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PETITIONER: INDIAN OVERSEAS BANK

       Vs.

RESPONDENT: INDUSTRIAL CHAIN CONCERN

DATE OF JUDGMENT07/11/1989

BENCH: SAIKIA, K.N. (J) BENCH: SAIKIA, K.N. (J) FATHIMA BEEVI, M. (J)

CITATION:  1989 SCR  Supl. (2)  27  1990 SCC  (1) 484  JT 1989 (4)   334        1989 SCALE  (2)1014

ACT:     Negotiable Instruments Act--Section 131--Bank can  avail of immunity as collecting banker--Opening of account--Duties of bank.

HEADNOTE:     The  plaintiff--respondent filed original suit No.  7667 of  1975 against the appellant-Bank in the City Civil  Court Madras for recovery of Rs.26,383.49 p. together with  inter- est  and costs, being the amount of loss suffered by  it  on account of the negligence and conversion on the part of  the appellant who negligently allowed one Sethuraman, Manager of the  plaintiff’s firm to open a "fictitious account" in  the name  of  "Industrial Chain Concern" as its  proprietor  and helped  him  to pay in stolen drafts and  cheques  drawn  in favour  of  the plaintiff, and by collecting  the  same  and paying  the proceeds thereof to Sethuraman, and closing  the account  thereafter.  The plaintiff’s case was that  it  was doing extensive business in steel Roller chains and  sprock- ets with leading Industries and Government undertakings  and had  supplied goods to seven parties who sent to  it  drafts and  cheques  for  Rs.26,383.49 p. which  were  received  by Sethuraman,  its Manager, who opened fictitious  account  in the name of the firm with the bank, and withdrew the  amount defrauding  the  plaintiff. According to the  plaintiff  the Bank  was negligent and guilty of conversion in opening  the account  as  also in collecting the cheques.  Hence  it  was liable to make good the loss suffered by it. The  appellant- Bank  denied the allegations of negligence levelled  by  the plaintiff. It stated that Sethuraman, who was a  Collegemate of  the Manager of the Bank was known to him earlier and  at the  time of opening the account he had represented  to  the Bank  that he, as proprietor, had started a firm  under  the name  and style of "Industrial Chain Concern" and had  shown in  that  connection some business papers on  the  basis  of which  the Manager gave the introduction necessary  to  open the  Account  but the manager declined  to  grant  overdraft facility  asked for by him. The bank asserted that it  acted in  good faith throughout the dealings till the  closure  of the account.     The  Trial Court held that the appellant bank had  acted in  good  faith but not without negligence  in  opening  the

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account and operating the same in the process of  collection of cheques/drafts and that it was not 28 entitled  to protection of section 131 of the Negotiable  of Instruments Act. Accordingly it decreed the plaintiff’s suit Bank’s  appeal to the High Court against the decree  of  the trial  Court  was dismissed. Hence this  appeal  by  Special Leave. Allowing the appeal, this Court,     HELD:  As  a general rule a banker  before  accepting  a customer, must take reasonable care to satisfy himself  that the  person  in question is of good reputation,  and  if  he fails  to do so he will run the risk of forfeiting the  pro- tection under section 131 of the Negotiable Instruments Act. What  is  "reasonable care", will depend on  the  facts  and circumstances of the case. [45F-G]     The  courts  have  tended to accept  the  practices  and procedures  which bankers lay down for themselves, but  that can by no means be decisive. [45G]     Till an account is opened, no banker-customer  relation- ship  exists  between the bank and the person  proposing  to open an account. Once the account is open, the  relationship is created and with it mutual rights and obligations between the  banker and the customer are created under law.  Opening an  account  by depositing cash is slightly  different  from opening one by a cheque as in that case, the Bank has to act according to the tenor of that instrument and its collection and  payment  involves the Bank’s avowed duty  to  its  real owner if the proposer happens not to be its real owner. Even when  an  account is opened by depositing cash but  so  soon after the opening of the account any cheque is paid into  it as to make it part of the same transaction with the opening, the same duty may be implied by law. [34D-F]     One of the tests of deciding whether the Bank was negli- gent,  though not always conclusive, is to see  whether  the Rules or instructions of the Banks were followed or not.  In the instant case, Sethuraman having been known to the Manag- er  who gave the introduction there was no violation of  any instruction or Rules. [35E; 36D]     Except when circumstances of a case so justify in making inquiries  the bankers attitude may be solicitious  and  not detective. It is difficult to hold that the Bank was  negli- gent  in opening the account, accepting the deposit of  cash by  a  person  known to the Manager of the  Bank  under  the circumstances. [37G; 38B] 29      The  bank  normally has an obligation  to  collect  the customer’s cheques paid into his account. [42H]      In  every case of opening an account bank takes a  man- date  and,  until  changed, controls the  operation  of  the account.  In  the  instant case having  already  opened  the account  the Bank was not concerned to question the  custom- er’s  title  to a cheque paid in by him, when a  cheque  was drawn in favour of ’industrial Chain Concern’. [41A-B]       If a banker fails to present a cheque within a reason- able time after it reaches him, he is liable to his customer for loss arising from the delay. A banker receiving instruc- tions  paid  in for collection and credit  to  a  customer’s account may collect solely for a customer or for himself  or both.  Where he collects for the customer he will be  liable in  conversion if the customer has no title. However, if  he collects  in good faith and without negligence he may  plead statutory protection under section 131 of the Act. [41D-E]          To  enable a bank to avail the immunity under  sec- tion  131  as a collecting banker he has  to  bring  himself

