CENTRAL BANK OF INDIA vs NARAIN STEEL TRADERS

FIRST Appeal No. 625/93 by the Central Bank of India and FIRST Appeal No. 648/93 by the Bank of Rajasthan Ltd. are directed against the Order dated 11.10.93 passed by the Punjab State Consumer Disputes Redressal Commission at Chandigarh in Original Complaint No. 18/92 filed by Narain Steel Traders, complainant holding both Central Bank of India and the Bank of Rajasthan Ltd. jointly and severally liable for the deficiency in service. The State Commission granted compensation of Rs. 20,000/- and in addition directed that the complainant would be entitled to interest at the maximum rate which the Central Bank of India is charging from its loans in any scheme on the delayed payment of four demand drafts other than the demand draft of Rs. 17,362/-and interest would also be paid by both the Banks in equal shares from the date of presentation of each demand draft till its honour. The Central Bank of India was directed to pay a compensation of Rs. 3,000/- which included the costs of litigation to the complainant for the demand draft of Rs. 17,362/-.

THE complainant filed a complaint under Section 17(a)(i) of the Consumer Protection Act, 1986 before the State Commission. THE complainant firm supplies steel to different firms all over the country and often the payments for the goods supplied by the complainant are made by way of Bank drafts. One party in Rajasthan sent a demand draft of Rs. 17,362/- to the complainant and that was issued on 6.3.91 by the Bank of Rajasthan Ltd. on Central Bank of India, Mandi Gobindgrah. THE Bank draft was presented through the complainant''s Bankers and was returned unpaid for the reason that it ''exceeds arrangements''. Similarly, the complainant received two demand drafts issued on 15.4.91 by the Bank of Rajasthan Ltd. of the value of Rs. 1,45,838/- and Rs. 32,950/- and were presented for encashment to the Central Bank of India and they were also returned with the remarks that the same ''exceeds arrangements''. However, subsequently on receipt of the payments by Central Bank of India, the payments were made to the complainant on 18.4.91. Similarly the complainant received another demand draft of Rs. 1,22,232/- issued on 6.4.92 by the Bank of Rajasthan Ltd. and was returned twice for the same reason that it ''exceeds arrangements''. That was ultimately paid by the Central Bank of India on 16.4.92. Another demand draft of Rs. 2,06,052/- issued on 25.2.92 by the Bank of Rajasthan Ltd. was presented for encashment but was returned unpaid twice for the reasons that it "exceeds arrangements". It was ultimately paid on 29.2.92 when represented for encashment. THE complainant alleged deficiency in service of both the Banks in not immediately making payment of the demand drafts. THE complainant alleged that because of the repeated bouncing of cheques the complainant''s goodwill and reputation has been seriously affected and the complainant has lost credit in the market. It is also claimed that the complainant had to take loans at high rates of interest to pay the amount when the Bank drafts issued by the Bank of Rajasthan Ltd. were dishonoured by the Central Bank of India. THE complainant claimed relief of compensation of Rs. 2.5 lakhs as damages caused due to the repeated bouncing of the cheques. On being noticed the opposite parties filed their respective versions. The Central Bank of India admitted that on 6.3.91 a demand draft of Rs. 17,362/- issued by the Bank of Rajasthan Ltd. and drawn on the Central Bank of India was presented. However, the said demand draft for Rs. 17,362/- was returned unhonoured due to oversight by the dealing official of the Bank. So far as the other demand drafts are concerned the plea is that on the basis of the arrangement by the Central Bank of India entered into with the Bank of Rajasthan Ltd., the Central Bank of India honoured its commitment from time to time but the four demand drafts exceeded the arrangements and therefore its payment could not be made as the debit balance would have exceeded the over draft limit. The Bank of Rajasthan Ltd. took the stand that since it was not having any branch at Mandi Gobindgarh, it had entered into an arrangement with the Central Bank of India which is having a branch at the said place and as per the said arrangement Central Bank of India agreed to honour the drafts issued by the Bank of Rajasthan Ltd. from time to time. It is admitted that the said drafts were dishonoured when the same were presented at Mandi Gobindgarh branch of the Central Bank of India and they were encashed on re-presentation after some period. It was denied that the complainant had suffered any loss on account of delay in encashment of the Bank drafts. It was pleaded that the claim of compensation can only be for actual loss or damage caused to the complainant and that has to be established. The prayer made by the Banks is for dismissal of the complaint.

