The liability of a collecting banker under the Negotiable Instruments Act, 1881, is determined based on the bank's good faith and negligence in collecting the instrument, as well as the general banking practices.

VALMIKI J. MEHTA, J.

1. These appeals are being disposed of by this common judgment inasmuch as facts and issues are more or less the same. For the sake of convenience, facts pertaining to RFA No.490/2004 are stated.

2. The facts of the case are that the respondent/plaintiff-bank filed a suit for recovery against the appellant-bank for a sum of Rs.8,14,007/-alongwith interest at 16% per annum by pleading that the appellant/defendant no.1 acting as the collecting bank for its customer/defendant no.2, Bhupinder Singh, sole proprietor of M/s. Radha Trading Company, collected from the respondent/plaintiff an amount of Rs.6,00,000/- under the forged bank draft bearing no. RUG 071395 dated 25.5.1999 issued by the branch of the respondent/plaintiff-bank at Begum Bridge, Meerut, UP. The proceeds of the bank draft, which were collected, by the appellant, were credited to the account of the defendant no.2, and which amount was withdrawn on 27.5.1999. The bank draft was presented by the appellant-bank on behalf of its customer on 27.5.1999. The respondent/plaintiff-bank, when it did not receive the advice with respect to the subject instrument, took up the matter with its branch office at Begum Bridge, Meerut, UP on 28.5.1999. The respondent-bank came to know that the bank draft was not for the amount of the instrument in question and also that the beneficiary was different. The Begum Bridge, Meerut Branch of the respondent-bank informed the respondent that the subject draft was actually draft bearing serial no.306/99 and was issued on 19.4.1999 for Rs.400/-in favour of the M/s Bhupinder Leasing & Housing Limited. It therefore transpired that the defendant no.2 through its banker, namely the appellant-bank, had encashed the draft which was actually a forged draft. The respondent-bank pleaded that the appellant-bank committed negligence including of failing to observe safeguards for collection of the instrument for a huge amount in a newly opened account in the name of the defendant no.2. It was also pleaded that the account was not a properly introduced account. It was further pleaded that the very fact that the amount of the bank draft was immediately withdrawn by the defendant no.2 soon after collection, and which fact taken with the doubtful acts of opening of account, proximity of opening of the account with the depositing of a huge amount and the immediate withdrawal show that it was part of one scheme/one set of transactions making the appellant-bank liable to pay the amount of the bank draft. The respondent-bank issued letters dated 1.6.1999, 5.10.1999 and 20.12.2000 calling upon the appellant-bank to make the payment, however, since the payment was not made, the subject suit came to be filed.

3. The appellant-bank contested the suit by filing its written statement. The appellant-bank denied its liability by pleading that it acted in good faith without negligence in collecting the amount of the draft for its customer/defendant no.2. It was pleaded that the appellant-bank was not liable because not only there was no negligence, the appellant-bank had no occasion to doubt the genuineness of the bank draft. It was contended that in fact it is the respondent-bank who was negligent because it without verifying the genuineness of the bank draft made payment, which is such lapse on its part thereby disentitling it to the suit amount.

4. After the pleadings were complete, the Trial Court framed the following issues:

“ISSUES:

1. Whether defendant no.1 is not liable to reimburse the plaintiff with the amount of demand draft in question which was later on discovered to be forged one as alleged in the W.S.?OPP.

2. To what amount the plaintiff is entitled to recover and against whom? OPP.

3. Whether the plaintiff is entitled to any interest and if so, on what amount, at what rate and for which period? OPP.

4. Relief.”

5. The main issue decided by the Trial Court is issue no.1. With regard to issue no.1, Trial Court has held th