Allowed

M/S.B.and B.Industries v. Union Bank of India

Orissa HC2 Dec 2021WP(C)/3097/2018

Case brief

AI extract

What is this about?

In this writ petition, the petitioner firm sought a refund of Rs.35,90,500/- wrongfully debited due to a fraudulent truncated cheque. The High Court held that the petitioner was entitled to the refund and directed the bank to credit the amount within four weeks.

What did the court decide?

Directed Opposite Party Bank to credit Rs.35,90,500/- to petitioner's cash credit account within four weeks.

M/S.B.and B.Industries Vs Union Bank of India — Banking and Recovery | Orissa HC (2021)

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IN THE HIGH COURT OF ORISSA AT CUTTACK

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W.P.(C) No.3097 of 2018 (Through hybrid mode)

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M/s. B. & B. Industries

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…. Petitioner

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Mr.P.K.Nayak, Advocate

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-versus-

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…. Opposite Parties Mr.S.K.Dey, Advocate

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Union Bank of India and another

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CORAM: JUSTICE ARINDAM SINHA

ORDER 02.12.2021

Order No.

06.

Mr. Nayak, learned advocate appears on behalf of petitioner and submits, his client, a partnership firm, had obtained credit facility of cash credit account from its banker, opposite parties. He submits, his client [partner(s)] received information by text message that on 21^st February, 2017 a cheque had been debited in the cash credit account for Rs.35,90,500/-. On next available working day, petitioner firm by letter dated 27^th February, 2017 informed opposite party, inter alia, as follows:

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“ The above cheque has been debited to our CC a/c 302105040000224 for Rs.35,90,500/on 21.02.2017. However, we have not been issued this cheque series. Also we have not issued any such cheque of this amount to anyone. We request you to investigate this transaction and credit the amount that has been wrongfully debit to our a/c immediately.

Page 1 of 1

// 2 //

Thanking you.”

Further letter dated 1^st March, 2017 was written by his client to opposite party mentioning, inter alia , that cheque book containing cheques 12072751 to 12072800 stood issued in his favour by the head office and sent to branch for onward delivery, which has not been delivered. Paragraph 1 in said letter is reproduced below:

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“01) As informed by you, Cheque Sl. No. 12072751 to 12072800 (Containing 50 Nos. Cheques) were issued in our favour by your Head Office and sent to your branch for onward delivery to us which has not been delivered to us and kept with you. You confirmed that you have also blocked the above 50 Nos. cheques in your computer system for further transaction.”

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He refers to annexure 4 in the writ petition and submits, opposite party admitted that there was fraudulent payment of the cheque. Contents of letter dated 4^th March, 2017 of opposite party are reproduced below:

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“Dear Sir,

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Sub: Payment of cheque no.1272770 for Rs.3590500/-

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In reference to your letter no.BBI/02 dt.01.03.2017, we would like to inform you that we have intimated our higher office of the fraudulent payment of the above cheque. Our controlling office have taken up the matter with Service Branch, Delhi where the cheque has been passed. They have requested for immediate return of the amount. We will be intimate regarding further development from time to time.

Thanking you.”

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There be direction for immediate refund of the amount in the account.

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Mr. Dey, learned advocate appears on behalf of opposite parties and submits, it was a truncated cheque that was presented for payment and payment made. Petitioner has not disputed the signature appearing in the cheque presented for payment. It was crossed cheque. He relies on section 131 of Negotiable Instruments Act, 1881. Said section along with its explanations are reproduced below:

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“131. Non-liability of banker receiving payment of cheque.—A banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself shall not, in 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.

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[Explanation I.—A banker receives payment of a crossed cheque for a customer within the meaning of this section notwithstanding that he credits his customer’s account with the amount of the cheque before receiving payment thereof.]

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[Explanation II.—It shall be the duty of the banker who receives payment based on an electronic image of a truncated cheque held with him, to verify the prima facie genuineness of the cheque to be truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care.]”

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Court is convinced that the cheque, on which payment was made belongs to the cheque book, not delivered to petitioner. The truncated cheque, as submitted by opposite party, was presented for

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Page 3 of 5

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// 4 //

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payment in Chandigarh, from the account of payee, one Rakesh Kumar. The cheque was received for clearance and everything found to be in order and the payment made. In this connection petitioner also relied on letter dated 1^st March, 2017 written by Centralized Branch office of opposite party to Branch Head of Service Branch, Andhra Pradesh quoting instruction from Reserve Bank of India and requesting immediate refund of Rs.35,90,500/-, extracted and reproduced below.

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“1. In case of frauds due to fake/forged instruments sent in clearing, the presenting bank will be required to immediately hand over the cheque to the drawee/payee Bank as and when demanded to enable the drawee/payee bank to file FIR with the police authorities and report the fraud to RBI.

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2. “The bank liable to pay shall not wait for the payment by a customer in whose account the fraudulent amount has been credited, as precondition for making payment to the claiming bank”. In other words, the collecting Bank should immediately make the payment of disputed amount to the drawee bank and recover the money later from its customer.”

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Explanation II in section 131 mandates duty of the banker who receives payment based on electronic image of a truncated cheque held with him to verify the prima facie genuineness of the cheque to be truncated and any fraud, forgery or tampering apparent on the face of the instrument that can be verified with due diligence and ordinary care. Due diligence and ordinary care by receipient bank would not reveal that the cheque number does not belong to the cheque book issued to the constituent. This duty

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Page 4 of 5

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// 5 //

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appears to have been discharged by the receipient bank. However, opposite party bank is not covered by the section.

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It is apparent there has been practice of fraud. Police case has been registered, enquiry and investigation will reveal perpetrator(s) of the fraud. Mean while petitioner is entitled to have the money refunded in its account. The bank has no ground to resist such claim. It could not be demonstrated that petitioner had option to look at the cheque, to either confirm or dispute the signature appearing in it. The cheque was passed for payment by opposite party bank without reference to petitioner.

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Opposite party bank will credit Rs.35,90,500/- in petitioner’s cash credit account no.302105040000224 within four weeks of communication of this order.

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The writ petition is disposed of. (Arindam Sinha) Judge

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RKS

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Page 5 of 5

M/S.B.and B.Industries v. Union Bank of India

Case brief

What is this about?

What did the court decide?

M/S.B.and B.Industries v. Union Bank of India

Case brief

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What did the court decide?

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