Bank Of India vs Sri. Nanda Narasimha Rao And Another
2024 Latest Caselaw 2256 Tel

Telangana High Court

Bank Of India vs Sri. Nanda Narasimha Rao And Another on 14 June, 2024

     THE HONOURABLE SMT. JUSTICE M.G. PRIYADARSINI

                          A.S.No.550 OF 2019

JUDGMENT:

Aggrieved by the judgment and decree dated 25.06.2019 in

O.S.No.1275 of 2007 (hereinafter will be referred as 'impugned

judgment') passed by the learned IX Additional Senior Civil Judge,

Ranga Reddy District at L.B.Nagar (hereinafter will be referred as

'trial Court'), the plaintiff preferred the present appeal to set aside the

impugned judgment.

2. For the sake of convenience, the parties hereinafter are referred

to as they are arrayed before the trial Court.

3. The brief facts of the case, which necessitated the appellant to

file the present appeal, are as follows:

a) The plaintiff filed O.S.No.1275 of 2007 against defendant

Nos.1 and 2 seeking recovery of Rs.5,37,753/-. The brief averments

of the plaint are as under:

i) Defendant No.1 got hold of a demand draft bearting

No.009494 of plaintiff's Gurushaigunja Branch, Uttar Pradesh and

manipulated a DD in his name for a sum of Rs.4,75,560/-dated

19.06.2006. Defendant No.1 in a premeditated scheme had opened

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savings bank account No.3009 with defendant No.2 on 26.06.2006.

The said account was allowed to be opened by defendant No.2, even

without following the rules and regulations/instructions issued by

RBI. The antecedents of defendant No.the absolute owner and

psosessor of the were not verified and the account was opened in a

cursory manner, with introduction from one of its

customers/existing account holders. No efforts appear to have been

made as to how the account holder, who signed the account opening

form of defendant No.1 is acquainted with the applicant, and even

the residential address is not verified by the defendant No.2. The

defendant No.1 deposited the fabricated demand draft with

defendant No.2 to be credited to his SB Account and the same was

presented for clearance through Development Credit Bank, A.S.Rao

Nagar Branch on 29.06.2006. The said demand draft was honoured

by the plaintiff, since its apparent tenor was found to be genuine.

ii) Gurusahaiganj Branch did not respond to the debit advice.

The plaintiff bank, which is a centralized clearing house for all the

branches of the bank in Hyderabad and Secudnerabad, set up for

expeditious clearance of proceeds of the cheques and DDS issued by

the Branches of Bank of India, took up the matter with the said

Branch. Gurusahaiganj Branch in its turn advised the plaintiff that

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the said demand draft did not emanate from their branch, through

their letter dated 30.08.2006, which was received by the plaintiff on

04.09.2006. Thereafter, the plaintiff bank lodged a complaint with

P.S. Neredmet on 06.09.2006. On the basis of the said complaint,

the Neredmet Police have registered FIR No.308 of 2006, dated

08.09.2006 under Sections 468, 467 and 420 of IPC. During the

course of investigation, it is revealed that the address furnished by

defendant No.1 to defendant No.2 is fake and that defendant No.2

had allowed him to withdraw the entire funds from the account,

within a very short span of time. The Police are making hectic efforts

to apprehend the accused i.e., defendant No.1.

iii) The plaintiff bank issued a registered notice defendant No.2

and also the Development Credit Bank Limited on 09.10.2006

bringing to their notice the deficiencies on their part in enabling

defendant No.1 to encash a forged instrument, resulting in

unwarranted loss to the plaintiff and demanded refund of the

amount of the DD. The said notice was received by both the

presenting bank and clearing bank. The defendant No.2 bank by its

reply dated 11.10.2006 denied its liability to repay the amount and

tried to justify its action by allowing defendant No.1 to open the

account and draw the proceedings, ignoring the fact that he is the

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new customer. The defendant No.2 being a collecting Bank shall not

get any protection under Section 131 of the Negotiable Instruments

Act, in as much as it acted without due diligence in the manner of

opening of account by defendant No.1, and collected the instrument

with defective title for him. It is thus evident that defendant No.2

had collected a fake instrument and the plaintiff in utmost good faith

that defendant No.2 had acted with due caution for defendant No.1

parted with the funds. In view of the fact that defendant No.2 had

acted in a negligent manner, and allowed defendant No.1 to

withdraw the entire proceeds, it is equally liable to make good the

loss, along with defendant No.1 with upto date interest till the date

of payment. The defendant No.2 cannot claim protection under

Section 22 of the Indian Contract Act also. Hence, the suit.

b) In reply to the plaint averments, Defendant No.1 was set

exparte, however, the defendant No.1 filed written statement, the

brief averments of which are as under:

i) The plaintiff chosen to attribute negligence on the part of

defendant No.2 with malafide intention to cover its deficiencies and

circumvent the law and chose to wrongfully lay claim against this

defendant. There is no negligence on the part of defendant No.2 in

opening the accounts much less the account of defendant No.1.

