[Cites 14, Cited by 0]
Madhya Pradesh High Court
R.K.Shrivastava vs Reserve Bank Of India & Ors. on 12 February, 2026
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235
IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE SANDEEP N. BHATT
W.P.No.5823 OF 2005
R.K.SHRIVASTAVA
VERSUS
RESERVE BANK OF INDIA THROUGH ITS DEPUTY GENERAL
MANAGER AND OTHERS
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Appearance:
Shri Kishore Shrivastava - Senior Advocate with Shri Raman
Choubey, Advocate for the petitioner.
Shri Rajesh Maindiretta - Advocate for respondent No.4.
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RESERVED ON : 04.02.2026
PRONOUNCED ON : 12.02.2026
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ORDER
Present petition is filed seeking following reliefs :-
"(i) Call for the entire records in possession of the respondents
pertaining to the complaint case no. 112/2003-2004 for its kind
perusal;
(ii) To issue a writ in the nature of certiorari quashing the impugned
communication/letter dated 6.5.2003 (Annexure P/2) passed by the
respondent bank.
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W.P.No.5823 OF 2005
(iii) To issue a writ in the nature of certiorari quashing the impugned
order dated 19.1.2005 passed by the reviewing authority under clause
18(1) of the scheme;
(iv) To issue a writ in the nature of certiorari quashing the impugned
order dated 15.4.2005 (Annex. P/15) passed in review by the Banking
Ombudsman.
(v) To issue a writ in the nature of mandamus commanding the
respondents to compensate the petitioner to the value of cheques
alongwith the interest at the FDR rate from the date of dishonour of
the cheques i.e. 17.4.2003 till the date of payment;
(vi) Any other relief in the facts and circumstances of the case may
also kindly be granted;
(vii) "Cost of the petition."
2. The facts of the case in brief are that petitioner submitted two
cheques worth one lac each for collection, through his banker UCO
Bank Wright Town, Jabalpur, which were not honoured by the
respondent Bank on the ground "Title of account modified" vide its
communication dated 17-4-2003 Annexure-P/18. Neither any other
faults were found with the two cheques nor it was dishonoured for
want of funds. As required by clause 13(3)(a) of the Banking
Ombudsman Scheme 2002 (in short Scheme), before making a
complaint to the Banking Ombudsman under clause 12 of the Scheme,
the Petitioner submitted a representation dated 30.04.2003 (Annexure-
P/1). The respondent Bank vide its communication dated 6-5-2003
(Annexure- P/2) could not agree with the representation, hence the
petitioner was compelled to file a complaint under clause 12 of the
Scheme, to the Banking Ombudsman. The Banking Ombudsman
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 3
W.P.No.5823 OF 2005
respondent No.3 after considering the contentions of both the parties,
and upon failure of the conciliation proceedings held under clause 15
of the Scheme, advised the respondent Bank (before passing any
award under clause 16 of the Scheme) to compensate the Petitioner to
the extent of the value of the cheques and also to pay interest at FDR
rate from the date of dishonour, till date of payment (Annexure-P/8).
3. The respondent No.1 & 2 inter alia, entertained review petition
(Annexure-P/10) against advise given by Ombudsman (Annexure-P/8)
filed by the Respondent Bank and remanded the matter vide impugned
order dated 19-1-2005 without supplying any copy of the impugned
order to the petitioner, it was informed vide Annexure-P/14 that the
Review Authority has passed order on 19-1-2005 under clause 18(1)
of the Scheme, for review of award by the Ombudsman. Thereafter,
the Ombudsman, in his turn, vide order dated 15-4-2005, rejected the
petitioner's claim/complaint holding that 'the complaint is without
sufficient cause' (Annexure-P/16).
4. Learned Senior counsel for the petitioner submits that the
impugned award is challenged mainly on four grounds viz (i) The
application dated 03.08.2004 is barred by limitation; (ii) No
opportunity of hearing was given to him; (iii) The Bank was at
liability to compensate the petitioner and (iv) The Banking
Ombudsman has wrongly dismissed the complaint holding that
petitioner is not a customer of the Bank.
