The onus of proving 'good faith' and 'absence of negligence' is on the banker claiming protection under the Negotiable Instruments Act.

1. These two appeals out arise of the judgment of the learned Temporary Additional District Judge, Kottayam, in O. S. No. 146 of 1124. A. S. No. 367 of 1954 is by the plaintiff against the disallowance of costs by the learned District Judge. A. S. No. 437 of 1954 is by the defendant, the Catholic Bank of India Ltd., against the main decree passed by the District Judge.

2. O. S. No. 146 of 1124 was filed by Woodbriar Estate Ltd., against the Catholic Bank of India Ltd., for recovery of two sums of Rs. 10,000 and Rs. 5,000 together with interest thereon. Plaintiff's case was that in pursuance of contracts entered into with Mody and Company, Bombay, the latter company, as purchasers, had sent two demand drafts on 16-3-1946 and 20-3-1946 payable on certain banks at

Kottayam. Krishnankutty and Veloo (India) Ltd., were the managing agents for the plaintiff company and one Mr. Veloo was the Managing Director of the Managing Agents Co. The two drafts for Rs.10,000 and Rs, 5,000 were endorsed by the Managing Director, Mr. Veloo, and delivered for collection to the defendant Bank. The defendant Bank instead of collecting the amounts and paying the same to the plaintiff company, credited the same to the personal account of Mr. Veloo in the name of Wilson and Company. Veloo appears to have drawn the amounts and misappropriated the same. The plaintiff's case was that the said payment by the defendant Bank to Veloo was unauthorised and that the plaintiff is in law entitled to recover the said two amounts covered by the two drafts on the ground of conversion and wrongful detention.

3. The defendant Bank contested the claim on the ground that they paid over the amount to Mr. Veloo under his instructions and that they had acted in good faith and in due course of business and as such there was no liability in law for refunding the amounts to the plaintiff, especially as the amounts had already been paid over to the Managing Director of the Managing Agents, Mr. Veloo.

4. The learned District Judge on a consideration of the relevant sections of the Negotiable Instruments Act and also on the evidence placed before him came to the conclusion that the defendant Bank cannot be said to have acted in good faith and without negligence. In particular, the learned judge has also referred to the actual endorsement on the two drafts and held that endorsement clearly puts the defendant Bank on notice that the amount has to be paid only for the plaintiff company and not to Veloo in his individual capacity. In this view, the learned judge held that the payment of the amounts covered by the two drafts to Mr. Veloo was wrongful in law and as such he passed a decree against the defendant Bank for the amount claimed. The learned judge directed the parties to bear their own costs and this aspect of the matter is considered by him in Para.20 of the judgment.

5. As stated earlier, the defendant Bank has filed A. S. No. 437 of 1954 and A. S. No. 367 of 1954 is filed by the plaintiff.

6. Mr. P. Govindan Nair, the learned counsel for the defendant-appellant has raised two main contentions before us. They are (i) that the learned judge's finding that the defendant has not acted in good faith and without negligence is wrong and that the learned judge has not properly applied the correct legal principles regarding the duties of a collecting Bank; and (ii) that in any event, the learned judge erred -in treating the defendant Bank as a collecting Bank and that he should have treated the said Bank as a Bank which has paid value for the drafts, and as such he should have applied different legal principles applicable to such paying Banks.

7. Regarding the first contention, we are to state that we are unable to agree with the learned counsel, Mr. Govindan Nair. In our view, the learned judge has come to a correct finding on the evidence adduced in the case. The duties of a collecting banker have been considered in the decisions in Bapulal v. Nath Bank (A.I.R.1946 Born. 482