Kerala State Co-operative Bank Limited v. State Bank of India

## IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE V.CHITAMBARESH & THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN TUESDAY, THE 28TH DAY OF FEBRUARY 2017/9TH PHALGUNA, 1938 AS.No. 695 of 1999 (C) ----------------------AGAINST THE JUDGMENT IN OS 144/1996 of ADDL.SUB COURT, THALASSERY DATED 24-03-1999 ## APPELLANT: ----------------- THE KERALA STATE CO-OPERATIVE BANK LIMITED, CO-BANK TOWERS, THIRUVANANTHAPURAM. BY ADVS.SRI.GEORGE POONTHOTTAM, SC, KERALA STATE CO.OP BANK LTD. SRI.K.RAVIKUMAR, SC, KERALA STATE COOPERATIVE BANK LTD. SRI.NAGARAJ NARAYANAN,SC,K.S.CO-OP BANK RESPONDENT: -------------------- M/S.STATE BANK OF INDIA, CANNANNORE. ## BY ADV. SRI.S.EASWARAN THIS APPEAL SUIT HAVING BEEN FINALLY HEARD ON 15.12.2016, THE COURT ON 28.2.2017 DELIVERED THE FOLLOWING: ## **V.CHITAMBARESH & ANIL K.NARENDRAN, JJ.** **-------------------------------------------------A.S.No.695 of 1999** **-------------------------------------------------Dated this the 28[th] day of February, 2017** ## **JUDGMENT** ## **ANIL K.NARENDRAN, J.** The appellant is the plaintiff in O.S.No.144 of 1996 on the file of the Subordinate Judge's Court, Thalassery, a suit for recovery of money filed against the respondent/defendant Bank for a sum of 3,00,000/- with interests and costs. The₹ trial court by the impugned judgment and decree dated 24.3.1999 dismissed the suit on a finding that the defendant Bank has acted bonafidely under good faith and honoured Ext.X1 cheque and as such, it is not liable to satisfy the plaint claim of 3,00,000/- with interest and costs. Feeling aggrieved₹ by the judgment and decree of the court below, the appellant/plaintiff Bank is before this Court in this appeal. 2. We heard the arguments of learned counsel for the appellant/plaintiff Bank and also learned counsel for the respondent/defendant Bank. 3. The pleadings and materials on record would show that the plaintiff Bank maintains a current account with the South Bazar Branch of the defendant Bank at Talap in Kannur A.S.No.695/1999 2 with account No.7042. The plaintiff Bank used to operate that account by issuing cheques signed by its authorised officers. For facilitating such operation the specimen signature of the authorised officers were furnished to the defendant Bank. According to the plaintiff Bank, one cheque leaf and one covering letter form were stolen from their office. However that did not came to their notice immediately after the theft. The plaintiff Bank later noticed that a sum of 3,00,000/- was₹ paid by the defendant Bank on 23.3.1995 on the strength of Ext.X1 cheque bearing No.469116, which was debited to its account; though no such cheque was issued or payment authorised by the plaintiff Bank. On verification, the plaintiff Bank found that the said cheque was not signed by its authorised officers or issued by it or authorised for presentation to the defendant Bank. Immediately the matter was brought to the notice of the defendant Bank, asking them to credit the said amount into the account of the plaintiff Bank. However, the defendant Bank failed to do so, taking an evasive stand that the payment was made and the debit was entered in the usual course of business. The plaintiff Bank caused to issue Ext.A9 lawyer notice dated 29.5.1995, with a demand to A.S.No.695/1999 3 credit an amount of 3,00,000/- covered by Ext.X1 cheque to₹ its account with interest at banking rate from 23.3.1995 onwards. On receipt of Ext.A9 lawyer notice, the defendant Bank sent Ext.A10 reply dated 30.6.1995 stating that Ext.X1 cash cheque was presented with a covering letter by Sri.K.J.Chacko and the specimen signature of the said person was also attested by the Senior Manager of the plaintiff Bank. Therefore, the amount covered by the cheque was paid to Sri.K.J.Chacko under his signature. The signature on Ext.X1 cheque with the seal of the plaintiff Bank resembles with the specimen signature of the authorised signatory on record and that, the alleged payment was made in accordance with the tenor of the instrument in good faith and without negligence under circumstances not affording reasonable grounds for believing that the said person is not entitled for payment and that, the payment was made in the ordinary course of business and in accordance with the customary practice followed by the defendant Bank. The signatures on the cheque and the authorisation memo