A bank is liable for negligence if it fails to exercise due diligence and remain vigilant in verifying the authenticity of cheques and request letters for cheque books before debiting a customer's account.

( 1 ) THIS appeal is directed against the judgment and decree dated17. 8. 1977 passed by the Court of Mr. N. L. Kakkar, Additional District Judge, Delhidecreeing the suit of the plaintiff/respondents for Rs. 47665. 00 with costs and interestat the rate of 18% per annum from the date of filing the suit till the date of realisation,against the appellant-Bank.

( 2 ) RESPONDENTS filed a suit alleging therein that they were maintaining currentaccount with the Union Bank of India, Chandni Chowk Branch, Delhi; in which theyused to deposit substantial amounts; on 27/10/1974 one cheque book containing100 cheque forms was obtained by them from the Bank; on scrutiny of the statement ofaccount from 1. 10. 1974 to 7. 11. 1974 furnished by the Bank it was found that a sum of Rs. 20,000. 00 was debited to their account on 5. 11. 1974 and another sum of Rs. 25,000. 00 wasdebited to their account on 6. 11. 1974; enquiries from the Bank revealed that these debitentries were made against the two cheques purported to have been issued from anothercheque book issued by the appellant on 5. 11. 1974 to someone else; the respondents neverreceived the said cheque book and had sent no requisition for the same; on 7. 11. 1974respondents received a letter dated 5. 11. 1974 from the appellant-Bank staling that thecheque book containing 50 cheques was issued and asking the same to be acknowledged;on 8. 11. 1974 respondents informed the appellant that no such request was made by themfor issuance of cheque book; none of the partners had issued the said two cheques to anyone; the signatures on these two cheques, and on the request letter dated 5. 11. 1974 forissuance of the cheque book were forged; that the Bank had no right to debit their accountand requested the appellant to credit their account alongwith interest.

( 3 ) THE appellant-Bank filed written statement pleading therein that the account ofthe respondents was properly debited in the ordinary course of business and the chequesencashed, bore the signatures of Radhey Shyam, one of the partners of the respondentfirm, and his signatures tallied with the specimen signatures available in the Bankrecords; Bank refuted the allegation of the plaintiffs that no request was made by themfor issuance of a cheque book on 5. 11. 1974; and that the officers of the Bank acted in goodfaith and without any negligence, on their part in the matter of encashment of thecheques and issuance of cheque book.

( 4 ) THE Trial Court framed the following issues :

(I) Whether the notice under Section 80, Civil Procedure Code had been issued bythe plaintiff? OPP (ii) Whether letter of request for issuance of cheque bookscontaining the cheques in question had been issued to thedefendant by the plaintiff? OPD (iii) Whether cheques in question i. e. for Rs. 20,000. 00 dated5. 11. 1974 and Rs. 25,000. 00 dated 6. 11. 1974 had been issued bythe plaintiff? OPD (iiia) Whether the defendants Bank paid the amount of thesetwo cheques in question in good faith and withoutnegligence in the ordinary course of its business and if soto what effect? (iv) Whether the plaintiff is entitled to recover any interest? If so atwhat rate? OPP (v) Relief.

( 5 ) ON the basis of the evidence led by the parties, learned Trial Court decided allthe issues in favour of the respondents and against the appellant. We have heard learnedcounsels for the parties and have been taken through the record.

( 6 ) MR. J. Lal, learned Advocate for the appellant referred to various provisions ofthe Negotiable Instruments Act, 1981 (for short the Act ). Section 10 defines payment indue course, as payment in accordance with the apparent tenor of the instrument in goodfaith and without negligence, to any person in possession thereof under circumstanceswhich do not afford a reasonable ground for believing that he is not entitled to receivepayment of the amount therein mentioned; Section 31 fixes liability of the drawee ofcheque and requires the drawee of a cheque,