Venkatarama Ayyar, J.- This appeal arises out of a suit instituted by the respondent, which is a firm of cloth merchants carrying on business among other places at Madras, for the recovery of a sum of Rs. 5,225-12-9 from the Bharat Bank, Ltd., who are the appellants. On 24th November, 1943, the respondent drew a cheque for Rs. 5,225-12-9 on the Chartered Bank of India, Australia and China at Madras payable to their Benares branch or bearer. The cheque was crossed and sent by oridinary post to the payee at Benares. Exhibit P-2 is a photographic copy of the said cheque. On 6th December, 1943, a person who gave out his name as Matha Prasad Gupta opened an account with the Mount Road branch of the appellants with a cash deposit of Rs. 250 and then put into his account the cheque drawn by the plaintiff on 24th November, 1943 and the same was cashed by the bank in the usual course of business through the clearing house on 7th December, 1943. Matha Prasad Gupta operated on this account by issuing a cheque for Rs. 200, Exhibit P-4(a) and another cheque for Rs. 2,225, Exhibit P-4(b) both dated 6th December, 1943 and drawn in favour of one Seetharam. On 7th December, 1943, he drew a cheque for Rs. 125 in favour of a watch-maker Exhibit P-4(d) and on 9th December, 1943, himself drew a cheque for Rs. 2,800, Exhibit P-4(c), and thereafter disappeared. The balance remaining to the credit of his account at that time was Rs. 124-9-0. The plaintiff discovered the loss of the cheque in March, 1944 and lodged a complaint with the police. Investigation which followed thereon revealed that the person who had cashed the cheques, Exhibits P-4 and P-4(b), and signed his name as Seetharam was in truth a person called R.P. Misra of Benares; that the person who gave out his name as Matha Prasad Gupta was in fact a person called Jawahar Lal; that they along with others had conspired to commit theft of cheques and to cash them by forging signatures; that in pursuance of this conspiracy one Jai Narayanan had stolen the cheque of which Exhibit P-2 is a copy; that Jawahar Lal forged the signature of the payee therein and that the proceeds thereof had been taken by Jawahar Lal and Misra. Thereafter Jawahar Lal turned approver; Misra was prosecuted along with nine others for various offences in Sessions Case No. 15 of 1945 on the file of the Court of the Additional Sessions Judge, Benares, and convicted and sentenced to imprisonment. Meantime the plaintiff instituted the suit out of which this appeal has arisen for the recovery of the amount of the cheque from the appellants on the ground that Jawahar Lal alias Matha Prasad Gupta got no title to it and that by receiving the amount due thereon the bank had become liable to the plaintiff in conversion. The appellants pleaded that in realising the cheque they had acted in good faith and without negligence and that they were accordingly protected by section 131 of the Negotiable Instruments Act. The suit was tried by Mack, J. He held that Matha Prasad Gupta had been permitted by the Bank authorities to open an account without proper introduction, that Exhibit P-2 had been cashed without due examination of the endorsements thereon and that such examination would have revealed the true character of the transaction, that the bank had been negligent at all stages of the matter and was, therefore, not entitled to rely on section 131 of the Act, in answer to the claim. In the result the suit was decreed. The defendants prefer this appeal. The only point for decision in this appeal is whether the appellants are entitled to the protection afforded by section 131 of the Negotiable Instruments Act on the ground that they received payment of the cheque “in good faith and without negligence” as provided in the section, the burden of establishing the same being unquestionably on them. Though the section requires good faith and absence of negligence in the receipt of the payment of the cheque amount, the sense of the matter requires that these elements should be present at all stages of the transaction culminating in the cashing of the cheque. The section is intended to give protection to the bank not merely at the stage of the realisation of the cheque but also at the earlier stages leading to it. The section is intended to give protection to the bank not merely at the stage of the realisation of the cheque but also at the earlier stages leading to it. The basis of the action against which section 131 grants protection is conversion and an action in conversion will lie only with reference to chattels and in strict theory, therefore, no action will lie in conversion by a customer in respect of money standing to his credit in a bank as he has no property in specific coins. To get over this difficulty the theory has been adopted that the piece of paper called the cheque might be treated as converted and an action in conversion could be maintained for its value,-vide Morison v. London County and Westminster Bank1 and A.L. Underwood, Ltd. v. Bank of Liverpool and Martins2. The result then is that the receipt of the stolen cheque would itself be conversion even without reference to cashing and if section 131 is not applicable at that stage the bank will be without protection even if it acts bona fide and without