ex facie tallied with the specimen signature on record with the defendant Bank and that, the payment was made in due course and hence the defendant A.S.No.695/1999 4 Bank is not liable to reimburse the amount. Dissatisfied with Ext.A10 reply, the plaintiff Bank filed the suit for recovery of an amount of 3,00,000/- from the defendant Bank with₹ interest at the rate of 18% per annum from 23.3.1995 onwards, together with notice charge and cost. 4. The defendant Bank filed written statement contending that, in places where the Reserve Bank of India does not have an office, they conduct clearing houses as an agent of the Reserve Bank. The defendant Bank conducts one such clearing house at Cannanore and all the 24 Banks at Cannanore including the plaintiff Bank maintain accounts with the defendant Bank, in order to manage their funds. The clearing house of the defendant Bank is located in the Branch building itself. On 24.10.1994, the Manager of the plaintiff Bank at Cannanore accompanied by one of its employees came to the defendant Bank and opened a current account with account No.7042 by depositing an amount of 50,000/- in₹ cash. As requested by the plaintiff Bank, the defenant Bank issued a cheque book containing 100 cheque leaves. The employee who accompanied the Manager of the plaintiff Bank acknowledged the receipt of that cheque book in the cheque A.S.No.695/1999 5 book issue register maintained by the defendant Bank. Thereafter, the plaintiff Bank started regular and frequent operation of that account. The transactions were of large amounts running into lakhs. During the period from 24.2.1995 to 28.4.1995, the plaintiff Bank made 16 withdrawals in cash over the counter of amounts ranging from 3,00,000/- to₹ ₹52,00,000/-, aggregating to ₹227,00,000/-. The usual practice followed by the plaintiff Bank was to sent an employee with the cheque and covering letter and cash will be withdrawn over the counter. The covering letter would contain the signature of the employee duly attested by the authorised officer of the plaintiff Bank. Therefore, according to the defendant Bank, there was nothing unusual in the withdrawal made by the plaintiff Bank through one of its employees of an amount of 3,00,000/- in cash over the counter. The plaintiff₹ Bank issued Ext.X1 cheque bearing No.469116 for 3,00,000/-₹ and sent it to the defendant Bank through its employee, who have been regularly visiting the branch of the defendant Bank for collection with proper covering letter. After the encashment of Ext.X1 cheque, the plaintiff Bank issued cheque bearing No.469106 on 11.3.1995. The next cheque bearing No.469109 A.S.No.695/1999 6 was issued on 13.3.1995, leaving out cheque Nos.469107 and 469108. The said two cheques, which were left out while issuing cheque No.469109, were seen issued after the issuance of another 6 cheques above them in serial number. Therefore, the defendant Bank contended that, the plaintiff Bank was not keeping a proper track or control in the matter of issuing cheques. The cheques ordinarily sent by the plaintiff Bank used to contain the signature of its two officers. Prima facie, Ext.X1 cheque presented to the defendant Bank contained the signatures of the authorised persons and as such, there was nothing to suspect the genuineness of the signatures. Further, the employee of the plaintiff Bank, who came to the defendant Bank with Ext.X1 cheque and Ext.X1(a) covering letter was known to the officers of the defendant Bank as the employees of the plaintiff Bank. Therefore, there was no reason for the defendant Bank to suspect any foul play. The defendant Bank has also denied the allegation that, the signatures in Ext.X1 cheque and Ext.X1(a) covering letter were widely different in appearance, style and design from the signature of the authorised officers of the plaintiff Bank and the further allegation that the signatures in the said cheque and covering A.S.No.695/1999 7 letter were very crude and conspicuously different from the specimen signatures with the defendant Bank. Therefore, the defendant Bank contended that, the plaint claim to credit a sum of 3,00,000/- to the account of the plaintiff Bank with₹ interest at bank rate from 23.3.1995 onwards is untenable and without any basis whatsoever. The defendant Bank has exercised due care and caution in keeping with the apparent tenor of the instrument while paying Ext.X1 cheque and such payment was made in due course. According