A collecting bank is entitled to protection under section 131 of the Negotiable Instruments Act, 1881, if it acts in good faith and without negligence.

B. SUBHASHAN REDDY, J.

( 1 ) THIS appeal is directed against the judgment and decree rendered by the Court of the First Subordinate Judge, Kurnool, in O. S. No. 8 of 1979. The defendant is the appellant. The Andhra Bank-defendant is the appellant herein and assails the judgment and decree rendered by the court below mulcting it with the liability of payment of Rs. 1,60,400 together with interest at 12 per cent. per annum from 14/06/1979, till payment and also costs. The parties are referred to as arrayed in the suit.

( 2 ) THE Kurnool District Co-operative Central Bank is the plaintiff. It has instituted a suit claiming a sum of Rs. 1,60,400 with interest thereon from the date of suit on the ground that the defendant was negligent in discharge of functions as collecting bank for its customer. The imputation against the defendant was that the defendant had not verified the antecedents of its customer, Mr. A. Rama Rao, at the time of opening his account, that when he presented the drafts for conversion, the defendant had failed to exercise due care and caution, that even after the said conversion after the transfer of amount from the plaintiff s bank to the defendant s bank into the account of the said customer, Mr. A. Rama Rao, the defendant had negligently honoured the cheques issued and presented by the said customer, even though the said action of withdrawal was in a short span of time, that too, of heavy amounts. The protection pleaded by the defendant under section 131 of the Negotiable Instruments Act, 1881, was negatived by the court below and the decree as sought for by the plaintiff was granted.

( 3 ) MR. C. V. Narasimha Rao, learned counsel for the defendant, contends that the defendant-bank has taken all precautions as a commercial bank normally takes and that absolutely there are no lapses on its part and that while opening the account of Mr. A. Rama Rao in the name of Raja Traders, the defendant has taken due and proper care and relied on the introduction by another valued customer, namely, Mr. Polimera Bakthavasthalam, a well known cloth merchant with a turnover in lakhs who runs a cloth mill under the name and style of Polimera Cloth Stores at Kurnool; that the drafts when presented by its customer Mr. A. Rama Rao were scrutinised and on being satisfied that they were presentable, they were sent to the plaintiff-bank for conversion; that after conversion, when the amount was credited into the account of Mr. A. Rama Rao and the latter s presentation of cheques for encashment, the same was made as duty bound being a banker and that the plaintiff-bank is negligent and it ought to have verified and ought to have informed the defendant not to honour the cheques presented by Mr. A. Rama Rao and that the plaintiff not only failed to take such action at the first instance, but also failed to take action even when the second set of drafts were presented and were encashed and when the first set of drafts were honoured by the plaintiff s bank, there was no reason for the defendant to doubt and that all such steps, care and caution which were to be taken by the collecting bank, had in fact been taken by the defendant bank and the action of the defendant squarely comes within the protection of section 131 of the Negotiable Instruments Act and negativing the same to the defendant and imposing a liability to pay the amount under impugned decree is uncalled for and unwarranted and that the decree is liable to be set aside.

( 4 ) MR. Prasad, appearing for Mr. R. V. Subba Rao, counsel for the respondent-plaintiff-bank, contends otherwise and submits that Mr. Rama Rao was not a genuine person and that his address was Fake and ficticious and his plea for opening an account with the defendant bank ought to have been rejected by the latter and that the defendant-bank did not properly verify the antecedents of Mr. A. Rama Rao before opening his account, that the drafts were not properly perused and that had they been properly perused w

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