NDLI: Canara Bank Vs. Canara Sales Corporation & Ors

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Negotiable Instruments Act
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Negotiable Instruments Act, 1881 (26 of 1881)
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Dismissed
Headnote	Negotiable Instruments Act, 1881-Sections 6, 31, 77, 85 and 117-Bank and customer of the Bank-Relationship between-That of a creditor and debtor-Cheque duly signed by a customer presented-Mandate to Bank to pay the amount-Element of trust between Bank and its customer-Exists. Banking Law-Bank and Customer-Entries in pass book and statement of accounts furnished by bank-Customer whether duty bound to intimate discrepancies. The respondent-company had a current account with the lant-bank in its Mangalore Bunder Branch. The Managing Director of the company and the General Manager of a sister concern of the company had been authorised to operate the said current account. The second defendant was attending to the maintenance of accounts of the respondent -company and was also in charge and had the custody of the cheque book issued by the Bank to the respondent company. During the process of bringing the accounts upto date certain irregularities were noticed in the account and on verification it was found that cheques purporting to bear the signature of the Managing Director were encashed, though they did not hear his signature. A complaint was lodged by the respondent Company with the police and a special audit of the company's accounts for the years 1957-58 to 1960-61 by a firm of Chartered Accountants disclosed that the second defendant had withdrawn a sum of Rs.3,26.047.92 under 42 cheques. A suit was filed for the recovery of the said amount on the plea that the amounts as per the forged cheques were not utilised for the purpose of the respondent company, that they were not authorised ones, that there was no acquiescence or ratification open or tacit on the part of the respondent company and that the respondent was unaware of the fraud till the new accountant discovered it. The appellant-bank resisted the suit on the grounds (1) that the cheques were not forged ones; (2) that even if they were forged ones, the company was not entitled to recover the amount on account of its own negligence; (3) that there was settlement of accounts between the parties from time to time and as such the company was not entitled to reopen the same and claim the sums paid under the cheques; and (4) that the suit was barred by limitation. The second defendant pleaded that the cheques were utilised for the purpose of the company. The trial Court negatived the contentions of the bank and passed a decree for the sum claimed with interest at 6%. In appeal the Division Bench confirmed the judgment of the trial court but as the case involved substantial questions of law of general public importance it granted a certificate to file the appeal. In the appeal before this Court it was contended on behalf of the appellant that: after reasonable opportunities are given to the customer to examine the bank statements, its debit entries should be deemed to be final and will not be open for reconstruction to the detriment of the bank; (2) a representation may be made either by statement or by conduct, and conduct included negligence, silence, acquiescence or encouragement, and if a customer of a bank, by his negligence, to give timely information of forged cheques, allows amount to be drawn on such cheques the debit will stand for the whole amount and the consumer will be estopped from claiming the amount; and (3) in-action for a long period would amount to such negligence as would persuade a court to impute to the customer with knowledge or at any rate constructive knowledge, to decline him relief in an action for recovery of amounts which would be to the detriment of an innocent party, namely, the bank.
Judge	Hon'ble Mr. Justice V. Khalid
Neutral Citation	1987 INSC 125
Petitioner	Canara Bank
Respondent	Canara Sales Corporation & Ors
SCR	[1987] 2 S.C.R. 1138
Judgement Date	1987-04-22
Case Number	1777

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