to the defendant Bank, in the plaint the plaintiff Bank has deliberately not mentioned the date on which the alleged fraud came to their notice. The defendant Bank had promptly furnished to the plaintiff Bank on 13.4.1994, the balance confirmation letter and the statement of account. Therefore, the defendant Bank contended that the plaintiff Bank is not entitled to recover any amount from them and the suit is liable to be dismissed with cost. 5. On the side of the plaintiff Bank PWs.1 and 2 were examined and Exts.A1 to 10 were marked. Exts.X1 to X3 were marked as court exhibits. On the side of the defendant Bank, DWs.1 and 2 were examined and Exts.B1 to B7 were marked. A.S.No.695/1999 8 6. After considering the pleadings and evidence on record, the trial court dismissed the suit on a finding that the defendant Bank has acted bonafidely under good faith and honoured Ext.X1 cheque. The defendant bank has also discharged their onus to prove that they were not negligent while discharging their duty in due course of their business and hence, they are not liable to satisfy the plaint claim of ₹3,00,000/- with interest and costs. Accordingly, the trial court dismissed the suit. 7. Section 10 of the Negotiable Instruments Act, 1881 (for brevity 'the Act') define 'payment in due course' to mean payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned. 8. Going by Section 10 of the Act, in order to treat a payment as one made in due course, it should be, (i) in accordance with the apparent tenor of the instrument; (ii) it must be made in good faith and without negligence; (iii) the payment must be made to a person in possession of the A.S.No.695/1999 9 instrument; and (iv) while making the payment care should be taken to see that no circumstances exist which afford a reasonable ground for believing that the instrument holder is not entitled to receive payment of the amount mentioned in the instrument. The phrase 'apparent tenor' in Section 10 of the Act indicates the information available on the face of the instrument itself. Factors such as identity of the payee or of the drawee, figure of the amount or date on which or after which the amount becomes payable must be deemed to have been conveyed by the apparent tenor of the instrument. 9. In **Pranendra Mohan Das v. Central Bank of India (AIR 1978 Calcutta 55)** , a learned Judge of the Calcutta High Court held that, where a bank makes payment in accordance with the apparent tenor of the instrument in good faith and without negligence under circumstances which do not afford a reasonable ground for believing that the person in possession is not entitled to receive the payment, payment is said to be made in due course. 10. Section 131 of the Act deals with non-liability of banker receiving payment of cheque. As per Section 131, a banker who has in good faith and without negligence received A.S.No.695/1999 10 payment for a customer of a cheque crossed generally or specifically to himself shall not, in the case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment. 11. In **Central Bank of India v. Gopinathan Nair (1972 KLT 518)** a Division Bench of this Court held that, a payment to be a payment in due course, must have been made in good faith and without negligence to the person in possession of a draft in accordance with the apparent tenor of the instrument under circumstances which do not afford a reasonable ground for thinking that the person in possession was not entitled to receive payment. What is negligence is a question of fact and whether or not such negligence is established in a particular case depends upon the facts and circumstances of that case. 12. In **Pranendra Mohan Das's case(supra)** the learned Judge of the Calcutta High Court held that, the relationship of a banker and his customer is that of a debtor and creditor with the obligation of honouring customer's orders on the funds in the hands of a banker. Banker would only be liable where it has acted negligently and payment is made out A.S.No.695/1999 11 of usual course of business. As an agent of the customer a bank is expected to act bona fide and without negligence. 