahakari Sakkare Karkane
Niyamita (hereinafter referred to as 'plaintiff Society' for short).
The Commissioner for Cane Development and Director of
Sugar, Bengaluru being the competent authority, by its order
dated 22.11.2007, superseded the committee of management
of plaintiff Society and appointed the District Commissioner of
Haveri as Administrator and the Deputy Registrar of
Co-operative Society, Haveri as a Managing Director of the
plaintiff's Society. Hence, they both were administering the
plaintiff Society from 22.11.2007.
4. The plaintiff Society was an assessee under the
provisions of Karnataka Commercial Tax and was to pay
purchase tax on purchase of sugarcane from farmers for
crushing during the year 1990-91 to 1995-96. The plaintiff
Society had paid excess tax of Rs.45,76,981/- to Commercial
Tax Department. As such, the plaintiff preferred an appeal
before the Karnataka Appellate Tribunal, Bangalore seeking
refund of excess tax paid. The Karnataka Appellate Tribunal
allowed the claim of plaintiff and passed an order for refund of
the said amount to the plaintiff by the Commercial Tax
Department. Accordingly, Deputy Commissioner, Commercial
Tax, Dharwad by his letter dated 01.02.2008 arranged for
refund of Rs.45,76,981/- to the plaintiff's Society.
5. The defendant No.1 was the elected President of
plaintiff Society till 22.11.2007 i.e., before superseding the
committee of management. The defendant No.1 knowingfully
that, he is no authorized to manage the affairs of the plaintiff
Society, with an ulterior motive, he received the refund order
with voucher dated 01.02.2008 issued by the Deputy
Commissioner, Commercial Tax and approached defendant
No.2- the Manager of defendant No.3 Bank to open an account
in the name of plaintiff Society. The defendant No.2 without
properly verifying the authenticity of documents produced by
defendant No.1, including the Board resolution, allowed a
current account bearing No.88997 to be opened on 12.02.2008
in the name of Karnataka Sahakari Sakkare Karkane Niyamita.
Later, defendant No.1 submitted the refund payment order of
Rs.45,76,981/-. The defendant No.2 cleared the same on
14.02.2008 and defendant No.1 withdrew a sum of
Rs.20,00,000/- by cash on 15.02.2008 by presenting a self
drawn cheque.
6. The audit of the plaintiff Society for the year 2007-
08 and 2008-09 was finalized on 29.06.2010. The Auditor
reported a shortfall of Rs.20,00,000/- out of the amount
refunded by the Tax Department. It was thereafter found that
defendant No.1 by opening an account in defendant No.3 Bank,
withdrew the said amount. As such, the auditor of plaintiff's
Society advised to recover the said amount from defendants
jointly.
7. Accordingly, the plaintiff Society got issued a notice
to defendants on 03.06.2012 calling upon them to pay
Rs.20,00,000/- with interest from 16.02.2008 till the date of
payment. However the defendants neither replied to the notice
nor made the payment. Hence, left with no other option, the
plaintiff Society filed the suit in O.S. No.20/2013 against the
defendants for recovery of the said amount.
8. In response to the suit summons, defendants No.2
and 3 entered their appearance through their respective
counsel. However, defendant No.1 remained absent and was
placed ex-parte before the trial Court. The defendant No.2 filed
a written statement contending that he was in no way
connected to the illegal act of defendant No.1 in withdrawing
the amount from the plaintiff Society's account for unlawful
gain. Further, he contended, defendant No.1 who claimed to be
the Chairman of plaintiff Society held the refund order from the
Department of Commercial Tax and accordingly opened an
account in defendant No.3-Bank after completing all the
formalities. He claimed that when the account was opened, he
obtained resolution of the plaintiff's Society dated 02.06.2006,
the meeting held on 12.01.2008, the letter of the plaintiff
Society dated 01.02.2008 and the photographs with specimen
signature card etc., from defendant No.1. He further stated that
after withdrawal of amount by defendant No.1, he grew
suspicious and went to Haveri to meet the Managing Director of
the plaintiff Society in person on 20.02.2008 and met one
H.Y.Gaddanakeri and came to know that the defendant No.1
played fraud on the defendant No.3-Bank by forging the
documents. Hence, he instructed the Managing Director of the
plaintiff Society to lodge a complaint against defendant No.1.
Accordingly, he lodged a complaint before Haveri Rural Police
and the said Police registered FIR against defendant No.1, laid
charge sheet against him. Hence, according to defendant No.2,
he discharged his duty as a Manager of the Bank as per law.
