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TMI Blog2018 (11) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit and that the enrichment is at the expense of the plaintiff, and lastly, that retention of enrichment is unjust. In the present case, there is no doubt that the payment was made to the petitioners under a mistake of fact, that it was due when actually it was not due. The respondent-bank did not know that the cheque was altered. The petitioners have certainly been enriched at the expense of the respondent-bank and the retention of this enrichment is unjust. The payment in the present case was made by mistake due to fraud. Since respondent-bank was merely a collecting agent, what is to be considered in such a case is whether there was any negligence on its part in making the payment and what was the cause of delay, and legal effect of the delay. The circumstance or reason which could have caused any doubt in the mind of a prudent bank to initiate inquiries, rather the facts of the case demonstrate that the respondent-bank and the petitioners were in the same position. The mere fact that the collecting bank has made a payment to its customer who deposited the tampered cheque does not raise an estoppel against the paying bank if later on it is found that the cheque is forged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Cheque . Accordingly, payment of ₹ 31,45,696/- was reversed. Petitioners had contested the notice stating and highlighting the above facts and also asserted that Foreign Inward Remittance Certificate ( FIRC ) had been issued on 27.02.2009 by the respondent-bank. 7. On 31.10.2009, a criminal complaint was lodged by the respondent-bank against the petitioners with the Economic Offence Wing, New Delhi stating that the aforesaid cheque was returned as Altered Cheque and that earlier another cheque had been returned being a Counterfeit Cheque . 8. On 31.12.2009, the respondent-bank filed Original Application No.08/2010 before the Debt Recovery Tribunal-III, Delhi ( Tribunal in short) for recovery of ₹ 31,95,860/- with pendente lite and future interest against the petitioners. Original Application was allowed vide the order dated 10.05.2013 by the Tribunal directing the petitioners to pay ₹ 31,45,696/- to the respondent-bank within a period of 30 days with simple interest @ 14% p.a. from the date of filing of the Original Application till its realization. 9. Aggrieved, the petitioners preferred Appeal No.185/2014 before the Appellate Tribunal along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus was on the respondent-bank to show that it acted in good faith and without negligence and, therefore, the respondent bank was liable and not entitled to recover the amount. 16. To buttress his arguments, learned counsel for the petitioners relies on United Bank of India v. M/s. AT Ali Hussain Co. a firm Ors ., AIR 1978 Cal 169 and Indian Overseas Bank v. Industrial Chain Concern , (1990)1 SCC 484. 17. Learned counsel for the respondent-bank refutes the said contentions and submits that the respondent-bank had acted in good faith as well as with due care and diligence and states that there was no negligence on its part and thus claims protection under Section 131 of the Act. 18. Section 131 of the Act reads: 131. Non-liability of banker receiving payment of cheque.-A banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment. Explanation I.-A banker receives payment of a crossed cheque for a customer within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank was liable and cannot recover the money paid to the petitioners under the forged cheque presented to them for payment by the petitioners. The said elucidation would be also relevant when we consider the contention of the petitioners that even if Section 131 of the Act was not applicable, the petitioners were entitled to defend the proceedings for recovery initiated by the respondent-bank on the ground of negligence and lack of due diligence on the part of the respondent-bank. 22. In Brahma Shum Shere Jung Bahadur and Another v. Chartered Bank of India, Australia and China and others, AIR 1956 Cal 399, an account-holder had brought a suit for recovery, inter alia against his own banker for the wrongful loss suffered as a result of the account having been debited against a cheque presented by another person after its fraudulent alteration into a cheque for a large sum of money. The bank contested the claim essentially claiming protection under Section 131 of the Act, also seeking to attribute the negligence of the customer. Claim against the bank was rejected holding that it was entitled to debit the amount from the account of the plaintiff since the cheque at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a cheque within a reasonable time after it reaches him, he is liable to his customer for loss arising from the delay. A banker receiving instruments paid in for collection and credit to a customer's account may collect solely for a customer or for himself or both. Where he collects for the customer he will be liable in conversion if the customer has no title. However, if he collects in good faith and without negligence he may plead statutory protection under Section 131 of the Act. . 25. To enable a bank to avail the immunity under Section 131 as a collecting banker he has to bring himself within the conditions formulated by the section. Otherwise he is left to his common law liability for conversion or for money had and received in case of the person from whom he took the cheques having no title or defective! title. The conditions are: (a) that the banker should act in good faith and without negligence in receiving a payment, that is, in the process of collection, (b) that the banker should receive payment for a customer on behalf of him and thus acting as a mere agent in collection of the cheque and not as an account holder (c) that the person for whom the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2 can be said to have derived any benefit from the mistake committed by the plaintiff bank. 26. In Kerala State Co-operative Marketing Federation v. State Bank of India Ors. , II (2004) BC 1 (SC), the Supreme Court had on the principles governing the liability of a collecting banker held:- ( 1) As a general rule the collecting banker shall be exposed to his usual liability under common law for conversion or for money had and received, as against the 'true owner' of a cheque or a draft, in the event the customer from whom he collects the cheque or draft has no title or a defective title. ( 2) The banker, however, may claim protection from such normal liability provided he fulfils strictly the conditions laid down in Section131or Section 131A of the Act and one of those conditions is that he must have received the payment in good faith and without negligence. ( 3) It is the banker seeking protection who has on his shoulders the onus of proving that he acted in good faith and without negligence. ( 4) The standard of care to be exercised by the collecting banker to escape the charge of negligence depends upon the general practice of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The test to determine and decide whether the bank had acted in good faith and with due diligence, depends upon general practice of the banks. In some cases it could extend to opening of accounts in which the cheque was deposited. However, the bank is not required to subject the cheque to minute and microscopic examination. On the face of it, the instrument should give rise to suspicion. Lastly, contributory negligence it has been observed is of no consequence. 