13. In **Vysya Bank Ltd. v. Indian Bank (AIR 1988 Madras 256)** a Division Bench of the Madras High Court held that, Section 131 of the Negotiable Instruments Act is a salient provision made with a view to protect the interests of the banks in their day-to-day activities. In order to attract the application of the section and to avail of the protection given by it, the conditions imposed by the section must be strictly complied with otherwise the banker's liability for receiving payment of a customer with a defective title in the cheque will remain unaffected. One of the important ingredients of the said provision is that the banker must have received the payment in good faith and without negligence. The standard by which the absence or otherwise of a negligence is to be determined by reference to the practice of reasonable men carrying on the business of bankers and endeavouring to do so in such a manner as may be calculated to protect themselves and others against fraud. 14. In **Vysya Bank Ltd.'s case (supra)** the Division Bench held further that, Section 131 of the Negotiable A.S.No.695/1999 12 Instruments Act does not provide an absolute immunity to the collecting banker, and unless he can bring himself within the conditions formulated by this section, he is left to his common law liability for conversion or for money had and received, in the event of the person from whom he takes the cheque having no title or a defective title. Since the statutory duty contemplated under this Section takes the form of a qualified immunity from a strict liability at common law, the onus of showing that he did take such reasonable care lies upon the defendant banker. Where the customer is in possession of the cheque at the time of delivery for collection, and appears upon the face of it to be the 'holder', i.e., the payee or the indorsee or the bearer, the bank is entitled to assume the customer is the owner of the cheque unless there are facts which are known, or ought to be known, to the banker which would cause a reasonable banker to suspect that the customer is not the true owner. The Apex Court observed that, the duty of care owed by the banker to the true owner of the cheque does not arise until the cheque is delivered to him, by his customer. It is then, and then only, that any duty to make inquiries can arise. What enquiries the banker should make, and what facts are A.S.No.695/1999 13 sufficient to cause him reasonably suspect that the customer is not the true owner, must depend upon current banking practice and change as that practice changes. If the bank has fallen short of its own requirements of care as revealed to its written instructions, it would go a long way to establish negligence; it cannot be taken always as a universal rule. Conversely, proof by the Bank that its rules had been observed by its officers would not be an answer to a claim in conversion though that would be a relevant factor to show that the bank had acted without negligence. 15. In **Vysya Bank Ltd.'s case (supra)** the Division Bench laid down the principle which should guide the court in deciding the question of bankers' negligence, in the context of Section 131 of the Negotiable Instruments Act, as follows; (i) The standard of care required of bankers is that to be derived from the ordinary practice of bankers; (ii) The standard of care required of bankers does not include the duty to subject an account to microscopic examination; (iii) In considering whether a bank has been negligent in receiving a cheque and collecting the money for it, it has presumably to scrutinise the circumstances in which a bank accepts a new customer and A.S.No.695/1999 14 opens a new account; and (iv) The onus is upon the bank to show that it acted without negligence. 16. In **Indian Overseas Bank v. Industrial Chain Concern (1990 (1) SCC 484)** the Apex Court held that, to enable a bank to avail the immunity under Section 131 of the Negotiable Instruments Act as a collecting banker he has to bring himself within the conditions formulated by the Section. Otherwise he is left to his common law liability for conversion or for money had and received in case of the person from whom he took the cheque having no title or defective title. The conditions are; (i) that the banker should act in good faith and without negligence in receiving a payment, that is, in the process of collection, (ii) that the banker should receive payment for a customer on behalf of him and thus acting as a mere agent in collection of the cheque and not as an account holder, (iii) that the person for whom the banker acts must be his customer, and (iv) that the cheque should be one crossed generally or especially to himself. The receipt of payment contemplated by the Section is one from the drawee bank. It is settled law that the onus of bringing himself within the Section rests on the banker. In **Capital and Counties Bank v.