Fortune Marketing (P) Ltd. vs United Bank Of India

Ranjit Singh, J

The issue involved in this appeal relates to a fraudulent encashment of demand draft which was allegedly lost from the Chanditala (West Bengal) branch of United Bank of India.

The demand draft bearing No. 295188 dated 3.12.1998 for a sum of Rs. 8.5 lacs purported to have been issued by Begu Sarai branch in favour of M/s Fortune Marketing Pvt. Ltd., Nehru Place, New Delhi got encashed on 9.12.1998. This demand draft was presented to State Bank of Saurashtra (respondent No. 2) and was paid by respondent No. 1 - United Bank of India to the appellant though erroneously. When respondent No. 1 came to know that the demand draft was a forged one, it filed a complaint with Connaught Place Police Station on 2.9.1999. In addition, respondent No. 1 bank immediately called upon respondent No. 2 bank to remit the payment encashed by the appellant on the forged demand draft. Respondent No. 2 responded by saying that it was merely acting as a collecting bank and thus was not liable to pay the amount. On 31.7.2000, an FIR was registered at Connaught Place Police Station. Respondent No. 1 bank, thereafter, served a legal demand notice on 30.10.2001 calling the appellant to remit the outstanding amount. As per the respondent No. 1 bank, the demand draft was a forged instrument and it did not confer any valid title upon the appellant and as such the appellant was liable to pay the amount at the commercial rate of interest, i.e., 18% p.a. with quarterly rests. On this basis, a demand for a sum of Rs. 14,24,640/- with interest and cost was made in the Original Application (O.A.) filed by respondent No:1 bank before the DRT.

When served with the notice, appellant filed a written statement raising various pleas that the O.A. was not signed, verified and instituted by duly authorized person, that the O.A. is bad for mis-joinder as the appellant was not a proper party and that there was no privity of contract between the appellant and the respondent bank. Plea further was that O.A. did not disclose any cause of action against the appellant.

Explaining the facts, it was stated that the demand draft was given by one Mr. Virender Pratap Singh, sole proprietor of M/s Graphic Computers and M/s. Computech Orbit, Muzaffarpur (Bihar). Said Mr. Virender Pratap Singh wanted to purchase some computer parts on urgent basis. No dealer/ businessman at Delhi could have sold him the computer parts on the basis of cheques and he accordingly prepared the demand draft in the name of the appellant after making some preliminary enquiries. The appellant deposited the draft with respondent No. 2 bank, i.e., State Bank of Saurashtra on 8.12.1998 which was cleared. As per the appellant, no doubt was raised by respondent No. 1 bank on the genuineness of the demand draft. Once the demand draft was cleared, the appellant supplied goods to Mr. Virender Pratap Singh in the name of his sole proprietorship concern M/s Computech Orbit and M/s Graphics Computers. In this background, it is pleaded that the appellant was surprised to receive telephonic call from the bank on 17.9.1999 disclosing that the aforesaid demand draft was a forged one. The appellant also felt cheated as he had already supplied the goods. Appellant would contend that the erring officials of the bank took considerably long period to ascertain the genuineness of the demand draft. If it was a forged one, respondent No. 1 bank could have dishonoured the same on the ground that it was a stolen or forged, at the time of its clearance. It is also pleaded that Mr. Virender Pratap Singh was a necessary party, but was not impleaded and so the O..A. filed by respondent No. 1 bank was liable to be dismissed on account non-joinder of a necessary party.

Rejoinder to the written statement was filed disputing all the averments made in the reply. Evidence was led by the respective parties and the Tribunal below thereafter went on to determine the issues which arising for consideration in the O.A. The Tribunal has noted the issues arising for consideration, which are whether the application filed by the bank was maintainable and whether the bank was entitled to recover the amount as claimed from the appellant and, the relief.