5. With regard to ground No.(i), learned Senior counsel submits
that as per Banking Ombudsman Scheme clause 17(1), the prescribed
period for preferring review application is 1 Month from the date of
receiving of copy of the award. In the present matter, a perusal of
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 4
W.P.No.5823 OF 2005
Annx.P/14 at page 55 of the writ petition would reveal that the review
application was filed on 03.08.2004 i.e., after a delay of 1 month. It is
also noteworthy that the said application for review was preferred
without any application for condonation of delay. Thus, the review
application (Annx.R/3 of the return) is clearly barred by limitation.
6. With regard to ground No.(ii) that no opportunity of hearing
was given, learned Senior counsel submits that clause 17(3) of the
Scheme requires reviewing authority to issue a notice and call for the
reply from the opposite party. However, in the present case no notice
was issued to the petitioner. The bank has also not filed any document
or proceeding to show that any notice was issued. As such it becomes
an admitted position. He further submits that proviso to clause 17(1)
requires that review application would lie only if the application has
the approval of the chairman or in his absence the Managing Director
or the Chief Executive Officer. It is submitted that paragraph 11 of
the review application states that a "review is filed after obtaining due
approval from the chairman and Managing director of the bank".
However, no such approval is annexed alongwith review application
nor is available before this Court. The Chairman and Managing
Director are two different authorities under the proviso to clause 17(1)
approval is required from the Chairman, and it is only in case of
absence of Chairman, Managing Director can give approval. However,
the statement does not make it clear, approval is given whether by
Chairman or by Managing Director. In any case no such approval is
attached with the review application.
7. With regard to ground No.(iii) that Bank has liability to
compensation the petitioner, learned Senior counsel submits that in the
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W.P.No.5823 OF 2005
impugned order Bank has wrongly relied on Section 31, which is not
applicable in the present case. The applicable provision is under Sec.
77 of N.I Act. A bare reading shows that the bank is obliged to honour
the cheque if they have sufficient funds in the account. Statement
filed by respondent of the return shows that the bank had Rs.
4,80,592.61 in the account whereas the cheques were only for two
lakhs. He further submits that as per the provision of Sec. 77 of the
Negotiable Instruments Act, 1881, the bank is liable to compensate the
petitioner for dishonour of the cheques. He submits that it is also not
the case that upon reconstitution of the firm, the Account number of
the firm was changed or the signatory was changed. Admittedly, the
account no (3003) continued to be account of the firm and Girdhar
Daga the signatory of the said account. It is submitted that breaking of
account, is totally unheard of under the Negotiable Instrument Act
1881 and it also not the case that the Bank had recalled the cheques
issued earlier to the firm, upon its reconstitution.
8. With regard to ground No.(iv) that Banking Ombudsman has
wrongly dismissed the complaint on the ground that petitioner is not a
customer of the Bank, learned Senior counsel submits that as per
clause 13 of the Banking Ombudsman scheme, 'Any Person' can file a
complaint for a grievance as enumerated in clause 12. As per Cl. 12
(1) (a) of the Banking Ombudsman Scheme a complaint can be filed
on the ground of "non-payment/inordinate delay in the payment of
collection of cheques, drafts, bills etc.," In the present matter the
complaint related to the non-payment of cheques of the Petitioner.
Therefore, in view of the clause 12 & 13 of the scheme, the Banking
Ombudsman clearly committed a grave error in holding that the
complaint is not maintainable. In support of his contentions, he relied
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W.P.No.5823 OF 2005
on the judgment of Hon'ble Supreme Court in the case of
Commissioner of Income Tax Vs. A.W.Figgis-(1953) 2 SCC 219,
particularly para-7 and prayed for allowing his petition.