28. It is pertinent to note that in Indian Overseas Bank v. Industrial Chain Concern (supra), the Supreme Court, while holding the bank to be not negligent , had observed as under:- 37. ..that expansion of the banker's liability and corresponding narrowing down of the banker's protection under the provision of Section 131 of the Act may make the banker's position so vulnerable as to be disadvantageous to the expansion of banking business under the ever expanding banking system. This is because a commercial bank, as distinguished from a Central bank, has the following characteristics, namely (a) that they accept money from, and collect cheques for, their customers and place them to their credit; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he plaintiff, and lastly, that retention of enrichment is unjust. In the present case, there is no doubt that the payment was made to the petitioners under a mistake of fact, that it was due when actually it was not due. The respondent-bank did not know that the cheque was altered. The petitioners have certainly been enriched at the expense of the respondent-bank and the retention of this enrichment is unjust. The payment in the present case was made by mistake due to fraud. Since respondent-bank was merely a collecting agent, what is to be considered in such a case is whether there was any negligence on its part in making the payment and what was the cause of delay, and legal effect of the delay. 31. Test of negligence for the purpose of Section 131 of the Act is whether the transaction of paying in any given cheque, coupled with the circumstances antecedent and present is so out of the ordinary circumstances, that it ought to arouse doubts in the bankers' mind and cause him to make enquiries. We are unable to find any material to demonstrate lack of good faith or failure to exercise due diligence or ordinary care when the cheque was presented for collection. Impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Privy Council has followed the rule laid down in Kelly's case (supra). In this case, cheque for a certain amount certified by the bank's stamp was fraudulently altered to a bigger amount and paid by the respondent to the appellant, a holder for value under a mistake of fact, which was not discovered till the next day. Privy Council held that the respondent was entitled to recover from the appellant-bank. Thus the rule laid down in Kelly's case (supra) is that if a person acting under a mistake pays money to another, the latter must repay the same. 34. On the question whether the respondent-bank was negligent on account of delay in intimating the petitioners that the cheque given by the foreign party was an altered cheque and consequently on credit of ₹ 31,45,969/- the petitioners had exported the consignment of the rice to the foreign party, the Appellate Tribunal has observed as under:- Having considered the submissions made before me, I am clear in mind that apparently no negligence neither is being attributed nor can be attributed to the bank. The respondent in this case acting as a collecting agent of the appellants for the cheque they have dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecovery of this amount, but has also filed a complaint with the Economic Wing which statedly is in process. The other submission made by the counsel for the appellants that the amount sought to be recovered by the bank is not covered under the definition of debt' was never raised before the Tribunal below and is being raised for the first time in the appeal at the stage of arguments. Though in support counsel has made reference to the judgment passed by this Tribunal in Axis Bank Ltd., Satna vs. Bhanu Oil and Dal Mills Ors., III (2013) BC 8(DRAT) where it is observed that transaction of wrong clearance of cheque cannot be said to be a debt. These observations were made by the Tribunal in the facts of the said case where amount recovered during the course of business activities was held to be not falling within the definition of debt. Present one is not a case of any wrong payment and the liability in this case arises in the course of business activities between the bank and the appellants. In my view, the wide definition of debt contained in section 2(g) of the RDDBFI Act would cover such transaction as well. I, therefore find no merit in the appeal and would dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 21.1.2009. Clearly, the respondent-bank was not negligent when they had credited ₹ 31,45,696/- to the account of the petitioners earlier on 08.12.2008. It is also pertinent to note that the respondent-bank had only credited the amount after clearance from its Foreign Department. The respondent-bank would have acted contrary and against the law if they had not credited ₹ 31,45,696/-. Subsequently and in terms of the international banking norms, US$ 62,400 had to be refunded/paid back to the Bank of America in view of the claim made on 21.01.2009. Therefore, the petitioners were liable to refund and repay the amount credited and now debited. The respondent-bank cannot be held liable/responsible for the payment/credit. Notably, the petitioners did not suspect that the cheque in question was altered and tampered with. Neither had the respondent-bank noticed the alleged tampering. Indeed, even the foreign bankers had no reason to suspect alteration. In these circumstances, we would hold that the petitioners would be liable, and the liability cannot be transferred and fastened on the respondent-bank, which had acted as an agent to collect the money. The respondent-bank ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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