1. This appeal arises out of a suit instituted by Dr. Nand Lal plaintiff, whose name has now been Substituted by his legal representatives who are the respondents in this appeal, for recovery of a sum of Rs. 1,500/- on basis of cheques fictitiously drawn an his name on the appellant. Allahabad Bank Limited, Jullundur.
2. Dr. Nand Lal had a current account with the Allahabad Bank, Jullundur, since July 1948, and there is no dispute that ample funds were available in his credit on the relevant dates when three cheques drawn in his name were honoured and cashed by the Allahabad Bank Limited. The first cheque of Rs. 500/-, Exhibit P. 4 was drawn and cashed On 4th of December, 1950, the second one of like amount of 13th December, 1950 was cashed on the following day, and the third one also of Rs. 500/- of 27th of December, 1950, was cashed on 29th of December, 1950. According to Dr. Nand Lal, these cheques on which his signatures were forged were cashed by defendants Nos. 4 and 5 through the connivance and instrumentality of the Bank's employees, defendants Nos. 2 and 3. The fraud was discovered by him on 13th of February 1951 when on a perusal of the statement of accounts sent to him by the Bank, he found that these three cheques had been encashed. Dr. Nand Lal forthwith lodged a first information report against Karam Vir, defendant No. 5. Though Karam Vir was prosecuted and convicted by the Magistrate he was acquitted in appeal.
Thereafter the present suit was instituted on 2nd of December 1953 for recovery of Rs. 1,500/-as principal and Rs. 265/12/- as interest. The suit was dismissed, in the first instance, by the trial Judge on 28th of February, 1955, and again after remand on 8th of August, 1955. It is worthy of note that the trial Judge, though he found that the cheques had not been issued by Dr. Nand Lal, came to the conclusion that the forgery had not been established. The lower appellate Court has, however, held that it was sufficient for the plaintiff to show that the signatures on the cheques were not his and the Bank could not be exonerated from liability. The lower appellate Court has relied in aid on the evidence of the handwriting expert in whose opinion the signatures on the cheques were forged. The lower appellate Court has, however, decreed the suit only against the first defendant, namely, the Allahabad Bank, who has now come in appeal to this Court.
3. Mr. Bahri, the learned counsel for the appellant Bank has, in the first instance, attacked the finding of the learned District Judge regarding the forged signatures on the cheques. The counsel has argued that the lower appellate Court has rejected the finding of the trial Judge without even discussing the reasons embodied in the judgment of the first Court. In my opinion, the finding of the lower appellate Court is not open to challenge in second appeal based as it is on evidence of the expert witness together with the other evidence adduced on behalf of the plaintiff. The ground on which the finding of the lower appellate Court has been assailed is tenuous and I have no hesitation in rejecting it.
4. It was next urged by Mr. Bahri that the plaintiff is precluded by his conduct from challenging the action of the Bank. In this connection he has referred to the confirmation slip, Exhibit C. 8 of 30th of June, 1951, in which tie plaintiff had accepted the balance due to him on that date struck after debits had been given on account of the three cheques in dispute. Likewise, there is a confirmation slip of 31st of December, 1951 (Exhibit C. 9) where the balance was struck after these adjustments; As against these slips there are objection memos, Exhibits P. W. 7/1 and 2 of 8th August, 1952 and 9th February, 1953, wherein the objection with regard to the cheques in dispute had been noted by the plaintiff. In my opinion, the confirmation slips are valueless as the plaintiff admittedly lodged a report immediately after he had discovered the forgery on 13th of February 1951. A letter was also sent to the Bank on that very day to stop payment of the three cheques.
5. Mr. Bahri further contends that the plaintiff having impleaded defendants Nos. 4 and 5 exonerated the Bank from any liability by implication on the principle of adoption. Reliance has been placed by both sides on the Single Bench judgment of Ramaswami J. in K. M. Abbu Chettiar v. Hyderabad State Bank, AIR 1954 Mad 1001. It was held by the learned Judge that
'the banker cannot charge his customer with any money with which he has parted without the customer's authority. Where the customer's signature on a cheque as drawer is forged, the banker is not protected because a document Purporting to be a cheque but to which the drawer's signature is forged, is not a cheque at all, and is not drawn on a banker.'
In the words of Ramaswami J.,
'it is for the customer to establish affirmatively that the signature on the disputed cheque is not that of the customer but a forgery. If the drawer's cheque is forged or unauthorised, however clever the forgery is, the banker cannot debit his customer's account in case he pays the sum unless he establishes adoption or estoppel. What amounts to adoption or estoppel is dependent upon the circumstances of each case. In order to make the customer liable for the Joss the neglect on his part must be in or intimately connected with the transaction itself and must have been the proximate cause of the loss. The banker cannot set up either estoppel or adoption if his own conduct or negligence has occasioned or contributed to the loss, the well-Settled principle being that where one of two innocent parties must suffer for the fraud of a third, that party should suffer whose negligence facilitated the fraud.'
I do not think that the pleas of adoption or estoppel to which reference was made by Ramaswami J. are available to the appellant in the present case. I fail to see how the impleadment of defendants Nos. 4 and 5 can be said to be in pursuance of a policy of adoption to justify the Court in exonerating the Bank altogether. It has been faintly suggested by Mr. Bahri that the conduct of Dr. Nand Lal was negligent inasmuch as the cheque book became accessible to defendants Nos. 4 and 5 who were able to forge his signatures and encash the cheques. This again is pure conjecture and no evidence has been adduced to come to this conclusion.
6. Lastly, Section 10 of the Negotiable Instruments Act cannot be pressed into service by the appellant to show that the encashment of the cheques constituted payments in due course according to the tenor of the instrument in good faith and without negligence. It was held by Ramaswamy, J. in AIR 1954 Mad 1001 that where payment is made on forged cheques this cannot be regarded as payment in due course. It may be that the Bank was an innocent victim of the fraud but so was Dr. Nand Lal. If there are two innocent parties, the one whose negligence led to the ultimate loss is primarily responsible.
7. In this view of the matter, the suit of Dr. Nand Lal was rightly decreed. There is no scope for interference in this appeal which fails and is dismissed. There would, however, be no order as to costs of this appeal.