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IN THE HIGH COURT OF JUDICATURE AT MADRAS
Mr. Justice Ramaswami, XJ.
K.M. Abbu Chettiar
Versus
The Hyderabad State Bank
C.S. No. 71 of 1953.
Decided On : 29 January 1954
FORGERY - BANKING - NEGOTIABLE INSTRUMENTS ACT, 1881 - SECTION 10 - BANKER'S DUTY TO VERIFY SIGNATURE - FORGED CHEQUE - LIABILITY OF BANKER - CONTRIBUTORY NEGLIGENCE - ESTOPPEL - ADOPTION.
Fact of the Case:
Plaintiff, a merchant, sued the defendant bank to recover the amount of a cheque that was forged and cashed by a third party. The plaintiff claimed that the bank was negligent in paying the cheque without verifying the signature. The bank defended the suit on the grounds that the plaintiff was contributorily negligent and that the bank was not liable for the forgery because it was cleverly executed.
Finding of the Court:
The court found that the plaintiff's signature on the cheque was forged and that the bank was negligent in paying the cheque without verifying the signature. The court also found that the plaintiff was not contributorily negligent and that the bank was not entitled to rely on the defenses of estoppel or adoption.
Issues: 1. Whether the signatures of the plaintiff in the cheque in question are forgeries? 2. Did the plaintiff owe a duty to the defendant Bank in the circumstances set out in para. 7 of the written statement? 3. Is the plaintiff entitled to the damages claimed? 4. To what relief are the parties entitled?
Ratio Decidendi: 1. The court held that the signatures of the plaintiff on the cheque were forgeries based on the following circumstances: - The plaintiff was a respectable merchant with a good reputation. - The plaintiff immediately reported the forgery to the bank and the police. - The police investigation established that the cheque had been forged. - A comparison of the signatures on the cheque with the plaintiff's specimen signatures showed that they were not made by the same hand. - The bank's reply notice did not deny that the signatures were forgeries. 2. The court held that the plaintiff did not owe a duty to the bank to prevent the forgery because: - The plaintiff had not been shown to have been negligent in keeping his cheque book or in signing blank cheques. - The bank had not warned the plaintiff about the risk of forgery. - The plaintiff had reported the loss of two cheque leaves to the bank. 3. The court held that the plaintiff was not entitled to damages because he had not provided any evidence to support his claim for damages. 4. The court held that the plaintiff was entitled to the following relief: - An order directing the bank to release the goods to the plaintiff. - Costs of the suit.
Final Decision: The court decreed the suit in favor of the plaintiff and ordered the bank to release the goods to the plaintiff and pay the costs of the suit.
The suit is for ordering the defendant, the Hyderabad State Bank, Limited, forthwith to release and deliver over to the plaintiff Abbu Chettiar the goods, viz., 4050 bags of Gingelly oil seeds described in the plaint schedule and for damages of Rs. 1,800 and for an interim order directing the defendant to deliver over to the plaintiff the said goods and for costs.
The case for the plaintiff is as follows:He is a merchant carrying on business in gingelly, castor and groundnut oil as manufacturer and wholesale dealer and distributor with head office at No. 81, Perambur Barracks Road, Vepery, Madras and branches all over the City. The defendant, the Hyderabad State Bank, Limited, with its Head office in Hyderabad State, has its branch office at Linghi Chetty Streeet, George Town, Madras. The plaintiff had dealings with the defendant bank on a produce loan account. On the forenoon of 23rd December, 1952, the plaintiff sent his clerk Rukmangadan (P.W. 4) with a cash of Rs. 2,000 to pay it into the Bank and settle the produce loan account in which according to the plaintiff the balance due was Rs. 1,255-14-6 plus interest and get a release of the goods and for which purpose take the key of the godown from the bank. On this Rukmangadan going to the bank and tendering the amount due as per instructions of Abbu Chettiar and asking back for the key he was infromed by the bank clerk Ramanathan (D.W. 1) that what was due was Rs. 16,000 apart from interest and not the sum tendered. Rukmangadan says that he was taken aback and asked for information, and found out that a bearer cheque Ms/C No. 007215 for Rs. 15,000 drawn on self and signed by Abbu Chettiar had been cashed that morning at about 10-10 a.m. by a person describing himself as T. Annamalai Chettiar, 81, Perambur Barracks Road, Vepery, Madras, and who has endorsed his name and address on the back of the cheque. Therefore this Rukmangadan phoned up his master who was then performing annual ceremony in his house. Abbu Chettiar accompanied by others ran to the bank, verified this information, looked into the cheque mentioned above and protested that his signature had been forged and that he had not sent any Annamalai Chettiar to cash any cheque. This matter was taken promptly to the notice of the North Beach Police Station by the Bank through the accountant Bijoor and by Abbu Chettiar. This Abbu Chettiar gave a complaint by 11 -30 a.m. and the North Beach Police Station registered it as Crime No. 794/52 under sections 380 and 467, Indian Penal Code, in which this Abbu Chettiar has stated that his signature had been forged and a sum of Rs. 15,000 had been drawn from the Hyderabad State Bank without his knowledge and that on checking the cheque book it was found that five leaves, viz., Nos. 007212 to 007216 were missing. The Sub-Inspector of Police Mr. Abdul Wahab examined as P.W. 2 investigated this complaint and came to the conclusion that the work must be an inside job, viz., of some one in the household of Abbu Chettiar or closely connected with one such person having access to the cheque book normally kept inside an iron safe outside business hours and in the office room during the business hours and that the crime was undetectable. Thereafter this Abbu Chettiar issued a notice to the Bank asking them to make good the sum of Rs. 15,000 and on the refusal of the Bank has filed this suit for the reliefs mentioned above, because the Bank has refused to release the goods on the foot that they properly honoured the cheque of Abbu Chettiar.
The case for the Bank is threefold, viz., that the signature of the plaintiff as drawer of the bearer cheque in question is not a forgery and that during the period of the plaintiff’s account with the defendant bank the bank has come to know that the plaintiff used to sign blank cheques and leave the same with his office for the purpose of business emergencies and that when the plaintiff turned up at the Bank immediately after receiving the ph
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