Accordingly, he prayed to dismiss the suit against him.
9. Defendant No.3 filed the written statement by
contending that the suit is barred by limitation and not
maintainable against the Bank. Further, the original refund
order issued by the Deputy Commissioner of Commercial Tax
dated 01.02.2008 addressed to Manager of SBI, Dharwad
Branch produced before defendant No.3-Bank by defendant
No.1 who acted as a Managing Director of plaintiff Society by
placing the resolution of the Society and all other legal
documents, as such, there were no reasons to disbelieve
defendant No.1. Further, defendants No.2 and 3 showed their
bonafide by instructing the Managing Director of the plaintiff
Society to lodge a complaint against defendant No.1.
Accordingly, defendant No.3 prayed to dismiss the suit.
10. On the basis of above pleadings, the Trial Court
framed the following issues:
"ISSUES
1. Whether plaintiff proves that the
defendant No.1 has made
misappropriation in collusion with the
defendant No.2 and 3?
2. Whether the plaintiff further proves
that all the defendants are jointly and
severally liable to pay the misappropriated
amount of Rs.20 lakhs, to it?
3. Whether the suit of the plaintiff is
bad for mis-jonder and non jonder of
necessary parties?
4. Whether the plaintiff further proves
that it is entitle for recovery for amount of
along with the interest at the rate of 18%
p.a from the date of misappropriation till
its realization i.e. from 15.02.2008 till its
realization?
5. To what order or decree?"
11. In order to prove the case of plaintiff, the plaintiff
examined himself as PW.1 and marked Exs.P1 to P26. The
defendant No.2 examined himself as DW.1 and marked Ex.D1.
12. After assessing the oral and documentary evidence,
the Trial Court answered issues No.1, 2 and 4 in the
affirmative; issue No.3 in the negative and issue No.5 as per
final order and decreed the suit against the defendants as
under:
"ORDER
Suit of the plaintiff is hereby decreed with
costs.
The plaintiff is entitled to recover an
amount of Rs.20,00,000/- from the defendant
No.1 to 3 with interest at the rate of 18% per
annum from 15.02.2008 till its actual
realization.
The defendant No.1 to 3 are jointly
andseverally liable to pay amount to the plaintiff
as mentioned above along with interest thereon
within 3 months from the date of this order,
failing which the plaintiff is at liberty to recover
amount along with interest thereon as
mentioned above from the defendants by
following due procedure known to law.
Draw decree accordingly"
Challenging the said judgment and decree, defendants
No.2 and 3 are before this Court.
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13. We have heard the learned counsel Sri. Suresh S.
Gundi for the appellants, learned counsel Sri. Aravind D
Kulkarni and Sri. L.M Kurahatti for the respondent No.1 and
learned counsel Sri. Shrikant T. Patil and Sri. Rohit S. Patil for
respondent No.2.
14. The learned counsel appearing for the
appellants/defendants No.2 and 3 vehemently contended that
the Trial Court grossly erred while passing the impugned
judgment and decree without appreciating the pleadings and
evidence in the right perspective. He contended that the
plaintiff Society utterly failed to prove that defendant No.2
opened an account in the name of Karnataka Sahakari Sakkare
Karkane Niyamita in defendant No.3 Bank with an ulterior
motive either to support defendant No.1 to make unlawful gain
or to draw any benefit there from. As such, the trial Court erred
in answering issues No.1, 2 and 4 in the affirmative. According
to the learned counsel, the auditor of the plaintiff Society gave
a baseless and unreliable report that defendant No.2 without
proper verification of name and signature of Managing Director
with ID proof blindly opened an account and as such,
defendants No.2 and 3 are jointly and severally liable to pay
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Rs.20,00,000/- is totally not acceptable; while opening the
account in defendant No.3-Bank, defendant No.1 submitted the
photo of Hanumathappa Yallappa Gaddanakeri in the voter ID
which is the same photo of Managing Director-H.Y.Gaddanakeri
affixed on the account opening form. Further, the photo of
Shankarappagouda parappagouda in Voter ID card is also
matching to the photo of the account officer/secretary affixed in
the opening form. Additionally, defendant No.2 also verified the
signature of Managing Director and Accounts officer affixed in
the account opening form. Admittedly, the Bank account was
opened in the name of Society and not in the name of
Managing Director i.e., defendant No.1. Further, there is no bar
for any person or society from opening an account in any other
District than the place of its own District. Moreover, as per the
bylaws of plaintiff's Society at appendix which is a part of audit
report, the plaintiff society's area of operation is Haveri and
Dharwad District. He further contended that the total amount
deposited in the Bank by defendant No.1 was Rs.45,75,981/-.
