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PETITIONER: BIHTA  CO-OPERATIVE DEVELOPMENT CANE MARKETING  UNION  LTD.,

       Vs.

RESPONDENT: THE BANK OF BIHAR & ORS.

DATE OF JUDGMENT: 12/10/1966

BENCH: MITTER, G.K. BENCH: MITTER, G.K. WANCHOO, K.N. SHELAT, J.M.

CITATION:  1967 AIR  389            1967 SCR  (1) 848  CITATOR INFO :  R          1973 SC1034  (23)  F          1985 SC 582  (49)  R          1987 SC1603  (25)  R          1989 SC 227  (32)

ACT: Bihar and Orissa Co-operative Societies Act (6 of 1935),  s. 48  as  amended by Bihar Act 16 of 1948 and s.  57-  Dispute between  registered society and  non-member-Jurisdiction  of Civil Court, when ousted.

HEADNOTE: The first plaintiff was a Society registered under the Bihar and Orissa Co-operative Societies Act, 1935, and the  second plaintiff  was  its Secretary.  The Society had  an  account with  the  first  defendant  Bank.   The  6th  and  the  7th defendants  were  the joint secretary and treasurer  of  the Society respectively, who were jointly authorised to operate on the account.  A sum of Rs. 11,000 was withdrawn from  the account  by means of a cheque which did not come out of  the cheque book of the Society but which was a loose cheque form surrendered by an ex-constituent of the Bank.  The  spurious cheque  bore  the  signature of the 7th  defendant  and  the forged signature of the 6th defendant.  The suit against the Bank,  its  manager (the 2nd defendant) its  employees  (the 3rd,  4th  and 5th defendants) and ,defendants 6 and  7  was decreed  against  defendants 1, 2, 4, 5 and  7  jointly.  On appeal  by the 1st and 2nd defendants, the High Court  found in  favour of the plaintiffs-on the merits of the case,  but dismissed  the suit on the ground that the  jurisdiction  of the civil court was ousted by the combined operation of  ss. 48(9) and 57 of the Act. On  appeal to this Court, the defendants sought  to  support the judgment of the High Court on the ground that the  words in Explanation (1) to s. 48(1) of the Act must be understood in  their  widest  amplitude, so that,  even  if  a  dispute between  a registered society and a non-member did not  fall within  any  of the categories 48(1) (a) to  (e),  it  would still be within the purview of the section by reason of  the Explanation. HELD:     The  judgment  of  the High Court  should  be  set