The State Commission recorded in the order under appeal the factual position as undisputed. The undisputed facts are that 5 demand drafts, details of which are given hereinafter, had been issued by the Bank of Rajasthan Ltd. on the Central Bank of India. The demand draft of Rs. 17,362/- has been admitted by the Central Bank of India not to have been paid on 6.3.91 by oversight. On 15.4.91 two demand drafts, one for Rs. 1,45,838/-and the other for Rs. 32,950/- were issued by the Bank of Rajasthan Ltd. on Central Bank of India and were presented for encashment. The said two demand drafts were not encashed and were returned with the remarks that it exceeded arrangements. A sum of Rs. 12 lakhs was received by the Central Bank of India from the Bank of Rajasthan Ltd. on 18.4.91 and the 2 Bank drafts which were represented on 18.4.91 were honoured and payments made by the Central Bank of India. On 6.4.92 a demand draft of Rs. 1,22,232/-issued by the Bank of Rajasthan Ltd. and drawn on Central Bank of India was presented for encashment of 6.4.92 but returned with the remarks it exceeded arrangements. It was again represented for encashment on 10.4.92 but it was returned for the same reason unpaid. On 16.4.92 a sum of Rs. 30,00,000/- was received by the Central Bank of India from the Bank of Rajasthan Ltd. and the Bank draft was paid on 16.4.92. Yet on 25.2.92 a demand draft for Rs. 2,06,052/- issued by the Bank of Rajasthan Ltd. and drawn on Central Bank of India was presented for encashment and was returned unpaid with the remarks that it exceeded the arrangements. It was again presented for encashment on 27.2.92 and again returned for the same reason. On 29.2.92 a sum of Rs. 13.00 lakhs was received by the Central Bank of India from the Bank of Rajasthan Ltd, and thereafter the demand draft for Rs. 2,06,052/- which was again represented for payment on 29.2.92, was paid. These findings of fact by the State Commission are not questioned before this Commission.