negligence. That clearly could not have been the intention of the Legislature in enacting section 131 and therefore, when the section speaks of receipt of payment it has obviously in mind all the preceding stages leading up to the encashment of the cheque and in that view the requirement that the bank should act in good faith and without negligence would apply to all those stages. The following remarks on section 82 of the English Bills of Exchange Act of 1882 corresponding to section 131 of the Negotiable Instruments Act in Paget’s Law of Banking (Fifth Edition, page 294) may be quoted:- “The obligation and the protection must be co-relative and co-extensive. If the words”receives payment“are to be read as involving protection to the banker for all preliminary operations leading up to the receipt of the money, the condition precedent to that protection, viz., that the banker shall act in good faith and without negligence, must cover the same ground..... The whole transaction then, from the taking of the cheque to the receipt and disposition of the money, must be in good faith and without negligence”. We may now examine the evidence as to how the cheque came into the possession of the Bank. The whole transaction then, from the taking of the cheque to the receipt and disposition of the money, must be in good faith and without negligence”. We may now examine the evidence as to how the cheque came into the possession of the Bank. On 6th December, 1943, a current account was opened in the name of Matha Prasad Gupta with a cash deposit of Rs. 250 and the cheque in question was put into that account on the same date. There is some dispute as to whether the account itself was opened with the cheque in question or whether it was put into the account later. The evidence on the matter is not clear but there is no reason to differ from the finding of Mack, J., that “Matha Prasad Gupta opened the account with a cash deposit of Rs. 250”. The circumstances under whieh the accounts came to be opened have now to be reviewed. Matha Prasad Gupta was a new customer and the rules of business of the bank provided that the current accounts are to be opened “for persons known to the bank or properly introduced”. The application for opening the current account by Matha Prasad Gupta shows that he was introduced by one M. Krishnaswami, who was then in the service of the Bank and it also bears the initials of the accountant. Apart from this, there is practically no evidence throwing any light on the circumstances under which the current account came to be opened. D.W. 3 was the manager of the Mount Road branch at the material dates. The practice of the bank, as spoken to by him, is that a person who wants to open a new account goes in the first instance to the ledger clerk, who satisfies himself as to whether a new account could be permitted to be opened. When he is satisfied he takes a formal application from the customer and passes it on to the chief accountant or the manager for counter-signature, these being the two officers, who have the authority to permit opening of a new account. The account is then opened and a cheque book and a pass book are issued to the customer. The application presented by Matha Prasad Gupta was, as already stated, recommended by Mr. Krishnaswami and it bears the initials of the Chief Accountant. The account is then opened and a cheque book and a pass book are issued to the customer. The application presented by Matha Prasad Gupta was, as already stated, recommended by Mr. Krishnaswami and it bears the initials of the Chief Accountant. D.W. 3 deposes that it did not come to him for approval and that he did not see either Matha Prasad Gupta or make any enquiries about him. The Chief Accountant has not been examined nor Krishnaswami, Thus apart from what appears on the face of the application there is no independent evidence to show that the bank had made any enquiries in the matter. It was argued for the appellants that as the application had been recommended by Krishnaswami it must be held that the customer had been properly introduced but Krishnaswami has not been examined in these proceedings and his deposition in the Criminal Court which has been marked as Exhibit D-2 does not very much assist the appellants. He stated therein: “I was a clerk in the Bharat Bank at Mount Road, Madras, in 1943. One Matha Prasad Gupta opened a current account on 6th December, 1943, with Rs. 250. The account opening form, Exhibit P-98 was filled up by Matha Prasad Gupta. I introduced him to the bank. Exhibit P-98 bears my signature as well. I did not know him before. I introduced him thinking; that it would add to the business of the bank and it would help me in my prospects”. It is clear from this deposition that what Krishnaswami did was to introduce a person whom he did not know and the bank evidently acted on his introduction and made no further enquiries. Mr. M. Sundaram, the learned advocate for the appellants, argues that on these facts the bank must be held to have acted without negligence, inasmuch as they acted on the recommendation of their employee who, it is not disputed, was a respectable person, and the fact that he acted negligently is not a ground for depriving the bank of its protection under section 131, as