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2000 DIGILAW 358 (MAD)

Syndicate Bank v. T. M. Khadar Shah and Another

2000-03-29

N.V.BALASUBRAMANIAN

body2000
Judgment :- N.V. BALASUBRAMANIAN, J. The appellant was the first defendant in the suit O.S. No. 124 of 1984, on the file of the Subordinate Judge's Court, Coimbatore. The plaintiff, who is the first respondent in the appeal, instituted the suit for a decree directing the defendants to pay a sum of Rs. 30, 899 with future interest on Rs. 21, 200 and for costs. The case of the plaintiff, as seen from the plaint, is that the plaintiff opened a pigmy deposit account on February 15, 1980, with the first defendant, a nationalised bank, and the account No. is A.D. 8417. The plaintiff has stated that as per the said deposit scheme, the second defendant who was an employee of the first defendant, was collecting a sum of Rs. 100 per day from the plaintiff and he was making entries in the pass book provided by the first defendant. According to the plaintiff, he subscribed for 347 days amounting to Rs. 34, 700 to the first defendant and the said payments were entered in the pass book duly signed by the second defendant and since the second defendant collected the money on the authority given by the first defendant, the first defendant is liable to account for the same. The plaintiff has stated that when he approached the first defendant on February 3, 1981, with a view to close the said pigmy deposit account, he came to know that the first defendant had given credit to only a sum of Rs. 14, 000 towards his account and when the plaintiff produced the passbook wherein entries for Rs. 34, 700 were made, it was represented by the first defendant that the second defendant should have misappropriated the balance amount from out of the payments made by the plaintiff. The plaintiff has stated that the first defendant has given a complaint to the police in crime No. 339 of 1981, dated February 3, 1981, against the second defendant for the offences under sections 420 and 406 of the Indian Penal Code, 1908, and the police authorities have taken custody of the passbook given to the plaintiff. It is stated that the plaintiff has made repeated demands to the first defendant to make payment of Rs. It is stated that the plaintiff has made repeated demands to the first defendant to make payment of Rs. 34, 700 collected from him, but the first defendant represented that the matter was taken up by it with the higher authorities and the claim would be settled as early as possible. It is stated that the first defendant has not paid the amount of Rs. 34, 700 accrued as on August 19, 1981, but the first defendant has ploughed a sum of Rs. 13, 500 into an Adarsh Fixed Deposit in the name of the plaintiff and closed the same on August 19, 1981, and paid the said sum on August 24, 1982. According to the plaintiff, the first defendant has not given credit to the balance amount of Rs. 21, 200. Hence, the suit was filed for a decree directing the defendants to pay Rs. 21, 200 with interest at 18 per cent. per annum from August 19, 1981.The defence set up by the first defendant was that the payments were made contrary to the instructions and rules. According to the first defendant, it is the duty of the customer to verify the details and if any mistake is found, it is for him to report the matter to the bank immediately and in order to ensure that the savings are properly accounted for, a weekly card system has been introduced and the customer is expected to verify the balance up to the end of the previous week and authenticate the correct weekly collections and sign the confirmation part which should be retained by the bank. It is stated that the plaintiff should have verified the weekly payments and insisted upon the counterfoils of the weekly card being handed over to him. It is also stated that there is no passbook issued by the first defendant-bank under the pigmy deposit scheme and the pass book did not contain the signature of the manager or the signature of any other officer of the first defendant-bank. The precise case of the first defendant is that the first defendant is not liable for the amount except the one which was admitted by the first defendant. An additional written statement was filed by the first defendant stating that the second defendant was not a regular employee of the first defendant bank. The precise case of the first defendant is that the first defendant is not liable for the amount except the one which was admitted by the first defendant. An additional written statement was filed by the first defendant stating that the second defendant was not a regular employee of the first defendant bank. The second defendant, collecting agent of the first defendant-bank remained absent and he was set ex parte. On the above pleadings, the trial court framed as many as four issues. After trial, the trial court found that the plaintiff deposited money to the pigmy deposit scheme as per the terms of the said scheme