9. Per contra, learned counsel for the respondent No.4 submits
that upon reconstitution of the partnership firm the old account was
not closed but only broken for crystallising the liabilities of the
partners. As per the practice of the Bank, when any partner of the firm
retires then the existing account need not be closed but has to be
stopped / broken. The Branch also issued new chequebook only after
receiving written request from the proprietor. The proprietor after
reconstitution of the firm ought to have drawn the cheque in the
capacity of the proprietor of the firm. However, the proprietor of M/s.
Daga Commerce has drawn the same through its partners which was
no more in existence at the time of drawing the cheques. This prima-
facie shows the malafide intention of the drawer to which the Bank
has absolutely no control. The cheque was returned for the reason that
it does not contain proper title and not for want of proper signature.
The payee was advised to represent the cheque after rectifying the
defects, which was not done. Since the Complainant could not comply
with the requirement, the cheque could not be honoured. In the instant
case the Complainant / payee not being a customer of the drawee
Bank cannot enforce his right under the Ombudsman Scheme and
therefore, the Bank is not liable to the Complainant except to its
customers. Further, as per section 31 of N.I. Act the Bank can always
dishonour payment on any 'such cheque which is full of ambiguities /
defect / drawing of money by the holder on the said cheque, appears to
be unlawful. It is further submitted that U/S-6 of N.I. Act "one of the
essential elements of the cheque is that the drawer of a cheque should
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 7
W.P.No.5823 OF 2005
be a certain person if no so the instrument will not be dealt with as a
cheque." Since the cheque presented was defective the Bank could not
honour it and thereby the Bank has neither committed any negligence
by returning the defective cheque nor there is any deficiency of the
service on the part of the drawee Bank to attract the provisions of the
Banking Ombudsman Scheme, 2002. It is further submitted that the
Banking Ombudsman ignoring the plea of the Bank, issued advice
directing payment of compensation to the petitioner against which
respondent No.4 filed the review application under Clause 17 of the
Banking Ombudsman Scheme, 2002. The Banking Ombudsman
passed the award dated 24.06.2004 against which another review was
filed which was allowed vide order dated 19.01.2005 and the case was
remanded back. It is submitted that the Banking Ombudsman rightly
passed the order dated 24.06.2004 taking into consideration the order
of the review authority and accordingly rightly dismissed the
complaint of the petitioner. It is further submitted that complaint of
the petitioner was not maintainable considering the objectives of the
Banking Ombudsman Scheme as petitioner was not constituent of the
Bank. The petitioner had remedy under section 138 of the N.I Act
against Mr. Girdhar Daga partner M/s Daga Commerce. Section 31 of
the N.I. Act only provides compensation to drawer and not payee.
Section 7 of the N.I Act defines "drawer" and "drawee". Lastly, it is
submitted that the review filed by the respondent No.4 was within
limitation and it was with the approval of the competent authority. It
is submitted that due to reconstitution of the firm, the account of the
erstwhile partnership firm M/s Daga Commerce, Jabalpur was broken
for the sake of crystallising the liability of the partners. The said
partnership firm on dissolution became a proprietorship concern
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 8
W.P.No.5823 OF 2005
which is altogether a different identity. The action of the answering
respondent is absolutely legal and does not call for any interference.
The advice of the Banking Ombudsman (M.P. & Chhattisgarh),
Bhopal was erroneous and so also the Award dated 24.6.2004. In view
of this, the Reviewing Authority rightly remanded the matter back to
the Banking Ombudsman (M.P. & Chhattisgarh), Bhopal and the order
dated 15.4.2005 passed by the Banking Ombudsman, Bhopal is legally
perfect and need no interference. In support of his contention, he
relied in the case of Raghu Lakshminarayanan Vs. Fine Tubes-
(2007) 5 SCC 103 and Seth Jagjivan Mavji Vithalani Vs. Ranchhod
Das Meghji -(1954) 2 SCC-202. Learned counsel for the respondent
submits that there is no merit in the writ petition and the petitioner is
not entitled for any relief much less the reliefs sought in this petition
and, therefore, the same is liable to be dismissed with costs.