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Defendant No.1 submitted demand draft and for clearing this

defendant sent the same through Development Credit Bank, AS Rao

Nagar Branch on 29.06.2006 for presentment. The draft is issued by

the plaintiff bank and it is deposited by defendant No.1 with this

defendant bank for collection and this defendant through its clearing

agent i.e., Development Credit Bank Limited, A.S.Rao Nagar Branch

collected the proceeds of the draft in the normal course and proceeds

were credited to the payees account. This defendant acted prudently

without negligence in good faith following the banking practice and

guidelines laid down for collection of draft and presented the draft in

clearing. Draft issued by the plaintiff bank was paid by the

Gurushaigunj Branch (Uttar Pradesh) of the plaintiff bank when

presented in clearing in the normal course and the proceeds are

credited to the defendant No.1 account. Thus, this defendant, which

is only collecting banker, is no way concerned with purported defects

in the draft if any and the plaintiff has no manner of right to raise

any disputes. The draft was issued by the plaintiff bank itself and

paid by the plaintiff banks branch and thereby the plaintiff bank

shall have no manner of right to raise any claim against this

defendant. It is the responsibility of the paying banker to verify and

satisfy the genuineness or otherwise of the draft before making

payment and collecting banker is no manner responsible for the

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genuineness or otherwise of the draft in law and on facts.

iii) This defendant issued a detailed reply on 11.10.2006 to the

notice issued by the plaintiff bank on 09.10.2006, however, the

plaintiff filed the vexatious suit. There is no cause of action against

this defendant bank

c) Based on the pleadings of both the sides, the trial Court has

framed the following issues and additional issue:

1. Whether the plaintiff is entitled for recovery of the suit amount from the defendants?

2. To what relief?

d) The plaintiff, in support of his contentions, examined its

Senior Manager as PW1 and got marked Exs. A1 to A5. On the other

hand, on behalf of defendant No.2, its Chief Executive Officer was

examined and got marked Exs.B1 to B7. The trial Court on

appreciating the evidence on record, has decreed the suit only

against the defendant No.1 for recovery of Rs.5,37,753/- and the

suit against defendant No.2 was dismissed. Aggrieved by the

dismissal of suit against defendant No.2, the plaintiff preferred the

present appeal.

4. Heard both sides and perused the record including the

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grounds of appeal.

5. The grievance of the plaintiff is that Defendant No.1 is a white

collar offender involved in cheating banks of their customer's monies

by suing stolen/forged and fabricated negotiable instruments of out

station branches of nationalized banks to delay early detection. The

defendant No.1 adopted said process and defrauded the plaintiff

bank of the suit amount. The defendant No.2 is the banker, who

facilitated the illegal activity of the defendant No.1 and is equally

liable to make good the loss suffered by the plaintiff due to its

negligence in opening the account and allowing the person to draw

the entire amount. On the other hand, the defendant No.2

contended that there is no negligence on the part of the defendant

No.2 bank in opening the account in the name of defendant No.1

and thereby liability cannot be fixed on it.

6. The contention of the plaintiff is that the trial Court failed to

appreciate the fact that burden is cast on defendant No.2 to

establish that it opened the account in the name of defendant No.1

without negligence and it failed to discharge the said burden by

examining the persons, who worked in the branch at relevant point

of time. It is further contended that defendant No.2 examined the

person, who is presently incharge of the bank and who stated that

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he does not have any personal knowledge about the facts that

transpired at the time of opening the account and the same is of no

consequence. As seen from the record, even the plaintiff got

examined its Senior Manager as PW1, who deposed about the facts

of the case based on the records maintained by the branch, which

suggests that he is not the person, who was working with the branch

of plaintiff bank during the relevant period of time. Moreover, PW1

admitted that he has been working in the plaintiff bank from June,

2016 and whereas the incident in dispute occurred in the year 2006

i.e., ten years prior to the date of joining of PW1 in plaintiff bank.

