( 1 ) THE above appeal is filed against the decree passed in the suit, O. S. No. 72 of 1962, on the file of the Civil Judge, Mangalore, by the first defendant therein, the Canara Bank Ltd. After the nationalisation of the said bank, the Canara Bank has been brought on record as the appellant. The suit was instituted for and on behalf of the Canara Sales Corporation ltd. , Mangalore, by its Managaing Director, V. S. Kudva, who died during the pendency of the suit. After his death, the suit was continued by L. V. Kudva as the Managing Director of the plaintiff. The second defendant was one Y. Venkatesha Bhat who was the Chief Accounts officer of the plaintiff upto the year 1961. The second defendant died during the pendency of this appeal and his legal representatives have been brought on record.

( 2 ) THE suit was instituted against defendants 1 and 2 for reovery of a sum of Rs. 3,26,047-92 on the basis of the folloing allegations made in the plaint. The plaintiff is a Company having its head office at Mangalore and dealing mainly in motor vehicle parts and other requirements of motor vehicles. It had opened a current account in the Mangalore Bunder branch of the first defendant-Bank. V. S. Kudva who was the Managing director of the plaintiff and K. S. Bhandrakar who was the General manager of a sister concern of the plaintiff, had been authorised to operate on the said current account of the plaintiff with the first defendant. The second defendant was working as the Chief Accounts Officer of the plaintiff from 1950 and in that capacity he was attending to the maintenance of accounts of the plaintiff and was also incharge and custody of the cheque books issued by the first defendant-Bank to the plaintiff. In March 1961 second defendant was absent from his duty for some time and during that period one Appuraya Shenoy who was the assistant of the second defendant was asked to bring the accounts of the plaintiff upto date. While doing so, the said Shenoy noticed certain discrepancies with regard to two cheques bearing Nos. 625061 and 625070 for Rs. 8,364-12 and 6,774-05 respectively. The counter-foils of the above cheques showed that they had been drawn in favour of the Canara Industrial and Syndicate Bank (now known as Syndicate Bank) and were for sums of Rs. 1,000 each. But as there were no vouchers in support of the said payments to the Syndicate bank, Shenoy made further enquiry regarding them. His enquiry disclosed that in fact the two cheques had been drawn for Rs. 8,364-12 and rs. 6,774-05 by the second defendant and that the said amounts had not been shown in the accounts of the plaintiff. While as against cheque no. 625061 encashed on 3-2-1961 there was a debit entry of Rs. 1,000 as against the Syndicate Bank in the Rough Day Book maintained 'by the second defendant, there was no entry at all of any sort in respect of cheque No. 625070. In order to ascertain the truth about the withdrawal of the sums under the two cheques referred to above, 'the second defendant who was away at Bangalore was asked to go to Mangalore immediately by two telegrams which were sent on 17-3-1961 and 22-3-1961. It was not known at that time that the two cheques had been forged by somebody. Though the second defendant replied that he would be reaching mangalore shortly, he did not actually meet V. S. Kudva till 24-3-61.

( 3 ) ON that day one more cheque bearing No. 908792 drawn on the first defendant for a sum of Rs. 8,645-65 came to the noitice of V. S. Kudva. The counter-foil of the said cheque showed that it had been drawn for a sum of Rs. 3,000 in favour of the Syndicate Bank. Actually the said cheque had been drawn for Rs. 8,445-65 by the second defendant and he had received the said amount from the first defendant as the 'payee' under the said cheque. Thereupon V. S. Kudva went to the office of the first defendant on 24-3-1961 and inspected the three cheques. He found that the signatures on the three cheques purporting to