Bank of India vs Mr Abraham & Anr

S. Ravi Kumar, Chairperson

This Appeal is against Order dated 22.07.2015 of DRT-II, Chennai, in OA 168/2015 (old OA 267/2007 on the file of DRT-I, Chennai).

Brief facts leading to this Appeal are as follows:-

Appellant herein filed above referred OA for recovery of Rs.17,86,882/-, with future interest from 1st Respondent and another, contending that 1st Respondent herein forged three Demand Drafts said to have been issued by Vadipatti Branch, Nagavaram Branch and Pannan Kombu Branch, and presented those Drafts before 2nd Respondent Bank herein, and 2nd Respondent, in turn, presented them for collection. Thereafter, Drafts were cleared and 1st Respondent withdrew the amounts. It is contended that Appellant requested 2nd Respondent herein to furnish information relating to account opened by 1st Respondent herein, with their Bank, but 2nd Respondent wantonly and deliberately, did not disclose information. Appellant would further contend that 2nd Respondent opened account without fulfilling KYC Norms, and for the reasons best known to 2nd Respondent, information is not furnished. As both Defendants defrauded Appellant, both of them are jointly liable for the amount covered by three Drafts.

In the said OA, both Defendants i.e. Respondents herein, remained ex parte, and Tribunal below allowed OA by an Order dated 24.04.2008, and thereafter, 2nd Respondent herein, filed Application MA 87/2008 to set aside ex parte Order passed against it, and Tribunal below by Order dated 21.04.2009, allowed MA 87/2008 by imposing conditions. Second Respondent herein, complied with said conditions, on that, Tribunal below was pleased to set aside ex parte Order passed against 2nd Defendant Bank alone, and granted time for 2nd Defendant to file its Reply Statement. Subsequent to filing of Reply Statement, Tribunal below through impugned Order dated 22.07.2015, dismissed OA; aggrieved by which Appellant preferred present Appellant.

After concluding arguments, as it is felt original record is required for verification, the same is called for. On verification of the same, it is found that, that originally OA was allowed against both the Defendants on 24.04.2008, but on an Application filed by 2nd Respondent herein, ex parte Order against 2nd Defendant i.e. 2nd Respondent herein was set aside, and OA was restored and after hearing both Appellant and 2nd Respondent herein, OA is dismissed on 22.07.2015. Though, in the impugned Order, there is no clarity, but the fact remains that dismissal of OA is applicable to 2nd Defendant only, in OA, i.e. 2nd Respondent herein, and Recovery Certificate passed against 1st Defendant that is 1st Respondent herein, on 24.04.2008, still holds good, and is not disturbed through impugned Order dated 22.07.2015.

Both sides filed Written Arguments and submitted oral submissions reiterating the Written Submissions.

Advocate for Appellant submitted that DRT failed to appreciate judgement cited before it, concerning definition of ‘debt’, and came to an erroneous conclusion. It is submitted Hon’ble High Court of Punjab and Haryana and Hon’ble High Court of Delhi, held that amount claimed by Appellant therein falls within ambit of the word ‘debt’, and in view of that, Tribunal below ought to have allowed the claim against 2nd Respondent herein. It is submitted 2nd Respondent herein has not furnished the details as sought by Appellant, relating to account opened by 1st Respondent with them, and that itself shows that 2nd  Respondent herein, has not followed KYC Norms. It is submitted, 2nd Respondent has not acted in good faith, and due to the same, Appellant Bank suffered loss, and therefore, claim of Appellant is justified. It is submitted that to claim protection under Section 131 and 131A of Negotiable Instruments Act, 1881, certain pre requisite conditions have to be fulfilled and 2nd Respondent failed to fulfill those conditions. It is submitted, the Appeal of Appellant has to be allowed and Order of Tribunal below is liable to be rejected.