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aside. [858 A] (i)  The  scheme  of  s.  48(1)  is  that  certain  disputes touching  the  business of a registered  society  should  be referred  to the Registrar and not be taken to civil  courts and made the subject matter of prolonged litigation.  Before the  Act  was amended by Bihar Act 16 of  1948  disputes  in which  a Society might be involved with non-members  (except as  sureties) were not within the section.   Therefore,  the Explanation to the section as it then stood, made no mention of non-members as such and only served to clear up the doubt as to whether a dispute was referable to the Registrar  when the debt or demand was admitted and the only point at  issue was  the  ability  to pay or the manner  of  enforcement  of payment.   The amendment in 1948, introduced cl. (e)  in  s. 48(1) by which a dispute in which one of the disputants  was not  a member of a society was also covered by the  section. But only those non-members who bad disputes with a financing bank   were  made  amenable  to  the  jurisdiction  of   the Registrar,  and  in the present case the Society was  not  a financing  bank.   Therefore cl. (e) would not  apply.   Nor would the amended Explanation apply, because the Explanation had  to include non-members after the insertion of  category (e) in a. 48(1), but, by such inclusion, the Explanation did not  widen the scope of s. 48(1) so as to include claims  by societies  against  all non-members ,even if they  were  not included in cl. (e).  The Explanation cannot be read  849 as  adding a new head to the categories under s. 48 (1)  (a) to  (e) of disputes which may be referred to the  Registrar. It  must be read only so as to harmonise with and  clear  up any ambiguity in the main section. [854 B, E.H; 855 A-C] Sagauli  Sugar  Works (Pw.) Ltd. v. Asstt.   Registrar,  Co- operative  Societies, Motihari, [1962] Supp. 3  S.C.R.  804, followed. (ii) Because the signature of the 6th defendant was  forged, there never was any mandate  by  the Society  to  the  Bank. Therefore,  there  was  no negligence on  the  part  of  the Society.  On the Contrary, there was negligence on the  part of  the Bank in not ascertaining whether the  signatures  on the cheque were genuine and the circumstances attending  the encashment  of the cheque showed conclusively that the  Bank was negligent and some of its officers fraudulent [857 E-G] London  Joint  Stock Bank, Ltd. v. Macmillan,  [1918]   A.C. 777, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 699 of 1964. Appeal from the judgment and decree dated April 14, 1961  of the Patna High Court in Appeal from Original Decree No.  162 of 1955. A.   K. Sen, B. R. L. Iyengar and A. G. Ratnaparkhi, for the appellants. S.   V.  Gupte,  Solicitor-General  and R.  C.  Prasad,  for respondents Nos.  1 and 2. R.   S:  Sinha,  K.  N.  Srivastava and  K.  K.  Sinha,  for respondent No. 7. The Judgment of the Court was delivered by Mitter  J. This is an appeal from a judgment and  decree  of the Patna High Court on a certificate granted by it. The main question in this appeal is, whether the suit out of which this appeal arises was entertainable by a civil court, in view of the provisions of s. 48(1) read with S. 57 of the Bihar and Orissa Co-operative Societies Act, 1935.   Broadly

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speaking,  s.  48(1)  enumerates  disputes  between  certain classes of persons and/or the societies registered under the Act  which  have  to be referred to  the  Registrar  of  Co- operative  Societies for adjudication and S. 57(1)  provides that  no civil court shall have jurisdiction in  respect  of any  dispute required by s. 48(1) to be so  referred.   This point  was not taken in the written statement of any of  the defendants.  The Subordinate Judge decreed the suit  against several  of the defendants including the Bank of Bihar  Ltd. On  appeal,  the  learned Judges of  the  Patna  High  Court concurred, in the main, with the findings of the Subordinate Judge but gave effect to the contention raised on behalf  of two  of  the defendant-appellants on the basis of  s.  48(9) read  with  s. 57 of the Act.  The  appellants  before  this Court  are the plaintiffs.  The only contesting  respondents are the Bank of Bihar Ltd., Madan Mohan Pandit and Babu  Lal Varma (defendants 1, 2 and 6 in the suit). 850 In  order to find out whether s. 48(1) embraces the  dispute between  the  parties in this case, we have to  examine  the facts out of which this appeal arises.  The first appellant, Bihta  Co-operative  Development Cane Marketing  Union  Ltd. (hereinafter  referred  to  as  the  Union)  is  a   society registered under the Bihar and Orissa Co-operative Societies Act, 1935 (hereinafter referred to as the Act).  The  second plaintiff was a Secretary of the Union at the time when  the suit  was filed in 1951.  Under a Resolution dated the  16th April,  1947  of the Executive Committee of the  Union,  the defendant  No.  6, Babu Lal Varma, Joint  Secretary  of  the Union  and Ram Janame Varma, defendant No. 7, the  Treasurer of the Union, were jointly authorised to withdraw moneys  of the  Union from the 1st defendant, the Bank of  Bihar  Ltd., with  which it had a running account.  On the 26th  of  May, 1948,  defendant No. 6 and defendant No. 7 went to the  bank to encase a cheque on behalf of the Union and then they came to learn that the funds in the account of the Union were not sufficient to meet the cheque.  It appears that on the  16th of April, 1948 a sum of Rs. 11,000/- had been withdrawn from the said account by means of a cheque which did not come out of the cheque book of the Union and that a loose cheque form surrendered  by  an  ex-constituent of the  bank  issued  to someone  on the 23rd March, 1948 had been converted  into  a cheque purporting to bear the signatures of defendant No.  6 and defendant No. 7. It is not necessary to state the  facts in  detail  and  it  will be sufficient  to  note  that  the spurious  cheque bore the signature of defendant No.  7  but the  purported signature of the defendant No. 6 thereon  was found  to be a forgery at the trial of the  suit.   Criminal proceedings  were  started  and  five  defendants  including defendants Nos. 6 and 7 were put on trial.  Defendants  Nos. 3,   4   and  5  were  employees  of   the   defendant-bank. Ultimately,  however, all the accused were  acquitted.   The suit  was  instituted by the two  plaintiffs  against  seven defendants,  all of whom have already been mentioned  except the second defendant who was the Manager of the Bank and  in charge  of its affairs and management at the relevant  time. The cause of action for the suit as against defendants 3  to 7  was  that  they, in collusion  and  conspiracy  with  one another had authorised an illegal withdrawal of Rs. 11,000/- out of funds of the Union lying with the bank.  The bank was sought to be made liable on the ground that it was a trustee for  the  Union  and had abused the trust  by  allowing  the amount  in  question  to  be  embezzled  through  its  gross negligence.   All the defendants put in written  statements, some  doing so jointly while others did so individually.   A

