Federal Bank Ltd. vs ARBEE STAR MARITIME AGENCIES (P) LTD.

THE opposite party in COP No. 565/99 on the file of the District Consumer Disputes Redressal Forum, Chennai (North) is the appellant herein. THE case of the complainant was as follows : THE complainant was having account with the opposite party from the year 1979. THE opposite party had been regularly submitting statement of accounts periodically and the statement of account for February 1998 revealed that a payment of Rs. 1,20,000 was debited on 20.2.1998 against cheque No. 231193 on 17.2.1998. It was found that the said cheque was not at all issued to anyone and the cheque leaf had been taken away by someone without the knowledge of the complainant and was encashed fraudulently forging the signature of the Director. Vide letter dated 18.3.1998 the complainant requested the opposite party bank to give credit to the said amount of of Rs. 1,20,000 as the cheque had not been issued by them. After verification of the records, the opposite party informed vide letter dated 23.3.1998 informing the complainant that the cheque was encashed by one Rajagopal,.86, G.N. Chetty Road, T. Nagar, Chennai and after receipt of the complainant''s letter dated 18.3.1998 the bank had made inquiries at the said address. However, no such person by name Rajagopal was residing there. THEreafter, the opposite party filed a Police complaint with the Crime Branch, Egmore. THE complainant wrote to the opposite party bank that they could not be put to a loss of Rs. 1,20,000 due to the negligence of the bank staff as the bank staff had not followed the standard practice which a prudent banker would take while passing a cheque of high value. THE opposite party vide letter dated 9.4.1998 informed the complainant that the Police were investigating and if there had been any circumstances causing suspicion, the opposite party would not have made the payment. THE complainant sent reminders dated 25.4.1998 and 10.6.1998 for reversal of the debit of Rs. 1,20,000. Again, the matter was referred to the Chairman of the opposite party in September 1998. THE Head Office of the opposite party replied vide letter dated 24.10.1998 that reversal of the entry could be considered only after the conclusion of the Police inquiry. To the Notice dated 3.2.1999 sent on behalf of the complainant, a reply was sent by the opposite party reiterating the stand that reversal could be considered only after conclusion of the Police investigation. In such circumstances, the complaint came to be filed for payment of Rs. 1,20,000 by crediting the amount to their account, to pay compensation of Rs. 30,000 for the loss suffered by the complainant due to the deficiency in service on the part of the opposite party and to pay Rs. 2,000 towards costs.

THE opposite party resisted the complaint contending inter alia that as soon as the cheque was presented, the bank staff in-charge of cash sought for identity of the person, his address and also made him to write the details on the reverse of the cheque. It is only after complying with the established procedure that the staff concerned honoured the bearer cheque. THE bank did not suspect the bona fides of the bearer of the cheque. THE complainant was at fault in not keeping the cheque book in a secure place. He should have informed the opposite party bank as soon as the cheque leaf was found to be missing. THE complainant had taken advantage of the communication exchanged between them and called upon the opposite party to reverse the entry as if the opposite party was responsible for making a wrong payment. THEre was no deficiency in service. THE complaint was liable to be dismissed. Before the District Forum, on the side of the complainant Exs. A-1 to A-11 were marked while on the side of the opposite party, Exs. B-1 to B-3 were marked.

The District Forum found that there was deficiency in service on the part of the bank and that the complainant was entitled to get the said amount. So far as the compensation payable to the complainant was concerned, the District Forum held that the complainant himself had been negligent in not keeping the cheque book in a secure place and, therefore, the complainant was not entitled to compensation. The District Forum directed the opposite party to pay the said sum with interest at 12% p.a. from 20.2.1998. It is as aganst that the present appeal has been filed.

