BANK OF MAHARASHTRA versus AUTOMOTIVE ENGINEERING CO.

Citation: [1992] SUPP. 3 S.C.R. 482 · Decided: 08-12-1992 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
- ~ 
BANK OF MAHARAS~TRA 
v. 
AUTOMOTIVE ENGINEERING CO. 
DECEMBER 8, 1992 
[B.P. JEEVEN REDDY AND G.N. RAY, JJ.] 
Nagotiable Instrnments Act, 1881: Sections 10, 31 and 8'>-l'ayment on 
forge_d cheque-Liability of Bank-No alteration traceable on visual 
scrntiny-Signature of the drawer, and other particulars of cheque duly 
C verified-Whether Bank could be held to be negligent-Whether Bank under 
obligation to verify the cheque under ultra violet ray lamp in order to get 
absolved of liability-whether entitled to recovery of amount of cheque from 
customer. 
D 
The respondent firm opened a current account with one of the 
branches of the appellant-Bank. Another firm also opened an account with 
another Bank. The said account was represented by its proprietor. The 
proprietor presented a cheque for Rs.6,500 to the said second Bank for 
crediting the amount in his account in the said Bank. The cheque was sent 
·to the clearing house and on presentation of the cheque for payment the 
E appellant-Bank passed the cheque and debited the amount of the cheque 
to the account of the respondent-firm. Subsequently, the appellant Bank 
forwarded statement of account of the respondent-firm which raised an 
objection that the amount of .cheque was wrongly debited for Rs.6,500. The 
agent of the appellant Bank thereafter went to the second Bank and on 
F 
examining the cheque under the ultra violet ray lamp, it transpired that 
the original cheque was issued in fav;our of another person and the 
amount under the said cheque was Rs.95.98. The writing on the cheque 
was chemically aitered with regard to the date, the name of the payee and 
also the amount. The respondent-firm thereafter made demands to the 
appellant-Bank to credit the same amount to his account. Hence the 
G appellant-Bank instituted a suit for the recovery of Rs.7,452 comprising of 
the principle and interest. 
The trial court came to the finding that on visual scrutiny, the 
cheque in question did not appear to be fabricated or altered, but on 
H closer scrutiny some suspicion could have been raised, and .since the Bank 
482 
BANK OF MAHARASHTRA v. AUTOMOTIVE ENGG. CO. 
483 
had not provided the facility of ultraviolet ray lamp to the said Branch for A 
scrutinising the cheques, it had failed to discharge propei: care, and hence 
"· 
had not passed the cheque with due diligence. Accordingly, it dismissed 
the suit. 
The appeal preferred by the appellant-Bank was also dismissed by , 
the Additional Judge. 
B 
The High Court also dismissed the second appeal preferred by the · 
appellant-Bank. It accepted the fincling that the cheque in question ap-
parently did not show any sign of alteration, but held that the absence of 
ultra violet ray lamp amounted to negligence on the part of the Bank and, C 
therefore, the payment was not made in due course and the Bank was not 
entitled to claim relief under Section 8-A of the Negotiable Instruments 
Act. 
In the appeal before this Court, on behalf of the appellant-Bank it 
was contended that the Bank had made payment according to the ap- • D 
parent tenor of the cheque and in due course after verifying the signature 
of the respondent, and other particulars such as a serial number and 
amount of cheque, etc.; that since at the relevant time the appellant-Bank 
was not provided with ultraviolet ray lamp, it could not be said that the 
Bank was negligent in discharging its duties and functions in the matter . 
of passing the cheque, by not scruitinishing it under the ultraviolet ray E 
lamp; that it might be expedient and to ensure greater safety in some cases 
that a Bank should take the aid of advanced technology in detecting fraud • 
attempted to be committed by fabricating or forging cheques, but it could 
not be held as a sound proposition of law that unless a cheque was 
subjected to advance technology for further scrutiny as to .its genuineness, ' F 
the bank should be liable for such negligence and the protection under 
Section 10 and 89 of the Negotiable Instruments Act was not available. 
On. behalf of the respondent it was contended that the negligence 
attributable to a banker must depend on facts and circumstances of each 
case and in the instant case, the trial court had come to the finding that G 
even on a closer scrutiny without the aid of the ultraviolet ray lamp, some 
infirmity could have been noticed particularly, with reference to the num-
ber of the month; that since the amount of the cheque was q

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