and hence, the plaintiff is entitled to Rs. 21, 200 with interest thereon. The trial court also found that the first defendant-bank is liable to pay the money collected by the second defendant and accordingly, decreed the suit as prayed for with costs. It is against the judgment and decree, the present appeal has been preferred by the first defendant-bank.Mr. S. Ramanarayanan, learned counsel appearing for the appellant, submitted that in order to ensure that savings were properly accounted, a weekly card system was introduced and the plaintiff could have verified every week balance up to the end of previous week and the plaintiff was required to authenticate the correct weekly collections and sign the confirmation part which would be retained by the bank and the plaintiff was also given counterpart showing the balance of previous week balance duly confirmed by the appellant-bank. The rules also provide that weekly collections would be authenticated by the plaintiff and confirmed by the collecting representative. Learned counsel for the appellant also submitted that the evidence of PW-1 that it is not necessary to get weekly card is not correct, when PW-1 himself admitted that to ensure the weekly balance is verified, the weekly card system was introduced. According to learned counsel, the plaintiff himself admitted that the bank manager did not sign the passbook. Learned counsel submitted that it is not open to the plaintiff to shift the liability to the bank when the plaintiff has not acted according to the rules. According to learned counsel, the plaintiff himself admitted that the bank manager did not sign the passbook. Learned counsel submitted that it is not open to the plaintiff to shift the liability to the bank when the plaintiff has not acted according to the rules. Learned counsel for the appellant, in this connection, relied upon the decision of the Supreme Court in State Bank of India v. Smt. Shyama Devi, and submitted that unlike the case before the Supreme Court, it is a case where the amount was not paid by the customer to an employee of the bank for crediting the same to his account and he therefore submitted that on the basis of entries found in the passbook, the appellant-bank is not liable. On the question of limitation, learned counsel for the appellant submitted that the amount became due on February 3, 1981, as the plaintiff himself admitted that he made a demand for the sum on February 3, 1981, and he was informed that only a sum of Rs. 14, 000 was available at his credit against the amount due Rs. 34, 700, but the suit filed on March 2, 1984, is barred by limitation. Learned counsel in this connection referred to the decision of the Supreme Court in Kashinath Sankarappa Wani v. New Akot Cotton Ginning and Pressing Co. Ltd., Mr. G. M. Nathan, learned counsel for the first respondent submitted that the evidence of PW-1 remains uncontradicted and the plaintiff was following the pigmy deposit scheme and payments were entered in the pass book issued by the manager of the appellant-bank and the statement (exhibit A-20), furnished by the bank shows that Rs. 14, 000 was available at the credit of the plaintiff's account, while the plaintiff deposited a sum of Rs. 34, 700 through the second defendant, authorised representative of the first defendant and there is no explanation on what basis only a sum of Rs. 14, 000 was credited to the Adarsh account in the name of the plaintiff. 14, 000 was available at the credit of the plaintiff's account, while the plaintiff deposited a sum of Rs. 34, 700 through the second defendant, authorised representative of the first defendant and there is no explanation on what basis only a sum of Rs. 14, 000 was credited to the Adarsh account in the name of the plaintiff. Learned counsel submitted that the bank has acted in a careless manner and the respondent-bank has not sent any intimation regarding the balance amount available in the plaintiff's account and the plaintiff was issued a pass book by the manager of the bank and there is no dispute about the receipt of the money by the second defendant on behalf of the appellant-bank and hence, the appellant-bank is responsible for the amount deposited by the plaintiff. In so far as the question of limitation is concerned, learned counsel referred to the letters (exhibits A-12, A-18, A-19, A-20, A-21 and A-39) and submitted that the appellant-bank acknowledged the claim of the plaintiff on March 13, 1981, and suit was filed on March 2, 1984, and hence, the suit is maintainable. On hearing the arguments of learned counsel for the appellant and learned counsel for the first respondent, the following points arise for consideration in the appeal : (1) Whether the suit is barred by limitation ? (2) Whether the plaintiff is entitled to the suit claim ? In so far as the question of limitation is concerned, though on February 3, 1981, the plaintiff came to know that only Rs. 14, 000 was credited to his account against the actual amount said to be deposited, namely, Rs. 