LexTHE KERALA STATE CO-OPERATIVE MARKETING FEDERATION versus STATE BANK OF INDIA AND ORS.
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THE KERALA STATE CO-OPERATIVE MARKETING
A
FEDERATION
v.
STATE BANK OF INDIA AND ORS.
JANUARY 30, 2004
B
[S.N. VA RIA VA AND H.K. SEMA, JJ.]
Negotiable Instruments Act, 1881-Section 131-Protection under-
Customer opening bank account with a meagre amount, thereafter depositing c
exact amount for obtain;ng cheque book-Subsequent deposit of cheque qf
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Rs. J lakh and withdrawal of Rs. 50,000-Stop payment instructions received-
Thereafter customer not troceahle-Liability of Bank-Banker claiming
protection-Held: All the above incidents are part of the same transaction
which took place in close proximi(y to each other and the Bank failing to
discharge the burden which lay upon it to show that it had acted in goodfaith D !
and without negligence-Hence, Bank not entitled to protection.
Appellant received a cheque for Rs. 1,00,000 from respondent No.3
drawn on respondent No.1-bank. He sent the cheque by post, however it
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was stolen. It was altered to read as if it was payable to K .and a person
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calling himself K opened an account with respondent No. i-bank for a
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meagre amount. Thereafter, K deposited exact amount for being entitled
to receive cheque book. He then deposited a cheque for Rs.1 lakh •
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Respondent No.I collected the same on behalf of his client. K then
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withdrew Rs. 50,000 after which banker received stop payment
instructions. Thereafter K was not traceable. Appellant claimed the F
amount of Rs. 50,000 from respondent No.I, who claimed protection under
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Section 131 of the Negotiable Instruments Act. Thereafter, appellant filed
recovery suit which was decreed. However, High Court set aside the decree
and dismissed the suit. Her•~e the present appeal.
Disposing of the appeal, the Court
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HELD: In the instant c~~e, the transaction of opening of the account
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for a meagre sum,. depositing the exact amount for being entitled to receive
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a cheque book, depositing of the cheque of Rs.1,00,000/- and the
withdrawal of the sum of Rs. 50,000 were all part of the same transaction H
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SUPREME COURT REPORTS
[2004) 2 S.C.R.
;, 1\. and all these took place in close proximity to each other. From the evidence
of the Bank Manager it is clear that the person who called himself K,
opened an account on the introduction of an account holder by name D
and in the Account Opening Form ·an absolutely vague address was given.
ln cross-examination the Branch Manager admitted that the Bank made
B no enquiries as to the credit worthiness of the said K or as to his full
address, his telephone number, the nature and place of his business or the
name or the occupation of the person introducing the account holder.
Respondent No.I-bank does not seem to have put on its guard, even when
a cheque for a very large amount i;e. Rs.1,00,000 was deposited soon
thereafter. After it was found out that the cheque had been forged and
C stop payment notice had been issued, Bank made no enquiry with the
introducer. When questioned, it answered that the bank has no
responsibility to look into it. Also, the Bank made no attempt to lead the
evidence of the person who had introduced the account holder. Therefore,
Respondent No. I-Bank has not discharged the burden which lay upon it
to show that it had acted in good faith and without negligence.
D
119-C-D)
Indian Overseas Bank v. Bank of Madura ltd., (1992) Vol. 75 Company
Cases 481; Syndicate Bank v. United Commercial Bank, (1991) 70 Comp~ny
Cases 748; Brahma v. Chartered Bank, AIR (1956) Calcutta 399; Central
E Bank of India Ltd v. Gopinathan Nair, (1972) Kerala Law Times 518; Indian
Bank v. Catholic Syrian Bank Ltd., AIR (1981) Madras 129 and Indian
Overseas Bank v. Industrial Chain Concern, 11990) l SCC 484, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 151 of I 998.
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From the Judgment and Order dated 5.10.1995 of the Kerala High
Court in A.S. No. 252 of 1988.
M.P. Vinod for the Appellant.
R. Molian, V.G. Pragasam, Romy Chacko and Rajiv Mehta for the
G Respondents.
The Judgment of the Court was delivered by
S.N. V ARIA VA, J. This Appeal is against a Judgment dated 5th
October, 1995.
Briefly stated the facts are as follows:
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KERA LA STA TE CO-OPERATIVE MARKETING FEDERATION v. S.B.l. {VARIAVA, J.] 3
The Appellant received a cheque for Rs. 1,00,000/- from the 3rd A
Respondent. The cheque was drawn on the 2nd Respondent Bank. The
Appellant sent the cheque by post along with someExcerpt shown. Read the full judgment & AI analysis in Lexace.