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within  the conditions formulated by the section.  Otherwise he is left to his common law liability for conversion or for money  had and received in case of the person from  whom  he took  the  cheques having no title or defective  title.  The conditions are: (a) that the banker should act in good faith and  without negligence in receiving a payment, that is,  in the  process of collection, (b) that the banker  should  re- ceive  payment  for  a customer on behalf of  him  and  thus acting  as a mere agent in collection of the cheque and  not as  an  account  holder (c) that the persons  for  whom  the banker  acts  must be his customer and (d) that  the  cheque should  be one crossed generally or especially  to  himself. The  receipt of payment contemplated by the section  is  one from  the  drawee bank. It is settled law that the  onus  of bringing  himself  within the section rests on  the  banker. There  is very little evidence relating to the  deposit  and particulars  of cheques deposited and hence it is  difficult to  hold that the Bank ignored obvious indications  and  was negligent at that time. [41G-H; 42A; 48G]       Commissioner of Taxation v. English Scottish & Austra- lian Bank, [1920] AC 683; Ladbroke & Co. v. Todd, [1914]  30 TLR 433; Turner v. London & Provincial Bank, [1903] 2  Legal Decisions  Affecting  Bankers 33; Mariani & Co.  v.  Midland Bank, [1968] 2 ALL E.R. 573 at 582; Lloyds Bank Ltd. v. E.B. Savory & Company, [1933] AC 201; Capital & Counties Bank  v. Gordon,  [1903] AC 240; Barclays Bank Ltd. v. Astley  Indus- trial Trust Ltd.. [1970] 1 All E.R. 719; Arab 30 Bank  Ltd. v. Ross, [1952] 1 All E.R. 709; Karak Rubber  Co. Ltd.  v.  Burden (No. 2), [1972] 1 All E.R.  1210;  Penmount Estates Ltd. v. National Provincial Bank Ltd., [1945] 173 LT 344;  Motor Traders Guarantee Corpn. v. Midland  Bank  Ltd., [1937] 4 All E.R. 90; Bharat Bank Ltd. v. Kishanchand  Chel- laram, AIR 1955 Mad. 402; Sanyasilingam v. Exchange Bank  of India,  AIR 1948 Bombay 1; Woodbrier v. Catholic  Bank,  AIR 1958 Kerala 316; Orbit Mining & Trading Co. v.  Westminister Bank, [1962] 3 ALL E.R. 565; Underwood v. Bank of Liverpool, [1924] 1 K.B. 775; Bapulal Premchand v. Nath Bank Ltd.,  AIR 1946 Bom. 482; Lloyds Bank Ltd. v. Chartered Bank of  India, Australia  &  China,  [1929] 1 K.B. 40 and  Ross  v.  London County, Westminister & Parr’s Bank Ltd., [1919] 1 K.B.  678, referred to.

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 2842  of 1982.     From  the  Judgment  and Order dated  1.10.1981  of  the Madras High Court in Appeal No. 516 of 1977.     C.  Seetharamiah, P. Krishna Rao and K.R.  Nagaraja  for the Appellant. S. Balakrishnan for the Respondent. The Judgment of the Court was delivered by     K.N. SAIKIA, J. This defendant’s appeal by special leave is  from  the Judgment of the High Court  of  Judicature  at Madras  dated  1.10.1981 passed in Appeal No.  516  of  1977 dismissing  the appeal and affirming the decree in O.S.  No. 7667 of 1975.     The  respondent--Industrial Chain Concern  as  plaintiff filed  Original  Suit  No. 7667 of 1975 in  the  City  Civil Court,  Madras for recovery of Rs.26,383.49p. together  with interest and costs, being the total amount of loss sustained by it on account of the alleged negligence and conversion on the  part of the defendant--Indian overseas Bank having  its

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central  office  at 151, Mount Road,  Madras-2,  hereinafter referred as ’the Bank’, by negligently allowing one Sethura- man,  Manager  of  the plaintiff firm at Madras  to  open  a ’fictitious  account’ in the name of ’Industrial Chain  Con- cern’  as  its proprietor and helping him to pay  in  stolen drafts  and  cheques drawn in favour of  the  plaintiff  and collecting  the same and paying to Sethuraman  the  proceeds thereof and closing the account thereafter. It was the  case of  the  plaintiff that it was doing extensive  business  in Steel  Roller Chains and Sprockets with  leading  industries and Government undertakings. Its head office was situate  at 36, Linghi Chetti Street, Madras-1. It had supplied goods to seven parties who sent to it drafts and cheques in its 31 name amounting to Rs.26,383.49 and those drafts and  cheques had  been  received by Sethuraman, its  Manager,  who  after opening the ’fictitious account’ in the Bank’s  Nungambakkam Branch  paid in the stolen drafts and cheques and  the  Bank collected those and allowed Sethuraman to withdraw the  same defrauding  the  plaintiff. The plaintiff averred  that  the Bank  was negligent and guilty of conversion in  opening  of the account, collection of the cheques and drafts and allow- ing  Sethuraman to withdraw the same and therefore,  it  was liable to make good the plaintiff’s loss.     The  appellant Bank as defendant resisted the suit  con- tending,  inter alia, that it was not negligent in  allowing Sethuraman  to open the account inasmuch as approaching  the Bank  Sethuraman  represented that he,  as  proprietor,  had started a firm under the name and style of "Industrial Chain Concern" and proposed to open an account in that name. Since the Manager of the Bank at Nungambakkam Branch was erstwhile classmate  of Sethuraman he (the Manager) knew him and  gave the  introduction relying on which the current  account  was opened  and  after  opening the account, which  was  a  real account  and not a ’fictitious account’ as alleged,  various cheques  and  drafts had been paid into the account  by  the customer  for  collection  and the Bank in  good  faith  and without  negligence,  in course of its  business,  collected them  and  credited the account and Sethuraman  as  customer withdrew  money  from his account, and that neither  at  the time of opening the account for at the time of paying in and collection of the cheques, nor at the time of allowing money to  be withdrawn there was anything to arouse any  suspicion regarding  the  bona  fides of the  representation  made  by Sethuraman. Later on the customer having expressed a  desire to close the account because, as he said, he was winding  up his business, the account was closed. There was,  therefore, no  negligence on the part of the Bank acting in good  faith and it was not liable for conversion.     At  the  trial the plaintiff firm examined  its  Manager D.R.  Murthy (PW-1) while the defendant Bank  also  examined its  Manager  S.P.  Muthukrishnan (DW-1).  The  trial  court decreeing the suit held that the defendant Bank had acted in good faith but not without negligence in opening the account and  operating the same and in the process of collection  of the cheques and drafts and it was not entitled to invoke the protection of section 131 of the Negotiable Instruments  Act and, consequently, it was liable to make good the loss  with interest  as claimed by the plaintiff. The Bank  having  ap- pealed therefrom, the High Court agreed with the findings of the trial court and dismissed the appeal. 32     Mr. C. Seetharamiah, the learned counsel for the  appel- lant  submits,  inter alia, that the finding of  the  courts below  that the defendant Bank was negligent in opening  the