WE have heard the learned Counsel for the parties in both the appeals and have also gone through the records. The Counsel for the Bank of Rajasthan Ltd. requested and was permitted to file written arguments within a period of one week from 17th May, 1996 when the arguments were heard. Written arguments have not been filed. WE have carefully considered the respective contentions of the parties. It is the common case of both the Banks that the Bank of Rajasthan Ltd. was not having branches in all the small towns of different States of India and in order to carry on their banking operations in these small towns they approached Central Bank of India and entered into an arrangement in respect of 10 branches. The nature of arrangement was that the Central Bank of India would grant total overdraft facility of Rs. 12,00,000/- to certain branches of the Bank of Rajasthan Ltd. Under that arrangement the total overdraft facilities which were granted to the Bank of Rajasthan Ltd. by Mandi Gobindgarh branch was Rs. 3 lakhs which was subsequently raised upto Rs. 5.00 lakhs on 25.5.91. The copy of the letter dated May 25,1991 is on the record (pages 48-49). The purpose of the said arrangement was that in case the Bank of Rajasthan issued any draft upon the Central Bank of India, Mandi Gobindgarh branch the same would be honoured by the Central Bank as long as it did not exceed the arrangement of Rs. 3 lakhs and with effect from 25.5.91, Rs. 5 lakhs. Under this arrangement the Central Bank of India was required to honour the drafts issued by the Bank of Rajasthan Ltd. upto the allotted limit. If the Bank of Rajasthan Ltd. issued demand drafts payable at Central Bank of India, Mandi Gobindgarh branch over and above the allotted limit, then the Bank of Rajasthan was required to remit the fund to the Central Bank of India. Thus the Bank of Rajasthan Ltd. used to remit the funds of the Central Bank of India through their another branch at Jaipur. It is evident from the arrangement between the two Banks that it was obligatory on the part of the Bank of Rajasthan Ltd. to maintain funds in their accounts maintained with the Central Bank of India, Mandi Gobindgarh branch. In the absence of requisite funds being available, Central Bank of India had no other option but to refuse the payments in respect of the Bank drafts. In this arrangement the bank drafts are in the nature of pay others or in the nature of bankers'' cheque. When they are issued on a local branch they are called pay orders and when they are issued on an outside branch they are called bank drafts. The funds had to be made available to the Central Bank of India in case the arrangements exceeded to overdraft facility which was granted to the Bank of Rajasthan Ltd. There must be sufficient funds to cover the whole amount of the Bank draft presented either within the overdraft limit or by making available additional funds. There is no obligation on the Central Bank of India to pay the demand drafts of Bank of Rajasthan Ltd. for amounts exceeding the available balance. A Bank draft is not an assignment of funds when issued on a different Bank and it could only be paid if the Central Bank of India had funds in its hand. The Central Bank of India has filed a copy of the statement of accounts of the Bank of Rajasthan Ltd. maintained by the Central Bank of India, Mandi Gobindgarh branch. It is duly certified in the manner indicated in the Bankers'' Book Evidence Act and is signed by the Branch Manager and is thus evidence of the true and correct nature of the entries contained therein. It would be seen that the payment of the 4 demand drafts could not be made on the day when they were presented as it exceeded the arrangements. The payment of 4 demand drafts were made after the funds were made available by the Bank of Rajasthan Ltd. and after the same had been represented by the complainant for encashment. WE do not find any deficiency in service on the part of the Central Bank of India in respect of the 4 demand drafts. So far as the Bank draft dated 6.3.91 for Rs. 17,362/- is concerned, the Central Bank of India admits that the same was returned unhonoured due to oversight by the dealing officials of the Central Bank of India. There is clear negligence of the Central Bank of India or its officials and thus the relief granted of Rs. 3,000/- by the State Commission against the Central Bank of India is fully justified. The Bank of Rajasthan Ltd. has admitted the issue of the said four demand drafts and the same were drawn on the Central Bank of India, Mandi Gobindgarh branch. It is also admitted that the said demand drafts were dishonoured when the same were presented at Mandi Gobindgarh branch on the Central Bank of India initially and they were encashed on re-presentation. The Bank of Rajasthan Ltd. have not disputed the entries contained in the copy of the statement of accounts of the Bank of Rajasthan Ltd. maintained by the Central Bank of India. The Bank drafts were not initially paid by the Central Bank of India as it exceeded arrangements. The Bank of Rajasthan Ltd. later provided the funds and the Bank drafts were paid on representation when the funds were available with the Central Bank of India. As already expressed, it was the obligation of the Bank of Rajasthan Ltd. to make available sufficient funds to cover the whole of the amount of the Bank drafts presented. There is clear deficiency in service on the part of the Bank of Rajasthan Ltd. in issuing demand drafts of various amounts on different dates without ensuring the arrangements of remittance of the amounts to the Central Bank of India, Mandi Gobindgarh branch where these drafts were to be presented for payments. The State Commission also came to the finding that "respondent 3 has issued the demand drafts of various amounts on various dates without accurately ensuring the arrangement of remittance of the amounts to Central Bank of India, Branch Office, Mandi Gobindgarh where these were to be presented for collection". After recording this finding, the State Commission grossly erred in making the Central Bank of India jointly and severally liable with the Bank of Rajasthan Ltd. for the deficiency in service in respect of the 4 demand drafts.

FOR the above reasons the appeal of the Bank of Rajasthan Ltd. is dismissed. The appeal of Central Bank of India is partly allowed. There will be no liability of the Central Bank of India in respect of the said 4 demand drafts. FOR the purpose of clarification we uphold the grant of compensation of Rs. 3,000/- for the demand draft of Rs. 17,362/- awarded against Central Bank of India. It is not clear from the record whether the demand draft for Rs. 17,362/- was presented at any time after 6th of March, 1991 or paid by the Central Bank of India. The State Commission had also noticed that neither the complainant nor any of the Banks had thrown any light to the State Commission regarding the fate of demand draft of Rs. 17,362/- which was presented for encashment by the complainants to the Central Bank of India on 6.3.91 and same was admitted to have been returned by oversight by the Central Bank of India. FOR the re maining 4 demand drafts the Bank of Rajasthan Ltd. was directed by the State Commission to pay compensation of Rs. 5,000/- for each de-mand draft for the deficiency in service. This award of Rs. 20,000/- we uphold only as against the Bank of Rajasthan Ltd. In addition to Rs. 20,000/-, the complainant would be entitled to interest at the maximum rate which the Central Bank of India was charging from its loaners in any scheme on the delayed payment of 4 demand drafts. This interest would be payable only by the Bank of Rajasthan Ltd. The appeal of the Central Bank of India is allowed to this extent. The parties shall bear their own costs. F.A. 625/1993 partly allowed/ F.A. 648/1993 dismissed.