10. I have considered the submissions made at the Bar.
11. The dispute pertains to essentially regarding two cheques which
are submitted by petitioner to the respondent/Bank for encashment
which was issued by Girdhar Daga partner of M/s Daga Commerce.
Bank has declined to honour the cheques on the ground of title of the
account has been modified. It also transpires from the record that
therefore petitioner had preferred a complaint before the Banking
Ombudsman, wherein, respondent also filed reply. Initially Banking
Ombudsman advised the Bank with a letter dated 27.01.2004 to
compensate the complainant to the extent of value of cheques and also
to pay interest @ of FDR by finding that the cheques were wrongly
not dishonoured. Thereafter, the respondent had preferred a review
against the said advice. However, that review application was not
proceeded further and ultimately Banking Ombudsman by giving
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 9
W.P.No.5823 OF 2005
detail reasoning passed an award dated 24.06.2004 in favour of the
petitioner directing Bank to pay value of both cheques, interest and
sum of Rs.5000/- towards expenses of the company. Thereafter, it
seems that petitioner received communication on 28.01.2005 from the
respondent/Bank informing that review application was filed on
03.08.2004 against award dated 24.06.2004. The reviewing authority
has passed an order on 19.01.2005 but as per the say of the petitioner,
no such order was attached with the said communication. Thereafter
petitioner has demanded for copy of review application as well as
copy of order dated 19.01.2005 passed by reviewing authority. It
seems that same was not supplied and an order dated 15.04.2005
which is subject matter of the present petition was served to the
petitioner, whereby, different view was taken by the Banking
Ombudsman in comparison to earlier award and accordingly Banking
Ombudsman has rejected complaint of the petitioner.
12. Considering the submission which is mainly on four grounds
viz; (i) that application dated 03.08.2004 is barred by limitation; (ii)
No opportunity of hearing was given; (iii) liability of the Bank to
compensate is as per section 77 of Negotiable Instrument Act and not
as per section 31 of N.I. Act which is referred by the Banking
Ombudsman and, (iv) Banking Ombudsman wrongly dismissed the
complaint of the petitioner holding that the petitioner is not be a
customer.
13. The first submission is required to be considered whether
application was barred by limitation. Clause 17(1) of the Banking
Ombudsman Scheme,2002, which is produced on record as Annexure
P/17, prescribes period for preferring review application which is "one
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 10
W.P.No.5823 OF 2005
month". While considering the same, it is relevant to note that review
application is filed on 03.08.2004 which is after delay of almost one
month as award is passed on 24.06.2004. It also transpires that no
application for condonation of delay is produced on record. Neither it
is pointed out even in written submission that such application is filed
or any review application is filed within the period of limitation.
Therefore, on the ground of limitation there is substance found in the
contention raised by the petitioner that application is not filed within
the period of limitation of one month and without filing any
application for condonation of delay, the reviewing authority has
exercised power which is required to be considered after considering
application of condonation of delay, if any, that is not there and,
therefore, on that ground the contention of the petitioner is required to
be accepted. It also transpires that clause 17.3 of Annexure P/17
mandates that reviewing authority to issue a notice and call for reply
from the opposite party. From the record, it does not transpires that
even from the bullet points submitted by the respondent/Bank no
material is available to indicate that any notice was issued to the
petitioner and, therefore, in view of this undisputed averments made in
the petition and during the course of submission, it is required to be
believed that no notice was issued to the petitioner by the reviewing
authority. Moreover, considering the proviso to clause 17(1) requires
that review application would lie only if the application is approved by
the Chairman or in his absence, Managing Director or Chief Executive
Officer. However, attempt was made by the counsel for respondent to
point out that review application is filed with approval of Managing
Director and also within limitation, is not as such substantiated though
the respondent/ Bank has relied on Annexure R/3 and R/8 and tried to
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 11
W.P.No.5823 OF 2005
dispute this contention. Prima facie, it transpires that though there
cannot be any dispute regarding the approval given by the competent
authority but regarding aspect of limitation and considering the
contention that no opportunity of hearing is given, that aspect is also
required to be held in favour of the present petitioner. On that ground
also petition requires to be allowed.