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account is contrary to law inasmuch as there were no circum- stances  antecedent or present to arouse any  suspicion  and there  was no obligation on the part of the Bank to  compare and  verify  the  name and address given  by  Sethuraman  as proprietor, industrial Chain Concern with the address of the then  existing plaintiff’s firm of the same name;  that  the High Court’s finding that tile Bank was negligent in  clear- ing  the amounts of the cheques is equally contrary  to  law inasmuch  as there was nothing ex facie to put the  Bank  on guard  and there was no warning or indication  of  defective title on the race of the cheques and drafts to arouse suspi- cion  of  the Bank and it was not necessary for it  to  make thorough  enquiry about the cheques and drafts to have  been entitled  to  invoke the protection of section  131  of  the Negotiable Instruments Act: and that even assuming, but  not admitting that the Bank was negligent, the plaintiff  itself contributed  to it by entrusting Sethuraman to  receive  the cheques and drafts and to deal with them for a long time and that even when the complaint was made to Deputy Commissioner of  Police on 19.2.1975 it was about two cheques  only,  and there was still no complaint about other cheques and drafts.     The first question to be decided, therefore, is  whether the Bank was negligent in opening the account in the name of Sethurarman, as proprietor, Industrial Chain Concern. Mr. S. Balakrishnan,  for the respondent, defends the High  Court’s Judgment.     Evidence of DW- 1 Muthukrishnan, Manager of the Bank  at the relevant time is that the account was opened by Ext.  B- 1,  the  Account Opening From, on  3.10.1974  by  Sethuraman under the title Industrial Chain Concern, the sole  proprie- tary  concern.  It was signed by Sethuraman  for  Industrial Chain Concern with a rubber stamp as proprietor. Muthukrish- nan, DW- 1 deposed:               "This  account  was opened  by  R.  Sethuraman               under the title Industrial Chain Concern  sole               proprietary  concern. Sethuraman is  the  sole               proprietor.  Before that date I knew  Sethura-               man.  He  was my college mate  in  1955-57  in               Vivekananda  College.  I was  meeting  him  in               social  gathering.  When he went  to  open  an               account,  he  represented  that  he  had  just               started as commission agent under the name and               style  of  Industrial Chain  Concern  as  sole               proprietary  concern.  He wanted  to  open  an               account  with Overdraft facility.  I  declined               his  request for overdraft because he  himself               stated  that  he had just  started  commission               business. I               33               was  able to identify him as the college  mate               and  to  open his account I  have  signed  the               introduction    in    my    personal    capac-               ity   ...............   It  was  an   ordinary               current  deposit  account.  The   introduction               given by me was in the normal course of  bank-               ing  business.  Before  opening  account,   he               showed  me  some business  correspondence  and               orders.  Some  of the orders  were  placed  by               India Sugars and Refineries and Madras  Ferti-               lisers. At that time there was nothing to show               that  the Industrial Chain Concern was  not  a               proprietary concern or that Sethuraman was  an               employee  of  the firm. He opened  an  account               with  cash deposit of Rs. 100 as he  described               himself  as  a proprietary concern and  as  he

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             just  then started the business and as  I  did               not grant loan facility there was no  occasion               for calling credit reports from other bankers.               There  was  normal operation of  the  account.               Cheques given in the name of the concern  were               deposited in the account and after realisation               they were withdrawn." Comparing  the  statement of Account and Ext.  B1  with  the above  evidence there is nothing to doubt this  witness.  He denied that at any stage the Bank had acted with  negligence or without good faith or that there was no proper  introduc- tion  for opening an account. He clearly said that  the  ad- dress given in Ext. B1 was Nallathambi Mudali Chetti  Street and  that  he  knew the location and it was  far  away  from Nungambakkam.  That was the place of business of  Sethuraman mentioned  at  the  opening of account and  the  Mount  Road Branch of the defendant Bank was the nearest Branch for that place.  Opening of an account by Sethuraman with  a  trading place  at  Nallathambi Street with Nungambakkam  Branch  oc- curred to him as unusual but it did not create any suspicion as  he asked Sethuraman why he wanted to open an account  in Nungambakkam Branch and Sethuraman replied: "I am a  commis- sion  Agent.  I want overdraft facility. Your are  the  only agent known to me and that is why I have come to  Nungambak- kam  Branch."  DW-1 also said that in  opening  the  Current Account  he  glanced through the  order  and  correspondence shown to him by Sethuraman regarding supplies but he did not check  up the address given in the correspondence  by  these companies  in the name of the Industrial Chain  Concern.  He denied  that he had not checked up the business  credentials for  the  account to be opened in the name of  the  business concern  and that he was negligent in that aspect. He  said: "I declined overdraft facility. That itself shows that I was not negligent. Once I declined overdraft facility it did not strike me to refer Sethuraman to the nearest branch from his trading place. I did not refer him to the 34 Mount  Road Branch. I suggested he can go to the Mount  Road Branch.  He  came with another request  that  his  overdraft application  might be considered after the period  of  about one  year,  after his business had improved.  Therefore,  he wanted  to  open an account in  Nungambakkam  Branch."  Both Courts  below  held that the Bank acted in  good  faith.  We agree.  The  question is whether the Bank could be  held  to have been negligent while opening the account.     It  is,  however, necessary to bear in  mind  that  this question is often associated with the question of negligence in collecting cheques, etc. for the customers paid into  the account. This is because till an account is opened no  bank- er-customer  relationship  exists between the bank  and  the person  proposing  to open an account. Once the  account  is opened,  that  relationship is created and  with  it  mutual rights  and obligation between the banker and  the  customer are  created  under  law. Opening an account by  cash  is  a little  different from opening an account by a cheque as  in that case the Bank has to act according to the tenor of that instrument  and  its  collection and  payment  involves  the Bank’s  duty owed to its real owner if the proposer  happens not to be its real owner. Even when an account is opened  by depositing cash but so soon after the opening of the account any  cheque is paid into it as to make it part of  the  same transaction  with the opening, the same duty may be  implied by law.     What  is the standard of care to be taken by a  Bank  in opening  an account? In the Practice and Law of  Banking  by

