Judgement

Appeal (No. 11 of 1943) from a judgment and decree of the High Court at Calcutta in its appellate jurisdiction (March 17, 1942), which had affirmed a judgment and decree of that court in its ordinary original civil jurisdiction (June 28, 1940).

The following facts are taken from the judgment of the Judicial Committee The appellant was a company doing banking business, established in the State of Baroda, under the Baroda Companies Act, 1896-7, and having its registered office in Baroda, with branches in British India. The respondent was a bank incorporated under the Indian Companies Act. Both banks had branches in Calcutta. M. P. Amin was manager of the Calcutta branch of the appellant bank. Bhagwan Das was manager of the Calcutta branch of the respondent bank. One Mitter (respondent No. 2) became a customer of the appellant bank at Calcutta. In May, 1939, one Ghose (respondent No. 3) opened an account with the appellant bank on the understanding that he should be allowed " temporary accommodation from time to time." That account was guaranteed by Mitter. On June 13, 1939, Ghoses account with the appellant bank showed an opening debit balance of Rs. 1,26,339, reduced during the course of the day to Rs. 89,274. On the same date Mitters account with the respondent bank was overdrawn to the extent of about Rs. 35,000. On that day, Mitter brought to the respondent bank two cheques drawn by Ghose on the appellant bank, both in favour of Mitter and both dated June 13, 1939 ; both cheques were marked on their face with the words " Marked " good for payment up to 20th June, 1939," and signed by Amin on behalf of the appellant bank. One cheque was for Rs. 1,40,000, and the other for Rs. 1,35,000. Mitter informed Bhagwan Das that the cheques would not be paid until June 20, 1939, and asked to be allowed to draw Rs. 2,40,000 against them. Bhagwan Das said he wanted a cheque the date of which was the same as that on which payment was to be made. Mitter then took away the cheques and returned a little later on the same day with one cheque dated June 20, 1939, drawn by Ghose on the appellant bank in favour of Mitter or order, for Rs. 2,75,000. The cheque was crossed " & Co.," and on the face of it were written crosswise the words " Marked good for payment on 20.6.39. For the Bank " of Baroda, Limited, M. P. Amin, Manager." It had not been questioned that the signature was that of Amin. Mitter endorsed the cheque generally and handed it to Bhagwan Das, with two letters, in which he asked the respondent bank to credit Rs. 2,75,000 to his account u on realization on due " date," and also requested an overdraft of Rs. 2,40,000, besides the previous balance, which he promised to adjust on June 20, 1939. The respondent bank on the same day gave Mitter its cheque for Rs. 2,40,000, on the Imperial Bank of India at Calcutta, which Mitter duly cashed. The respondent bank debited Mitters account with the amount.

Meantime, the appellant bank had become suspicious of the conduct of Amin, and had sent two senior officials to keep Amin under observation. On June 19 Amin was suspended, and early next day a notice was sent to the respondent and other banks that Amins power of attorney had been cancelled and another branch manager appointed. On June 20, the respondent bank, who, though they had not yet received the notice, had become apprehensive, sent their cashier and their accountant to the appellant bank, as soon as it opened for business that morning, to present the cheque marked as above which Bhagwan Das had endorsed generally for Rs. 2,75,000, over the counter for payment. Ghoses account was then in credit to the extent of annas 7 pies 3 only. The appellant bank refused payment, and returned the cheque with a memorandum attached " not arranged for." After some

Law. Rep. 71 Ind. App. 124 ( 1943- 1944) Bank of Baroda, Limited V. Punjab National Bank, Limited

37

correspondence the respondent bank, on July 31, 1939, commenced the present suit ag