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2010(1) Bankmann 48
MADRAS HIGH COURT
M. Jeyapaul, J.
Omex Wires Pvt, Ltd. (Formerly Delite Wires Pvt. Ltd.) and another — Plaintiffs
versus
V,K, Mishra, Disposal Officer C/o Central Aromac Factory and others — Defendants
(CS. No, 554 of 1997,
Decided on 8th December, 2008).
K.K. Sanchetti, for the plaintiffs.
P.K. Gopalraj, for the defendant No.4.
IMPORTANT POINT
Mere allegation of negligence and collusion are not sufficient to record finding of the same.
Headnote:Negotiable Instruments Act, 1985, Section 131 – Suit for recovery – Filed against private defendants and bank – Plea that bank acted in collusion with the private defendants and allowed encashment of drafts negligently and wrongly – Plea that bank acted in good faith and is not negligent – Account opened after identification by old and sincere customer of the bank – Statutory protection under act – Available to the bank – Suit qua bank – Liable to be dismissed.
Facts of the case :
Facts leading to the filing of present case are that the defendant no. 1to 3 opened a bank account with the defendant no. 4 and received wrong full payment from plaintiff.
Finding of court :
The payment has been made by the fourth defendant to the second defendant in good faith and without any negligence. The amount was paid only with the authority found under the instrument by the banker. There was no occasion for the fourth defendant to doubt the title of the second defendant to the instrument. When such being the case, the payment made by the fourth defendant to the second defendant is payment in due course, as per Section 10 of the Negotiable Instruments Act, 1981.
M, ,Jeyapaul, ,J, —
The suit is filed praying for a decree and judgment against the defendants jointly and/or severally to pay plaintiffs a sum of Rs, 10,73,250.00 together with interest.
2. The brief case of the plaintiffs:
(i) The first plaintiff is the manufacturer of Bare and Super enamalled Copper and Aluminium Wires and Conductors. The second plaintifis the Ex-Director of the first plaintiff company. The first defendant representing himself as Disposal Officer in the second defendant factory approached the first plaintiff on 8.8.1996 about the sale of surplus Coper Wire and rods by tender by the second defendant.
(ii) The plaintiffs believing the second defendant’s representation asked the first defendant to do the needful in the purchase of surplus Copper Wires and Rods by tender from the second defendant. The first defendant met the first plaintiff in its factory premises in Raipur and informed that the first plaintiffs tender was accepted at Rs. 12,79,000/- on 26.8.1996,the first plaintiff was asked by the first defendant to obtain two Demand Drafts in favour of Central Aromac Factory payable at Chennai and also to come down to Chennai so that the material confirmed as the tender can be delivered to the first plaintiff. The first plaintiff obtained two Demand Drafts drawn on Union Bark of India, Raipur in favour of the second defendant.
(iii) The second plaintiff along with another Director of the first plaintiff reached Chennai on 29.8.1996 and stayed at Hotel Picnic in Chennai. Both the Demand Drafts were shown to the first plaintiff. A yellow tender document was shown to the son of the second plaintiff. The first defendant put those two Demand Drafts in the tender document cover and the same was sealed and handed over to the son of the second plaintiff. No material was supplied.
(iv) On verification, the plaintiffs came to know that there was no Central Aromac Factory at Chennai. The two Demand Drafts were also encashed through the fourth defendant by opening an account in the name of the second defendant by the second defendant.
(v) The defendants 1 to 4 colluded with each other in opening an account in the name of the second defendant, who is a fictitious person. The account in the name of the second defendant was opened in the bank of the fourth defendant based on the introduction given by the third defendant. Had the fourth defendant being vigilant at the time of opening the account, the fraud could not have been committed. The fourth defendant without making full enquiry about the credentials of the second defendant opened the account and thereby facilitated the second defendant to encash the Demand Drafts. Therefore, the plaintiffs are entitled to the draft amounts with interest and cost.
3. The defendants 1,2,3 and 5 remained exparte.
4. The counter case in brief of the fourth defendant :
(i) The fourth defendant is an unnecessary party to the suit. The plaintiffs intended to pay the amounts to Central Aromac Factory at Chennai by obtaining two Demand Drafts payable to them. The entire story of the plaintiffs is found to be unacceptable.
(ii) There is nothing unusual in the conduct of the fourth defendant in opening the account in the name of the second defendant after proper introduction by customer of a long duration. No occasion arises to embark upon an enquiry of a person, who was introduced by a regular customer. The fourth defendant had acted in good faith and without negligence throughout the transaction. The Demand Drafts were payable to the second defendant. The Demand Draft amount was collected for the second defendant, to whose favour those Demand Drafts were drawn. The fourth defendant is not liable to pay any amount to the plaintiffs. In view of the above, the fourth defendant submits that the suit may he dismissed against the fourth defendant.
Issues framed for determination:
(i) Whether the fourth defendant bank had opened an account in the name of the second defendant, a fictiti