34, 700, in the letter issued by the appellant-bank, exhibit A-12 dated March 13, 1981, the plaintiff was requested "to kindly bear with the appellant-bank till the bank received orders from the head office" regarding refunding of the plaintiff's AD account. In exhibit A-12, an assurance was given in favour of the plaintiff "to arrange for refunding of the amount" as requested by the plaintiff. In the letter, exhibit A-39, the appellant-bank has stated that the matter was taken up to the higher authorities and sought the co-operation of the plaintiff in the matter and requested the plaintiff "to bear with the bank for the delay caused in settling the claim". In the letter, exhibit A-39, the appellant-bank has stated that the matter was taken up to the higher authorities and sought the co-operation of the plaintiff in the matter and requested the plaintiff "to bear with the bank for the delay caused in settling the claim". It is clear from the above letter that the appellant-bank had assured to settle the matter in the above letters, it must be taken that the suit filed on March 2, 1984, is within the time. The letters issued by the appellant-bank clearly show that the appellant-bank have settled the claim of the plaintiff on August 13, 1981 (exhibit A-21) and converted the amount standing to the credit of the plaintiff's pigmy deposit account into Adarsh Fixed Deposit and even after that, the plaintiff was requested to bear with the bank. The assurance that the claim would be settled was also given by the appellant-bank. In my view, the suit filed on March 2, 1984, is within the time even taking into account the letter dated March 13, 1981 (exhibit A-12), as the starting point of limitation. Accordingly, I answer the first point against the appellant.In so far as the second point is concerned, the fact remains that the plaintiff was informed about the rules and regulations relating to the pigmy deposit scheme. Exhibit B-1 is the letter issued by the appellant-bank to the depositors wherein it was informed that the weekly card system was introduced to ensure that the savings were properly accounted for and by that system, the balance up to the end of the previous week could be verified. In exhibit B-1, it is also stated that the depositors should authenticate the correct weekly collections and sign the confirmation part which would be retained by the bank and the depositors would be issued counterfoils showing the balance of the previous week duly confirmed by the bank and the weekly collections authenticated by the depositors and confirmed by the collecting representatives would be given. The plaintiff, in acceptance of the same, has signed the same. The plaintiff, in his evidence, has admitted that he was aware of the weekly card system and he has also signed exhibit B-1 letter. The plaintiff also admitted that failure to maintain the weekly card and non-receipt of counterfoil are against the rules and regulations of the pigmy deposit scheme. The plaintiff, in his evidence, has admitted that he was aware of the weekly card system and he has also signed exhibit B-1 letter. The plaintiff also admitted that failure to maintain the weekly card and non-receipt of counterfoil are against the rules and regulations of the pigmy deposit scheme. He also admitted that he did not make any enquiry with the bank that the amount collected by the second defendant was deposited in his account. He admitted that his pass book did not contain the signature of the manager of the appellant-bank. The case of the appellant-bank is that the second defendant was not a regular employee of the appellant-bank. Unfortunately, on this aspect, there was no issue raised during the trial of the suit. The case of the plaintiff is that the second defendant was the employee of the appellant-bank. But, when it was denied by the appellant-bank, the plaintiff should have given some evidence to establish that the second defendant was an employee of the appellant-bank and collected the money from the plaintiff for and on behalf of the appellant-bank as an employee. In the absence of any evidence, it must be held that the second defendant has collected the money from the plaintiff as an agent of the appellant-bank as exhibit B-1 shows that the second defendant was the first defendant's collecting representative. The passbook produced by the plaintiff shows that there were no initials of the bank manager or bank officials acknowledging the collection of the amount. The plaintiff, in his evidence, has stated that the initials found in the passbook belong to the second defendant. Since the plaintiff has not acted in accordance with the rules and regulations governing the operation of the pigmy deposit scheme, I am of the view that it is not open to him to claim the amount from the appellant-bank.According to the plaintiff, the passbook was issued by the manager of the appellant-bank, but the assumption made by the trial court that the pass book was issued by the manager of the bank