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MERCANTILE BANK OF INDIA LTD. v. RATNAM
NLR57V193
1955 Present : Gratiaen, J.,
and Swan, J.
MERCANTILE BANK OF INDIA LTD., Appellant, and V. S. RATNAM,
Respondent
S. C. 366-D. C. Colombo, 25,215
Cheque-Crossed generally-Theft of cheque-Payment by drawee otherwise than to a
banker-Drawees liability to drawer--Bills of Exchange Ordinance, ss. 8 (3), 79
(2).
Where a cheque crossed generally by the drawer is paid by the drawee otherwise
than to a banker, the drawee's liability to the drawer is not automatic ; it
arises only if, by reason of the unauthorised mode of payment, the drawer proves
that he has incurred a loss for which responsibility may fairly be imputed to
the drawee. Therefore, where such a cheque is stolen after the payee indorses it
in blank and is subsequently paid across the counter to a holder, the drawer
cannot avail himself of the provisions of section 79 (2) of the Bills of
Exchange Ordinance to institute action for a declaration that the drawee is not
entitled to debit his account with the amount of the cheque.
APPEAL
from a judgment of the District Court, Colombo.
G. E. Chitty, with J. de
Saram, for the defendant appellant.
K. K. Choksy, Q.C., with D. J. Tampoe and K. M. U. Jayanetti,
for the plaintiff respondent.
Cur. adv. vult.
November 17, 1955. GRATIAEN,
J.-
According to the facts as found by the learned trial Judge, the plaintiff
had borrowed Rs. 2,000 from Dr. Thurairajah (hereafter called " the
payee ") on the security of his cheque dated 1st December 1950 drawn
on the defendant Bank in favour of the payee " or order ". At the time
of its delivery to the payee, the cheque had been crossed generally. The
arrangement was that the cheque should be presented for payment on
a future date to be agreed upon, and in the meantime the payee was to
be paid Rs. 13.33 each month by way of interest on the loan. Six months
later (i.e., on 1st June 1951) the plaintiff was in a position to repay the
loan but, as the cheque in its original form might be rejected as " stale ",
the plaintiff, at the payee's request, altered the date "1.12.50." to
" 1.6.51. " and placed his signature below the alteration. The payee
then took back the cheque and shortly afterwards, having indorsed it
in blank, gave it to someone to be sent by post to the Bank of Ceylon for
collection.
Unfortunately, the payee had not taken the precaution of indorsing the cheque
specially in favour of the Bank of Ceylon or even of making it " not negotiable
".
On or about 11th June 1951 the payee began to feel uneasy because the Bank of
Ceylon had not acknowledged receipt of the cheque. He then learnt that his
letter, with the cheque enclosed, had not reached them. The plaintiff was
informed, and he visited the defendant Bank where he discovered that the amount
of the cheque had been paid across the counter on 4th June 1951 to a subsequent
indorser signing himself as " W. D. Fernando ". The cheque, at the time when it
was presented for payment, bore words cancelling the original crossing and also
purporting to contain, immediately beneath those words, the plaintiff's
signature.
The plaintiff has repudiated the signature purporting to authorise the
cancellation of the crossing, and his evidence on the point has been accepted by
the learned Judge. I would therefore hesitate to take a different view, but the
resemblance of the impugned signature to his admitted signatures is so
remarkable that (as the learned Judge himself remarked) the officers of the Bank
could not be blamed for acting upon the purported cancellation.
The payee's honesty was not challenged at the trial, so that (upon the trial
Judge's findings of fact) the inference is irresistible that somebody had
dishonestly intercepted the letter containing the cheque either before or after
it was sent by post to the Bank of Ceylon. The details of what occurred
thereafter have not been investigated, and there is no evidence on record from
which we can determ