On the other hand, Advocate for 2nd Respondent submitted that, 1st Respondent herein opened Savings Bank Account with their Branch, on 27.04.2006 by producing original driving license and Reliance Telephone Bills for identification and address proof as per KYC Norms. It is submitted, after opening of account, 1st Respondent presented Demand Drafts for collection, and 2nd Respondent, during its course of business, had forwarded them to Appellant Bank, and on clearance by Appellant Bank, the amount was credited into the account of 1st Respondent, on 12.05.2006 and 16.05.2006, which was partially withdrawn on 13.05.2006 and 16.05.2006. It is submitted that after receiving information from Appellant Bank regarding forgery of Drafts, when agent of 1st Respondent came to its Branch on 17.05.2006 for withdrawal, said person was apprehended, and handed over to Officials of Appellant Bank, who, later produced before Police Authorities. It is submitted, 2nd Respondent followed all the statutory Regulations and Rules relating to Bankers Clearing Houses. It is submitted that there was no negligence on the part of 2nd Respondent herein, and it acted in good faith, and complied all KYC Norms, and the Appeal filed by Appellant is not maintainable. It is further submitted that 2nd Respondent is entitled for protection as a collecting Banker as per Section 131 and 131 A of Negotiable Instruments Act, 1881. It is further submitted 2nd Respondent is neither a borrower nor a guarantor, and has no liability towards Appellant Bank, and for these reasons, Appeal is liable to be dismissed.

I have perused material papers and impugned Order dated 22.07.2015.

It is clarified that dismissal of OA through impugned Order dated 22.07.2015 is only applicable to 2nd Respondent herein, but not to 1st Respondent, because ex parte Decree dated 24.04.2008 is set aside only against 2nd Respondent Bank, through MA 87/2008.

Main contention of Appellant is that the claim made against 2nd Respondent falls within the definition of ‘debt’, therefore, Appellant is entitled for Recovery Certificate against 2nd Respondent also. According to Appellant, it suffered loss for the reasons that 2nd Respondent has not followed KYC Norms while opening account of 1st Respondent herein, with their Branch. Though much is argued on this point, there is absolutely no evidence from Appellant side to show that 2nd Respondent has not followed KYC Norms. When allegations are made, it is for Appellant to prove those allegations, particularly, when 2nd Respondent pleaded that it has collected Driving License and Telephone Bills as per KYC Norms, for identification and address proof, the burden is on the part of Appellant to establish that those two documents are not sufficient to fulfill KYC Norms, but, Appellant has not produced any evidence, therefore, any length of argument, is of no use.

It is vehemently contended that issuance of Bank Drafts is business activity of Bank and the essence of definition of ‘debt’ is the existence of any liability founded on the allegation as due from any person. Advocate for Appellant has referred to the judgement of Hon’ble High Court of Punjab and Haryana in Punjab National Bank Vs. HDFC Bank and Ors., which followed Hon’ble High Court of Delhi judgement, wherein it is observed, in the course of its business activities, the Bank may be defrauded, but the fraud also is perpetrated on the Bank in the course of its business activities, therefore, falls under the definition of ‘debt’.

This decision would only help Appellant in so far as the claim against 1st Respondent is concerned, because allegation of fraud is against 1st Respondent herein; 2nd Respondent Bank is only a collecting Bank, and when placed proof that it collected documents as per KYC Norms, it will definitely have the protection of Section 131 and 131 A of Negotiable Instruments Act, 1881. Other decisions relied on by Appellant which are referred to in Written Arguments are also not applicable to the facts of this case, particularly, when there is evidence of collecting documents of address and identification as per KYC Norms.

It is not in dispute that all the three Drafts were sent for collection to Appellant and Appellant Bank cleared those three Drafts. As rightly pointed out by Advocate for 2nd Respondent, had Appellant Branch verified Demand Drafts carefully before honouring them, it would have detected the same as forged, so that there could not have been acceptance of those Drafts. When Appellant honoured Demand Drafts, and released the funds, it is not open for it to contend that there is negligence on the part of 2nd Respondent. In fact, negligence, if any, shall be attributed to Appellant because it honoured Demand Drafts in a very casual manner without proper verification. The loss sustained was only due to fault of Appellant, and for that, 2nd Respondent cannot be made responsible.

On a scrutiny of material, I am of the considered view that Tribunal below is perfectly justified in dismissing the claim against 2nd Respondent, and there are no merits in the Appeal. For these reasons, Appeal is liable to be dismissed.

In the result, Appeal RA 65/2015 is dismissed with costs. All pending IAs, if any stand closed.