IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Reserved on : 17.01.2025 Pronounced on : 04.02.2025 State Bank of India ...... Appellant Versus Union Bank of India and another ...... Respondents CORAM : HON'BLE MR. JUSTICE VIKRAM AGGARWAL ***

Present : Mr. Anil Kumar Ahuja, Advocate for the appellant.

Mr. Shailender Kashyap, Advocate for the respondents.

***

VIKRAM AGGARWAL , J This is plaintiff’s appeal against the judgment and decree dated

14.12.1992, passed by the Court of learned Addl. District Judge, Ludhiana, allowing the appeal filed by the defendants and setting aside the judgment and decree dated 19.07.1990, passed by the Court of learned Sub Judge Ist Class, Ludhiana, vide which the suit for recovery of `88,700/- as principal amount and `40,559/- as interest, filed by the plaintiff, was decreed.

2. For the sake of convenience and clarity, parties shall be referred as per their original status.

3. The plaintiff (State Bank of India) filed a suit for recovery of `88700/- as principal amount and `40559/- as interest against the defendants (Union Bank of India). The controversy was that a demand draft dated 07.02.1980 for an amount of `88,700/- issued by the Panipat Branch of State Bank of Patiala was presented for clearance by the Ludhiana Branch of the defendants-Bank to the Ludhiana Branch of the plaintiff-Bank on 09.02.1980. The same was cleared by the Ludhiana Branch of the plaintiff Bank. However, on 12.02.1980, the defendant-Bank informed the plaintiff-Bank that the draft looked suspicious. Upon receipt of the said information, the plaintiff-bank took up the matter with the Panipat Branch of State Bank of Patiala and it transpired that the draft in question had in fact been issued by them on 07.08.1979 for a sum of `10/- in favour of one Mr. P.K.Jain. It was, therefore, found that the draft which had been presented to the defendant- Bank and thereafter sent by the defendant-Bank to the plaintiff- bank had been materially altered in date, amount, payee and the drawee branch.

4. Upon inquiry, it was revealed that a savings bank account was opened in the Ludhiana Branch of the defendant-Bank in the name of one Gurmeet Kaur on 30.01.1980 without proper introduction and in violation of the standing practice amongst the bankers. It was averred that after the account had been opened, there was no turn over shown in the said account except the deposit of the draft in question. Immediately thereafter, i.e. on 11/12.02.1980, the defendant-Bank allowed heavy withdrawals despite knowing that the draft was suspicious and accordingly, `69,000/- stood withdrawn with only a balance of `19800/- remaining in the account.

5. It was averred that under the circumstances, the defendant-Bank had been negligent in making a fraudulent customer of their bank and then acting on behalf of such a person and negligently collecting the amount. It was averred that under the circumstances, the defendant-Bank had made itself liable for the offence committed by Gurmeet Kaur. It was also averred that the defendant-Bank had failed to take appropriate action against the customer and had also violated the ethics of bankers by keeping the plaintiff- Bank in dark as to what action they proposed to take against the fraudulent customer and the introducer. No appropriate action was initiated for cheating, fraud and misappropriation against Gurmeet Kaur and her introducer. No criminal complaint was lodged nor any suit for recovery was filed.

6. It was averred that after the dispute had arisen, a communication dated 07.06.1980 was issued by the plaintiff-Bank to the defendant-Bank raising a dispute and subsequently seeking reference of the matter for arbitration. Many reminders were issued but ultimately the said request for referring the matter to arbitration was declined by the defendant-Bank vide communication dated 27.03.1982. Under the circumstances, the suit for recovery was filed.

7. The suit was resisted by the defendant-Bank. In the written- statement,