The main legal point established is that defendants can be held jointly and severally liable for the encashment of a forged demand draft if they were aware of the forgery and benefited from the proceeds.

JUDGMENT :

P. SREE SUDHA, J.

1. Aggrieved by the Judgment in O.S. No. 331 of 1991 passed by I Additional Senior Civil Judge, Warangal on 15.04.1999, the Appellant/Plaintiff filed this Appeal Suit.

2. Central Bank of India, Warangal filed a suit for recovery of Rs. 1,08,771.45 ps. with interest @ 16½% per annum with quarterly rests against the defendants. The Trial Court considering the evidence on record and arguments of both sides decreed the suit against defendant Nos. 6 and 7 with costs and dismissed the same against defendant Nos. 1 to 5, 8 and 9.

3. Aggrieved by the said order, the plaintiff in the suit preferred this appeal and contented that the Judgment of the Trial Court is erroneous. The Trial Court failed to seek that defendant Nos. 1 to 4 acted bonafidely while transacting with defendant Nos. 6 and 7. The onus is on the defendant Nos. 1 to 4 to prove such bonafidity. Though defendants have not examined anyone to prove their case, the Trial Court without evidence on record on behalf of the defendants erroneously passed Judgment only against defendant Nos. 6 and 7. When the Demand Draft was endorsed by defendant No. 7 to defendant No. 1-firm and defendant Nos. 1 to 4 intentionally avoided producing any evidence on their behalf was not considered by the Trial Court. The Demand Draft in question is not supported by consideration in the hands of defendant No. 7 and it does not create any right in favour of subsequent endorsee. Forged document is void from the beginning and it does not create any rights in favour of endorsees. Defendant Nos. 1 to 4 appropriated the proceeds of the plaintiff bank under a void document and liable to refund the amount to the plaintiff Bank, but the Trial Court failed to appreciate the quasi-contractual liability and wrongly dismissed the suit against defendant Nos. 1 to 5, 8 and 9. Though defendant No. 1-firm made an endorsement on the back side of the Demand Draft it was not appreciated properly. Therefore, the Appellant-plaintiff requested the Court to set aside the Judgment of the Trial Court to an extent of dismissing the same against defendant Nos. 1 to 5, 8 and 9 and they are jointly and severally liable to pay the decreetal amount with interest @ 16.5% per annum.

4. Heard arguments on both sides. Perused the entire evidence on record.

5. The Appellant-plaintiff i.e. Central Bank of India filed suit against M/s. Katkam Narsaiah and others and stated that defendant No. 1 is partnership firm carrying on commission business in the name of M/s. Katkam Narsaiah and represented by one of its partners viz. Katakam Chennaiah-defendant No. 3. Defendant Nos. 2 to 4 are partners of defendant No. 1-firm. Defendant No. 5 is accomplice of defendant Nos. 1 to 4. Defendant No. 6 is an employee of Central Bank of India, Narsampet Branch and he was dismissed from service. Defendant No. 7 is an accomplice to Defendant No. 6. Defendant Nos. 1 to 4 are having banking transactions with plaintiff bank since 1985 and they are maintaining C/D Account No. 1673 with the plaintiff. On 22.11.1988, defendant No. 1 tendered a demand draft bearing No. 879437 dated 19.11.1998 for Rs. 65,000/- which was endorsed in favour of Sri K. Sudhakar-defendant No. 7. Defendant No. 7 endorsed in favour of defendant No. 1-firm. Defendant Nos. 1 to 4 guaranteed the endorsement on the reverse side of demand draft and they requested to credit the proceeds of the demand draft in their account bearing No. 1673. Plaintiff in a good faith in view of long relationship between them credited the said amount on the same day. Defendant Nos. 1 to 4 issued bearer cheque No. 055838 dated 22.11.1988 on the same day for Rs. 65,000/- in favour of N. Ashok-defendant No. 5. He presented the same and encashed the amount on the same day. When the plaintiff verified the accounts, it came to light that defendant submitted a forged demand draft and encashed Rs. 65,000/- immediately they rushed to defendant No. 3 and informed about the forged demand draft