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H.P. Sheldon, 11th Edition, in Chapter five at page 64 it is said:               "Before opening an account for a customer  who               is  not already known to him, a banker  should               make proper preliminary inquiries. In particu-               lar, he should obtain references from  respon-               sible  persons  with regard to  the  identity,               integrity  and  reliability  of  the  proposed               customer.                         If  a banker does not act  prudently               and  in accordance with current banking  prac-               tice  when obtaining references  concerning  a               proposed customer, he may later have cause for               regret."     M.L.  Tannan in Banking Law and Practice in India,  18th Edition at page 198 says:               "Before opening a new account, a banker should               take certain precautions and must ascertain by               inquiring from the person wishing to open  the               account,  if  such person is  unknown  to  the               banker, as to his profession or trade as  well               as  the nature of the account he  proposes  to               open. By mak-               35               ing  necessary inquiries from  the  references               furnished by the new customer, the banker  can               easily  verify  such  information  and   judge               whether  or not the person wishing to open  an               account is a desirable customer. It is  neces-               sary  for a bank to inquire, from  responsible               parties, given as references by the  customer,               as to the latter’s integrity and respectabili-               ty, an omission of which may result in serious               consequences  not  only for  the  banker  con-               cerned,  but  also for other bankers  and  the               general public."     One of the tests of deciding whether the Bank was negli- gent,  though not always conclusive, is to see  whether  the Rules or instructions of the Banks were followed or not.  We may accordingly consult those instructions. Ext. B6 contains the general instructions regarding constituent accounts  for bank. Mark II deals with opening of accounts. It says:               "Except at large branches where the  sub-agent               or  accountant may be authorised to open  Cur-               rent Accounts, no new Current Account shall               be  opened without the authority of the  agent               manager  who  is solely  responsible  for  all               Current  Accounts being opened in  the  proper               manner. A written application on the appropri-               ate  form must be submitted and will be  init-               ialled  by  the agent at the top  left  corner               after he has satisfied himself of the respect-               ability  of the applicant(s). It is  important               that  every  party must be introduced  to  the               Bank  by  a respectable person  known  to  the               Bank,  who must normally call at the Bank  and               sign in the column specially provided for  the               purpose  in the account opening form.  In  all               cases his signature must be verified with  the               specimen  lodged  and attested. The  agent  or               accountant  may introduce constituents to  the               Bank provided they are known to him personally               and in such cases he should sign the  applica-               tion  form  at the appropriate  place  in  his               personal  capacity. When the  introduction  of

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             any other member of the staff is accepted, the               agent must invariably make independent inquiry               and record his findings on the account opening               form   for  future  reference  if   the   need               arises ........." Mark  IV  deals with accounts of  proprietary  concerns.  It says:               "An individual trading in the name of  concern               should fill in form F.S. 5 and sign it in  his               personal name and also affix his signature  on               behalf  of  the concern as proprietor  in  the               space provided." 36 if  the Banker was negligent in following up the  references given  at opening of account and subsequently  cheques  etc. are  collected for the customer paid into that  account  and those happened to be of someone else the Bank may be  liable for  conversion,  unless protected by law.  In  the  instant case,  Sethuraman having been known to the Manager who  gave the introduction, there was no violation of any  instruction or Rules.     It  was  held  in Commissioner of  Taxation  v.  English Scottish  and Australian Bank, [1920] AC 683, that a  negli- gence  in  collection  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 whether there was negligence in collecting a cheque.     In Ladbroke & Co. v. Todd, [1914] 30 TLR 433, the plain- tiff  drew  a cheque and sent it to the payee by  post.  The letter was stolen and the thief took it to the defendant,  a banker,  and used it for the purpose of opening an  account- for the purpose of which he forged the payee’s  endorsement. The defendant accepted believing him to be the payee. He was not introduced to the Bank and no references were  obtained. The defendant opened the account and the cheque was special- ly cleared at the request of the thief, and he drew out  the proceeds on the next day. On the discovery of the fraud  the plaintiff  brought an action against the defendant for  con- version.  One of the main questions raised was  whether  the account having been opened by payment in all the cheques  to be  collected  the defendant could be properly  regarded  as having received payment for a customer. It was held that  as account  was already opened when the cheque  was  collected, payment had been received for a customer. The drawer  there- upon  sent  another  cheque to the real payee  and  took  an assignment of his rights in the stolen cheque and, as  hold- ers of the cheque or alternatively as assignees, brought  an action against the bank to recover the proceeds collected by the  bank as money had and received to their  use.  Evidence was  given  that it was the general practice of  bankers  to obtain a satisfactory introduction or reference. It was held that  the banker had acted in good faith, but was guilty  of negligence in not taking reasonable precautions to safeguard the  interests  of  the true owner of the  cheque  and  that therefore  he  had  put himself outside  the  protection  of section 82 of the Bills of Exchange Act, 1882. Bailbache, J. also  said that the banker would have been entitled  to  the protection  of the section as having received payment for  a customer, but had lost it owing to his want of due care.  It was also held that the relation of banker and customer began as soon as the first cheque was handed in to the banker  for collection, and not when it was paid. 37     In Turner v. London and Provincial Bank, [1903] 2  Legal Decisions  Affecting  Bankers 33, evidence was  admitted  as

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proof of negligence, that the customer had given a reference on opening the account and that this was not followed up.     In the instant case there was no question of a reference inasmuch as the Manager himself knew Sethuraman and gave the introduction.  The account was not opened by depositing  any cheque  but by depositing case of Rs. 100. The first  cheque was paid into the account later and there is nothing to show that it formed part of the same transaction. No  particulars have been proved as to the tenor of that cheque. The Manager made several inquiries which in the facts and  circumstances of  the  case, in our view, were sufficient, for  it  is  an accepted  rule  that  the banker may  refrain  from  "making inquiries  which it is improbable will lead to detection  of the  potential  customer’s purpose if he  is  dishonest  and which  are calculated to offend him and may drive  away  his customer  if he is honest," Marfani & Co. v.  Midland  Bank, [1968] 2 All E.R. 573 (582). Except when circumstances of  a case so justifies, in making inquiries the banker’s attitude may be solicitous and not detective. Sethuraman was believed when he said that he was the proprietor of Industrial  Chain Concern which he recently started. He showed some orders and references in proof of his business. The banker believed  in existence  of his business but did not meticulously  examine the  addresses. Sethuraman was asked as to why he wanted  to come to that branch and his reply was that he expected there to  have  overdraft facility and when that  was  refused  he expressed  that after his business improved he would  expect to be granted overdraft facilities after one year. There  is no  doubt that Sethuraman was a rogue, but he  prepared  the plan intelligently and the banker in good faith believed  in his  statements.  We, therefore, find it difficult  to  hold that the Bank was negligent in opening the account accepting the deposit of cash by a person known to the Manager of  the Bank under the above circumstances.     Mr.  Balakrishnan has argued that a cheque for  Rs.2,800 was  paid in on the same date which was a stolen cheque  and it ought to have aroused suspicion of the banker. But  there is nothing to show that it formed part of the same  transac- tion. As we have already observed, once an account is opened the relationship of banker and customer begins. Duration  is not  of the essence. As was held in Ladbroke &  Co.  (supra) the  mere opening of an account without the actual  transac- tion was sufficient to constitute the relationship and  this view  was  followed in Commissioner of Taxation  v.  English Scottish and Australian Bank (supra) and it was stated  that the word ’customer’ signifies a relationship of which  dura- tion is not of the essence. The contract is not bet- 38 ween a habitue and a newcomer, but between a person for whom the  bank performs a casual service  ...............  and  a person  who  has  an account of his own at  the  bank.  Lord Chorley has even expressed the view that for the purpose  of establishing  the relationship of banker and customer  there appears to be no logic in the actual opening of the account, and when the banker agrees to accept the customer the  rela- tionship  comes into existence at that time though  the  ac- count may not be opened until later. According to the author "the  relationship being contractual should be subjected  to the  normal  rules  of contract law and the  making  of  the contract  depends on the acceptance of the offer. This  con- tract could clearly be effected before an account had  actu- ally been opened though it would state that there must be an agreement to open an account before the banker and  customer relationship  can  exist."  In the instant  case  there  is, therefore,  no doubt that the first cheque was  subsequently