** A.S.No.695/1999 15 **Gordon (1903 AC 240)** the conception of a collecting banker was that of "receiving the cheque from the customer, presenting it and receiving the money for the customer, and then, and not till then, placing it to the customer's credit, exercising functions strictly analogous to those of a clerk of the customer sent to a bank to cash an open cheque for his employer." If the banker performs these functions in course of his business, in good faith and without negligence he will be within Section 131 of the Act. 17. In **Kerala State Co-op. Marketing Federation v. State Bank of India (2004 (2) SCC 425)** the Apex court reiterated that, a banker, who encashes a cheque, in respect of which his client had no title, would become liable in conversion or for money had and received. However, Section 131 of the Negotiable Instruments Act protects the banker, provided he has received payment in good faith and without negligence of a cheque crossed generally or specially. 18. In the instant case, the defendant Bank encased the disputed cheque, i.e., Ext.X1 cheque bearing No.469116 for an amount of 3,00,000/-, on 23.3.1995. The plaintiff Bank₹ denied the issuance of Ext.X1 cheque. They also contended A.S.No.695/1999 16 that, one cheque leaf and one covering letter form were stolen from their office. On the other hand, the defendant Bank would contend that the encashment and payment of Ext.X1 cheque issued by the plaintiff Bank was made in due course in good faith and without negligence. As such, they are entitled for the protection under Section 131 of the Act. 19. The Accounts Officer of the plaintiff Bank, who was examined as PW1, has deposed that current account No.7046 maintained with the defendant Bank was usually operated and amounts were used to be withdrawn by issuing cheques signed by the Accounts Officer and the Senior Manager. At the relevant time one Prabhakaran Unni was the Senior Manager and PW1 was the Accounts Officer. One Rasheed was the Manager of the plaintiff Bank. The plaintiff Bank used to send a Clerk with covering letter to the defendant Bank for the purpose of encashment of cheques, who shall be accompanied by a Peon. 20. According to PW1, the signatures seen on the disputed cheque, i.e., Ext.X1 cheque, are forged as those signatures have no comparison with the signature of the Manager and that of the Accounts Officer. As per Ext.X1 an A.S.No.695/1999 17 amount of 3,00,000/- is seen encashed, but it was not₹ credited to the account of the plaintiff Bank. PW1 deposed that the signature seen in Ext.X1 cheque is not her signature. According to her, Ext.X1 cheque leaf might have been stolen from the plaintiff Bank. The balance confirmation statement received from the defendant Bank on 18.4.1995 through the Peon does not show encashment of 3,00,000/- vide Ext.X1₹ cheque. Subsequently statement of accounts was brought from the defendant Bank and then only she came to know about encashment of 3,00,000/-. PW1 went to the defendant Bank₹ for verification. She found that Ext.X1 cheque is a forged one and that the amount was encashed by somebody else. PW1 also came to know that the confirmation statement brought by the Peon was not the one actually issued by the defendant Bank. In Ext.A2 cash transit register maintained by the plaintiff Bank, there is no corresponding entry for an amount of ₹3,00,000/on 23.3.1995. Accordingly the matter was informed to Kannur Police. 21. The specimen signature of the authorised officer given to the defendant Bank was marked as Ext.B1. Though PW1 has deposed that Ext.X1 cheque does not bear either her A.S.No.695/1999 18 signature or that of the Senior Manager, the averment in the plaint is only to the effect that, the cheque leaf and the covering letter form appear to have been stolen from the plaintiff Bank, however that did not came to the notice to the plaintiff Bank or its officers immediately after the alleged theft. The testimony of PW1 during chief examination does not clearly reveal any such theft of cheque leaf or covering letter from the office of the plaintiff Bank. 22. Ext.X1 cheque bearing No.469116 for 3,00,000/-₹ was encahsed on 23.3.1995. PW1 during cross examination admitted that, the plaintiff Bank issued cheque bearing No.469115 