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Before Saleem Akhtar, J
Messrs ATLAS BATTERY LTD.--Plaintiff
versus
Messrs HABIB BANK LTD.--Defendant
Suit No. 302 of 1986, heard on 13th April, 1987.
(a) Negotiable Instruments Act (XXVI of 1887)--
---S. 29--Encashment of cheques--Signatures on cheques slightly different from signatures on specimen card--Effect--Liability of banker--Where cheques presented for encashment were not taken out from the cheque book issued to plaintiff, denial by such plaintiffs that they had not signed the cheques and admission by Bank's employee that signatures on cheques were a bit different from signatures of specimen card, such evidence, held, conclusively proved that cheques were forged and not issued by plaintiffs--Forged cheque conferred no title and was a nullity--Cheque not bearing signature of customer, could not be termed as a cheque issuing direction, mandate or order to the Bank to make payment to bearer or presenter thereof--Bank making payment against a forged cheque could not debit customer's account for the said amount unless such customer was estopped from pleading forgery or want of authority.
Province of Sind v. Imperial Bank of India PLD 1961 Kar. 185 and Ansar Ahmad v. Bank of America Ltd. PLD 1975 Kar. 252 rel.
(b) Negotiable Instruments Act (XXVI opt 1881)--
---S. 29--Payment against cheque made in ordinary course of business how protected--Payments made in good faith and without negligence, held, could be protected but to avail such plea it would be necessary to establish that banker had acted in good faith without negligence in the ordinary course of business.
Pagent Law of Banking, 9th Edn., p. 223; Bank of England v. Valagio Brothers (1891) AC 107 and AIR 1945 Mad. 30 rel.
(c) Negotiable Instruments Act (XXVI of 1881)--
---S. 29--Civil Procedure Code (V of 1908), S. 9--Wrong encashment of cheques from plaintiff's account--Effect--Where forged cheques were en-cashed and debited from account of plaintiffs, such plaintiffs, held, were entitled to the amount debited from their account alongwith interest--Suit of plaintiff was decreed with specified interest against Bank responsible for encashment of forged cheques from the account of plaintiffs.
Mohsin Tayab Ali for Appellant.
Habibur Rahman for Respondent.
Date of hearing: 13th April, 1987.
The plaintiff maintains an account with the defendants at their branch at Shershah. On 14-4-1984 the defendant debited a sum of Rs.42,000 in the account of the plaintiff purporting to be payments made against cheque No. CDV-410950 to have been issued and signed by the plaintiff. Again on 15-4-1984 the defendant debited an amount of Rs.42,000 in the account of the plaintiffs against cheque No. CDV-410948 purporting to have been issued and signed by the plaintiffs. The plaintiffs denied that these cheques were issued by the plaintiffs and called upon the defendant to reverse the said entries and credit the amount of RB.84,000 to the plaintiffs account but the defendants failed to do so and hence this suit has been filed for recovery of 88.84,000 with interest at 15 per annum from 15-4-1984 to 31-4-1986 amounting to Rs.24,600. The total claim is Rs.I,08,600 with interest from the date of the suit till recovery and cost. The defendants filed their written statement and denied that the two cheques were not issued by the plaintiffs and pleaded that they were not liable to reverse the entries. It was pleaded that cheque No. CDV-410948 was presented on 14-4-1984 in the usual course which was dated 12-4-1984 for Rs.42,000. The apparent tenor of the instrument was found in order and payment was made to the presenter accordingly. Likewise Cheque No. CDV-410948 dated 12-4-1984 was presented on 15-4-1984 and Rs.42,000 was accordingly paid. It has been pleaded that cheques were bearing proper number and were having such serials of which number the defendant's branch had issued cheque book to the plaintiff on 28-3-1984. It has been pleaded that the signature of the drawer were noted genuine and the difference in the rubber stamp was immaterial. The defendants therefore, denied the entire claim. On the basis of the pleadings the following issues were framed:-
(1) Whether the cheques in the suit were forged documents If so, to what effect
(2) Whether the cheques were encashed by the defendant in the normal course of business If so, to what effect
(3) Relief
Issue No.l:
There is no dispute that the two cheques Ex.5/31 and 5/32 were presented for encashment and Rs.84,000 was paid by the Bank to the presenter. The only question is whether these cheques were issued by the plaintiffs. The plaintiffs have denied that they had issued these cheques. From the signature specimen card and the account opening form it is established that Mohammad Iqbal Ahmed and Khalid Jeelani were authorised to sign the cheques jointly. Their signatures are on these cards which are Ex.5/29 and 5/30. Their signatures were also obtained in Court which is Ex.6/i. Both these witnesses have been examined, anal they have denied their signatures on these cheques. The defendants have examined DW-1 Ex.7, who is presently Manager at Shershah Branch. However, he was not posted in that branch in 1984. He admits that the signatures of Mohammad Iqbal and Khalid Jeelani on the two cheques seem to be slightly different from the signatures on the signature specimen card, retained by the Bank. He, however, stated that it is a very busy branch and about 400 cheques are passed every day within the shortest possible time and as the signatures were similar, the cheques were encashed. The plaintiffs have contended that two cheques which were encashed were not taken out from the cheque books which were issued to the plaintiffs. This fact is also admitted by D.W.l. The plaintiffs have produced the entire cheque book with two cheques bearing the same number which were encashed by the plaintiffs. It seems that the cheques bearing same numbers which were contained in the cheque book Ex.5/4 were prepared printed and presented for encashment. The cheques presented for encashment were not taken out from the cheque book issued to the plaintiff. The denial by the P.Ws. Mohammad Iqbal and Khalid Jeelani that the had not signed the cheque and admission by P.W.1 that the signatures on the cheque are a bit A different from the signatures on the signatures specimen card, conclusively prove that both the cheques were forged. As both the cheques were forged and not issued by the plaintiffs, its effect and the defendants liability to compensate the plaintiffs will be discussed in the next issue.
ISSUE NO. 2:
The defendants have taken the plea that the cheques were encashed by the defendants in the normal course of business suggesting that they were not negligent in discharge of their duties. D.W. 1 has stated that it is the practice in the Bank that where the cheques are above Rs.5,000 they are to be checked by two persons. Ex.5/31 was tallied by one Tariq and checked by an employee of the Bank namely Jilani. Ex.5/32 was also checked by Tariq and Abrar Zaidi. These officers are serving the defendants in different branches, but they have not been examined to show in what circumstances they had passed the cheques for payment. In the forged cheques the stamp of account number was a bit larger than the stamp of account number on the cheques that were issued to the plaintiffs. The rubber stamp of the plaintiffs on these cheques was admitted by D.W.1 to be different from rubber stamp bearing on the cheques which were issued by the plaintiffs. The signatures were also different. Merely, because there was a rush at the time of issuing the cheque does not mean that the defendants would pass a cheque without proper checking it and comparing it with the specimen signatures. D.W. 1 admits that on the cheque the signatures were slightly different. This could have been noticed by the defendant's employee who had passed the cheque for payment. These facts lead to the conclusion that the cheques as well as the signatures were forged and the bank has acted negligently in making payment. Section 29-B of the Negotiable Instruments Act a forged cheque confers no title and is a nullity. A cheque which does not bear the signature of the customer cannot be termed a cheque issuing direction, mandate or order to the bank to H make payment to the bearer or presenter. Where a Bank makes payment against a forged cheque it cannot debit the customer's account for the said amount unless the customer is estopped from pleading forgery or want of authority. In this regard the learned counsel for the plaintiff has referred to Province of Sind v. Imperial Bank of India P L D 1961 Kar. 185 in which A.S. Farooqui J., one of the most eminent Judges has in clear and authoritative manner made the following observation: ----