14. The another contention raised by the petitioner that liability of
the Bank to compensate the petitioner under section 77 and not
considering section 31 of the N.I. Act, it is relevant to produce section
77 as well as 31 of the N.I. Act which reads as under :-
"77. Liability of banker for negligently dealing with
bill presented for payment.--When a bill of exchange,
accepted payable at a specified bank, has been duly
presented there for payment and dishonoured, if the
banker so negligently or improperly keeps, deals with
or delivers back such bill as to cause loss to the holder,
he must compensate the holder for such loss.
31. Liability of drawee of cheque.--The drawee of a
cheque having sufficient funds of the drawer in his
hands properly applicable to the payment of such
cheque must pay the cheque when duly required so to
do, and , in default of such payment, must compensate
the drawer for any loss or damage caused by such
default."
15. It clearly transpires that firm which is earlier a partnership firm
reconstituted and the same account continued to be the account of the
firm Girdhar Daga signatory of the said firm. There is no case put-up
by the Bank that the upon reconstitution of the firm the account
number of the firm was changed or signatory was changed. It is
normal practise of the Bank that when the constitution of firm is
changed, the Bank recalls the cheque book issued to the concerned
firm upon and provides new cheque book and by updating account
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 12
W.P.No.5823 OF 2005
accordingly. In the present case, it seems that Bank has not carried out
that exercise and considering the provisions of section 77 of N.I Act,
the case of the petitioner is required to be considered accordingly. It is
also necessary to refer to clause of 13 of Banking Ombudsman
Scheme, 2012, which provides that any person can file a complaint for
grievance as enumerated in clause 12 and clause 12(1) of the Scheme
provides that complaint can be filed on the ground of non-payment/
inordinate delay in payment of collection of cheques, draft, bills etc.,
and therefore, in the present matter, complaint related to the non-
payment of the cheques of the petitioner and, therefore, the finding
given by the authority, considering clause 12 and 13 of the Scheme,
the Banking Ombudsman clearly committed error in holding that
complaint is not maintainable on the ground that petitioner is not
customer of the Bank. The judgments which are relied on by the
parties are required to be reproduced. Learned counsel for the
petitioner relied in the case of Commissioner of Income Tax, West
Bengal (supra), in which it is held as under :-
"7. It is true that under the law of
partnership a firm has no legal existence apart from
its partners and it is merely a compendious name to
describe its partners but it is also equally true that
under that law there is no dissolution of the firm by
the mere incoming or outgoing of partners. A
partner can retire with the consent of the other
partners and a person can be introduced in the
partnership by the consent of the other partners.
The reconstituted firm can carry on its business in
the same firm's name till dissolution. The law with
respect to retiring partners as enacted in the
Partnership Act is to a certain extent a compromise
between the strict doctrine of English common law
which refuses to see anything in the firm but a
collective name for individuals carrying on business
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 13
W.P.No.5823 OF 2005
in partnership and the mercantile usage which
recognises the firm as a distinct person or quasi
corporation. But under the Income-tax Act the
position is somewhat different. A firm can be
charged as a distinct assessable entity as distinct
from its partners who can also be assessed
individually."
16. Learned counsel for the respondent relied in the case of Raghu
Lakshminarayanan (supra) in which it was held as under :-
"9. The description of the accused in the complaint
petition is absolutely vague. A juristic person can be
a Company within the meaning of the provisions of
the Companies Act, 1956 or a partnership within the
meaning of the provisions of the Indian Partnership
Act, 1932 or an association of persons which
ordinarily would mean a body of persons which is
not incorporated under any statute. A proprietary
concern, however, stands absolutely on a different
footing. A person may carry on business in the name
of a business concern, but he being proprietor
thereof, would be solely responsible for conduct of its
affairs. A proprietary concern is not a Company.