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large number of witnesses were examined and the  Subordinate Judge came to the conclusion that the cheque in question was a  forged and fabricated document and that defendants  4,  5 and  7 acting in collusion and conspiracy with  one  another had  withdrawn the sum of Rs. 11,000/- from the  plaintiff’s account  with  the bank fraudulently by means  of  the  said forged cheque.  He, however, thought that  851 there was no sufficient evidence against defendants 3 and  6 and  passed a decree as against defendants 1, 2, 4, 5 and  7 jointly.   Defendants 1 and 2 only went up in appeal to  the Patna High Court.  The High Court agreed with the finding of the  Subordinate  Judge  that defendants 4,  5  and  7  were parties to the conspiracy resulting in the withdrawal of the sum  of Rs. 11,000/-, but absolved the defendant No. 2  from any liability on the ground of negligence. Before the High Court, a further contention was put  forward on  behalf of the bank that even if the bank  was  otherwise liable for the negligence of its employees, it should not be held  to be liable because defendants 6 and 7 who  were  the agents  of  the Union were negligent and  dishonest  in  the discharge  of the duty entrusted to them by the Union.   The High Court, on an examination of the evidence, found  itself unable  to  hold that there was any negligence  or  lack  of reasonable precaution on the part of the Union.  It  further held  that  Ram Janame Varma may have been a  party  to  the conspiracy  which culminated in the withdrawal of the  money through the disputed cheque, but the Union could not be said to  be negligent or lacking in reasonable precaution  merely because of that. Having  found in favour of the plaintiffs on the  merits  of the  case, the High Court allowed the appeal of the bank  on the  ground  that the jurisdiction of the  civil  court  was ousted by the combined operation of s. 48(9) read with s. 57 of  the Act.  There is no controversy before us that if  the dispute  in the suit is covered by s. 48(1) it could not  be agitated  in  a civil court but had to be  referred  to  the Registrar  of  Co-operative Societies.   It  is,  therefore, necessary to, set out the relevant portion of s. 48(1) which reads as follows:-               "48. (1) If any dispute touching the  business               of a registered society (other than a  dispute               regarding  disciplinary  action taken  by  the               society  or its managing; committee against  a               paid servant of the society) arises-               (a)   amongst  members, past members,  persons               claiming  through  members,  past  members  or               deceased member and sureties of members,  past               members  or  deceased  members,  whether  such               sureties are members or non-members; or               (b)   between  a member, past member,  persons               claiming  through  a member,  past  member  or               deceased member, or sureties of members,  past               members  or  deceased  members,  whether  such               sureties  are members or non-members, and  the               society,   its  managing  committees  or   any               officer, agent or servant of the society; or               (c)   between  the  society  or  its  managing               committee  and  any past or  present  officer,               agent or servant of the society; or               852               (d)   between   the  society  and  any   other               registered               society;   or               (e)   between  a  financing  bank   authorised

