TMI Blog1945 (11) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... Gandhi, he signed his application form as N, A. Gandi. On January 30, 1945, Gandhi withdrew from his account by a cheque written in Gujarati the sum of ₹ 225. On February 7, 1945, Gandhi drew a further sum of ₹ 50 by drawing another cheque -this time in English. Therefore the position was that on February 7, 1945, there was only a sum of ₹ 25 to the credit of Gandhi's account. On February 7, 1945, Gandhi paid in into his account the cheque for ₹ 4,000 which had been drawn in favour of the plaintiff and of which the plaintiff claims to be the true owner. This cheque was collected by the defendant bank and the amount credited to Gandhi's account. On February 8, 1945, Gandhi drew a cheque for ₹ 3,800 on his account. The cheque was drawn in favour of Kantilal Maganlal Shah or bearer and has been endorsed by R. H. Desai, Bapulal Premchand, the plaintiff, has given evidence and also Chimanlal Nagindas Suratvala bearing out the facts as to the cheque being given to the plaintiff by the firm of Ramchandra Ramgopal and the cheque being stolen while in transit. On this evidence there can be no doubt and it has not been disputed by Mr. Taraporewalla th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solute, and independent of reasonable care. In my view, Section 83 lessened the duty of the bank by limiting it to an obligation only to use reasonable care in dealing with the cheque, or by providing that if the bank proved that it had used reasonable care in discharging its obligation to the true owner not to convert his property, it was discharged from liability though it had converted that property. Then Lord Justice Scrutton cites with approval the observations of Mr. Justice Kennedy in Hannan's Lake View Central, Limited v. Armstrong Co. (1900) 5 Com. Cas. 188 (p. 191): The only question is, Did they act without negligence ? What does ' without negligence mean ? It means, I take it, without want of reasonable care in reference to the interests of the true owner, the principal whose authority the customer purports to have. Therefore what I have to determine in this case is whether in collecting the cheque belonging to customer Gandhi the bank acted without reasonable care in reference to the interest of, the plaintiff, the true owner of the cheque. 4. The Privy Council in Commissioners of Taxation v. English, Scottish and Australian Bank [1920] A. C. 683 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir Lordships emphasized that negligence was a question of fact and they rejected the argument of the learned Chief Justice of the Supreme Court that the care that the bankers should take should not be less than a man invited to purchase or cash such a cheque for himself might reasonably be expected to take. Their Lordships thought that that was an inapposite standard for the simple reason that it was no part of the business or ordinary practice of individuals to cash cheques which were offered to them, whereas it was part of the ordinary business or practice of a bank to collect cheques for their customers. The argument that was presented to the Board was that the bank was negligent in collecting the cheque for a customer who was of recent introduction and about whom the bank knew nothing. Their Lordships then pointed out that there was nothing suspicious about the way the account was opened; they were of the opinion that there was nothing suspicious in the fact that a cheque was paid into that account for collection one day after the account had been opened; they further pointed out that if it was laid down that no cheque should be collected without a thorough inquiry as to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Modi can be imputed to the bank. Now it is not suggested and it cannot be suggested on the record as it stands that it was any part of the duty of Modi and the cashier to introduce customers. It is true that Modi has said that before he was employed he told the Manager that he would be able to introduce a few customers. That perhaps improved his chance of his being taken on as a cashier, but that does not mean that it was incumbent upon him in the performance of his duties to introduce customers. Modi gave a reference for Gandhi to the bank just as any other outsider would have done. The reference was not given in the performance of his duties as a cashier and therefore the negligence, if any, of Modi cannot be imputed to the bank. In order that the plaintiff should succeed, he must establish that the bank was negligent in accepting Gandhi as a customer if such negligence is sufficient to disentitle the defendant bank from the protection given to it under Section 131 of the Negotiable Instruments Act. 8. It is next urged by the plaintiff that the bank was negligent in accepting Gandhi as a customer. On this point the practice as to accepting customers is deposed to by Gangooli, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Street, Fort, in his, application form was a non-existent address. Now the position with regard to this address is that I have the evidence of Desai, Road Inspector, A Ward, Bombay Municipality, who has stated that the Municipality keeps a record of all the public streets and of such private streets as the public have access to; and no street, public or private, by the name of