M. Vaidyanathan, learned Counsel for the appellant submitted that the bank had done which was expected of a prudent banker by calling upon the bearer of the cheque to give the details about himself and had also made him write those details on the reverse of the cheque. The bank had acted in a bona fide manner while honouring the cheque making the payment. When that was the position, the learned Counsel submitted that, therefore, if the bank and the complainant were at fault, then the loss should be shared equally if at all. The Counsel further submitted that though the District Forum had specifically found that the complainant was also negligent and on that score the complainant should also have been made liable for the loss the liability has been hastened only on the bank. Learned Counsel relied on the judgment of the Supreme Court to the effect that the relationship between a banker and a customer was more in the nature of mutual trust and when the bank had acted prudently, no liability could be hastened on them. Per contra, Mr. P.V. Raghavan, learned Counsel for the complainant/respondent submitted that the bank had been negligent in that on its own, after the complaint made by the complainant, investigated the matter and found that the details given by the bearer were bogus details and no further steps were taken. It was clearly a case of negligence and deficiency in service on the part of the bank. The District Forum was perfectly justified in finding in favour of the complainant. The Counsel also relied on a judgment of the National Commission in N. Venkanna v. Andhra Bank, 1986-05 CON.C (Part VI) 9706 (NS), for the position that the non-keeping of one''s cheque book and pass book in safe custody does not absolve the bank from any payment to a wrong person on a forged withdrawal form without verifying the signature. There was clear deficiency in service on the part of the opposite party bank. The Counsel further submitted that there was nothing stated in the version of the opposite party that the signature found in the cheque was checked by comparison with the specimen signature relating to the complainant. A further point was made by the Counsel during the course of the arguments that the disputed cheque contained the signature of only one of the authorised signatories and not of the two authorised signatories, as could be seen from the exhibits filed on the side of the opposite party.

WE have gone through the materials on record. WE are satisfied that the District Forum had rightly held that there was deficiency in service on the part of the opposite party bank. The cheque was for Rs. 1,20,000 payable in cash to the bearer. The address of the complainant is No. 45, Armenian Street; the address of the opposite party is No. 51, Armenian Street. When the cheque was for such a large sum, prudence demanded that an immediate call was made to the complainant to find out as to whether such a cheque had been issued by the complainant. This had not been done. Again, as rightly pointed out on behalf of the complainant, the cheque bore the signature of only one signatory while the cheques viz., Exs. B-2 and B-3 passed by the opposite party bank subsequently bore the signatures of two authorised signatories. The opposite parties, in our view, were negligent in not getting in touch with the complainant to satisfy themselves about the genuineness of the cheque which had come to them for payment in cash. The decision of the National Commission relied on by the learned Counsel for the complainant in N. Venkanna v. Andhra Bank (supra), is on point. In that case, the cheque book had been lost and the bank refused to issue a new cheque book. There was cash withdrawal by an imposter using forged signature and by showing the passbook. It was contended on behalf of the bank that the constituent had been negligent in not keeping the cheque book and passbook in safe custody. It was held by the National Commission that such a thing did not absolve the bank from making the payment to a wrong person with forged signature without verifying it. There was deficiency in service on their part. The National Commission also referred to the decision of the Supreme Court in Canara Bank v. Canara Sales Corporation, AIR 1987 SC 1603, wherein the Supreme Court has observed as follows : "When a cheque duly signed by a customer which is presented for encashment before a bank, it carries a mandate to the bank to pay. However, if the signature on the cheque is not genuine, there is no mandate on the bank to pay. The bank when it makes the payment on such a cheque cannot resist the claim of the customer with the defence of negligence on his part such as leaving the cheque book carelessly so that third parties would easily get hold of it. This is because a document in cheque form, on which the customer''s name as drawer is forged, is a nullity. The bank can succeed only when it establishes adoption or estoppel."

Merely getting the address of the bearer and making him write in his own handwriting at the back of the cheque would not absolve the bank of its obligations to its customers in ensuring proper service. For the reasons stated above, we hold that there are no merits in the appeal. The appeal, therefore, fails and the same is dismissed. Appeal dismissed.