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paid  in  by Sethuraman as a customer and the  Bank  was  to collect it on account of the customer. The Bank,  therefore, in collecting the cheque and paying the proceed to  Sethura- man acted as a Collecting Banker and can be held  negligent, if  at all, only as such as it was to collect it on  account of  the customer. In fact, from the statement of account  it is clear that the account was opened on October 3, 1974  and was  closed on February 1, 1975 and there were a  number  of transactions  of  deposits  and  withdrawals.  The  detailed particulars of the cheques paid into the account are not  in evidence,  it is, therefore, difficult to know whether  each individual cheque or draft should have aroused suspicion  in the mind of the Banker before accepting the same for collec- tion from its customer.     The  High Court did not analyse the legal  position  and did not consider the facts and circumstances in this  regard in proper perspective. We are not inclined to hold the  Bank negligent in opening the account considered alone.     The  next question is whether the Bank was negligent  in collecting the cheques. In collecting a cheque on account of a  customer  the banker is protected by section 131  of  the Negotiable  Instruments Act, 188 1 (26 of 1881)  hereinafter referred to as ’the Act’ which reads:               "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  pay-               ment.               Explanation--A  banker receives payment  of  a               cros-               39               sed  cheque for a customer within the  meaning               of this section notwithstanding that he  cred-               its his customer’s account with the amount  of               the cheque before receiving payment thereof." In  the  section the words ’a cheque  crossed  generally  or specially to himself’ are important to be noted. Section 131 corresponded  to  section 82 of the Bills of  Exchange  Act, 1882 of England which was repealed by the Cheques Act,  1957 and  the protection there is now given by section 4  of  the Cheques  Act,  1957. English decisions  can,  therefore,  be guide in this regard.     In  Lloyds Bank Ltd. v. E.B. Savory and Company,  [1933] AC 20 1, the bank was held to be negligent (depriving it  of the  protection of section 82) not to ask a customer  though respectively introduced the name of his employer and in  the case of a married woman the name of her husband’s  employer. This is a case where a fraud had arisen through an  employee stealing cheques from his employer and placing them into the credit  of  his account. Had the bank  known  his  employer, enquiries would have been made.     The  request for special collection as in case  of  Lad- broke  & Co. (supra) was absent in this case as the  account continued  for  quite  some time. Even in  case  of  special collection  it was held that it was desired for the  purpose of learning quickly whether or not the cheques will be paid. This  case was mentioned in Marfani and Co. Ltd. v.  Midland Bank Ltd., (supra) where the Midland Bank had make a special collection  without  being asked by their customer.  It  was decided  that this did not indicate that the  bank’s  suspi- cions  were aroused which would require further inquiry.  It

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was  found that the bank took upon a special collection  for the reasons (a) that the cheque was for a large sum, so that it was in their interest to collect quickly and (b) that the customer  about to buy a restaurant might require  the  pro- ceeds quickly. In the Court of Appeal, Diplock LJ said  that the ’significance’ of the special clearance depends upon the Judge’s assessment of the credibility of the bank  officials who gave evidence; and he saw no reason to differ from  him. In the instant case we have no reason to disbelieve what was said by the Manager, DW- 1.     In  the  instant  case in the absence  of  any  evidence giving  the details of the cheques and their tenor,  we  are unable  to  hold that there were notices  and  circumstances which ought to arouse suspicion on the part of the bank. The bank  normally has an obligation to collect  the  customer’s cheques paid into his account. In Halsbury Laws of  England, 4th Edn., Vol. 3 at para 46 we read: 40               "46. Customer’s title to money paid in. In the               absence  of  notice, express  or  implied  the               banker  is not concerned to question the  cus-               tomer’s  title  to money paid in by  him.  al-               though  if  a person entrusted with  a  cheque               wrongfully  pays it to the bank to the  credit               of someone who is not entitled to it, the true               owner,  if he has given notice to the bank  of               his title while the credit remains, may recov-               er  the amount from the bank as money had  and               received;      or     as      damages      for               conversion  ...........                         A banker should be very cautious  in               accepting for a customer’s account any  cheque               drawn  by  him as agent upon  his  principal’s               account, however broad may be the authority to               draw. If the court detects circumstances which               should  arouse  suspicion that the  agent  was               abusing  his  authority, the  banker  will  be               liable to the principal even though the cheque               was crossed." This  is  because in every case of opening an  account  bank takes  a mandate and, until changed, controls the  operation of  the account. In the instant case, having already  opened the  account  the  Bank was not concerned  to  question  the customer’s title to money paid in by him, when a cheque  was drawn in favour of Industrial Chain Concern.     In  Capital and Counties Bank v. Gordon, [1903] AC  240, the  House of Lords accepted the position that a  bank  acts basically as a mere agent or conduit pipe to receive payment of the cheques from the banker on whom they are drawn and to hold  the proceeds at the disposal of its  customer.  Unless crossed  the banker himself is the holder for value. He  may be a sum collecting agent or he may take as holder for value or as holder in due course. As an agent of the customer  for collection he is bound to exercise diligence in the  presen- tation of the cheques for payment within reasonable time. If a banker fails to present a cheque within a reasonable  time after it reaches him, he is liable to his customer for  loss arising from the delay. A banker receiving instruments  paid in  for  collection and credit to a customer’s  account  may collect solely for a customer or for himself or both.  Where he collects for the customer he will be liable in conversion if  the  customer has no title. However, if he  collects  in good  faith  and without negligence he may  plead  statutory protection under section 131 of the Act.     In the instant case in the absence of evidence on record

