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1971 Supreme(Mad) 264
IN THE HIGH COURT OF JUDICATURE AT MADRAS
R. Sadasivam and Ramaswami, JJ.
Kanyalal Thakurdas, Bankers, carrying on business at No. 32, Audiappa Naicken Street, Madras-1.
Versus
The Bombay Cycle Importing Company, Cycle dealers, carrying on business at 7, Broadway, Madras-1.
A. Nos. 301 of 1964 and 377 of 1964 and C.R.P. Nos. 780 and 1041 of 1963.
Decided On : 05 April 1971
K. Ramaswamy, S. Ramanatha Davey, K. Kesavanatha Davey, G. Vasudevan, T. Venkatanarasimhalu and G. Vasudevan, for Appellant.
T.T. Srinivasan, A.N. Rangaswami and T.G.A. Srinivasan, for Respondent.
Contributory negligence is not a valid defense to an action for conversion.
Headnote:
NEGOTIABLE INSTRUMENTS ACT - SECTION 131 - BANKER'S PROTECTION - CONDITIONS - NEGLIGENCE - CONTRIBUTORY NEGLIGENCE - NO DEFENCE IN CONVERSION.
Fact of the Case:
The plaintiff-company sued the defendants, including the appellants, to recover amounts due on cheques and drafts that were allegedly forged and misappropriated by the first defendant, an employee of the plaintiff-company. The appellants, who were bankers, collected the amounts of the cheques and drafts from the drawee banks and claimed the protection of section 131 of the Negotiable Instruments Act, which provides that a banker who receives payment for a customer of a cheque crossed generally or specially to himself shall not incur any liability to the true owner of the cheque by reason only of having received such payment.
Finding of the Court:
The court found that the appellants were not bankers entitled to the benefits of section 131 of the Negotiable Instruments Act because they did not act in good faith and without negligence in collecting the amounts of the cheques and drafts. The court also found that the plaintiff-company was not guilty of contributory negligence that would bar its claim against the appellants.
Issues: 1. Whether the appellants were bankers entitled to the protection of section 131 of the Negotiable Instruments Act? 2. Whether the plaintiff-company was guilty of contributory negligence that would bar its claim against the appellants?
Ratio Decidendi: 1. The court held that the appellants were not bankers entitled to the protection of section 131 of the Negotiable Instruments Act because they did not act in good faith and without negligence in collecting the amounts of the cheques and drafts. The court found that the appellants had not asked the second defendant, who was their customer, to guarantee the endorsement of the payee in most cases, had not cared to ask the plaintiff-company about the truth of the endorsements alleged to have been made by them, and had not ascertained whether the plaintiff-company had any dealings with the second defendant. 2. The court held that the plaintiff-company was not guilty of contributory negligence that would bar its claim against the appellants. The court found that the plaintiff-company's failure to maintain certain registers did not amount to negligence that contributed to the first defendant's fraud and that contributory negligence is not a valid defense to an action for conversion.
Final Decision: The court dismissed the appeals and civil revision petitions filed by the appellants and confirmed the decrees and judgments of the trial court in favor of the plaintiff-company.
2. The first defendant, P. V. A. Chari in each of the suits was employed in the plaintiff-company as a steno-typist on a salary of Rs. no a month and he was in such employment from December, 1955 to July, 1956 and from September, 1956 to April, 1957. His duties were to attend the tapals and pass on the drafts and cheques to the Manager of the company. The evidence of P.W.1 Ratilal J. Shah, who is the manager of the plaintiff’s firm for the last 20 years, is that in respect of the drafts and cheques Exhibits A-6, A-14, A-17 and A-20 forming the subject-matter of O.S. No. 2838 of 1959, Exhibits A-22, A-24, A-26 and A-28 forming the subject-matter in O.S.No. 2765 of 1959, Exhibits A-31 and A-32 forming the subject-matter of S.C. No.7 of 1960 and Exhibits A-33 forming the subject-matter of S.C. No. 17 of 1961, the first defendant P.V.A. Chari did not hand over the cheques and drafts to him. According to him, the first defendant had access to his rubber stamp seal during his absence at lunch interval. The second defendant in these cases is the Nilgiri Potato Supply Company. The plaintiff-company deals only in cycles and it had no dealings with the Nilgiri Potato Supply Company who deal only in potatoes. The above drafts and cheques contained endorsements purporting to have been signed by the Manager of the plaintiff-company, as though they were transferred in favour of the second defendant-company. Admittedly, the second defendant-company as customers of the third defendant in each of the suits collected the amounts of the cheques and drafts by paying commission to the third defendant. The plea of defendants 1 and 2 is that these cheques and drafts were given by the plaintiff-company to the second defendant-company by way of accommodation. The first defendant filed a written statement in the original suits, but he remained ex parte. In fact, it is admitted before us that the first defendant has been convicted for the offences committed by him with regard to the cheques and drafts. The evidence of the second defendant as D.W.1 in this case that he got the cheques and drafts by way of accommodation from the plaintiff-company has been disbelieved by the learned Seventh Assistant Judge, City Civil Court, Madras, for the very good reasons given by him. There was no correspondence between the second defendant and the plaintiff and they have not seen each other. Even the account books maintained by the second defendant-company do not show that they had dealings with the plaintiff-company. It is also unnatural that the plaintiff-company would endorse their cheques and drafts in favour of the second defendant-company directly, instead of giving their own drafts and cheques, if they wanted to give accommodation to the second defendant-company. Further, D.W.1 started giving evidence by saying that he is the second defendant in the suit and the manager of the company. He admitted in cross-examination that he became an insolvent in 1955. He put forward a new case that his son is carrying on the business of the second defendant-company ever since he became insolvent and that his son has not come to give evidence on these cases. His explanation is that his son asked him to appear in these cases. The learned Seventh Assistant City Civil Judge has rightly pointed out that the plaintiff-company would not have given accommodation for a company owned by an insolvent. In fact, he has found that the above drafts and cheques which have been issued by the customers in favour of the plaintiff-company have been taken without the kno
