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High Court Of Calcutta
M. M. Dutt, Sharma
UNITED BANK OF INDIA LTD. - Appellant
Versus
A.T.ALI HUSSAIN AND CO., A FIRM - Respondent
A. F. O. D. 399 Of 1964
Decided On : 12/20/1977
CONTRACT - MISTAKE OF FACT - RECOVERY OF MONEY PAID - SECTION 72 OF THE INDIAN CONTRACT ACT - DOCTRINE OF ESTOPPEL - DOCTRINE OF EQUITABLE RESTITUTION - APPLICABILITY.
Fact of the Case:
The plaintiff bank, acting under the mistaken belief that a forged cheque was genuine, paid the amount to the defendant bank, which in turn credited the amount to the account of the defendant company. The defendant company, believing the cheque to be genuine, delivered goods to the persons who presented the cheque. The plaintiff bank, upon discovering the forgery, sought to recover the amount from the defendants.
Finding of the Court:
The court found that the plaintiff bank was not negligent in encashing the cheque, that the defendant bank acted as a mere conduit pipe, and that the defendant company acted in good faith in delivering the goods. The court also held that the plaintiff bank was not entitled to recover the money from the defendants as they had changed their position to their detriment before the mistake was detected.
Issues: 1. Whether the plaintiff bank was negligent in encashing the forged cheque? 2. Whether the defendant bank was liable to the plaintiff bank for the amount paid under the forged cheque? 3. Whether the defendant company was liable to the plaintiff bank for the amount paid under the forged cheque? 4. Whether the plaintiff bank was entitled to recover the money from the defendants under Section 72 of the Indian Contract Act?
Ratio Decidendi: 1. The court held that the plaintiff bank was not negligent in encashing the forged cheque as the forgery was so accurate that it was not possible even for a trained eye to detect it. 2. The court held that the defendant bank was not liable to the plaintiff bank for the amount paid under the forged cheque as it acted as a mere conduit pipe and had no knowledge of the forgery. 3. The court held that the defendant company was not liable to the plaintiff bank for the amount paid under the forged cheque as it acted in good faith in delivering the goods and had changed its position to its detriment before the mistake was detected. 4. The court held that the plaintiff bank was not entitled to recover the money from the defendants under Section 72 of the Indian Contract Act as the defendants had changed their position to their detriment before the mistake was detected and it would be inequitable to allow the plaintiff bank to recover the money.
Final Decision: The court dismissed the appeal filed by the plaintiff bank.
( 1 ) THIS appeal is at the instance of the plaintiff United Bank of India Limited and it arises out of 6 suit for recovery of money.
( 2 ) THE case of the plaintiff was that on Jan. 14, 1957, the defendant No. 2, the Union Bank of India Limited presented to the plaintiff bank, a cheque for Rupees 5,200 bearing date Jan. 11, 1957 purported to have been drawn by the Metal Alloy Co. Private Ltd. , a constituent of the plaintiff bank, in favour of the defendant No. 1, A. T. Alihussain and Co. , and crossed "not negotiable and account payee only". The plaintiff bank, acting under the mistaken belief that the said cheque had in fact been duly signed by the said Metal Alloy Co. , paid the said sum of Rs. 5,200 to the defendant Union Bank by debiting the C/d Account of the said constituent The signature on the said cheque and all other writings appearing thereon had, since transpired, been forged and no one on behalf of the company had signed or drawn the same. The forgery of the said cheque along with two other cheques were the subject-matter of a criminal proceeding and in that proceeding one Prodyot Kumar Ghosh and another were convicted. On Feb. 22, 1957, the plaintiff, after making necessary enquiry, came to know that the said cheques were forged and the amounts covered by them were obtained by fraud on the plaintiff who paid the same by mistake. Thereafter, on March 4, 1957, the plaintiff made a payment of Rs. 14,800 being the total amount covered by the aforesaid three cheques including the cheque in question to its said constituent, the Metal Alloy Co. on demand being made therefor. It was claimed by the plaintiff that the defendants Nos. 1 and 2 were liable for the amount covered by the cheque in question, that is, Rs. 5,200 paid by the plaintiff as aforesaid. Accordingly, the plaintiff prayed for the recovery of the said sum of Rupees 5,200 from the defendants.
( 3 ) THE suit was contested by both the defendants. The case of the defendant No. 1 was that certain persons alleging themselves to be the representatives of the Metal Alloy Co. Pvt. Ltd. , of Asansol came to the defendant's show room on Jan. 13, 1957 in order to ascertain the price of certain tube-well materials and after such talks and ascertainment of the price, they came on the next day with a cheque for Rs. 5,200 and the defendant, in the ordinary course of business, entered the order placed by them in the order book The defendant, acting in good faith, sent the cheque to its banker, namely, the Union Bank of India Limited for collection, and after the cheque had been encashed delivered the goods to those persons on Jan. 15, 1957. It was asserted by the defendant that it had acted in good faith having no reason to suspect that the cheque was forged, and on receipt of an intimation from the defendant bank, it parted with valuable properties and were not, therefore, in any way liable for the alleged loss suffered toy the plaintiff. It was contended by the defendant that the plaintiff and Its constituent had acted negligently and carelessly, and that accordingly, the plaintiff was precluded from recovering the money from the defendant
( 4 ) THE case of the defendant No. 2, the Union Bank of India Limited was that in the ordinary course of business it received the cheque in question on or about Jan. 14, 1957 and in good faith presented the same for encashment which the plaintiff bank duly honoured. It was contended that the plaintiff bank was under a duty to ascertain the genuineness or otherwise of any cheque drawn by its constituent and if it had allowed any forged cheque to be encashed it would have to suffer the loss arising from its conduct.
( 5 ) THE suit was tried by the learned Judge, Sixth Bench, City Civil Courty Calcutta. He came to the finding that the forgery of the signature in the cheque had been so accurately done that it was not possible even to a trained eye to detect the forgery. The contention of the defendants that the plaint
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