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High Court Of Calcutta
A. N. Ray
MAHABIR PRASAD BUBNA - Appellant
Versus
UNITED BANK OF INDIA - Respondent
Suit 28 Of 1984
Decided On : 03/12/1992
BANKING - LIABILITY OF BANK - PAYMENT OF CHEQUES - FORGED SIGNATURES - NEGLIGENCE OF CUSTOMER - BANK'S LIABILITY - PRINCIPLES.
Fact of the Case:
Plaintiff claimed Rs. 1,56,000 and return of securities pledged with the defendant bank. Two cheques, both self-bearer, were drawn on the plaintiff's account for Rs. 70,000 and Rs. 80,000. The plaintiff disputed the signatures on the cheques. The bank claimed that the plaintiff was negligent in leaving his cheque books unsecured, allowing an employee to use them and withdraw the money.
Finding of the Court:
1. The plaintiff's signatures on the disputed cheques were forged. 2. The bank issued the cheque book to an unauthorized person, but the plaintiff did not prove that the person had the authority to receive it on his behalf. 3. The bank paid the cheques in the regular course of business and was not negligent in verifying the signatures. 4. The plaintiff was negligent in keeping his cheque books and not taking precautions against forgery.
Issues: 1. Whether the plaintiff's signatures on the disputed cheques were forged. 2. Whether the bank was negligent in issuing the cheque book to an unauthorized person. 3. Whether the bank was negligent in paying the cheques. 4. Whether the plaintiff was negligent in keeping his cheque books and not taking precautions against forgery.
Ratio Decidendi: 1. A bank is bound to honor cheques duly signed by its customer and not to honor cheques not signed by the customer. 2. If an unauthorized person gets hold of a cheque and encashes it, the bank may have a defense if the signatures are forged, but if the signatures are genuine, there is no mandate to pay and the bank cannot rely on the customer's negligence as a defense. 3. A bank can claim damages from a customer for negligence that resulted in a loss, but the damages may be apportioned based on the principles of contributory negligence.
Final Decision: Decree for Rs. 1.50 lakhs with interim interest at 1% per annum and further interest at 1/2% per annum. No order for costs if the bank pays within 3 months, otherwise costs of Rs. 10,000.
( 1 ) IN this suit the plaintiff has claimed for a decree for Rs. 1,56,000. 00 and odd and return for certain securities pledged with the Bank.
( 2 ) BY reason of an interlocutory order the sum of Rs. 6000. 00 and odd and the securities claimed have been returned by the defendant Bank to the plaintiff and as such the suit servives only to the extent of the sum of Rs. 1,50,000. 00 and interest thereupon pendent lite and upon judgment. The Bank has not disputed about the return of the sum of money of Rs. 6310. 40 or the return of securities, or that the same should in any manner be altered by this decree, and as such the said returns are declared to have been done appropriately.
( 3 ) THE plaintiff had a long standing account with the Clive Row Branch of the defendant bank i. e. United Bank of India and the suit arose out of two cheques both bearing date 4/11/1982. The cheques were on their faces drawn as self bearer cheques for the respective sums of Rs. 70,000. 00 and Rs. 80,000. 00.
( 4 ) THE plaintiff admittedly carried on and carries on business under the name and style of M/s. M. Prasad and Company. The cheques bore the rubber stamp of the said business name and also bore the signature which ran as "m. Bubna. "
( 5 ) THE plaintiff has disputed the signatures appearing on these two cheques.
( 6 ) EXBT. A in this suit is composed of four documents which are the admitted account opening form signed by the plaintiff with the business name on the rubber stamp, the specimen signature card admittedly signed by the plaintiff, and the two disputed cheques.
( 7 ) THE bank said as follows in paragraph 20 of the written statement which is reproduced below in its entirety :"each and every allegation and submission made in para 12 of the plaint is incorrect and is denied and disputed as if they were set out hereinafter and traversed specifically. The defendant states that the statement of account have been furnished in due time and denies that the defendant wrongfully declined to pay to the plaintiff his dues or the credit balance as alleged or at all. All sums payable to the plaintiff have been duly paid without prejudice to any of the contentions aforesaid and/or in the alternative the defendant states that the plaintiff was negligent in leaving his concerned cheque books in an insecured place by reason whereof its employee one Bothra used the said cheque and withdrew the said sum of Rs. 70,000. 00 and Rs. 80,000. 00 from the said account of the plaintiff. In the premises the defendant is not liable at all. "
( 8 ) IN the trial before this Court, the plaintiff called two witnesses, the first being a hand-writing expert and the second being the plaintiff himself. The bank called one witness namely Tapan Kr. Basu. It was the purpose of the plaintiff to prove that he had not signed the two disputed cheques and it was the purpose of the bank to disprove that, and further to prove that the two cheques were utilised from a cheque book issued in the regular course of the bank's business and that the payment of the two self-bearer cheques also took place in the normal course after issuance of a token and after verification of the signatures. The parties went to trial upon the following five issues :"1. Were the signature of the plaintiff forged on cheque Nos. CLR/169903 and 769905 both dated 4-11-1982 both on the obverse and reverse as pleaded in para 8 of the plaint ? 2. Were the cheque foils never issued by the defendant to the plaintiff as alleged in para 8 of the plaint ? 3. Were the cheques allegedly forged/fabricated passed for payment and/or allowed to be encashed by the defendant without due care or attention with which the same should have been dealt with in the usual course of the defendant's duties and obligations as a banker owed to its constituent as alleged in paragraph 10 of the plaint ? 4. Was the plaintiff negligent in keeping the concerned cheque books by reasons of which the plaintiff's employees used the
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