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             under  the  provisions of sub-section  (1)  of               section 16 and a person who is not a member of               a  registered society such disputes  shall  be               referred to the Registrar: Provided  that no claim against a past member or the  estate of  a deceased member shall be treated as a dispute  if  the liability  of  the  past  member or of  the  estate  of  the deceased  member has been extinguished by virtue of  section 32 or section 63.               Explanation-(1)   A  claim  by  a   registered               society for any debt or demand due to it  from               a  member,  nonmember,  past  member  or   the               nominee,  heir  or legal representative  of  a               deceased member or non-member or from sureties               of members, past members or deceased  members,               whether  such  sureties are  members  or  non-               members,  shall  be  a  dispute  touching  the               business of the society within the meaning  of               this  sub-section  even in case such  debt  or               demand is admitted and the only point at issue               is  the  ability  to  pay  or  the  manner  of               enforcement of payment. It  will  be  noticed  that not  all  disputes  in  which  a registered -society may be involved are within the  mischief of  the  section.  Assuming that the dispute  in  this  case touches  the  business of the Union which  is  a  registered society,  the question is: is it one which ,comes under  any of  the heads mentioned in sub-cls. (a) to (e) of  the  sub- section?   Sub-cl.  (a)  has  no operation  if  one  of  the disputants is the society itself.  So far as sub-cl. (b)  is concerned,  a dispute between the society and  a  non-member would  only fall within this clause if the non-member was  a surety  of a member.  Cl. (c) can have no  operation  unless one  party  to the dispute was a past  or  present  officer, agent  or servant of the society.  Clause (d) is  restricted to  disputes  between two societies.  Clause (e)  which  was introduced by way of an amendment in 1948 (Bihar Act XVI  of 1948) would certainly include a dispute in which one of  the disputants  is not a member of the society, but it  is  only operative when the other party to the dispute is a financing bank authorised under the provisions of sub-s. (1) of s. 16. The  definition  of "financing bank" was  included  for  the first  time  in the Act by s. 2 of  the  Bihar  Co-operative Societies  Act  XVI  of  1948.   Under  the  definition,   a ’financing  bank’  means  a registered  society  whose  main object  is  to  make  advances in  cash  or  kind  to  other registered  societies  or  to  agriculturists  etc.   It  is nobody’s case that the dispute in this case is one between a financing  bank and a non-member.  The question then  arises whether the first Explanation to the section widens the  853 scope  of  sub-s. (1) of s. 48 so as to  include  claims  by registered  societies against non-members even if  the  same are  not covered by clause (e).  It is to be noted that  the word "non-member" was not to be found in the Explanation  to the  section before its Amendment of’ 1948.  The history  of legislation with regard to co-operative societies in general and   Bihar  and  Orissa  Co-operative  Societies   Act   in particular  was  traced in a decision of  this  Court  i.e., Sagauli  Sugar Works (Private) Ltd. v. Assistant  Registrar, Co-operative Societies, Motihari & Others(1).  In that case, there  was  a  dispute  between  the  appellant,  a  company registered  under  the Indian Companies Act and  a  society. registered under the Act.  The Society claimed a sum of  Rs. 1,20,809/-  from  the appellant company  as  commission  and