However, the defendant No.1 withdrew only Rs.20,00,000/-
thereafter. Immediately defendant No.2 made his sincere
attempt to verify the details of the plaintiffs' Society at Haveri
by personally visiting the Society. Though there is a delay in
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visiting the plaintiff's society by defendant No.2, the same was
due to non availability of the other staff in the defendant No.3-
Bank. After verifying with the plaintiff's Society, defendant No.2
came to know about the fraud played by defendant No.1 and as
such, immediately he stopped the withdrawal of the remaining
amount by defendant No.1. Further, at the instance of
defendant No.2, the then Managing Director-H.Y.Gaddanakeri
lodged a Police complaint against defendant No.1 on
24.02.2008 before Haveri Rural Police. The complaint lodged by
the Managing Director clearly reveals that defendant No.1 is
sole responsible for the cheating and fraud committed to the
plaintiff Society. The negligence of defendants No.2 and 3 in
the illegal act of defendant No.1 nowhere stated in the
complaint or in the charge sheet filed by the Police. In such
circumstance, at any stretch of imagination, it cannot be said
that defendant Nos.2 and 3 are vicariously liable for the act
committed by defendant No.1 and they are jointly and severally
liable to made good the claim of plaintiff Society.
15. During the course of argument, the learned counsel
for the appellants filed an affidavit along with 3 documents i.e.,
the guidelines in respect of KYC (Know Your Customer) dated
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16.08.2002, the subsequent guidelines dated 30.06.2008 and
submitted that there was no restriction to open an current
account to the plaintiff Society in any scheduled Bank at
Hubballi and also there is no restriction for withdrawal of cash
of Rs.20,00,000/- by self cheque and there is no limit to
withdraw the cash. Hence, according to the learned counsel,
the trial Court erred in passing the impugned judgment and
decree by directing defendants No.2 and 3 to make the
payment to the plaintiff Society jointly and severally with
defendant No.1. Accordingly, he prays to allow the appeal.
16. Per Contra, the learned counsel for the plaintiff
contended that the trial Court, on meticulously examining the
comprehensive evidence and documents placed before it,
passed a well-reasoned judgment which does not call for any
interference. According to the learned counsel, defendant No.2
has not followed the due procedure as per the Bank norms,
while opening the account in the Bank by defendant No.1.
According to the learned counsel, as admitted by defendant
No.2 in his cross-examination, though he is duty bound to visit
the plaintiff Society before opening an account, he failed to do
so and he visited the plaintiff Society after defendant No.1
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withdrew Rs.20,00,000/-. This aspect of the matter clearly
established that defendant No.2 was negligent while opening an
account and disbursing Rs.20,00,000/- to defendant No.1. He
also contended that the audit report-Ex.P4 clearly reveals,
while opening the account, defendant No.2 has not properly
examined/verified the ID proof, specimen signature and the
documents produced by defendant No.1 i.e., the Voter ID and
the specimen signature of the Managing Director and the
accountant of plaintiff Society, which were differing each other.
Despite, defendant No.2 opened an account without enquiry
and proper verification in the plaintiff Society in person. He
further contended that though FIR registered against defendant
No.1 alone, for the forgery and cheating committed by him,
however, the negligence on the part of defendants No.2 and 3
also attracts civil liability, as such they are liable to make good
the plaintiff Society jointly and severally with defendant No.1.
These aspects were rightly appreciated by the Trial Court, as
such; interference in the impugned judgment and decree does
not call for by this Court. Accordingly, he prays to dismiss the
appeal.
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17. Having heard the learned counsel for the parties
and on careful perusal of the evidence placed before us, the
points that arise for our consideration are:
1. "Whether the plaintiff Society proves that
defendant No.2 has not taken sufficient care
while opening the account of defendant No.1
in defendant No.3 Bank and was not diligent
while disbursing the amount to defendant
No.1?
2. Whether the defendants No.1 and 2 are
jointly and severally liable to pay the
decreetal amount to the plaintiff Society?"
