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TMI Blog1966 (10) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. This point was not taken in the written statement of any of the defendants. The Subordinate Judge decreed the suit against several of the defendants including the Bank of Bihar Ltd. On appeal, the learned Judges of the Patna High Court concurred, in the main, with the findings of the Subordinate Judge but gave effect to the contention raised on behalf of two of the defendant-appellants on the basis of s. 48(9) read with s. 57 of the Act. The appellants before this Court are the plaintiffs. The only contesting respondents are the Bank of Bihar Ltd., Madan Mohan Pandit and Babu Lal Varma (defendants 1, 2 and 6 in the suit). In order to find out whether s. 48(1) embraces the dispute between the parties in this case, we have to examine the facts out of which this appeal arises. The first appellant, Bihta Co-operative Development Cane Marketing Union Ltd. (hereinafter referred to as the Union) is a society registered under the Bihar and Orissa Co-operative Societies Act, 1935 (hereinafter referred to as the Act). The second plaintiff was a Secretary of the Union at the time when the suit was filed in 1951. Under a Resolution dated the 16th April, 1947 of the Executive Committee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another had withdrawn the sum of ₹ 11,000/- from the plaintiff's account with the bank fraudulently by means of the said forged cheque. He, however, thought that there was no sufficient evidence against defendants 3 and 6 and passed a decree as against defendants 1, 2, 4, 5 and 7 jointly. Defendants 1 and 2 only went up in appeal to the Patna High Court. The High Court agreed with the finding of the Subordinate Judge that defendants 4, 5 and 7 were parties to the conspiracy resulting in the withdrawal of the sum of ₹ 11,000/-, but absolved the defendant No. 2 from any liability on the ground of negligence. Before the High Court, a further contention was put forward on behalf of the bank that even if the bank was otherwise liable for the negligence of its employees, it should not be held to be liable because defendants 6 and 7 who were the agents of the Union were negligent and dishonest in the discharge of the duty entrusted to them by the Union. The High Court, on an examination of the evidence, found itself unable to hold that there was any negligence or lack of reasonable precaution on the part of the Union. It further held that Ram Janame Varma may have been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether such sureties are members or non members, shall be a dispute touching the business of the society within the meaning of this sub-section even in case such debt or demand is admitted and the only point at issue is the ability to pay or the manner of enforcement of payment. It will be noticed that not all disputes in which a registered -society may be involved are within the mischief of the section. Assuming that the dispute in this case touches the business of the Union which is a registered society, the question is: is it one which ,comes under any of the heads mentioned in sub-cls. (a) to (e) of the sub- section? Sub-cl. (a) has no operation if one of the disputants is the society itself. So far as sub-cl. (b) is concerned, a dispute between the society and a non-member would only fall within this clause if the non-member was a surety of a member. Cl. (c) can have no operation unless one party to the dispute was a past or present officer, agent or servant of the society. Clause (d) is restricted to disputes between two societies. Clause (e) which was introduced by way of an amendment in 1948 (Bihar Act XVI of 1948) would certainly include a dispute in which one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tertained by the Registrar were disputes among members, past members or their heirs, or their sureties or between a society and its officers, agents or servants, or between a society and other registered societies (without meaning to ekhaust all the categories). But before the amendments, one who was not a member of society or was not claiming through a member or a past member or a deceased member, or was not a surety of a member or a deceased member, was not subject to the jurisdiction of the Registrar under s. 48. That is to say, any dispute between a society or its members, past members or deceased members or sureties of such members on the one hand and non-members on the other was not within the purview of the section, so that the appellant company, which is not a registered society or a member of a registered society, could not have its claim, or a claim against it by a registered society, referred to the Registrar for decision, under this section. According to the Court, the effect of the amendments introduced by the Act of 1948 was that a claim by a financing bank against a non-member to whom the former had made an advance in cash or kind, with the sanction of the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the society do not figure in sub-cls. (a) to (d) except as sureties of members. By sub. cl. (e) only those non-members who had disputes with a financing bank authorised under the provisions of sub-s. (1) of s. 16 were made amenable to the jurisdiction of the Registrar. It was probably thought desirable in the interest of the financing bank which might otherwise be faced with litigation in a civil court in respect of its ordinary day-to-day transactions of advances to agriculturists who were non-members that disputes between the society and this class of persons should be quickly and inexpensively adjudicated upon by the Registrar. Before the amendment of 1948, the Explanation only served to clear up the doubt as to whether a dispute was referable to the Registrar when the debt or demand was admitted and the only point at issue was the ability to pay or the manner of enforcement of payment. As already pointed out by this Court, the Explanation had to include non-members after the. insertion of category (e) in sub-s. (1) of s. 48. The purpose of the Explanation never was to enlarge the scope of sub-s. (1) of s. 48 and the addition of category (e) to that sub-section and the incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y negligence in the mode of signing the cheque and assuming that they had been guilty of negligence, the negligence was not the proximate cause of the loss. He therefore ordered judgment to be entered for the plaintiffs. The Court of Appeal upheld this decision. This was, however, reversed in appeal to the House of Lords. Lord Finlay L. C. observed: As the customer and the banker are under a contractual relation in this matter, it appears obvious that in drawing a cheque the customer is bound to take usual and reasonable precautions to prevent forgery. Crime, is indeed, a very serious matter, but every one knows that crime is not uncommon. If the cheque is drawn in such a way as to facilitate or almost invite an increase in the amount by forgery if the cheque should 'get into the hands of a dishonest person, forgery is not a remote but a very natural consequence of negligence of this description. The learned Lord Chancellor observed further at page 795: Of course the negligence must be in the transaction itself, that is, in the manner in which the cheque is drawn. It would be no defence to the banker, if the forgery had been that of a clerk of a customer, that the latt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligence of the customer in between the signature and the presentation of the cheque never arose. Not only was there negligence on the part of the banker in not ascertaining whether the signatures on the cheque were genuine, the circumstances attending the encashment of the cheque show conclusively that the banker was negligent and some of its officers fraudulent right from the beginning. The cheque form did not come out of the customer's cheque book. A loose cheque form returned by ,in ex-constituent had been used for the purpose of making out a cheque purported to be drawn by the customer. The entries in the register for the issue of such loose forms were so suspicious that it is difficult to believe that the employees of the bank concerned with the encashment of the cheque were acting bonafide. There was no negligence on the part of the customer according to whose resolution, the cheque had to be signed jointly by two persons. The fraud could only be perpetrated because of the complicity of the employees of the bank, no doubt, with the help of one of the officers of the Union. The dishonesty of a particular officer of the Union was not the proximate cause of the loss to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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