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interest for the supply of sugar cane and referred the  same to  the first respondent.  The preliminary objection of  the appellant  to  the jurisdiction of the first  respondent  to adjudicate  upon the dispute was over-ruled.  The  appellant went  to the Patna High Court under Articles 226 and 227  of the  Constitution  for  quashing the  orders  of  the  first respondent.  The High Court following a previous decision in Union of India v. Registrar, Co-operative Societies Patna(2) summarily dismissed the application.  Before this Court,  in appeal,  it  was contended that the dispute was  beyond  the pale  of s. 48 and as such, not referable  thereunder.   The Court  took into consideration the various amendments  which were introduced by the Act of 1948 and observed:               "Before  the amendments introduced by the  Act               of   1948,   the  disputes  which   could   be               entertained  by  the Registrar  were  disputes               among members, past members or their heirs, or               their  sureties or between a society  and  its               officers,  agents  or servants, or  between  a               society   and   other   registered   societies               (without   meaning   to   ekhaust   all    the               categories).   But before the amendments,  one               who  was  not a member of society or  was  not               claiming through a member or a past member  or               a  deceased member, or was not a surety  of  a               member  or a deceased member, was not  subject               to the jurisdiction of the Registrar under  s.               48.   That  is to say, any dispute  between  a               society  or  its  members,  past  members   or               deceased  members or sureties of such  members               on  the one hand and non-members on the  other               was not within the purview of the section,  so               that  the  appellant company, which is  not  a               registered society or a member of a registered               society, could not have its claim, or a  claim               against  it by a registered society,  referred               to  the  Registrar for  decision,  under  this               section." According  to  the  Court,  the  effect  of  the  amendments introduced  by  the  Act  of 1948 was "that  a  claim  by  a financing bank against a (1) (1962] Supp. 3 S.C.R, 804-A.I.R. 1962 S.C. 1367. (2) I.L.R. 40 Patna, 7. 854 non-member to whom the former had made an advance in cash or kind,  with  the sanction of the Registrar under  s.  16(1), would be entertainable by the Registrar, on a reference, but that  does  not  mean  that a claim  which  is  not  of  the description referred to in s. 16(1) read with s. 2(c), by  a registered  society  against any nonmember, who  is  not  an agriculturist,  is within the purview of s. 48(1) read  with the Explanation.  The Explanation cannot be read as adding a new head to the categories (a) to (e) under s. 48(1) of dis- putes  which may be referred to the Registrar.   Originally, the  Explanation had been added only to make it  clear  that even if a debt or demand is due and the only point at  issue is  the  ability  to pay or the  manner  of  enforcement  of payment  the  dispute would come within the purview  of  the main  section 48(1).  The addition of the word  ’non-member’ by  the Amending Act of 1948, to the First  Explanation  has not  enlarged the scope of the main section 48(1) so  as  to make all kinds of disputes between a registered society  and a non-member cognizance by the Registrar, thus excluding the jurisdiction of the ordinary courts." Appearing for the respondents 1 and 2, the learned Solicitor

