V. S. DESHPANDE, J.

( 1 ) THIS is a blatant case of fraud practised on banks by their officials to the prejudice of the banks as well as the customer or the drawer of a cheque. The liability of the banks to the customer was never in doubt. But the further question how banks should deal with the bank officials who defraud both the banks and their customers also deserves to be considered.

( 2 ) THE appeal is by the Punjab National Bank which was Defendant 1 in the suit filed by Durga Devi, Respondent 1 herein. Respondents 2 and 3. the National and Grindlays Bank Limited and Shri Satya Pal Madan were Defendants 2 and 3 in the suit. A decree for Rs. 18,000 against the National and Grindlays Bank has been passed but the said Bank has not appealed against it. The Punjab National Bank and S. P. Madan have been held to be jointly and severally liable with the National and Grindlays Bank to pay these Rs, 18,000. Further, they are also held liable to pay. Rs. 2. 835 as interest on these Rs. 18,000. The decree was in favour of the plaintiff.

( 3 ) PLAINTIFF Durga Devi wanted to keep Rs. 18,000 in fixed deposit in the State Bank of India. She, therefore, issued a crossed cheque No. 821064 for Rs. 18. 000. 00 in favour of the State Bank of India on her Savings Bank Account No. 683 with the Jangpura Branch of the Punjab National Bank. Certain procedural difficulties stood in the way of State Bank of India in issuing the fixed deposit receipt to the plaintiff. S. P. Madan, therefore, undertook to get over the procedural difficulties. He was, therefore, entrusted with the cheque by the plaintiff. Madan had an account w:th the National and Grindlays Bank. He filled in the pay-in-slip and gave the cheque to the National and Grindlays Bank for the collection of the money from the Punjab National Bank and for deposit of the same into his own account at the National and Grindlays Bank. The cheque which was given by him to the National and Grindlaya Bank was, however, materially altered by the substitution of the words "shri Salya Pal Madan" in place of the words "the State Bank of India". The date and the amount which had been written with a thin pen were also overwritten with the same thick pen and ink which had been used to overwrite the words "shri Satya Pal Madan" on the words "the State Bank of India". The whole cheque except the signature of Durga Devi was, therefore, materially altered when presented for collection to the National and Grindlaya Bank. The forgery and the material alterations were so obvious at the very sight of the cheque that it is surprising how it was accepted for collection by the National and Grindlays Bank. It is only if the official accepting it for collection was in collusion with Madan that the cheque could pass muster. To pursuade the National and Grindlays Bank to accept the cheque for collection, Satya Pal Madan procured a certificate from Durga Devi on 14th June, 1967 to the effect that he was the son-in-law of Durga Devi and that she desired to endow him with the sale proceeds of the cheque. Madan wag not Durga Devi s son-in-law and she did not want to endow the money to him. But the certificate was obtained from her by fraud. He also made a statement to the collecting bank on 17th June, 1967 that he was a Central Government employee with 15 long years of service and it was imperative on him to keep secrecy of the amount received by him from his mother-in-law. After the amount was collected by the National and Grindlays Bank from the Punjab National Bank and deposited in Madan s account, Madan closed the account in June, 1967. He had first withdrawn Rs. 1,000 from his account on 15th June, 1967 and then withdrew the amount of Rs. 17,005 from his account on 17th June, 1967.

( 4 ) WHAT is even more surprising is that the concerned officials of the Punjab National Bank honoured the forged and materially altered cheque and paid the amount of Rs. 18,000 to the collecting bank.

( 5 ) THE fraud was discovered soon and

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