what they did was in strict accordance with the rules. But the question is not whether the rules of the bank had been observed but whether the bank had acted without negligence in opening a new account and though the fact of the observance of the rules would be a material factor in determining the question, it is not decisive. In Motor Traders Corporation v. Midland Bank1, the point arose for consideration whether the bank could be said to have acted with negligence merely because its officers had failed to observe the rules of the bank for the conduct of its business. In answering the question in the negative Goddard, J., observed: “I am far from saying that the plaintiffs, or any other person whose property has been converted are entitled to rely upon a literal performance, or are entitled to require a literal performance by the bank of these regulations. The bank does not owe a duty to them to carry out this rule, that rule, or the other rule. Indeed I doubt whether they owe their own customers the duty of carrying out all the rules which they may lay down as counsels of perfection. The question in every case is not whether the bank require a particular standard of conduct, but whether the particular acts which are done are enough to discharge the onus which is upon the bank either in respect of their own customer or in respect of some other customer.” 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 material element in establishing that the bank had acted without negligence as required by section 131. It is next contended by Mr. M. Sundaram that what section 131 requires is absence of negligence in the realisation of the cheque, that even construing it as including negligence in the “preliminary operations leading up to the receipt of the money”, it cannot include negligence in the opening of accounts and the decision of the Privy Council in Commissioners of Taxation v. English, Scottish and Australian Bank1, is strongly relied on in support of this contention. There, the facts were that on 6th June, 1917, one Mr. Friend drew a cheque on the Australian Bank of Commerce for the amount of income-tax payable by him and delivered it to the Commissioner of Taxes. There, the facts were that on 6th June, 1917, one Mr. Friend drew a cheque on the Australian Bank of Commerce for the amount of income-tax payable by him and delivered it to the Commissioner of Taxes. A person calling himself Thallon appeared before the Accountant of the respondent bank and wanted to open a current account. He complied with the usual formalities and paid £20 and an account was opened on the 7th. Next day he put into his account the cheque of Mr. Friend and the same was cashed in the usual course. On the 9th, nth and 12th of June, 1917, Thallon issued three cheques for substantial amounts and thereafter disappeared. In fact there was no person of the name of Thallon at the address given. The Commissioner of Taxes claimed the amount of the cheque from the respondent bank on the ground of conversion. The defence was that the bank was protected by section 88 of the Australian Bills of Exchange Act corresponding to section 131 of the Indian Negotiable Instruments Act. In upholding this defence Lord Dunedin observed at page 688: “The remaining point is, was there negligence on the part of the bank in collecting the cheque? Their Loriship; say ‘in collecting the cheque,‘because that is in a slightly different phrase what the statute says, ‘without negligence receives payment for a customer ‘. It is not a question of negligence in opening an account, though the circumstances connected with the opening of an account may shed light on the question of whether there was negligence in collecting a cheque.” It is contended that on the facts the present case is indistinguishable from Commissioners of Taxation v. English, Scottish and Australian Bank1, that negligence on the opening of an account, as is observed therein, has no direct bearing on the question whether there was negligence in the encashment of the cheque and that, therefore, the fact that the bank had not made proper enquiries regarding Matha Prasad Gupta before opening; an account in his name was not a ground for denying to the appellants, the protection which section 131 gives. Reliance was also placed on the decision in Bapulal v. Math Bank2, wherein Chagla, J., as he then was, held that there was no absolute duty cast on a bank to make enquiries about an intending customer and that it cannot be said to have acted with negligence if it acts on a proper reference and there are no suspicious circumstances. Mr. K. Umamaheswaram, the learned counsel for the respondent, relied on the decisions in Ladbroke & Co. v. Todd3 and Hampstead Guardians v. Barclays Bank, Limited4 and certain observations in Lloyds Bank, Limited v. E.B. Savory and Company5, as establishing that if the bank did not make proper enquiries before an account is opened, that would amount to negligence for the purpose of section 82 of the English Act. In Ladbroke & Co. v. Todd3, a cheque payable to Jobson was stolen and a person pretending to be Jobson opened an account with the defendant bank with that cheque. The cheque was cleared in the usual course of business and the amount was drawn by the pretender, Jobson. In