KESHARICHAND JAISUKHAL versus THE SHILLONG BANKING CORPORATION

Citation: [1965] 3 S.C.R. 110 · Decided: 16-02-1965 · Supreme Court of India · Bench: RAGHUBAR DAYAL · Disposal: Dismissed

Judgment (excerpt)

llO 
KESHARit':BAND IAISUKBAL 
v. 
THE SHILLONG BANKING CORPORATION 
February 16, 1965 
A 
(RAGHUBAR DAYAL, J. R. 
MUDHOLKAR, 
R. S. BACHAWAT AND 
B 
V. RAMASWAMI, JJ.] 
Banker and Customer-Nature of relationship between. 
Indian Limitation Act (9 of 1908), Art. 81>--Mutual dealings bet-
ween Banker and Customer-If article applicable. 
The appellant had a combined overdraft and deposit account, 
C 
also described as a mutual open and current account, with the res-
pondent bank. In December 1946, the respondent credited two chegues 
to the appellant's account one for Rs. 8,200 and the other 
for Rs. 600 and sent them for· collection to the Shillong branch of 
the Bharati Central Bank, on which they were drawn. Instead of 
obtaining cash from that Bank, the respondent accepted a cheque 
on the Nath Bank. This the respondent did without consulting the D 
appellant and on its own responsibility. When the respondent pre-
sented the cheque to the Nath Bank, it was returned with a note 
"full · cover not received". The respondent thereupon debited the 
appellant with the sum· of Rs. 8,800 in the accounts without inform· 
ing him. 
On the instructions of the appellant, who was informed 
about the dishonouring of the cheque, the respoJldent accepted a 
demand draft from the Bharati Central Bank drawn on its Calcutta B 
branch for the amount. The Calcutta branch of the Bharati Central 
Bank however. requested the respondent to present it to the Shil-
long branch. The respondent presented the draft to the Shillong\ 
branch of the Bharati Central Bank, but the Bank applied for mora-
torium and closed its business, in January 1947 and the draft was 
not cashed. In the proceedings for the reconstruction of the Bharati 
Central Bank, the respondent asked to h€ treated as a preferential .F 
creditor in respect of the amount of the draft, and was so treated. 
The dealings between the appellant and respondent continued till 
December 1950. In May 1953, the respondent Bank was ordered to 
be wound up and the liquidator presented an application to 'the High 
Court under s. 45D of the Banking Companies Act, 1949, for settle-
ment of the list of debtors, claiming a decree for about Rs. 6,000 and 
interest, against the appellant. The appellant resisted the claim but 
the High Court decreed it. 
G 
In the appeal to the Supreme Court, it was contended that (i) the 
respondent acted negligently and in breach of its duty 
as 
collecting agent of the appellant and was bound to give credit for 
.. the sum of Rs. 8,800 and (ii) the claim was barred by limitation. 
HELD: (per Raghubar Dayal, Bachawat and Ramaswami. JJ.)-
(i) It was not shown that the respondent acted negli!iently or in 
H 
breach of its duties or contrary to any instructions given by the 
appellant or any lawful 
usages prevailing amongst bankers and 
therefore was not bound to give credit to the appellant for the sum 
of Rs. 8,800. r114 H] 
A banker entrusted by its customer With the collection of a 
cheque is bound to act according to the directions given by a cus-
tomer, and in the absence of such directions, according to the usages 
prevailing at the place where the banker conducts his business 
A 
B 
c 
D 
E 
F 
G 
H 
KESliARICl!AND V. S.B. CO.RP. 
111 
and applicable to the matter in hand. The banker is also J?ound to 
use reasonable skill and diligence in presenting and securmg pay-
ment of cheques and placing the proceeds to his customers' accounts 
and in taking such other steps as may be proper to secure the cus-
tomer's interests. The respondent in the iristant case. received the 
two cheques for coJlection in the usual way as agent of the appel-. 
!ant and not with the intention of acquiring title to them. The appel-
lant, instead of disowning the various acts of the respondent in 
respect of the collection of the cheques, had ratified them, By prefer-
ring a claim as creditor .in respect of 'the draft, in the 1-iquidation 
proceedings of the Bharati Central Bank, the respondent was not 
accepting the draft in satisfaction of its dues from the appellant. It 
was only preserving all the .rights in respect of the draft and was 
acting in his bes~ interests. fl14 A, F-H; 115 A-Bl 
(ii) The respondent gave loans on overdrafts and the appellanl 
made deposits. The loans and deposits created mutual obligations. 
Since the account was mutual and continued to be so until Decem-
ber 1950, the claim against the appellant was not barred by limita-
tion having regard to s. 45 (0) 

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