Company in terms of the explanation appended to
Section 141 of the Negotiable Instruments Act, means
any body- corporate and includes a firm or other
association of individuals. Director has been defined
to mean in relation to a firm, a partner in the firm.
Thus, whereas in relation to a Company,
incorporated and registered under the Companies
Act, 1956 or any other statute, a person as a Director
must come within the purview of the said description,
so far as a firm is concerned, the same would carry
the same meaning as contained in the Indian
Partnership Act."
He further relied in the case of Seth Jagjivan Mavji (supra) in
which it was held as under :-
"5. There has been no serious attempt before us to
challenge the correctness of the legal position on
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 14
W.P.No.5823 OF 2005
which the judgment of the High Court is based, that
the drawee of a negotiable instrument is not liable on
it to the payee, unless he has accepted it. On the
provisions of the Negotiable Instruments Act, no other
conclusion impossible.
6. Chapter III of that Act defines the obligations
of parties to negotiable instruments. Section 32
provides that,
" 32. Liability of maker of note and acceptor of
bill--In the absence of a contract to the contrary, the
maker of a promissory note and the acceptor before
maturity of a bill of exchange are bound to pay the
amount thereof at maturity according to the apparent
tenor of the note or acceptance respectively, and the
acceptor of a bill of exchange at or after maturity is
bound to pay the amount thereof to the holder on
demand. "
Under this section, the liability of the drawee arises
only when he accepts the bill.
7. There is no provision in the Act that the drawee
is as such liable on the instrument, the only exception
being under section 31 in the case of a drawee of a
cheque having sufficient funds of the customer in his
bands; and even then, the liability is only towards the
drawer and not the payee. This is elementary law, and
was laid down by West J. in Seth Khandas Narandas
v. Dahibhai in the following terms:
" Where there is no acceptance, no cause of action
can have arisen to the payee against the drawee."
Nor is there any substance in the contention
that section 61 of the Act provides for presentment for
acceptance only when the bill is payable after sight,
and not when it is payable on demand., as is the suit
hundi. In a bill payable after sight, there are 'two
distinct stages, firstly when it is presented for accept-
ance, and later when it is presented for payment.
Section 61 deals with the former, and section 64 with
the latter.
NEUTRAL CITATION NO. 2026:MPHC-JBP:12235 15
W.P.No.5823 OF 2005
17. In view of foregoing analysis and the wholesome exercise
undertaken by the court to do complete justice between the parties and
considering action of the respondent/authority that impugned orders
passed by same authority who has passed the earlier orders that too
without giving opportunity of hearing to the petitioner, is ex facie bad
and against the principle of natural justice and suffers from
arbitrariness as no procedure is properly followed as prescribed in
clause 17 of the scheme and such order is erroneous as section 77 of
the N.I. Act is applicable in facts of the present case and not section 31
of the N.I. Act as found by the authority, it will be proper to allow the
present petition. Accordingly, the impugned order is set aside.
Resultantly, the present petition deserves to be and is hereby allowed
by granting the prayers reproduced in para-1 above.
18. Accordingly, petition is allowed.
(SANDEEP N. BHATT)
JUDGE
MKL
MANOJ Digitally signed by MANOJ KUMAR LALWANI
DN: c=IN, o=HIGH COURT OF MADHYA
PRADESH JABALPUR,
2.5.4.20=ad36bd0a68daf2238756985812b125
KUMAR
26281ad9d6703a41595304a2e8195ef028,
ou=HIGH COURT OF MADHYA PRADESH
JABALPUR,CID - 7057354,
postalCode=482001, st=Madhya Pradesh,
serialNumber=8c3e535065cece45851c1ef8f4
LALWANI
c941f5f7bbefdaf1b1edf887c4deded3da0aa3,
cn=MANOJ KUMAR LALWANI
Date: 2026.02.12 11:46:23 +05'30'