Further, the plaintiff has not even filed any authorisation before the

trial Court authorizing PW1 to depose on its behalf. It is always not

possible to examine the exact persons, who were holding official

positions at the relevant point of time to depose about the facts of

the case. Furthermore, the burden of proof as to any particular fact

lies on that person, who wishes the Court to believe in its existence,

unless it is provided by any law that the proof of that fact shall lie on

any particular person. When the plaintiff asserts or makes

allegation of negligence in allowing the defendant No.1 to open a

savings bank account against defendant No.2 bank, the burden of

proving that there is negligence on the part of defendant No.2 is on

the plaintiff. As per Section 102 of the Indian Evidence Act, the

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burden of proof in a suit or proceeding lies on that person who

would fail if no evidence at all were given on either side. The

Honourable Supreme Court in Anil Rishi v. Gurubaksh Singh1

observed that ordinarily, the burden of proof would be on the party

who asserts the affirmative of the issue and it rests, after evidence is

gone into, upon the party against whom, at the time the question

arises, judgment would be given, if no further evidence were to be

adduced by either side. In the case on hand, both the sides have

adduced oral and documentary evidence to discharge burden on

their respective sides. Initially the burden was thrown on the

defendant No.2, who in turn has discharged its burden by adducing

oral and documentary evidence to refute the contention of the

plaintiff bank.

7. In the cross examination PW1 admitted that demand draft

contains the signature of concerned office and his code number. He

further admitted that DD was issued by Guru Sai Gunj Branch,

Uttar Pradesh and that the demand draft was honoured after

verification of the signatures. It is admitted by PW1 that after

passing the demand draft in their bank, amount will be credited to

the defendant No.2 bank and thereafter to the account of defendant

1 (2006) 5 SCC 558

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No.1. PW1 deposed that Bank of India, Guru Sai Gunj Branch never

complained about missing of DD. These admissions on the part of

PW1 makes it clear that only after verification of the signatures on

the demand draft and after passing of the demand draft in the

plaintiff bank, the amount was credited to the account of defendant

No.1. If the contention of the plaintiff that the acts of defendant

No.2 allowing defendant No.1 to open account in their bank amounts

to negligence, then the acts of plaintiff bank and its branch of Guru

Sai Gunj Branch at Uttar Pradesh in issuance of demand draft and

passing of the draft, which is alleged to be forged and fabricated,

would also amounts to sheer negligence.

8. Though the plaintiff bank lodged complaint against defendant

No.1 under Ex.A1, it did not lodge any complaint against defendant

No.2 for the reasons best known. Perhaps, the plaintiff bank only

with an intention to recover the money from the defendant No.2 has

filed civil case rather than lodging a complaint against the defendant

No.2 for initiating criminal action against defendant No.2. If at all

there was any malafide intention on the part defendant No.2 leading

to negligence, then certainly, plaintiff bank ought to have lodged

complaint against the defendant No.2 also apart from defendant

No.1.

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9. It is the specific contention of the plaintiff that the defendant

No.2 failed to ascertain the correct address and other details of the

defendant No.1. However, PW1 admitted that for opening of SB

Account in the year 2006 introduction form was sufficient but

whereas there was no necessity of KYC (Know Your Customer) like

Aadhar card, PAN Card etc in the year 2006. Admittedly, the

account was opened by the defendant No.1 with the plaintiff bank in

the year 2006. Hence, there is no necessity for the defendant No.2

bank to know about the details of the customer before opening the

account except the introduction form.

10. The burden on the part of defendant No.2 was discharged by

defendant No.2 by examining DW1 and adducing documentary

evidence in the form of Exs.B1 to B7. The defendant No.2 got

marked Ex.B1 i.e., the board resolution authorizing DW1 to depose

in this case. Ex.B2 is the account opening application form of

defendant No.1. Ex.B3 is the driving license of defendant No.1.

Ex.B6 is the letter addressed by the Station House Officer,

Neredment Police Station to the defendant No.2 bank to furnish the

original bank account opening application forms, original cheques,

which are used for encashment from their bank. Ex.B7 is the reply

given by defendant No.2 bank to EX.B6. Thus, the burden shifts

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upon the plaintiff to establish that the defendant No.2 bank has

shown negligence in allowing the defendant No.1 to open a savings

bank account in their bank. Except asserting that defendant No.2

has not followed the rules and regulations/instructions issued by

RBI, the plaintiff has not explained as to which

guidelines/instructions issued by RBI, were not followed by

defendant No.2.