"A cheque is in the nature of a mandate from the customer to the bank directing it to pay out from his account. If, therefore, the signature of the customer on the cheque is forged then it is not his mandate or order to pay. From this it must follow that any payment by the bank upon the basis of such a cheque is a payment without authority and would not bind the customer. The question which next arises, is whether a customer becomes disentitled from making a claim for reimbursement on the ground of his own negligence or conduct. In my opinion the customer is not so disentitled unless it is established either that he adopted the forgery or he is by his own conduct estopped from making a claim against the bank. But even adoption and estoppel cannot be effective against the customer if it is established that the bank itself was guilty of negligence which led to the payment on the forged cheque and the resulting loss. Where the negligence of the bank itself had facilitated the fraud it would not be open to it to clothe the customer with liability for a payment which was not authorised by him upon a plea of estoppel or adoption. The negligence of the customer himself such as not keeping the cheque book under lock and key or not reporting its loss promptly can be of little avail to the bank in avoiding its liability for having made an unauthorised payment. It is true there is a duty cast upon the customer not to act in a manner which might facilitate a fraud upon the bank just as there is a duty cast upon the bank to exhibit in its task as a banker the skill and prudence required in the course of the business of a banker to make payments in good faith to detect forgeries and to take all necessary steps to guard against fraud and protect the interest of the customer. Yet it is rot every negligence of a customer which would afford immunity to the banker. The negligence of the customer in a case where a forged cheque has been honoured must be shown to be such which may preclude him from pleading that the payment by the bank was without authority, that is to say that the customer will not be allowed to plead want of authority when it is established that it was his own conduct which induced the bank to act upon a document which purported to have proceeded from the customer and upon which the bank acted without any negligence on its own part".
This judgment was followed in Ansar Ahmed v. Bank of America Ltd. P L D 1975 Kar. 252. The plea that the payment against the cheques were made in the ordinary course of business has been raised to avoid the liability of the defendant No. l for acting negligently in making payment against forged cheques. The payments made in good faith and without negligence may be protected, but in order to avail this plea it is necessary to establish that the Bankers had C acted in good faith without negligence in the ordinary course of business. According to Pagent In Law of Banking 9th Edition at page 223 "Ordinary course of business is some what vague expression there can be no ordinary course of business in extraordinary circumstances". Reliance was placed on the following observation of Lord Halsbury in Bank of England v. Valagio Brothers (1891) A.C. 107:-
"I do not know what is usual course among bankers, and I should doubt whether in such matters it would be possible to affirm that any particular course was either usual or unusual in the sense that there is some particular course to be pursued without circumstances occur necessarily give rise to suspicion".
A Bank cannot take a plea that although it has acted negligently but as the payment has been made in due course it is not liable to compensate the customer. Section 85 (2) of the Negotiable Instruments Act provides protection to the drawee where it makes payment for the cheque payable to bearer in due course. Protection for acting in due course is given to a bank where it is not negligent and has followed the ordinary and recognised banking practice in discharge of its duties. In Madras Provincial Cooperative Bank Ltd. v. South Indian Match Factory Ltd. A I R 1945 Mad. 30 the Official Liquidator was the payee in a cheque and the bank in violation of the provisions of the Companies Act instead of paying through his bank paid to him directly. The Official Liquidator misappropriated the amount. It was held that the bank was negligent and payment was not made in due course therefore, it was not entitled to the protection under section 85.
The plaintiff has claimed Rs.84,000 and Rs.24,600 interest from 15-4-1984 to 13-4-1986 @ 15% per annum. The plaintiffs while demanding Rs.84,D00 by legal notice stated that interest will be charged from the defendants. From the entire correspondence it seems that the D defendants have been avoiding their liability. In the circumstances of the case interest is granted from 15-4-1984 till the filing of suit @ 10% per annum. The suit is therefore, decreed for Rs.1,00,750 with interest @ 10% per annum from the date of suit till recovery and costs.
A.A./A-94/K Suit decreed.
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