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General  in  effect  contended-  that  the  above   decision required  reconsideration and the words in  the  Explanation must be understood in their widest amplitude so that even if a  dispute  between a registered society  and  a  non-member which  did not fall within any of the categories (a) to  (e) it  would  still  be within the purview of  the  section  by reason of the Explanation. We find ourselves unable to accept this contention.   Before the  amendments introduced in 1948, the Explanation  to  the section  made no mention of non-members and non-members  had to  be included in the Explanation because of the  inclusion of this class of persons in category (e) of sub-s. (1) of s. 48.   The Explanation must be read so as to  harmonise  with and  clear up any ambiguity in the main section.  It  should not  be so construed as to widen the ambit of  the  section. The  scheme  of sub-section (1) of s. 48 seems  to  be  that certain  disputes  touching  the business  of  a  registered society  should  not be taken to civil courts and  made  the subject  matter  of prolonged litigation.   The  legislature took pains to specify the persons whose disputes, were to be subject  matter of reference to the Registrar.   Non-members did  not  come into the picture at all.   Non-members  other than  officers,  agents or servants of the  society  do  not figure in sub-cls. (a) to (d) except as sureties of members. By sub. cl. (e) only those non-members who had disputes with a  financing bank authorised under the provisions of  sub-s. (1)  of s. 16 were made amenable to the jurisdiction of  the Registrar.   It  was  probably  thought  desirable  in   the interest  of  the financing bank which  might  otherwise  be faced  with  litigation in a civil court in respect  of  its ordinary    day-to-day   transactions   of    advances    to agriculturists  855 who  were non-members that disputes between the society  and this  class of persons should be quickly  and  inexpensively adjudicated upon by the Registrar.  Before the amendment  of 1948,  the Explanation only served to clear up the doubt  as to whether a dispute was referable to the Registrar when the debt or demand was admitted and the only point at issue  was the ability to pay or the manner of enforcement of  payment. As already pointed out by this Court, the Explanation had to include non-members after the. insertion of category (e)  in sub-s.  (1) of s. 48.  The purpose of the Explanation  never was  to  enlarge the scope of sub-s. (1) of s.  48  and  the addition  of  category  (e)  to  that  sub-section  and  the inclusion of non-members in the Explanation cannot have that effect. In our opinion, the High Court was not justified in allowing the appeal of the bank on that ground. The  learned  Solicitor General then sought to  support  the judgment  of the High Court on the ground that its  decision on the merits of the case was not correct.  His argument  in substance  was that even though there was negligence on  the part  of the bank and its employees, the  plaintiff  society was not altogether free from blame or negligence in that but for the part played by at least one of its employees in  the matter of encashment of the cheque for Rs. 11,000/the  fraud could not have been perpetrated.  It was argued that if both parties were negligent or blameworthy, the plaintiffs’ claim ought not to succeed.  He referred us to the judgment of the House  of  Lords  in London Joint  Stock  Bank,  Limited  v. Macmillan & Arthur(1) in support of his argument.  The facts in that case were as follows. The plaintiffs, Messrs.  Macmillan and Arthur brought a suit for a declaration that the defendant, the London Joint Stock

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Bank, was not entitled to debit the plaintiffs with a cheque for  pound  120.   The  plaintiffs had  in  their  employ  a confidential  clerk who had been with them for  some  years. They  left to him the copying of their books and filling  up cheques for signatures.  The usual practice in the office of the  plaintiffs seems to have been for the clerk to  present cheques  for signatures to get petty cash usually for  pound 3. On a certain day, the clerk made out a cheque for pound 2 and  asked one of the partners to sign it which the  partner did.   As  the  clerk  did not turn up  the  next  day,  the partners became suspicious and went to the bank.  There they learnt  that the clerk had presented a cheque for pound  120 which  had  been  paid.   The clerk  was  a  thief  and  had absconded  with  the money. :The learned trial  Judge  found that  at  the  time when the cheque  was  presented  to  the partner  for  signature the figure ’2’ was  written  thereon with enough space on either side for insertion of additional figures  and  the  clerk had  taken  advantage  thereof  and altered the figure ’2’ to 120.  The (1)  [1918] A.C. 777. 856 question  was, whether the plaintiffs had been so  negligent with regard to the cheque that their action against the bank should  fail.   The trial Judge found that  the  respondents were not guilty of any negligence in the mode of signing the cheque and assuming that they had been guilty of negligence, the negligence was not the proximate cause of the loss.   He therefore ordered judgment to be entered for the plaintiffs. The  Court  of  Appeal  upheld  this  decision.   This  was, however,  reversed  in appeal to the House of  Lords.   Lord Finlay L. C. observed:               "As  the customer and the banker are  under  a               contractual   relation  in  this  matter,   it               appears  obvious that in drawing a cheque  the               customer is bound to take usual and reasonable               precautions  to  prevent forgery.   Crime,  is               indeed,  a very serious matter, but every  one               knows  that  crime is not  uncommon.   If  the               cheque is drawn in such a way as to facilitate               or almost invite an increase in the amount  by               forgery  if  the cheque should ’get  into  the               hands of a dishonest person, forgery is not  a               remote  but  a  very  natural  consequence  of               negligence of this description."               The  learned Lord Chancellor observed  further               at page 795:               "Of  course  the  negligence must  be  in  the               transaction itself, that is, in the manner  in               which  the  cheque is drawn.  It would  be  no               defence to the banker, if the forgery had been               that of a clerk of a customer, that the latter               had  taken the clerk into his service  without               sufficient   inquiry  as  to  his   character.               Attempts  have often been made to  extend  the               principle  of  Young  v. Grote,  4  Bing.  253               beyond the case of negligence in the immediate               transaction, but they have always failed." According  to  the learned Lord  Chancellor,  leaving  blank spaces  on  either  side of the figure  ’2’  in  the  cheque amounted  to a clear breach of duty which the customer  owed to the banker.  The learned Lord Chancellor said:                "If  the  customer chooses to  dispense  with               ordinary  precautions because he has  complete               faith in his clerk’s honesty, he cannot  claim               to  throw  upon  the  banker  the  loss  which