Kavarana Street appears in this record. But he admitted to Mr. Taraporewalla that the Post and Telegraph Office Directory did mention this street as being near the Bombay General Post Office. Sub-Inspector Paltonwalla also said that he could not find any such street as Kavarana Street in the Fort. But the Road Inspector of the Bombay Municipality did admit that there was a building known in Frere Road called Kavarana Building; next to this building there was a bye-lane off Frere Road; that bye-lane was not named; and the address of Kavarana Building was No. 103, Frere Road. There is no evidence before me whether any man by the name of Gandhi was living in this Kavarana Building, the address of which is No. 103, Frere Road. 11. It is further contended that there were suspicious circumstances attendant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a minimum sum of ₹ 300 and in Bombay the minimum balance required to be maintained was ₹ 50. If the balance of Rs, 50 is not maintained, then a fee of Re. 1 is charged to the customer. The manager stated that it was not unusual for a customer to deposit the minimum amount necessary arid then to withdraw within four or five days the maximum amount permissible and leave just the balance required. It is true that Gupte, the accountant in the defendant bank, did not quite agree with this view of the manager because he said that he knew of two or three cases where a customer had opened an account with the minimum deposit required and withdrawn practically the whole of the amount within a few days. He would consider such a thing as unusual. But Gupte went on to say that he did not think that that circumstance would put the bank on inquiry. It is difficult to see why a customer who opens an account with the minimum permissible, namely, ₹ 300 should not operate upon it so as to reduce it to an amount less than required under the rules to maintain the account and when he finds that he has gone below the minimum necessary, pay in a sum of ₹ 4,000 so that the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not seriously disputed by Mr. Tendolkar that there is nothing on the face of the cheque which should put the bank on inquiry. Therefore, prima facie, the bank was not negligent in collecting this cheque which on the face of it did not in any way arouse its suspicion. But it is not sufficient that the cheque itself should not arouse the suspicion of the bank. If there is any antecedent or present circumstance, again to use the language of the Privy Council, which aroused the suspicion of the bank, then it would be the duty of the bank before it collected the cheque to make the; necessary inquiry and undoubtedly one of the antecedent circumstance would be the opening of the account. Now it is important to bear in mind that there is no connection whatever in this case between the opening of the account and the stealing of the cheque. The cheque did not come into existence till February 5, 1945, and the account was opened on January 26, 1945. It is impossible to believe that Gandhi or whoever opened the account on January 26 had the remotest idea that on February 5 Messrs. Ramchandra Ramgopal would make out a cheque in favour of the plaintiff on February 5 and that the plaintiff w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respectability of the intended customer. A little before he made this observation in the judgment, Mr. Justice Bail-hache expressed his own opinion that if he had been left without any evidence on the point he should have been disposed to think that the defendant was under no obligation td make any inquiries in the absence of anything to make him suspicious; but he relied on the evidence on the practice of banks, namely, that it is usual to make inquiries. He further adds that inquiries as to the respectability of the intended customer can be done by references and sometimes by an introduction through a customer. In the 'Privy 'Council case (Commissioners of Taxation v. English, Scottish and Australian Bank [1920] A. C. 683) curiously enough the case was cited at the bar by Mr. Romer K. C. on behalf of the appellants not on the question of negligence but on the question of what is sufficient to constitute a person a customer of the bank, and in the judgment of their Lordships this case is not referred to at all; and when one turns to the facts of the Privy Council case, which I have already set out in some detail above, it will be remembered that Thallon, the customer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances attendant upon the opening of the account whether an inquiry as to a customer was necessary and called for or not. Lord Justice Sankey does not say, as Mr. Tendolkar contends for, that in every case it. is obligatory upon a bank to make inquiries as to the respectability of a customer in order that it should avail itself of the protection given to it under Section 131' of the Negotiable Instruments Act. In that case the plaintiffs were bankers having a branch office in Bombay. One Lawson, their Chief Accountant at the Bombay Branch, had express authority to draw cheques on other bankers with whom the plaintiffs had an account. He had an account with the defendants, who were bankers in Bombay, and another account with the plaintiffs' Bombay branch. The plaintiffs paid his salary by crediting his account with their Bombay branch. In 1922 Lawson began fraudulently drawing cheques on the plaintiffs' bankers in favour of the defendants, to whom he sent written instructions to place the cheques to the credit of his account with them. These frauds were continued for two years by means of false entries in the books of the plaintiffs' Bombay branch. When these fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the banker. 