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2019 (12) TMI 632 - HC - Indian LawsDishonor of Demand Draft - Recovery of debt - Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 - HELD THAT - The fact of the matter is that in both FMPL and VIL had acted on demand drafts which were prepared on stolen draft leaves, and in respect of which, an FIR was lodged by UBI and on the basis of which a charge-sheet has also been prepared by the police and filed in the concerned Court. A copy of the said charge-sheet forms part of the record in both cases. It shows that in both instances the bank drafts were fraudulently prepared on stolen bank draft leaves. These were not valid instruments and could not have resulted in any valid credit being made in the accounts of either VIL or FMPL. The Bank i.e. UBI was simply not liable to honour such DDs. It transpires from the charge-sheet that this was an inter-state fraud committed by an organised gang and not in respect of just the two DDs in question, but several others which were fraudulently used for making payments. Counsel for the Petitioners have no answer to the query posed by Court as to whether if the payment had been made by using fake currency, which both Petitioners accepted bonafide, any valid credit could have been given in their accounts by the respective bankers, who may have accepted such currency without checking them first. The answer had to be in the negative. A fake currency, even if acted upon bonafide and given credit, could not have resulted in such credit being continued once the fraud was discovered. The principle can be no different in the instant case. The DRT and the DRAT were right in finding that UBI was entitled to recover the aforementioned sums claimed against the two Petitioners - Petition dismissed.
Issues:
1. Validity of demand drafts presented by the petitioners. 2. Liability of the banks in honoring the demand drafts. 3. Application of Section 72 of the Contract Act, 1872. 4. Burden of proof in cases of stolen or forged instruments. 5. Recovery of sums claimed by the banks against the petitioners. Analysis: Issue 1: Validity of demand drafts presented by the petitioners In the case of W.P.(C) 3549/2014, the petitioner FMPL presented a demand draft for payment, which was later found to be forged. The court noted that the DD was prepared on a stolen draft leaf, leading to doubts about its validity. Similarly, in W.P.(C) 11334/2015, VIL also presented a demand draft that was later discovered to be fraudulently encashed. The court found that both petitioners had acted on demand drafts prepared on stolen leaves, which were not valid instruments. Issue 2: Liability of the banks in honoring the demand drafts The court highlighted that the banks, in both cases UBI, were not liable to honor the forged demand drafts. It was revealed that the DDs were fraudulently prepared on stolen bank draft leaves, leading to an organized fraud by an inter-state gang. The court emphasized that the banks were not obligated to honor such invalid instruments, as evidenced by the charge-sheet filed by the police. Issue 3: Application of Section 72 of the Contract Act, 1872 The court rejected the application of Section 72 of the Contract Act, 1872, which deals with the liability of a person to whom money has been paid under a mistake. It was held that the rule of equity enshrined in Section 72 could not be invoked in cases where forged instruments were used, as it shifts the burden of proof to the party accepting the instrument in due course. Issue 4: Burden of proof in cases of stolen or forged instruments The court emphasized that the burden of proof lies with the party accepting stolen or forged instruments. It was noted that the petitioners had no valid explanation for accepting and acting upon the forged demand drafts, which led to the banks being entitled to recover the sums claimed against them. Issue 5: Recovery of sums claimed by the banks against the petitioners Ultimately, the court upheld the decisions of the DRT and the DRAT, ruling in favor of UBI's right to recover the sums claimed against the petitioners. It was concluded that there was no merit in the petitions, leading to their dismissal without costs.
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