IMPORTANT POINT
The plaintiff bank must prove negligence on the part of the collecting bank to recover losses from fraudulent transactions involving negotiable instruments.

JUDGMENT:

M.G. Priyadarsini, J.

Aggrieved by the judgment and decree dated 25.06.2019 in O.S.No.1275 of 2007 (hereinafter will be referred as ‘impugned judgment’) passed by the learned IX Additional Senior Civil Judge, Ranga Reddy District at L.B.Nagar (hereinafter will be referred as ‘trial Court’), the plaintiff preferred the present appeal to set aside the impugned judgment.

2. For the sake of convenience, the parties hereinafter are referred to as they are arrayed before the trial Court.

3. The brief facts of the case, which necessitated the appellant to file the present appeal, are as follows :

(a) The plaintiff filed O.S.No.1275 of 2007 against defendant Nos.1 and 2 seeking recovery of Rs.5,37,753/-. The brief averments of the plaint are as under:

(i) Defendant No.1 got hold of a demand draft bearting No.009494 of plaintiff’s Gurushaigunja Branch, Uttar Pradesh and manipulated a DD in his name for a sum of Rs.4,75,560/- dated 19.06.2006. Defendant No.1 in a premeditated scheme had opened savings bank account No.3009 with defendant No.2 on 26.06.2006. The said account was allowed to be opened by defendant No.2, even without following the rules and regulations/instructions issued by RBI. The antecedents of defendant No.the absolute owner and psosessor of the were not verified and the account was opened in a cursory manner, with introduction from one of its customers/existing account holders. No efforts appear to have been made as to how the account holder, who signed the account opening form of defendant No.1 is acquainted with the applicant, and even the residential address is not verified by the defendant No.2. The defendant No.1 deposited the fabricated demand draft with defendant No.2 to be credited to his SB Account and the same was presented for clearance through Development Credit Bank, A.S.Rao Nagar Branch on 29.06.2006. The said demand draft was honoured by the plaintiff, since its apparent tenor was found to be genuine.

(ii) Gurusahaiganj Branch did not respond to the debit advice. The plaintiff bank, which is a centralized clearing house for all the branches of the bank in Hyderabad and Secudnerabad, set up for expeditious clearance of proceeds of the cheques and DDS issued by the Branches of Bank of India, took up the matter with the said Branch. Gurusahaiganj Branch in its turn advised the plaintiff that the said demand draft did not emanate from their branch, through their letter dated 30.08.2006, which was received by the plaintiff on 04.09.2006. Thereafter, the plaintiff bank lodged a complaint with P.S. Neredmet on 06.09.2006. On the basis of the said complaint, the Neredmet Police have registered FIR No.308 of 2006, dated 08.09.2006 under Sections 468, 467 and 420 of IPC. During the course of investigation, it is revealed that the address furnished by defendant No.1 to defendant No.2 is fake and that defendant No.2 had allowed him to withdraw the entire funds from the account, within a very short span of time. The Police are making hectic efforts to apprehend the accused i.e., defendant No.1.

(iii) The plaintiff bank issued a registered notice defendant No.2 and also the Development Credit Bank Limited on 09.10.2006 bringing to their notice the deficiencies on their part in enabling defendant No.1 to encash a forged instrument, resulting in unwarranted loss to the plaintiff and demanded refund of the amount of the DD. The said notice was received by both the presenting bank and clearing bank. The defendant No.2 bank by its reply dated 11.10.2006 denied its liability to repay the amount and tried to justify its action by allowing defendant No.1 to open the account and draw the proceedings, ignoring the fact that he is the new customer. The defendant No.2 being a collecting Bank shall not get any protection under Section 131 of the Negotiable Instruments Act, in as much as it acted without due diligence in the manner of opening of account by defendant No.1, and collected the instrument with defective title for him.