THE HONOURABLE SMT. JUSTICE K. SUJANA APPEAL SUIT NO.1883 OF 2002

JUDGMENT:

This appeal is filed by the appellant-plaintiff No.2 aggrieved by the judgment and decree dated 17.04.2002 passed in O.S.No.65 of 1993 on the file of Senior Civil Judge at Jagtial. The suit is filed for recovery of an amount of Rs.2,10,000/- from the defendant-State Bank of Hyderabad on the basis of fraudulent encashment of the cheque stolen from the office of the Executive Engineer, Panchayath Raj, Jagtial-plaintiff No.2 and for passing of the cheque by the defendant officials. For the sake of convenience the parties hereinafter be referred to as arrayed in the suit.

2. The facts of the case are that the Zilla Praja Parishad, Karimnagar, is the first plaintiff in the suit and the Executive Engineer, Panchayat Raj, Jagtial is the second plaintiff. The second plaintiff, who works under the overall control of the first plaintiff, opened a savings account with the defendant bank and deposited funds allotted to Zilla Praja Parishad, Karimnagar. The defendant bank issued a cheque book to the second plaintiff for drawing amounts from its account as needed.

3. A cheque leaf bearing No. 854396 along with counterfoil was removed and stolen from the cheque book by some unknown persons during the tenure of Sri T.N. Chary, Executive Engineer, P.R. Jagtial. He was the Executive Engineer till 24.04.1993. The theft was not detected immediately. On 04.03.1993, a cheque bearing No. 854395 was used for drawing the amount, and it was only on 05.05.1993, the missing cheque leaf was detected. When the defendant bank was informed about the same, they informed the then Executive Engineer that the stolen cheque leaf bearing No.854396 was used for drawing Rs.2,10,000/- and was en-cashed on 03.03.1993, by one K. Prakash Rao, a contractor. The plaintiffs alleged that Sri T.N. Chary, did not issue the cheque No. 854396 dated 03.03.1993, to K. Prakash Rao for Rs. 2,10,000/- and the signatures on the cheque were forged. Further, the cheque was returned at the first instance when there were spelling mistakes regarding quantum of amount written in words as ‘Two Laks Ten thousands only’. Thereafter it was again re-presented after correcting the spelling mistakes. The employees of the defendant bank dealt with the matter recklessly and made the payment without taking necessary care. The plaintiffs further alleged that the defendant bank could have easily detected the forgery and intended cheating if they had been more careful, especially when the cheque was initially presented with spelling mistakes in describing the amount in words. The plaintiffs claimed that the conduct of defendant bank and its employees was callous and speaks about their collusion and collaboration in perpetrating forgery, cheating, and fraud. Hence, the plaintiffs alleged that the defendant bank was liable for the loss caused due to their negligence and recklessness.

4. The defendant denied all allegations made in the plaint and submitted that they had no knowledge about the cheque bearing No. 854396 being stolen from the plaintiff's office. Upon inquiry, the defendant revealed that the stolen cheque was honoured on 03.03.1993, and payment was made to one K. Prakash Rao. The defendant claimed that they were unaware of any forgery at that time and informed the plaintiffs of the same on 05.03.1993. The defendant explained that after passing the cheque, it was sent to the Sub-Treasury Office in Jagtial as per usual practice. The Bank manager noticed spelling mistakes in the cheque, which was returned for correction. After due correction, the cheque was re-presented with the full signature of the drawer, and the officer-in-charge of the defendant bank satisfied and compared the signature with the specimen signatures of the drawer. The payment was made in good faith and after taking sufficient care and precaution in the normal course of banking business. It was further stated that the Executive Engineer, being a Gazette