18. The points No.1 and 2 are interlinked with each
other and hence are taken up together for discussion. As could
be gathered from records, the plaintiff Society is a Co-operative
Society. The Commissioner for Cane Development and Director
of Sugar, Bangalore being the competent authority superseded
the committee of management of plaintiff Society vide order
dated 22.11.2007 and appointed the Administrator and Deputy
Registrar to the said Society. Since then, the Administrator and
Managing Director are administering the affairs of plaintiff
Society. On perusal of cross-examination of DW.1 i.e.,
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defendant No.2, he categorically admitted that, he worked as a
Manager in defendant No.3 Bank from the year 2007. He
deposed that he was aware that defendant No.1 was the
Chairman of plaintiff Society before 22.11.2007 and on
22.11.2007 the plaintiff Society was superseded, resultantly,
the Chairman and all the members of plaintiff Society lost their
power and the Administrator was appointed to the Society.
DW.1 further admitted that, while opening the account of any
registered society, as a Manager of the Bank, he is bound to
examine the documents to ascertain, whether the person who
intends to open the account was the authorized person of the
society or not. Additionally, to open the account in the name of
Society, the Bank authorities are bound to peruse the bylaws of
the society and the resolution passed by the Society authorizing
the opening of an account. The defendant No.2 also admitted in
his cross-examination that, if the society is registered under
the Co-operative Societies Act, before opening the account in
any Bank the audit report of the society has to be verified.
However, the defendant No.2 has not properly verified any of
the documents before opening the account of plaintiff Society in
defendant No.3 Bank. Moreover, defendant No.2 also failed to
send the resolution and specimen signature furnished in the
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account opening form to the concerned Society and to obtain
confirmation from the Society. As admitted by DW.1, there is a
difference between ID proof, specimen signature of the
Managing Director and the accountant of plaintiff Society
furnished by defendant No.1 when he opened the account. In
such circumstance, defendant No.2 being a responsible officer
of the defendant No.3-Bank is duty bound to scrutinize all the
documents meticulously before opening the account and
disbursing the amount to defendant No.1. Besides, defendant
No.3 Bank is situated far away from plaintiff Society. In such
circumstance, after knowing fully well the fact that the plaintiff
Society was superseded as on 22.11.2007, defendant No.2
ought to have verified the documents before opening the
account and releasing a huge sum of Rs.20,00,000/- by cash to
defendant No.1 immediately within two days of opening the
account. On perusal of the evidence of defendant No.2, it is
definitely established that defendant No.2 was negligent in his
lawful duty while opening the account and releasing the
amount. The guidelines issued by the Reserve Bank of India
vide Circular No.DBOD.AML.BC.18/14.01.001/2002-03 dated
16.08.2002 on 'KNOW YOUR CUSTOMER' norms and 'CASH
TRANSACTION' cited in Paragraphs 2.2 (i) and 4 (ii) as under:
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"2.2 Customer identification
(i) The objectives of the KYC framework
should be two fold, (i) to ensure appropriate
customer identification and (ii) to monitor
transactions of a suspicious nature. Banks
should obtain all information necessary to
establish the identity/legal existence of each
new customer, based preferably on disclosures
by customers themselves. Typically easy means
of establishing identity would be documents
such as passport, driving license etc. However
where such documents are not available,
verification by existing account holders or
introduction by a person known to the bank
may suffice. It should be ensured that the
procedure adopted does not lead to denial of
access to the general public for banking
services.
4. Ceiling and monitoring of cash
transactions
(ii) The banks are required to keep a
close watch of cash withdrawals and deposits
for Rs.10 lakhs and above in deposit, cash
credit or overdraft accounts and keep record of
details of these large cash transactions in a
separate register. (Circular
DBOD.BP.BC.57/21.01.001/95 dated May
4,1995)."
19. The defendant No.3 being the Bank in which the
defendant No.1 opened the account through defendant No.2-
the Manager and withdrew the huge amount illegally due to the
negligence of defendant No.2, as discussed supra, as per the
circular of the Reserve Bank of India, defendant No.3 is also
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vicariously liable for the act of defendant No.2. As rightly
contended by the learned counsel for the plaintiff, though
defendants No.2 and 3 are not arraigned as accused in the
criminal case filed by the Managing Director of the plaintiff
Society for the fraudulent act committed by defendant No.1,
however, the civil liability is attracted against defendants No.2
and 3 for the negligent act committed by defendant No.2. The
documents placed by learned counsel for the appellants no way
aid the defendants case, as defendant No.2 himself admitted
that he did not follow the procedure established under law
while opening the account. Though there is no limit for
withdrawal of cash by self cheque, however the circular stated
supra, provides the banks are required to keep a close watch of
cash withdrawals and deposits for Rs.10 lakhs and above.