on 18.3.1995. Thereafter, cheque bearing No.469117 was issued on 21.3.1995. At the time of issuance of those cheques, the missing of cheque bearing No.469116 never came to her notice. According to PW1, she came to know about the missing of cheque bearing No.469116 only on 17.4.1995. The evidence of PW1 would make it explicitly clear that, the plaintiff Bank had no knowledge about the alleged theft of Ext.X1 cheque leaf and Ext.X1(a) covering letter form at the time of the encasement of Ext.X1 cheque on 23.3.1995. Therefore, it is evident that, at the time of encashment of A.S.No.695/1999 19 Ext.X1 cheque nothing was conveyed to the defendant Bank as to 'stop payment' on the ground of alleged theft of Ext.X1 cheque leaf and Ext.X1(a) covering letter. 23. The Senior Manager of the plaintiff Bank, who was examined as PW2, deposed that, the signature seen in Ext.X1 cheque is not his signature and it has no similarity with the specimen signature in Ext.B1. Ext.X1(a) covering letter also does not bear his signature. Ext.A1 is a cancelled cheque, which bears his signature. PW2 has also deposed that as per Ext.A2 cash transit register, no transaction had taken place on 23.3.1995 for an amount of 3,00,000/-. Similarly, Ext.A3₹ cash book and Ext.A4 cash scroll do not show that an amount of 3,00,000/- was debited in the account of the plaintiff Bank₹ through encashment of Ext.X1 cheque. 24. According to PW2, he came to know about the alleged encahsment of Ext.X1 cheque only on 26.4.1995. Therefore, it is evident that, at the time of encashment of Ext.X1 cheque on 23.3.1995, Pws.1 and 2, the authorised signatories of the plaintiff Bank, were not even aware about the alleged theft of Ext.X1 cheque leaf and Ext.X1(a) covering letter. They did not know about the missing of Ext.X1 cheque A.S.No.695/1999 20 leaf bearing No.469115, even at the time of issuance of cheque bearing No.469117 on 21.3.1995. From the testimony of Pws.1 and 2 it has come on record that the officials of the plaintiff Bank were not diligent in keeping a proper track of the transactions with the defendant Bank. Even without noticing the alleged theft of cheque leaf bearing No.469115, Pws.1 and 2 issued cheque bearing No.469117 on 21.3.1995. Therefore, negligence is writ large on the part of Pws.1 and 2 and other officials of the plaintiff Bank. PW1 has also deposed that, on verification with the defendant Bank she came to know that the confirmation statement brought by the Peon of the plaintiff Bank was not the one actually issued by the defendant Bank. 25. Dws.1 and 2 are the officials attached to the defendant Bank. DW1, who was the person appointed by the defendant Bank to deal with the Current Account Section at the relevant time, identified Ext.X1 cheque and Ext.X1(a) covering letter. DW1 deposed that, Ext.X1 cheque and Ext.X1(a) covering letter were brought by a person who regularly visited the defendant Bank and as such, there was no reason to doubt its genuineness. It was the usual practice of the plaintiff Bank to encash cheques worth several lakhs. Therefore, at the time A.S.No.695/1999 21 of presentation, there was no suspicious circumstances for DW1 to doubt the genuineness of Ext.X1 cheque and Ext.X1(a) covering letter. DW1, during cross examination deposed that, at the time of passing Ext.X1 cheque, he had verified the same with the specimen signatures and found nothing to suspect its genuineness of the said cheque. 26. DW2, who was the Accountant of the defendant Bank at the relevant time deposed that, when the cheque amount exceeds 1,00,000/-, the cheque will be sent to him₹ and he will also verify the same. DW1 has stated that Ext.X1 cheque was encashed after verifying the signatures in the said cheque and Ext.X1(a) covering letter, with the specimen signatures. He verified Ext.X1 cheque and found no suspicion on the apparent tenor of the instrument. He never felt any forgery. It has come out during the examination of DW2 that, he is a well experienced employee of the defendant Bank having experience for about 33 years, and he used to verify and pass cheques for lakhs and lakhs of rupees per day. 27. The cash scroll, which was marked as Ext.B5 contains the corresponding entry for encashment of an amount of 3,00,000/- as per Ext.X1 cheque, which was marked as₹ A.S.No.695/1999 22 Ext.B5(a). DW2 has deposed that Ext.X1 cheque was honoured in due course of the business and that Ext.B5(a) entry was made by him. The