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we  find  it  difficult to ascertain whether  the  bank  was collecting the cheques merely as agent of the customer or as holder  for  value or as holder in due course. Some  of  the entries in the statement do show deposits and 41 withdrawals of lesser amounts on the same date, but that  is not  enough for arriving at any conclusion whether the  bank was  collecting as a holder for value and not merely  as  an agent of the customer.     To enable a bank to avail the immunity under section 131 as  a collecting banker he has to bring himself  within  the conditions  formulated by the section. Otherwise he is  left to his common law liability for conversion or for money  had and  received  in case of the person from whom he  took  the cheques  having no title or defective title. The  conditions are: (a) that the banker should act in good faith and  with- out  negligence  in  receiving a payment, that  is,  in  the process  of collection, (b) that the banker  should  receive payment for a customer on behalf of him and thus acting as a mere agent in collection of the cheque and not as an account holder (c) that the person for whom the banker acts must  be his  customer and (d) that the cheque should be one  crossed generally  or especially to himself. The receipt of  payment contemplated by the section is one from the drawee bank.  It is settled law that the onus of bringing himself within  the section rests on the banker. In Capital and Counties Bank v. Gordon,  (supra) as we have seen, the conception of  a  col- lecting  banker was that of "receiving the cheque  from  the customer,  presenting  it and receiving the  money  for  the customer,  and  then, and not till then, placing it  to  the customer’s  credit, exercising functions strictly  analogous to  those of a clerk of the customer sent to a bank to  cash an  open  cheque for his employer." If the  banker  performs these functions in course of his business, in good faith and without negligence he will be within section 131 of the Act.     We  have already observed that the principle  enunciated in  the  Commissioners of Taxation v. English  Scottish  and Australian Bank, (supra) is that the opening of the  account is material as shedding light on the question whether  there was  negligence  in collecting a cheque does 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 facts as to how far the two stages can be regarded as  so intimately  associated as to be considered as  one  transac- tion.  We have already found that in the instant case  there was no evidence to show that the opening of the account  and the collection of the cheques and drafts formed part of  the same  transaction. Where a banker in good faith and  without negligence  receives payment for a customer of a cheque  and the  customer  has  no title or a  defective  title  to  the cheque, the banker does not incur any liability to the  true owner  of the cheque by reason only of having received  such payment. The banker is not to be treated for purposes of the protective 42 section  as  having  been negligent by reason  only  of  his failure to concern himself with absence of, or  irregularity in,  endorsement of the cheque or other instrument to  which the section applies. This has to be so because the drawer of the cheque is not a customer of the bank while the payee is. Where the protection attaches, it covers the receipt of  the cheque and every step taken in the ordinary course of  busi- ness and intended to lead up to the receipt of payment. Even

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if  there was negligence in opening of the account that  act ipso facto would not result in loss to the true owner of the cheque collected. While collecting the cheque for a customer the bank is under obligation to present it promptly so as to avoid  any loss due to change of position. When it  receives the money collected then also there is no direct loss to the true owner. It is only when the amount is paid or  withdrawn by  the customer that the loss results. During  this  period what  is important to note is that at every step in  collec- tion of the money and making payment the banker is bound  by the banker--customer relationship and rights and obligations flowing  therefrom. Even so, if there was anything to  rouse suspicion regarding the cheque and ownership of the customer the banker may find itself beyond the protection of  section 131. The scope or ambit of possible suspicion will depend on various  situations  that  may have  prevailed  between  the drawer  of the cheque and the customer. In the instant  case Sethuraman having been believed to have been the  proprietor of Industrial Chain Concern the cheques payable to Industri- al  Chain  Concern  left little scope to  have  aroused  any suspicion  in the minds of the Bank. The position  may  have been  different  if  Sethuraman was known as  acting  as  an employee  of Industrial Chain Concern and the  cheques  were payable  to that concern, but were deposited  into  personal account  of  the employee which was not the case  here.  The requirement  of receiving payment for a customer  enunciated clearly in Capital and Counties Bank Ltd. v. Gordon, (supra) was  extended  in Barclays Bank Ltd.  v.  Astley  Industrial Trust  Ltd., [1970] 1 All E.R. 719 wherein it was held  that the banker may receive payment for himself and yet be  enti- tled to the protection where, acting in a purely  collecting capacity,  he  has  nevertheless a lien or  is  otherwise  a holder for value.     There  can be no doubt that the existence of  a  Current Account created relationship of banker and customer in  this case. Sethuraman would be a customer even if his account was over drawn until that account was closed. In Halsbury’s Laws of England, 4th Edn., Vol. 3 at para 103 it is said:               "If  the banker wishes to plead the  statutory               protection, his dealings throughout must be in               good faith and without negligence. The  alter-               native liability arising from negligence               43               renders the question of good faith practically               superfluous,  and  it  is  seldom,  if   ever,               raised.  Negligence  in  this  connection   is               breach  of a duty to the possible true  owner,               not  the  customer,  created  by  the  statute               itself,  the duty being not to  disregard  the               interests of the true owner." It  is  a settled law that the test of  negligence  for  the purpose of section 131 of the Act is whether the transaction of paying in any given cheque coupled with the circumstances antecedent and present is so out of the ordinary course that it ought to arouse doubts in the banker’s mind and cause him to make inquiries. Lloyds Bank Ltd. v. E.B. Savory and  Co., (supra),  Marfani & Co. Ltd. v. Midland Bank Ltd.,  (supra), Arab  Bank  Ltd. v. Ross, [1952] 1 All E.R.  709  and  Karak Rubber  Co. Ltd. v. Burden, (No. 2) [1972] 1 All E.R.  1210. are some of the authorities laying down the above rule.  The banker is bound to make inquiries when there is anything  to rouse  suspicion that the cheque is being  wrongfully  dealt with in being paid into the customer’s account. However, the banker  is not called upon to be abnormally  suspicious,  as was  held  in Penmount Estates Ltd. v.  National  Provincial