suffers from the flaw as the trial court has overlooked that there was no authentication or the signature of the manager in the pass book produced by the plaintiff. Secondly, the rules and regulations of the pigmy deposit scheme do not provide for the issue of a pass book. Secondly, the rules and regulations of the pigmy deposit scheme do not provide for the issue of a pass book. Since the rules and regulations of the said scheme only provide for the maintenance of a weekly card, it must be held that the amount collected from the plaintiff was de hors the rules and regulations governing the scheme and therefore the appellant-bank is not responsible for the amount collected by the second defendant. In addition, the plaintiff has admitted that the collection made was against the rules and regulations of pigmy/adarsh deposit rules, and when the plaintiff has admitted that the collection was against the rules, the non-examination of the manager, I consider, is not fatal as it is not open to the manager of the bank to act in deviation of the rules and regulations governing the operation of the pigmy deposit account. The trial court has overlooked that elaborate procedures involved in maintaining the weekly cards and in the maintenance of the periodical check over the collections of the amounts have been prescribed to avoid the fraud that may be played on the bank by the collecting agents in case they do not remit the money collected outside the bank premises. I hold that when the second defendant was appointed as an authorised representative for the purpose of collecting money under the pigmy deposit scheme, the appellant-bank is not liable to repay the amount collected by the second defendant in another account or in any other manner. As a matter of fact, the plaintiff was also informed that the second defendant was authorised only to make collections towards pigmy/adarsh deposit schemes and not to accept money towards other deposit or loan accounts and the bank is not responsible for contributions to any other deposit. As a matter of fact, the plaintiff was also informed that the second defendant was authorised only to make collections towards pigmy/adarsh deposit schemes and not to accept money towards other deposit or loan accounts and the bank is not responsible for contributions to any other deposit. Since the rules and regulations of the scheme provide for a weekly card system, the liability to pay the money cannot be shifted to the bank when the system was not followed.In this connection, it is relevant to notice the decision of the Supreme Court in State Bank of India v. Smt. Shyama Devi, and the Supreme Court held as under: "Where a client of the bank paid certain amount to an employee of the bank for crediting it to her account, the onus was on the client to show that she paid the amount to the employee of the bank and was received by that employee in the course of his employment with the bank. In such a case, the false and fraudulent entry about the deposit of the amount in the pass book of the client, could not shift the onus on the bank to prove the contrary. So also, where the husband of the client gave a cheque drawn on his bank account to the bank employee for crediting it to the account of the client by endorsing on its back and the employee cashed the cheque and misappropriated the amount, the act of the employee which caused the loss to the client could not be said to have been committed by the employee in the course of his employment with the bank. In such a case, the fact that false and fictitious entries to cover up his fraud were made by the employee in the pass book of the client and in the ledger account of the husband could not make the embezzlement committed by the employee an act committed in the course of his employment with the bank. In such a case, the fact that false and fictitious entries to cover up his fraud were made by the employee in the pass book of the client and in the ledger account of the husband could not make the embezzlement committed by the employee an act committed in the course of his employment with the bank. Consequently, the bank was not liable to make good the loss caused to the client by the act of the employee because the latter in such a case would be deemed to have acted as an agent of the client and not within the scope of his employment with the bank." The above decision makes it clear that if a customer had paid a certain amount to an employee of the bank and the employee received the amount in the course of his employment with the bank, the false and fraudulent entries made in the pass book of the customer could not shift the onus on the bank to prove the contrary. The decision of the Supreme Court is applicable as the second defendant was only a collecting representative or agent of the appellant-bank and there is no evidence to show that he was an employee of the appellant-bank. Though the second defendant might have collected the amount as a representative of the appellant-bank, the