an action in conversion by the drawers of the cheque the bank relied by way of defence on section 82 of the English Bills of Exchange Act. Bailhache, J., in overruling the same, referred to the evidence which established that it was the practice of the banks to make enquiries before opening new accounts and observed: “It was true that banks were willing to take cheques, but before they would allow them to be operated upon they must be satisfied as to the respectability of the intended customer. Sometimes that was done by references, and sometimes by an introduction through a customer......The defendant, in fact, did fall short of that degree of care ordinarily exercised by bankers, and therefore, he was guilty of negligence.” It was observed in Bapulal v. Nath Bank1, that this decision could not be regarded as good law in view of the later decision of the Privy Council in Commissioners of Taxation v. English, Scottish and Australian Bank2. In Hampstead Guardians v. Barclays Bank, Ltd.3, which was decided in 1923 and in which reference is made to the decision in Commissioners of Taxation v. English, Scottish and Australian Bank2, Acton, J., held that in order to entitle a bank to protection under section 82 it must prove that it made reasonable enquiries before opening an account. In Hampstead Guardians v. Barclays Bank, Ltd.3, which was decided in 1923 and in which reference is made to the decision in Commissioners of Taxation v. English, Scottish and Australian Bank2, Acton, J., held that in order to entitle a bank to protection under section 82 it must prove that it made reasonable enquiries before opening an account. In Lloyds Bank v. The Chartered Bank of India, Australia and China4, Sankey, L.J., quoted the decision in Ladbroke & Co. v. Todd5, as authority for the position that “a bank may be negligent in not making enquiries as to a customer on opening an account.” In Lloyds Bank v. E.B. Savory & Company6, the position was thus summed up by Lord Wright: “It is true that the question of absence of negligence must be considered separately in regard to each cheque, but it is also true that the matter must be considered, as Lord Dunedin says in Commissioners of Taxation v. English, Scottish and Australian Bank2, in view also of all the circumstances antecedent and present. There may thus be relevant negligence in connection with the opening of the customer’s account by the banker. It is now recognised to be the usual practice of bankers not to open an account for a customer without obtaining a reference and without an enquiry as to the customer’s standing; a failure to do so at the opening of the account might well prevent the banker from establishing his defence under section 82 if a cheque were converted subsequently in the history of the account; this rule was applied by Bailhache, J., in Ladbroke & Co. v. Todd5, who on that ground held that the banker had not made out his defence under section 83. v. Todd5, who on that ground held that the banker had not made out his defence under section 83. The matter is now so well appreciated by bankers that the appellants have a printed rule saying that no new current account is to be opened without knowledge of or full enquiry into the circumstances and character of the customer.” The law is thus stated in Halsbury’s Laws of England, Volume I, paragraph 1330, page 811: “It is negligence not to make enquiries as to a customer upon opening an account and collecting a cheque for him.” The position in law may thus be summarised:-When in an action in conversion a defence is raised under section 131 of the Negotiable Instruments Act, the primary question for determination is whether in the matter of realisation of the cheque the collecting bank had acted without negligence-negligence not merely at the stage of encashment but at the prior stages from the receipt of the cheque in question. The question whether the bank had acted with negligence in the opening of the account will, however, be relevant under section 131 to this extent that if the opening of the account and the deposit of the cheque are really part of one scheme, as where the account itself is opened with the cheque in question or where it is put into the account so shortly after the opening of the account as to lead to the inference that it is part of it, then negligence in the matter of opening the account must be treated as negligence in the matter of realisation of the cheque. It might happen that even when an account is opened without a proper enquiry it might continue to be operated upon satisfactorily for sometime but. long afterwards a cheque might be put into the account which might turn out to be forged. In such a case it cannot be laid down as an inexorable rule that negligence in the opening of an account must be treated as negligence in the receipt of the amount of the cheque. In all the decisions in which negligence in opening the account was held to preclude a defence under section 82 of the English Act, the opening of the account and the deposit of the cheque were contemporaneous or so close in point of time as to be regarded as one transaction. In all the decisions in which negligence in opening the account was held to preclude a defence under section 82 of the English Act, the opening