transit voucher book, which is marked as Ext.B6, also contains a corresponding entry in page No.72, which was marked as Ext.B6(a). Similarly, the Cashier payment scroll which was marked as Ext.B7 also contains an entry at page No.264, which was marked as Ext.B7(a). Therefore, the materials on record shows that Ext.X1 cheque was honoured in due course of the business of the defendant Bank and there was no malafides or lack of diligence on the part of the employees of the defendant Bank. Dws.1 and 2 are admittedly the competent employees of the defendant Bank and Exts.B5, B5(a), B6, B6(a), B7 and B7(a) are the entries corresponding to encashment of 3,00,000/- as per Ext.X1₹ cheque. Therefore, the materials on record makes it explicitly clear that Ext.X1 cheque was honoured in due course of the business of the defendant Bank. 28. The pleadings and evidence on record show that, the defendant Bank conducts clearing house at Kannur, as an agent of the Reserve Bank of India, in which all the 24 Banks at Cannanore including the plaintiff Bank maintain accounts in A.S.No.695/1999 23 order to manage their funds. The fact that the plaintiff Bank made 16 withdrawals in cash over the counter of amounts ranging from 3,00,000/- to 52,00,000/-, aggregating to₹ ₹ ₹227,00,000/-, during the period from 24.2.1995 to 28.4.1995, is not in dispute. The usual practice followed by the plaintiff Bank for such cash withdrawals was to sent an employee with the cheque and covering letter, which would contain the signature of such employee duly attested by the authorised officer of the plaintiff Bank operating the accounts, is also not in dispute. The encashment of Ext.X1 cheque was also made following the said practice, on 23.3.1995, on the strength of Ext.X1(a) covering letter. The said fact is borne out from the evidence on record. During the cross-examination of DW1, an attempt was made to bring out certain variations in the signatures in Ext.X1 cheque with that of the specimen signatures in Ext.B1. Since the standard of care required of the defendant Bank, derived from the ordinary practice of bankers, does not include the duty to subject a cheque or covering letter to microscopic examination, it can only be presumed that, while encashing Ext.X1 cheque the defendant Bank acted in good faith and without negligence. A.S.No.695/1999 24 29. The evidence of DWs 1 and 2, who are the competent officers of the defendant bank, would show that they did not find any suspicious circumstance as to the genuineness of Ext.X1 cheque and Ext.X1(a) covering letter, at the time of presentation and encashment of Ext.X1(a) cheque. The evidence of Dws.1 and 2 would also show that the plaintiff Bank did not inform the defendant Bank anything about the alleged theft of Ext.X1 cheque by 23.3.1995, the date of encashment. In the plaint, the plaintiff Bank has no case that DWs 1 and 2 or any other officials of the defendant Bank had a role in the alleged forgery of Ext.X1 cheque and Ext.X1(a) covering letter or in the presentation and encashment of Ext.X1 cheque. The plaintiff Bank has also no case in the plaint that they do not have an employee by name K.J. Chacko. Therefore, as rightly found by the trial court, the totality of the facts and circumstances would go to show that, Ext.X1 cheque was presented by the plaintiff Bank under Ext.X1(a) covering letter and it was honoured in accordance with the apparent tenor of the instrument by the defendant Bank in good faith and without negligence. On appreciating the entire evidence on record, the trial court found no negligence A.S.No.695/1999 25 on the part of the defendant Bank in honouring and encashing Ext.X1 cheque. Accordingly, the trial court concluded that the defendant Bank has acted bonafidely under good faith while honouring Ext.X1 cheque. Based on the pleading and evidence on record the trial court concluded further that, the defendant Bank has substantiated their case that they were not negligent while discharging their duty in the course of their business and hence they are not at all answerable and liable to pay the amount of 3,00,000/- claimed by the plaintiff Bank together₹ with interest and costs. The said finding of the trial court is perfectly legal, which warrants no interference in this appeal. In the result, the appeal fails and the same is accordingly dismissed. Sd/- ## **V.CHITAMBARESH, JUDGE** Sd/- **ANIL K.NARENDRAN, JUDGE** skj/dsn True copy P.S. To Judge