collections should have been made under the rules and regulations governing the pigmy/adarsh deposit scheme and not de hors the same. Therefore the decision of the Supreme Court would apply to the facts of the case, in favour of the appellant.The submission of Mr. G. M. Nathan, learned counsel for the first respondent that the bank had given credit to Rs. 14, 000 in Current Account No. 8417 of the appellant-bank does not help the plaintiff as it is well known in the banking practice that it is open to even a third party to remit amount in the account of the plaintiff and unless the plaintiff disowns the same, the appellant-bank is bound to receive the same. Therefore the mere fact that sum of Rs. 14, 000 was credited in the current account of the plaintiff does not improve the case of the plaintiff. The other submission made by Mr. Therefore the mere fact that sum of Rs. 14, 000 was credited in the current account of the plaintiff does not improve the case of the plaintiff. The other submission made by Mr. G. M. Nathan, learned counsel for the first respondent, was that the plaintiff followed the instructions given by the manager of the bank and in this aspect, the evidence of the plaintiff remains uncontradicted is not acceptable. As I have already held that it is not open to the manager of the bank to act in deviation of the rules and regulations framed for the operation of the pigmy/adarsh deposit scheme. Moreover, the evidence of the first respondent (plaintiff) is also clear that he has not followed the rules and regulations, and he has not acted as a reasonable person by not verifying with the bank whether the amounts given to the second defendant were credited assuming that the second respondent has operated on the basis of the passbook issued by the manager of the bank. In my view, a normal and reasonable customer would have sent the pass book for the verification with the bank as to the correctness of the amount credited in his account and there is no evidence to show that the pass book was sent for verification to the appellant-bank. Though the bank has also acted in a negligent manner in not sending weekly confirmation reports to the plaintiff, yet the negligence is not sufficient to enable the plaintiff to claim the amount collected by the second defendant in some other account other than the pigmy deposit account. Moreover, the power of the second defendant to collect money from the plaintiff was restricted to the collection of money under pigmy/adarsh deposit account and if he had collected money in any other account, it must be held that his act was beyond his authority and he had no power to affect the legal position of his principal by making use of the contract for collection of money for the pigmy account, when he was not authorised to collect money in any other account. The plaintiff, as already held by me, has not acted in a reasonable manner when he failed to make enquiry even with the second defendant by making proper inquiry whether he was acting as a collecting representative for accounts other than the pigmy/adarsh deposit scheme. The plaintiff, as already held by me, has not acted in a reasonable manner when he failed to make enquiry even with the second defendant by making proper inquiry whether he was acting as a collecting representative for accounts other than the pigmy/adarsh deposit scheme. Since the collection of the money by the second defendant affects the legal position of the principal, viz., the appellant-bank, I hold that the second defendant had no authority even to collect money incidentally in his capacity as an agent for the pigmy/adarsh deposit account for any other account. The nature of the relationship between the appellant-bank and the second defendant is the basis for the determination of the question whether the second defendant can involve the appellant-bank in the liability claimed by the plaintiff. I have already held that the second defendant had no such authority and hence, the appellant-bank is not liable for the amount claimed by the plaintiff.I therefore, hold that the second defendant, acted only as a collecting representative; he had not collected the money under pigmy/adarsh deposit scheme, and he was not authorised to collect the amount for any other scheme apart from the pigmy/adarsh deposit scheme. Admittedly, the plaintiff has not followed the rules and regulations framed for the maintenance and operation of pigmy/adarsh account and for the loss arising out of the money collected by the second defendant towards any other account apart from pigmy/adarsh deposit account, I hold the appellant-bank is not liable or responsible to make good the loss to the plaintiff. I hold that the trial court was not correct in holding that the plaintiff is entitled to the suit amount claimed and erred in decreeing the suit as prayed for. I therefore set aside the judgment and decree passed by the trial court and allow the appeal. However, in the circumstances of the case there will be no order as to costs.