11. As rightly pointed by the learned counsel for the defendant

No.2, the demand draft was issued by the plaintiff bank and the

draft was cleared by the branch of plaintiff bank. Merely because

defendant No.1 has shown fake address in the account opening

application form, defendant No.2 cannot be found at fault. It is not

the case of the plaintiff bank that the introducer having account

No.2443 with the defendant No.2 bank, who alleged to have

introduced defendant No.1 to the defendant No.2 bank, is hand in

glove with defendant No.1 or defendant No.2.

12. It is further contended that the trial Court strangely held that

the plaintiff is responsible to establish negligence on the part of the

defendant No.2 ignoring the decision of Union Bank of India v.

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Bank of Baroda 2, wherein the High Court of Madras observed as

follows:

"21. The attempt on the part of the learned counsel for the appellant to contend that since the amount is sought to be regarded as one paid on account of a mistake, the claim has to be adjudged only in the context of Section 72 of the Contract Act has no meaning. The plaintiff and the defendant are both banking institutions. A perusal of the plaint would go to show that the very grievance of the plaintiff-bank is that the defendant-bank has not acted with reasonable care and caution and though the provisions of Section 131 have not been specifically referred to, the fact the plaintiffs have made a grievance about the lack of care and caution in opening the account and seeking to fix on the defendant the responsibility and liability for the suit claim and the defence taken also in the written statement that they have taken such care as.is expected of a banker would go to show that their liability has to be adjudged not merely on the basis of one act or the other but, at any rate, has to be in the light of the provisions contained in the Act. The grounds of appeal filed and the question of law formulated by the appellant bank also is using reference to Ss. 131 and 131A. That the provisions of Negotiable Instruments Act applies to the case admits of no doubt for the simple reason that the case on hand really deals with the handling of a negotiable instrument only and the plaintiff-bank cannot therefore avoid its liability by taking such plea or by contending that they are neither the beneficiary of the amount, nor that the amount is still with them. Once the Court found as of fact that the defendant-bank has not taken the required care and caution and has been, on the other hand, found to be negligent in opening the account and being mainly responsible to have the draft realised and make the plaintiff-bank to part with its money, the claim that they are not themselves the beneficiaries or that the money of the plaintiff-bank is not still with the defendant-bank is no answer in law."

13. In the case on hand, as stated supra, the plaintiff failed to

establish before the trial Court that the acts of defendant No.2 in

allowing the defendant No.1 to open savings bank account in its

bank amounts to negligence. Moreover, the defendant No.2 could

successfully establish that there was no negligence on the part of

2 AIR 19897 Madras 23

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defendant No.2 in allowing defendant No.1 to open savings bank

account. It is not the case of the plaintiff bank that only because of

the negligence of defendant No.2, the defendant No.1 could withdraw

the amount under demand draft. It is pertinent to note that if at all

the plaintiff bank or its Branch at Uttar Pradesh exercised due

diligence in issuing the demand draft or passing of demand draft,

there would not have been any occasion for the defendant No.1 to

withdraw the amount covered under demand draft. As can be seen

from Ex.A3 i.e., the complaint lodged by plaintiff bank, there is no

whisper about the negligence on the part of defendant No.2 in the

complaint as alleged by the plaintiff bank. In fact, it is clearly

mentioned in Ex.A3 that defendant No.1 and Mr. G.V. Reddy have

cheated their bank by depositing fraudulent demand drafts.

14. Thus, the evidence adduced on behalf of the plaintiff bank,

more particularly, when the evidence of PW1 is not consistent and

cogent, it is not sufficient to hold that the acts of defendant No.2

bank amounts to negligence. It is not the case of the plaintiff bank

that the trial Court has entirely dismissed the suit claim. The trial

Court has rightly dismissed the claim of the plaintiff bank against

the defendant No.2 and decreed the suit only to the extent defendant

No.1, who is the beneficiary under his fraudulent acts. The plaintiff

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bank failed to show any palpable evidence to establish that due to

the negligence on the part of defendant No.2, the defendant No.1

could succeed in his misdeeds of withdrawing the amount under

demand draft by adopting illegal methods.

15. In view of the above facts and circumstances, this Court do

not find any merits in the appeal to set aside the impugned order

and in fact, the trial Court has elaborately discussed all the aspects

and arrived to a proper conclusion. Therefore, this Court is of the

opinion that there is no need to interfere with well reasoned

judgment passed by the trial Court and thereby, the appeal is devoid

of merits and liable to be dismissed.

16. In the result, this appeal is dismissed. There shall be no order

as to costs.

As a sequel, pending miscellaneous applications, if any, shall

stand closed.

_______________________________ JUSTICE M.G. PRIYADARSINI Date: 14.6.2024 Note: LR Copy to be marked.

B/o. AS