The main legal point established in the judgment is the requirement for a payment to be considered in due course under the Negotiable Instruments Act, and the conditions for a banker to be protected from liability when receiving payment of a cheque.

ANIL K. NARENDRAN, J.

The appellant is the plaintiff in O.S.No.144 of 1996 on the file of the Subordinate Judge's Court, Thalassery, a suit for recovery of money filed against the respondent/defendant Bank for a sum of Rs. 3,00,000/- with interests and costs. The trial court by the impugned judgment and decree dated 24.3.1999 dismissed the suit on a finding that the defendant Bank has acted bonafidely under good faith and honoured Ext.X1 cheque and as such, it is not liable to satisfy the plaint claim of Rs. 3,00,000/- with interest and costs. Feeling aggrieved by the judgment and decree of the court below, the appellant/plaintiff Bank is before this Court in this appeal.

2. We heard the arguments of learned counsel for the appellant/plaintiff Bank and also learned counsel for the respondent/defendant Bank.

3. The pleadings and materials on record would show that the plaintiff Bank maintains a current account with the South Bazar Branch of the defendant Bank at Talap in Kannur with account No.7042. The plaintiff Bank used to operate that account by issuing cheques signed by its authorised officers. For facilitating such operation the specimen signature of the authorised officers were furnished to the defendant Bank. According to the plaintiff Bank, one cheque leaf and one covering letter form were stolen from their office. However that did not came to their notice immediately after the theft. The plaintiff Bank later noticed that a sum of Rs. 3,00,000/- was paid by the defendant Bank on 23.3.1995 on the strength of Ext.X1 cheque bearing No. 469116, which was debited to its account; though no such cheque was issued or payment authorised by the plaintiff Bank. On verification, the plaintiff Bank found that the said cheque was not signed by its authorised officers or issued by it or authorised for presentation to the defendant Bank. Immediately the matter was brought to the notice of the defendant Bank, asking them to credit the said amount into the account of the plaintiff Bank. However, the defendant Bank failed to do so, taking an evasive stand that the payment was made and the debit was entered in the usual course of business. The plaintiff Bank caused to issue Ext.A9 lawyer notice dated 29.5.1995, with a demand to credit an amount of Rs. 3,00,000/- covered by Ext.X1 cheque to its account with interest at banking rate from 23.3.1995 onwards. On receipt of Ext.A9 lawyer notice, the defendant Bank sent Ext.A10 reply dated 30.6.1995 stating that Ext.X1 cash cheque was presented with a covering letter by Sri. K.J. Chacko and the specimen signature of the said person was also attested by the Senior Manager of the plaintiff Bank. Therefore, the amount covered by the cheque was paid to Sri. K.J. Chacko under his signature. The signature on Ext.X1 cheque with the seal of the plaintiff Bank resembles with the specimen signature of the authorised signatory on record and that, the alleged payment was made in accordance with the tenor of the instrument in good faith and without negligence under circumstances not affording reasonable grounds for believing that the said person is not entitled for payment and that, the payment was made in the ordinary course of business and in accordance with the customary practice followed by the defendant Bank. The signatures on the cheque and the authorisation memo ex facie tallied with the specimen signature on record with the defendant Bank and that, the payment was made in due course and hence the defendant Bank is not liable to reimburse the amount. Dissatisfied with Ext.A10 reply, the plaintiff Bank filed the suit for recovery of an amount of Rs. 3,00,000/- from the defendant Bank with interest at the rate of 18% per annum from 23.3.1995 onwards, together with notice charge and cost.

4. The defendant Bank filed written statement contending that, in places where the Reserve Bank of India does not have an office, they conduct clearing houses as an agent of the Reserve Bank. The defendant Bank co