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Bank  Ltd., [1945] 173 LT 344. It was held in Motor  Traders Guarantee Corpn. v. Midland Bank Ltd., [1937] 4 All E.R. 90, that disregard of the bank’s own regulations may be evidence of negligence. In the instant case no such regulation of the bank has been produced so as to establish that in collecting the  cheque and allowing the customer to withdraw  the  bank violated  its  own regulations. Nor has the  plaintiff  been able  to show that the transactions in paying in the  drafts and  cheques coupled with the circumstances  antecedent  and present were so out of the ordinary that it ought to  arouse doubts in the Banker’s mind and cause him make inquiries. As we  have observed that the Bank’s negligence in  not  making inquiries  as  to the customer upon opening  an  account  if there  was any, could shed light in its negligence  in  col- lecting  the cheques for him. But we have found  that  there was  no  such negligence in this  case.  Mr.  Balakrishnan’s submission that in this case while opening the account,  the appellant should have inquired of the plaintiff’s firm  does not reasonably follow in view of the fact that what Sethura- man said was that he was the proprietor off the newly estab- lished  firm "Industrial Chain Concern" and if that was  the name  of  the payee in the cheques, Sethuraman  having  been accepted as its proprietor there would be no room for suspi- cion  that the firm’s cheques were being paid into the  pro- prietor’s personal account. There is no allegation and proof that  the collection and payment were made contrary  to  the tenors  of the instruments. Carelessness could occur at  the time  of collection especially if there was failure  to  pay due attention to the actual terms of the mandate. The actual circumstances at the time of 44 paying  in for collection, if the amount was very large  one might  raise  suspicion. But in this case the  first  cheque paid  in  was of 2,800.17p. which could not be  regarded  as such  a large amount to have aroused  suspicion  considering the  fact  that  the firm was  ’Industrial  Chain  Concern’, dealing in industrial chains and pulleys.     Bharat  Bank  Ltd. v. Kishanchand  Chellaram,  AIR  1955 Madras  402;  Sanyasilingam v. Exchange Bank of  India,  AIR 1948  Bombay 1; Woodbrier v. Catholic Bank, AIR 1958  Kerala 316, applied the accepted principles to the facts. In  Orbit Mining & Trading Co. v. Westminister Bank, [1962] 3 All E.R. 565,  Harm LJ said: "It cannot at any rate be the duty of  a bank continually to keep itself upto date as to the identity of a customer’s employer", though he is presumably  required to  know the identity of the employer. That case is  distin- guishable on facts. Underwood v. Bank of Liverpool, [1924] 1 K.B  775, was a case of a Director paying into his own  pri- vate account cheques in favour of the company duly  endorsed by  himself as sole Director and as such distinguishable  on facts.     In  Bapulal Premchand v. Nath Bank Ltd., AIR  1946  Bom. 482,  Chagla  J, as he then was, in the facts of  that  case expressed  that  in his opinion, there was no  absolute  and unqualified  obligation on a bank to make inquiries about  a proposed customer and that modern banking practice  required that  a customer should be properly introduced or  the  bank should act on the reference of some one whom it could trust. Therefore, perhaps in most cases it would be wiser and  more prudent  for  a bank not to accept a customer  without  some reference.  But he was not prepared to go so far as to  sug- gest  that  after a bank had been given a  proper  reference with regard to a proposed customer and although there was no suspicious  circumstances attendant upon the opening of  the account,  it was still incumbent upon the bank to make  fur-

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ther inquiries with regard to the customer. In that case the manager of the defendant-bank accepted.the reference of  the cashier Modi and also in fact made certain inquiries of Modi as  to the position and status of the customer. It was  held that  it was not obligatory upon the defendant-bank to  make any  further  inquiries  about his customer  and  in  having failed  to make any such further inquiries in  his  Judgment they were not guilty of negligence. In the instant case  the Manager himself gave the introduction.     As a general rule a banker before accepting a  customer, must take reasonable care to satisfy himself that the person in question is of good reputation; and if he fails to do  so he  will run the risk of forfeiting the protection given  by section 131 of the Act but ’reasonable care’ will 45 depend  on  the  facts and circumstances of  the  case.  The courts  have tended to accept the practices  and  procedures which  bankers lay down for themselves, but that can  by  no means  be  decisive. The "type of necessary inquiry  at  the opening of an account seems to be less stringent at  present than  it was a generation ago, and it is difficult to  spell out  from  the cases any hard and fast rules."  This  is  so because,  in the words of Lord Chorley, the use  of  banking facilities at the present day "has become so wide spread and has  penetrated  so  far into social  strata  where  banking accounts  were previously unknown, that precautions  at  one time considered necessary are now difficult in the press  of business  to apply. One of the obvious problems is  that  of the  dishonest employee who may wish to open a bank  account for  the purpose of getting cheques collected for  which  he has stolen from his employer. If the banker is aware of  his employment  he  will naturally watch that those  cheques  of which  the  employer is payee, or in which he  is  otherwise interested, do not pass through the account. But how far can he be expected to keep himself informed of the employment of all  his  customers? This is typical of the  problems  which have faced the judges, and on which their views have  tended to vary from time to time, and indeed from judge to judge."     The  above  problem has been realised by the  courts  in England and India. In Marfani & Co. v. Midland Bank  (supra) a man called Kureshy who was minded to cheat his  employers, the plaintiffs in the case went to a branch of the defendant bank  and asked to open an account giving the name of  Sheik Eliaszade and also those of the referees. He was allowed  to do so immediately, before the references had been taken  up, and  paid Pound 50 the same day. The next day he paid  in  a further  Pound  35 in cash and the  plaintiffs’  cheque  for Pound  3,000  made  payable to one Eliaszade  which  he  had stolen  from them. His object in opening the account was  to get this cheque collected by the defendant bank.     The  defendants in fact had this cheque  collected  spe- cially on the day it was paid in, and on the same day  wrote to the referees. On the next day the defendants received the proceeds of the cheque, and one of the officers of the  bank on  same day had an interview with one of the  referees  who was a customer at the same branch and who gave a  favourable account of Eliaszade which satisfied the manager--the  other referee  never  replied. During the following  days  Kureshy drew  out the whole of the Pound 3,000; indeed he  tried  to draw  out substantially more. On discovering the  fraud  the plaintiffs  sued  the defendant bank for the  conversion  of their  cheque. When the defendants pleaded section 4 of  the Cheques  Act, 1957, the plaintiffs contended that  they  had been negligent under four heads: 46