20. Further, the Reserve Bank of India in its Circular
vide No.DBOD.LEG.BC.86/09.07.007/2001-02 dated
08.04.2002 in Paragraph No.3 stated as under:
"3. With a view to redressing the
grievances of the customers in this regard, we
have reviewed the position and advise that (i)
in cases where banks are at fault, the banks
should compensate customers without demur,
and (ii) in cases where neither the bank is at
fault nor the customer at fault but the fault lies
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elsewhere in the system, then also the banks
should compensate the customers (upto a limit)
as part of a Board approved customer relations
policy."
21. Post passing of this Circular, the Hon'ble Apex Court
in the case of The Kerala State Co-operative Marketing
Federation vs. State Bank of India and Others in Appeal
(Civil) No.151/1998 dated 30.01.2004, held that 'the banker
had acted in good faith, but was guilty of negligence in not
taking reasonable precautions and safeguards, to ensure the
safe transaction, he will put out side the protection of Section
82 of the Bills of Exchange, 1882'. Further in Paragraph No.15,
the Hon'ble Apex Court by referring the judgment of Turner v.
London and Provincial Bank (1903) 2 Legal Decisions
Affecting Banker 33: IV Journal of Institute of Bankers 220),
evidence was admitted as proof of negligence, that the
customer had given a reference on opening the account and
that this was not followed up. The principles governing the
liability of a collecting banker have also been extracted in the
impugned judgment, which reads as follows:
"(1) As a general rule the collecting banker
shall be exposed to his usual liability under
common law for conversion or for money had
and received, as against the 'true owner' of a
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cheque or a draft, in the event the customer
from whom he collects the cheque or draft has
not title or a defective title.
(2) The banker, however, may claim
protection from such normal liability provided he
fulfils strictly the conditions laid down in S. 131
or S. 131A of the Act and one of those conditions
is that he must have received the payment in
good faith and without negligence.
(3) It is the banker seeking protection who
has on his shoulders the onus of proving that he
acted in good faith and without negligence.
(4) The standard of care to be exercised by
the collecting banker to escape the charge of
negligence depends upon the general practice of
bankers which may go on changing from time to
time with the enormous spread of banking
activities and cases decided a few decades ago
may not probably offer an unfailing guidance in
determining the question about negligence
today.
(5) Negligence is a question of fact and
what is relevant in determining the liability of a
collecting banker is not his negligence in opening
the account of the customer but negligence in
the collection of the relevant cheque unless, of
course, the opening of the account and
depositing of the cheque in question therein from
part and parcel of one scheme as where the
account is opened with the cheque in question or
deposited therein so soon after the opening of
the account as to lead to an inference that the
depositing the cheque and opening the account
are interconnected moves in a integrated plan.
(6) Negligence in opening the account such
as failure to fulfill the procedure for opening an
account which is prescribed by the bank itself or
opening an account of an unknown person or
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non-existing person or with dubious introduction
may lead to a cogent, though not conclusive,
proof of negligence particularly if the cheque in
question has been deposited in the account soon
after the opening thereof.
(7) The standard of care expected from a
banker in collecting the cheque does not require
him to subject the cheque to a minute and
microscopic examination but disregarding the
circumstances about the cheque which on the
face of it give rise to a suspicion may amount to
negligence on the part of the collecting banker.
(8) The question of good faith and
negligence is to be judged from the stand point
of the true owner towards whom the banker
owes no contractual duty but the statutory duty
which is created by this section and it is a price
which the banker pays for seeking protection,
under the statute, from the otherwise larger
liability he would be exposed to under common
law.
(9) Allegation of contributory negligence
against the paying banker could provide no
defence for a collecting banker who has not
collected the amount in good faith and without
negligence."
22. On careful analysis of the Circulars of the Reserve
Bank of India and the principles summarized by the Hon'ble
Apex Court in the above case and collocating the same to the
facts and circumstance of this case, we are of the considered
view that defendant No.2 was negligent while opening the
account in the name of plaintiff Society at the instance of
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defendant No.1 and while releasing a huge sum of
Rs.20,00,000/- to defendant No.1 jointly and severally. In such
circumstance, defendants No.1 to 3 are liable to make good the
loss suffered by the plaintiff Society.
23. In that view of the matter, the trial Court rightly
appreciated the evidence on record and passed the impugned
judgment and decree, which does not call for any interference.
Accordingly, we answer points No.1 and 2 in the affirmative
and proceed to pass the following:
ORDER
The Regular First Appeal No.100221/2020 is dismissed.
SD/-
(R.NATARAJ)
JUDGE
SD/-
(RAJESH RAI K)
JUDGE
HKV
Ct:vh
