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TMI Blog2018 (3) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts of moneys by the defendant no. 1/bank is in lack of good faith and with negligence, and hence defendant no. 1/bank cannot take the benefit of provisions of Sections 131 and 131-A of the Negotiable Instruments Act, 1881. 2. The facts of the case are that plaintiff/bank pleads that the defendant no. 2 impersonating as one Sh. Manjit Singh Sethi a Non- Resident Indian (NRI) of Canada, approached the defendant no.1/bank for opening of a Saving Bank Non-Resident External (SBNRE) account on 22.1.1998. It is pleaded in the plaint that defendant no. 1/bank opened an SBNRE bank account in the name of Sh. Manjit Singh Sethi on 22.1.1998. The defendant no. 2 deposited in his account a bank draft no. 04253301 dated 30.12.1997 allegedly of Bank of Montreal. Bank of Montreal is the foreign bank with which plaintiff/bank has a commercial understanding for clearing of bank drafts of the said Bank of Montreal. This bank draft was for an amount of Rs. 92,45,234/-. This bank draft which was presented by defendant no. 2 to defendant no. 1/bank for encashment in the bank account of defendant no. 2, was purchased by the defendant no. 1/bank on the same date and therefore defendant no. 1/bank b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank has acted without good faith and did not act with due care and caution for opening of the bank account of defendant no. 2, operation of the bank account of defendant no. 2 with the defendant no. 1/bank and defendant no.1/bank negligently purchasing the bank draft deposited by the defendant no. 2. 3. All the aforesaid facts are essentially not disputed in the written statement filed by the defendant no.1/bank. Defendant no.1/bank does not dispute as per its written statement that the bank draft of Bank of Montreal presented by defendant no. 2 in its account opened with defendant no. 1/bank was a forged bank draft. Defendant no. 1/bank in its defence pleads that it has always acted in good faith and there is no negligence on its behalf either with respect to opening of the bank account in the name of Sh. Manjit Singh Sethi/defendant no. 2 or for operation of the bank account in the name of Sh. Manjit Singh Sethi. 4. The following issues were framed in this suit on 18.11.2005:- "1. Whether the plaintiff bank is entitled to the relief claimed? 2. Whether there is any cause of action against defendants? 3. Whether the suit is bad for non joinder of necessary parties? OPD 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gligence 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 non-existing person or with dubious introduction may lead to a cogent, though not conclusive, proof of negligence particularl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igence. 8. In the case of Brahma v. Chartered Bank it has been held that the onus of proving "good faith" and "absence of negligence" is on the banker claiming protection under Section 131 of the Negotiable Instruments Act. It is held that in deciding whether a collecting banker has or has not been negligent it becomes necessary to take into consideration many factors such as the customer, the account and the surrounding circumstances. It is held that if the cheque is of a large amount, then the bank has to be more careful unless the customer was a customer of long standing, good repute and with great personal credit and was one who regularly deposited and withdrew cheques of large amounts. 9. The same principles are reiterated in the cases of Central Bank of India Ltd. v. Gopinathan Nair and Indian Bank vs. Catholic Syrian Bank Ltd. 10. This Court has also considered this question in the case of Indian Overseas Bank v. Industrial Chain Concern. In this case, on the basis of evidence lead by the bank (evidence of the Manager and the accountant of the bank) the bank was exonerated. However, principles which governed such cases were noted from various decisions. The relevant po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very party must be introduced to the Bank by a respectable person known to the Bank, who must normally call at the Bank and sign in the column specially provided for the purpose in the account opening form. In all cases his signature must be verified with the specimen lodged and attested. The agent or accountant may introduce constituents to the Bank provided they are known to him personally and in such cases he should sign the application from at the appropriate place in his personal capacity. When the introduction of any other member of the staff is accepted, the agent must invariably make independent inquiry and record his findings on the account opening form for future reference if the need arises ..." 12. Mark IV deals with accounts of proprietary concerns. It says : "An individual trading in the name of concern should fill in Form F.S. 5 and sign it in his personal Name and also affix his signature on behalf of he concern as proprietor in the space provided." If the banker was negligent in following up the references given at opening of account and subsequently cheques etc. are collected for the customer paid into that account and those happened to be of someone else ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was also held that the relation of banker and customer began as soon as the first cheque was handed in to the banker for collection, and not when it was paid. 15. In Turner v. London and Provincial Bank 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." 8. A reading of the aforesaid paras of the judgment of the Supreme Court in the case of Kerala State Cooperative Marketing Federation (supra) shows that ordinarily once there is undue haste and lack of proper verification in opening of a bank account, a collecting banker will not be able to seek exemption of its liability by relying upon the provisions of Sections 131 and 131-A of the Negotiable Instruments Act. Want of good faith and negligence of a banker is not only with respect to opening of an account but also with respect to operation of the account and there cannot be large cash transactions in the account immediately after opening of the account and if it is so found then the collecting banker would have to be held guilty of negligence and want of good faith and thereby disentitled to avoid its liability by taking the defence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to Rs. 75,00,000/- on the very next date of encashment of the bank draft by defendant no. 2. (v) The two cheques cash withdrawals of Rs. 60,00,000/- and Rs. 15,00,000/-, Ex.DW1/13 and Ex.DW1/3, are signed twice with one signature showing "Manjit Singh Sethi‟ and another signature showing "Manjeet Singh Sethi‟ whereas admittedly in the bank account opening form of the defendant no. 2 with the defendant no. 1/bank the signatures of defendant no. 2 appear as "Manjit Singh Sethi‟ and not "Manjeet Singh Sethi‟. This aspect itself should have put the defendant no. 1/bank to question the identity of the defendant no. 2 or at least the bonafides of the defendant no. 2 as these facts show that within two days of opening of the bank account though the account opening form showed the name and signing as "Manjit Singh Sethi‟, but in the two cheques the signatures were as "Manjit Singh Sethi‟ in the first instance and thereafter the second signature appeared of "Manjeet Singh Sethi‟. 10. In the aforesaid factual position which has emerged on record when applied as per the ratio of the judgment of the Supreme Court in the case of Kerala State Coope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of defendant no.2, and nor there was any verification done by the defendant no. 1/bank either of the identity of defendant no. 2 or with respect to the address of the defendant no. 2 as stated in the photocopy of the passport taken by defendant no. 1/bank for opening of the account. I, therefore, reject the argument urged on behalf of the defendant no. 1/bank that by taking photocopy of the immigration form the defendant no. 1/bank should not be held liable for want of good faith and it should be held guilty of negligence. 12. Learned counsel for the defendant no.1/bank then argued that even the plaintiff/bank is guilty of negligence, inasmuch as, the plaintiff/bank credited the amount of subject bank draft to the defendant no. 1/bank without first verifying the genuineness of the bank draft from its contracting bank being the Bank of Montreal, however this argument of the defendant no. 1/bank is without any substance because para 11 (9) of the judgment of the Supreme Court in the case of Kerala State Cooperative Marketing Federation (supra) holds that an allegation of contributory negligence against the paying banker does not provide any defence to the collecting banker who h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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