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V. KHALID AND G.L. OZA, JJ.
Civil Appeal No., 1777 of 1973,
D/- 22-4-1987.
Canara Bank, Appellant
Versus
Canara Sales Corporation and others Respondents.
Companies Act, 2013 - Transfer of Property Act, 1882 - Trusts Act, 1882 - Bihar and Orissa Co-operative Societies Act, 1935 - Company - Irregularities In Account - Recovery Of Amount - Plaintiff is a Private Limited Company with its head office - It had a current account with appellant-Bank - Managing Director of company and General Manager of a sister concern of company had been authorised to operate said current account of plaintiff with Bank - Second defendant was attending to maintenance of accounts of plaintiff and was also in charge and custody of cheque books issued by Bank to plaintiff - Second defendant was absent from duty for some time - During that period one A. Shenoy, who was Assistant of second defendant was directed to bring accounts up to date - During this process, he noticed certain irregularities in account and brought this to notice of plaintiff - Suit was filed for recovery of amount on plea that amounts as per forged cheques were not utilized for purpose of plaintiff, that they were not authorized ones - Whether acceptance by customer without protest of a balance struck in pass book or statement of account constitutes a settled account - Whether he actually had knowledge or not, and knowledge may be attributed to a person who has sought to avoid finding out, or has shut his eyes to obvious means of knowledge - Whether plaintiffs had been so negligent with regard to cheque that their action against bank should fail - Whether there is a duty on part of customer to examine pass book and inner part of cheques and to communicate to banker within a reasonable time of debits which he does not admit - Whether a customer is estopped from disputing debits shown in passbook when pass book is returned without any comment and whether such a conduct would constitute a "stated and settled account - Whether customer owes a duty to bank to inform it about correctness or misstatements in entries in pass book within a reasonable time and whether failure to do so would amount to such negligence as to non-suit him in a suit for recovery of amount paid on a forged cheque - Whether acceptance by customer without protest of a balance struck in pass book or statement of account constitutes a settled account - Whether plaintiffs had been so negligent with regard to cheque that their action against bank should fail – Held, Suit was for recovery of certain amount representing price of coal supplied to respondent - Inter alia respondent pleaded in defence of suit that respondent had issued and sent bills to cover amount and intimation cards in accordance with usual practice in ordinary course of dealings - Respondents it was alleged paid amount by cheque to a person authorised by appellant and on presentation of proper receipts - It was, pleaded that appellants claim having been satisfied, he had no cause of action - Court understood how a plea of estoppel based on negligence can be successfully put forward – Court have seen that there is no duty for a customer to inform bank of fraud committed on him, of which he was unaware - Nor can inaction for a reasonably long time in not discovering fraud or irregularity be made a defence to defeat a customer in an action for loss - Thus contentions put forward by bank cannot be accepted to defeat plaintiff - Various submissions made by counsel for bank based on constructive notice in general law and on other branches of law cannot be extended to relationship between a bank and its customer - Appeal Dismissed.
Judgement
KHALID, J. :- This is an appeal by certificate, against the Judgment dated 25th June, 1972, passed by a Division Bench of the Karnataka High Court. The 1st defendant Bank is the appellant.
2. Original Suit No. 72 of 1962 was filed in the Court of Civil Judge, Mangalore, by the Canara Sales Corporation Ltd. through its Managing Director, V. S. Kudva. He died during the pendency of the suit and the suit was continued by the succeeding Managing Director of the Corporation. The suit was against two defendants : the appellant-Bank was the first defendant and the second defendant was one Y. V. Bhat who was the Chief Accounts Officer of the plaintiff, till 1961. He died during the pendency of the appeal before the High Court and his, legal representatives were brought on record. When the suit was filed, the appellant-Bank was called the Canara Bank Ltd. After the nationalisation of banks it became the Canara Bank which is the appellant before us.
3. The suit was instituted for., recovery of a sum of Rs. 3,26,047.92, with the following allegations : The plaintiff is a Private Limited Company with its head office at Mangalore. It had a current account with the appellant-Bank in its Mangalore Bunder branch, The Managing Director of the company and the General Manager of a sister concern of the company had been authorised to operate the said current account of the plaintiff with the Bank. The second defendant was attending to the maintenance of accounts of the plaintiff and was also in charge and custody of the cheque books issued by the Bank to the plaintiff. In March, 1961, the second defendant was absent from duty for some time. During that period one A. Shenoy, who was the Assistant of the second defendant was directed to bring the accounts up to date. During this process, he noticed certain irregularities in the account and brought this to the notice of the plaintiff. On verification, it was found that cheques purporting to bear the signature of Shri V. S. Kudva were encashed though they did not bear his signature. In other words the signature were forged. On 25-3-1961, a complaint was made by the plaintiff with the Superintendent of Police. The plaintiff appointed a firm of Chartered Accountants to conduct special audit of the companys accounts, for the years 1957-58 to 1960-61. This special audit disclosed that the second defendant had withdrawn, in all, a sum of Rs. 3,26,047.92 under 42 cheques. The suit was filed for recovery of the amount on the plea that the amounts as per the forged cheques were not utilized for the purpose of the plaintiff, that they were not authorized ones, that there was no acquiescence or ratification open or tacit on the part of the plaintiff, that the plaintiff was unaware of the fraud till the new accountant discovered it.
4. The appellant-Bank resisted the suit on the following grounds in their written statement :
(i) That the cheques were not forged ones.
(ii) Even if they were forged ones the plaintiff was not entitled to recover the amount on account of its own negligence.
(iii) There was settlement of accounts between the parties from time to time and as such the plaintiff was not entitled to reopen the same and claim the sums paid under the cheques in question.
(iv) The suit was barred by limitation.
5. The second defendant pleaded that the cheques were not forged ones and amounts recovered by the cheques were utilized for the purpose of the plaintiff.
6. The trial Court negatived the contentions of the first defendant-Bank and passed a decree for the sum claimed, with interest at 6 from the date of the suit till recovery of the amount. In appeal before the Division Bench, the judgment of the trial Court was confirmed.
7. The High Court certified that the case involved substantial questions of law of general public importance and granted certificate to file the appeal. It is thus that this appeal has come before us.
8. Venkataramiah, J. as he then was, who spoke for the Bench, has in his deta
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