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(i) They had taken no steps to identify the proposed custom- er, without which the referee’s good opinion was valueless. (ii) No inquiry was made as to the antecedents of Kureshy. (iii) Only one referee responded to the bank’s inquiry (iv) The cheque was in fact collected before the  references had been taken up. The  defendants called evidence that they had done all  that was usual in such a case, and claimed that this proved  that they  had acted with due care. It was held that the  defence succeeded.     It  is thus clear that the question of negligence or  no negligence depends entirely on the facts of each  individual case and thus makes it difficult to judge in advance how any particular  litigation involving allegations  of  negligence will go. In the instant case Sethuraman had in effect opened another account in the name of the plaintiff firm and  oper- ated it himself as its proprietor.     As we have already observed, carelessness on the part of the  bank is most likely to occur at the time of  collection of cheques especially in failure to pay due attention to the actual terms of the mandate. It is not here a case of  play- ing the detective but of a careful examination of everything which appears on the front and back of the instrument.  Each set  of  circumstances produces its  own  requirements.  The instruments,  crossing, type of crossing, per pro, pay  cash or order etc. are important. The banker may be negligent  in acting  contrary to such mandate under  appropriate  circum- stances. In the instant case, however, no details  regarding such mandates on the alleged cheques are available.     The High Court took the view that if the Manager of  the Bank gave the introduction of Sethuraman to open the account in the plaintiff’s name showing him is its proprietor  with- out making any enquiry as to its true relationship with  the concern  then  he was taking a risk and when  it  transpired that Sethuraman had made fraudulent representation then  the Manager  should be taken to have acted negligently.  We  are not  inclined  to  agree inasmuch as while  dealing  with  a customer  for collecting a cheque, there is  no  contractual relation  between the collecting banker and the true  owner. The  duty  is implied by law. A conduct  beneficial  to  the customer at the expense of the true owner when the Bank acts in good faith and without negligence, is no 47 breach  of that duty. It is from this position of  the  true owner  that question of negligence under section 131 of  the Act  has to be viewed. The formula approved in  Lloyds  Bank Ltd. v. Chartered Bank of India, Australia and China, [1929] 1  K.B. 40, is that broadly speaking, the banker must  exer- cise  the same care and forethought in the interest  of  the true owner, with regard to cheques paid in by customer, as a reasonable  man would bring on similar business of his  own. Lord  Dunedin in Commissioner of Taxation (supra) said  that the  bank’s action must be in accordance with  the  ordinary practice  of banking and bank cannot be held  liable  merely because they have not subjected an account to a ’microscopic examination’.     In  Ross v. London County, Westminister and Parr’s  Bank Ltd., [1919] 1 K.B. 678, Bailhache J. took the view that the clerks and cashiers of the defendant bank would be attribut- ed  the degree of intelligent and knowledge  ordinarily  re- quired  of  a person in their position to fit them  for  the discharge  of their duties but that no microscopic  examina- tion  of  cheques paid in for collection was  necessary  and that it was not expected that officials of banks should also be  ’amateur detectives’. It could not be said  that  before

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opening  an account in the name of a firm the Bank would  be required to enquiry always whether any firm of the same name was  already  in existence or not. What facts  ought  to  be known  to the Bank, what inquiries he should have  made  and what  facts were sufficient to cause the Bank reasonably  to suspect that Sethuraman was not the true owner in the  facts and circumstances of the case would depend on current  bank- ing practice. What was the practice long time back when  the use  of  banking facilities by the general public  was  much less widespread may not be a proper guide. It should also be noted  that the duty of care owed by the Bank to the  plain- tiff  as owner of the cheque did not arise until the  cheque was delivered to the Bank by the customer Sethuraman. It was then  only  that  duty to make inquiries  about  the  cheque arose. Those inquiries would depend on the apparent tenor of the cheque and the knowledge of facts that earlier inquiries ascertained.  What we have to do is to look at all the  cir- cumstances  at  the time of the paying in of the  cheque  by Sethuraman and to see whether those circumstances were  such as would cause a reasonable banker possessed of the informa- tion  gathered about Sethuraman to suspect that he  was  not the true owner of the cheque. There is very little  evidence relating  to  the  deposit and particulars  of  the  cheques deposited  and hence it is difficult to hold that  the  Bank ignored obvious indications and was negligent at that  time. It  is difficult to accept so speculative a  proposition  as what  would have happened if inquiries had been  made  which were not made. It does not constitute any lack of reasonable care to refrain from making 48 such inquiries which it was improbable to have led to detec- tion of the customer’s fraud.     While arriving at the above conclusion we have borne  in mind  the standard of reasonable care and the banking  prac- tices  and its trend in a developing banking system  in  the country.  Any  stricter liability may not be  conducive.  It will also be observed that expansion of the banker’s liabil- ity and corresponding narrowing down of the banker’s protec- tion under the provision of section 131 of the Act may  make the banker’s position so vulnerable as to be disadvantageous to the expansion of banking business under the ever  expand- ing  banking system. This is because a commercial  bank,  as distinguished from a Central bank, has the following charac- teristics,  namely  (a)  that they accept  money  from,  and collect cheques for, their customers and place them to their credit; (2) that they honour cheques or orders drawn on them by  their  customers when presented for  payment  and  debit their customers accordingly; and (3) that they keep  current account  in their books in which the credits and debits  are entered.  The receipt of money by banker from or on  account of  his customer constitute it the debtor of  the  customer. The bank borrows the money and undertakes to repay it or any part  of it at the branch of the bank where the  account  is kept  during banking hours and upon payment being  demanded. The banker has to discharge this obligation and normally the banker would not question the customer’s title to the  money paid  in. Applying the above principles of law to the  facts of  the  instant case we are not inclined to hold  that  the Bank  was  negligent either in collecting  the  cheques  and drafts or allowing Sethuraman to withdraw the proceeds.     As  we have taken the view that the bank was not  negli- gent,  it  is  not necessary to deal with  the  question  of contributory negligence. Let the loss lie where it falls.     In the result, this appeal succeeds. The impugned  judg- ments  are set aside and the appeal is allowed, but  without

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any order as to costs. Y. Lal                                 Appeal allowed. 49