of the account and the deposit of the cheque were contemporaneous or so close in point of time as to be regarded as one transaction. The observations in Commissioners of Taxation v. English, Scottish and Australian Bank1, that the opening of the account is material as shedding light on the question whether there was negligence in collecting a cheque does, with respect, bring out the true position that there must be sufficient connection established between the opening of the account and the collection of the cheque before a defence under section 131 could be held to be barred. The question would then be one of fact as to how far the two stages can be regarded as so intimately associated as to be considered as one transaction. On the facts of this case no difficulty arises as to the true position. The account was opened on 6th December, 1943, with cash; the cheque was put into the account on the Same date and drawn by cheques dated 6th, 7th and 9th December. All these clearly form parts of a single scheme and negligence at the stage of opening the account must accordingly be held to deprive the bank of the benefit of section 131. Mack, J., further held that the endorsements on the cheque were suspicious and sufficient to put the bank on enquiry and as no enquiry was made that would also be negligence which would prevent the bank from relying on section 131. The points to be noticed in connection with these endorsements are these:The cheque was made payable to the plaintiff’s firm at Benares and it is a matter for suspicion that it should have been presented for collection at Madras. While the issue of the cheque by the plaintiff’s firm bears its stamp, the endorsement by the same firm at Benares is without stamp. There are three endorsements ostensibly by three different persons but all of them would appear to be in the same handwriting and a remarkable feature about them is that in all of them the word “proprietor”, describing the signatory, is spelt as “propritor”. There are three endorsements ostensibly by three different persons but all of them would appear to be in the same handwriting and a remarkable feature about them is that in all of them the word “proprietor”, describing the signatory, is spelt as “propritor”. How, three wits jumped on an error is a matter which must have excited suspicion and provoked enquiry but no enquiry whatever was made. There cannot, therefore, be any doubt that the bank had acted negligently in not scrutinising the endorsements. But it is argued for the appellants that the cheque is made payable to bearer and that in such a case there is no need to examine the endorsements because the bank is bound to pay the amount to whoever was its holder. Reference was also made to section 85 (2) of the Negotiable Instruments Act which enacts that the drawer of a bearer cheque is discharged by payment in due course to the bearer and it is argued that in view of that section there is no obligation cast upon the bank to examine the endorsements in bearer cheques. Reliance is also placed on the evidence of D.W. 1 that endorsements on bearer cheques are never looked into. But this contention proceeds on a misapprehension of the true position. Section 85(2) applies to a paying bank and has no bearing on the rights of a collecting bank which must be determined in accordance with the provisions of section 131. If a claim were to be made by the plaintiff against the Chartered Bank of India, Australia and China for refund of the amount of the cheque, then section 85(2) will come into operation and that bank can plead discharge under that section. But in an action in conversion against the collecting bank where the defence is based on section 131 the endorsement becomes material as an element in determining whether the bank had acted without negligence. If there had been no endorsement at all it might be that no inference of negligence could be made; but if in fact there is one and that conveys a warning that all is not well with the title of the holder it will be negligence not to heed to it and pursue the matter. If there had been no endorsement at all it might be that no inference of negligence could be made; but if in fact there is one and that conveys a warning that all is not well with the title of the holder it will be negligence not to heed to it and pursue the matter. In fact the evidence is that when the holder presents a bearer cheque at the counter he is asked to sign it before receiving payment and that was also done in this case and if at that stage the bank shuts its eyes to what plainly appeals on the back of the cheque it would clearly be negligence, such as will deprive it of the protection under section 131. To sum up the bank was negligent in opening an account in the name of Matha Prasad Gupta without making an enquiry; the cheque came to the possession of the bank as part of the opening of the account and the endorsements on the cheque are sufficiently suspicious to put the bank on enquiry. On these facts it must be held that the bank had acted with negligence at all stages of this matter and they are not entitled to rely on section 131 in answer to the claim. In the result we confirm the judgment of Mack, J. and dismiss this appeal with costs. V.P.S. ----- Appeal dismissed.