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             results.  No one can be certain of preventing,               forgery,  but  it is a very  simple  thing  in               drawing  a  cheque  to  take  reasonable   and               ordinary  precautions  against  forgery.    If               owing to the neglect of such precautions it is               put into the power of any dishonest person  to               increase  the amount by forgery, the  customer               must bear the loss as between himself and  the               banker."                857 According  to Lord Shaw the responsibility of  what  happens between  the  signature and presentation of  the  cheque,  a period wholly in the customer’s control, lies entirely  with him. The principle of this case cannot help the respondent before us. If the signatures on the cheque had been genuine so that there  was a mandate by the customer to the banker  but  the cheque was somehow got hold of by an unauthorised person and encashed by him, the bank might have had a good defence.  If the signatures on the cheque or at least that of one of  the joint  signatories to the cheque are not or is not  genuine, there  is no mandate on the bank to pay and the question  of any negligence on the part of the customer, such as, leaving the  cheque  book  carelessly so that a  third  party  could easily  get hold of it would afford no defence to the  bank. According  to Halsey’s Laws of England (3rd Edition) Vol.  2 article 380 :               "A  document  in  cheque  form  to  which  the               customer’s name as drawer is forged or  placed               thereon without authority is not a cheque, but               a   mere  nullity.   Unless  the  banker   can               establish  adoption  or  estoppel,  he  cannot               debit  the customer with any payment  made  on               such document." In this case, the finding is that one of the signatures  was forged  so that there never was any mandate by the  customer at  all to the banker and the question of negligence of  the customer  in between the signature and the  presentation  of the  cheque never arose.  Not only was there  negligence  on the  part  of  the banker in not  ascertaining  whether  the signatures  on  the cheque were genuine,  the  circumstances attending  the  encashment of the cheque  show  conclusively that  the  banker  was negligent and some  of  its  officers fraudulent  right from the beginning.  The cheque  form  did not come out of the customer’s cheque book.  A loose  cheque form  returned by ,in ex-constituent had been used  for  the purpose of making out a cheque purported to be drawn by  the customer.  The entries in the register for the issue of such loose  forms  were  so suspicious that it  is  difficult  to believe  that the employees of the bank concerned  with  the encashment of the cheque were acting bonafide.  There was no negligence  on the part of the customer according  to  whose resolution,  the  cheque  had to be signed  jointly  by  two persons.  The fraud could only be perpetrated because of the complicity of the employees of the bank, no doubt, with  the help of one of the officers of the Union.  The dishonesty of a  particular  officer of the Union was  not  the  proximate cause of the loss to the bank.  In our opinion, the case  of G. C. Kurbar & Another v. Balaji Ramji Dange(1) referred  to in the judgment of the High Court has no application to  the facts of this case. (1) A. 1. R. 1941 Bombay 274. M17Sup.CI/66-10 858 In  the  result, the appeal succeeds, the  judgment  of  the

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Patna  High Court is set aside and that of  the  Subordinate Judge restored.  The appellants do not want a decree against respondent  No. 7. Consequently, there will be no decree  as against the said respondent.  The other respondents must pay the costs of this appeal. V.P.S.                                             Appeal allowed. 859