17. Further it is always dangerous to rely on observations of Judges; torn from their context or read without reference to the facts of the case which necessitated the particular observation. The facts of the case in Lloyds Bank, Limited V. E. B. Savery Co. were very peculiar, A firm of London stockbrokers had in their employment two clerks, Perkins and Smith. Perkins had an account at one country branch of the bank. The wife of Smith had) an account at another country branch. Perkins stole many cheques signed by the stockbrokers in payment of jobbers' accounts and handed them in at one or other of the bankers' London branches. Smith also stole many of the cheques and handed them in at the bankers' head office, making out paying-in slips directing payments to be made to the account of his wife which was at a country branch. The stolen cheques in each case were received by the London office and sent to the clearing house. The House of Lords, in coming to the conclusion that the bankers were negligent and were deprived of the protection of Section 82. of the Bills of Exchange Act, particularly took into consideration the rules framed by the bank and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of finding out what the names of the stockbrokers were. A further passage relied on is in the judgment of Lord Russell who delivered the dissenting judgment taking the view that the bank was not negligent. At p. 226 the learned Law Lord says: They must make sufficient inquiries to satisfy themselves of the integrity of the proposed customer and of the desirability of having his account on their books. The learned Law Lord, took the view that there was no justification for adding to the obligation of the banker the burden of making inquiries as to the names of the employers of his customer. It is difficult to say, with respect, why it was incumbent upon the bank to make sufficient inquiries to satisfy themselves of the integrity of the proposed customer if in this very case the learned Law Lord took the view that there were no circumstances calculated to arouse suspicion in the bank's mind which would have necessitated an inquiry as to the names of Perkins' employers. Ladbroke Co. v. Todd is also referred to in two leading and well-known text books. Byles on Bills, nineteenth edition, p. 39, lays down the proposition that it is negligence not to make inquiries as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him. I frankly confess that I find it very difficult to understand this judgment of Mr. Justice Acton, because it does not appear from the judgment that there were any suspicious circumstances attendant upon the opening of the account by Donald Stewart which would have put the bank on suspicion. The case is not reported in any authorised reports, and the judgment given in the Solicitors' Journal is rather sketchy and incomplete. 19. In my opinion there is no absolute and unqualified obligation on a bank to make inquiries about a proposed customer. I agree that modern banking practice requires that a customer should be properly introduced or, in other words, that the bank should act on the reference of some one whom it could trust. Therefore perhaps in most cases it would be wiser and more prudent for a bank not to accept a customer without some reference. But I am not prepared to go so far as to suggest that after a bank has been given a proper reference with regard to a proposed customer and although there are no suspicious circumstances attendant upon the opening of the account, it is still incumbent upon the bank to make further inquiries with regard to the customer. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ened was that when the account was reduced to ₹ 25, a cheque for ₹ 4,000 was paid in. In my opinion that was not sufficient to put the bank on inquiry and the bank was not negligent in not having made any inquiries when they discovered the state of the account on February 7, 1945. 22. Under all the circumstances of the case the bank has established that there was no negligence on its part in collecting the cheque of Gandhi and crediting it to his account and therefore the bank is protected by Section 131 of the Negotiable Instruments Act and is not liable to the plaintiff for conversion. 23. I should like to mention one further contention on which an issue has been raised and which has been very rightly not pressed by Mr. Taraporewalla and that is the issue of contributory negligence. In their written statement the defendants have alleged that the plaintiff was guilty of contributory negligence. It is difficult, to see how a person who converts an article belonging to the true owner can turn upon the true owner and say: I am not guilty of conversion because you showed negligence in relation to your own article. However negligent the true owner may be, it can be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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