9911796707
TMI Blog1953 (9) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 and the same was cashed by the Bank in the usual course of business through the clearing house on 7-12-1943. Matha Prasad Gupta operated on this account by issuing a cheque for ₹ 200, Ex. P. 4(a) and another cheque for ₹ 2,225 Ex. P. 4(b) both dated 6-12-1943 and drawn in favour of one Seetharam. On 7-12-1943 he drew a cheque for ₹ 126 in favour of a watch-maker. Ex. P. 4(d) and on 9-12-1943 himself drew a cheque for ₹ 2,800 Ex. P. 4(c), and thereafter disappeared. The balance remaining to the credit of his account at that time was ₹ 124-9-0. 2. The plaintiff discovered the loss of the cheque in March 1944 and lodged a complaint with the police. Investigation which followed thereon revealed that the person who had cashed the cheques, Exs. P. 4 and P. 4(b), and signed his name as Seetharam was in truth a person called R. P. Misra of Benares; that the person who gave-out his name as Matha Prasad Gupta was In fact a person called jawahar Lal; that they along with others had conspired to commit theft of cheques and to cash them by forging signatures; that in pursuance of this conspiracy one Jai Narayanan had stolen the cheque of which Ex. P.2 is a cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, no action will lie in conversion by a customer in respect of money standing to his credit in a bank as he has no property in specific coins. To get over this difficulty the theory has been adopted that the piece of paper called the cheque might be treated as converted and an action in conversion could be maintained for its value - vide - 'Morison v. London County and Westminster Bank Ltd.', 1914 3 KB 356 (A) and - 'A.L. Underwood Ltd. v. Bank of Liverpool, 1924 1 KB 775 (B). The result then is that the receipt of the stolen cheque would itself be conversion even without reference to cashing and if Section 131 is not applicable at that stage the bank will be without protection even if it acts 'bona fide' and without negligence. That clearly could not have been the intention of the Legislature in enacting Section 131 and therefore, when the section speaks of receipt of payment it has obviously in mind all the preceding stages leading up to the encashment of the cheque and in that view the requirement that the bank should act in good faith and without negligence would apply to all those stages. The following remarks on Section 82 of the English Bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have the authority to permit opening of a new account. The account is then opened and a cheque book and a pass book are issued to the customer. The application presented by Matha Prasad Gupta was, as already stated, recommended by Mr. Krishnaswami and it bears the initials of the Chief accountant. D. W. 3 deposes that it did not come to him for approval and that he did not see either Matha Prasad Gupta or make any enquiries , about him. The Chief accountant has not been examined nor Krishnaswami. Thus apart from what appears on the face of the application there is no independent evidence to show that the bank had made any enquiries in the matter. ' 6. It was argued for the appellants that as the application had been recommended by Krishnaswami it must be held that the customer had been properly introduced but Krishnaswami had not been examined in these proceedings and his deposition in the Criminal court which has been marked as Ex. D. 2 does not very much assist the appellants. He stated therein: I was a clerk in the Bharat Bank at Mount Road, Madras in 1943. One Matha Prasad Gupta opened a current account on 6-12-1943 with ₹ 250. The account opening form, Ex. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a material element in establishing that the Batik had acted without negligence as required by Section 131. 8. It is next contended by Mr. M. Sundaram that what Section 131 requires is absence of negligence in the realisation of the cheque, that even construing it as including negligence in the preliminary operations leading upto the receipt of the money , it cannot include negligence in the opening of accounts and the decision of the Privy Council in - 'Commrs. of Taxation v. English, Scottish and Australian Bank Ltd.', AIR 1920 PC 88 (D) is strongly relied on in support of this contention. There, the facts were that on 6-6-1917 one Mr. Friend drew a cheque on the Australian Bank of Commerce for the amount of Income Tax payable by him and delivered it to the Commissioner of Taxes. A person calling himself Thallon appeared before the Accountant of the respondent bank and wanted to open a current account. He complied with the usual formalities and paid 20 and an account was opened on the 7th. Next day he put into his account the cheque of Mr. Friend and the same was cashed in the usual course. On the 9th, 11th and 12th of June 1917 Thallon issued three cheques for su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tending to be Jobson opened an account with the defendant bank with that cheque. The cheque was cleared in the usual course or business and the amount was drawn by the pretender, Jobson. In an action in conversion by the drawers of the cheque the bank relied by way of defence on Section 82 of the English Bills of Exchange Act. Bailhache J. in overruling the same, referred to the evidence which established that it was the practice of the banks to make enquiries before opening new accounts and observed:- It was true that banks were willing to take cheques, but before they would allow them to be operated upon they must be satisfied as to the respectability of the intended customer. Sometimes that was done by references, and sometimes by an introduction through a customer.... The defendant, in fact, did fall short of that degree of care ordinarily exercised by bankers, and therefore, he was guilty of negligence . It was observed in AIR1946Bom482 (E) that this decision could not be regarded as good law in view of the later decision of the Privy Council in AIR 1920 PC 88 (D). In (1923) 39 TLR 229 (G) which was decided in 1923 in which reference is made to the decision in AIR 1920 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 131 to this extent that if the opening of the account and the deposit of the cheque are really part of one scheme, as where the account itself is opened with the cheque in question or where it is put into the account so shortly after the opening of the account as to lead to the inference that it is part of it, then negligence , in the matter of Opening the account must be treated as negligence in the matter of realisation of the cheque. It might happen that even when an account is opened without a proper enquiry it might continue to be operated upon satisfactorily for sometime but long afterwards a cheque might be put into the account which might turn out to be forged. In such a case it cannot be laid down as an inexorable rule that negligence in the opening of an account must be treated as negligence in the receipt of the amount of the cheque. In all the decisions in which negligence in opening the account was held to preclude a defence under Section 82 of the English Act, the opening of the account and the deposit of the cheque were contemporaneous or so close in point of time as to be regarded as one transaction. The observations in AIR 1920 PC 88 (D) that the opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to the bearer and it is argued that in view of that section there is no obligation cast upon the bank to examine the endorsements in bearer cheques. Reliance is also placed on the evidence of D. W. 1 that endorsements on bearer cheques are never looked into But this contention proceeds on a misapprehension of the true position. Section 85(2) applies to a paying bank and has no bearing on the rights of a collecting bank which must be determined in accordance with the provisions of Section 131. If a claim were to be made by the plaintiff against the Chartered Bank of India, Australia and China for refund of the amount of the cheque, then Section 85(2) will come into operation and that bank can plead discharge under that section. But in an action in conversion against the collecting bank where the defence is based on Section 131 the endorsement becomes material as an element in determining whether the bank had acted without negligence. If there had been no endorsement at all, it might be that no inference of negligence could be made; but if in fact there is one and that conveys a warning that all is not well with the title of the holder it will be negligence not to heed to it an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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