After considering the evidence and the materials placed on record before it, the Tribunal came to the conclusion that the amount claimed is a 'debt' as per the definition given in section 2(g) of the RDDBFI Act and so held that the O.A. was maintainable. After analyzing the evidence, the Tribunal has also held that respondent No. 1 bank had succeeded in proving that a fraud was played on it by the appellant. The bank was also held justified in claiming interest @18% p.a. and accordingly allowed the claim for recovery of Rs.14, 24, 640/- with simple interest @18% p.a. from 13.11.2001 onward till the recovery. The appellant has, therefore, filed the present appeal against this order passed by the Tribunal below.

The appellant would challenge the various finding of facts returned by the Tribunal below. As per the appellant, it was purely a business transaction and he had supplied computer parts when this demand draft was presented to him by Mr. Virender Pratap Singh. Counsel would contend that said Mr. Virender Pratap Singh was a necessary party, but was not impleaded. As per the counsel, the appellant was neither a borrower nor a guarantor and thus the O.A. filed by the bank was not maintainable. The counsel would also make a grievance that the bank took considerably long period to check whether the draft was a forged or fictitious. He would also make a grievance that despite order, the Tribunal did not take on record the investigation report qua the FIR where only Mr. Virender Pratap Singh along with his nephew was charge-sheeted, being involved in the said fraud and the appellant had not been arraigned as an accused.

Apart from challenging the finding on merit, the appellant would also press his plea that the transaction, whatever it be, would not be covered under the definition of 'debt' as defined in sections 2(g) and 17 of the RDDBFI Act. In support of his submission, the counsel has made reference to some precedents. As per the counsel for the appellant, this was not a case of erroneous payment under mistake as is being claimed by the bank, as it has occurred because of gross negligence on the part of the bank. In this regard, reference is made to some circular which regulate the accounting system of demand drafts to substantiate his plea that it is a case of gross negligence and casualness.

The counsel for the respondent bank, on the other hand, has invited my attention to various documents to plead that the innocence as being pleaded by the appellant is belied from these documents. The appellant claims to have received this demand draft from Mr. Virender Pratap Singh. The appellant, as per the counsel for the bank, has not been able to link the payment of this draft to Mr. Virender Pratap Singh by any of the documents on which he has placed reliance. The counsel has made reference to the document to show that no supply of any material was made to Mr. Virender Pratap Singh and the bills, relied upon, do not in any manner indicate if these were in favour of Mr. Virender Pratap Singh. These bills as placed on record by the appellant are in the name of M/s. Computech Orbit where one Manoj has put his signatures as recipient of these items. There is no material placed on record which could indicate or link that these parts were supplied to Mr. Virender Pratap Singh, for which he had given this draft of Rs. 8.50 lacs. These bills even do not total up to Rs. 8.50 lacs for which the demand draft was handed over to the appellant. On this count and on various other counts, the counsel for the respondent bank would submit that the impugned order passed by the Tribunal is well-reasoned and one passed after considering all the pleas raised by the appellant and hence the appeal deserves to be dismissed.

I have considered submissions made before me by the counsel and am unable to accept the pleas raised on behalf of the appellant. The plea of mis-joinder or non-joinder of necessary party as raised by the appellant was rightly declined once the appellant had admitted the encashment of the demand draft. After admitting encashment of draft the appellant pleaded in defence that the draft was given to him by Mr. Virender Pratap Singh. It is the defence which the appellant had put up before the Tribunal below that he had received this demand draft from Mr. Virender Pratap Singh. That being so, Mr. Virender Pratap Singh cannot become necessary or proper party. It was for the appellant to prove this fact and for this he could not have forced the bank to implead a party. So far as the bank was concerned, Mr. Virender Pratap Singh has had no concern in the encashment of this draft and this fact was raised only in the written statement filed by the appellant. How could then the appellant pray before the Tribunal to direct the bank to implead Mr. Virender Pratap Singh with whom the bank never had any dealing? In my view, Mr. Virender Pratap Singh was neither a necessary nor proper party and the Tribunal has rightly rejected this plea of the appellant.

The plea which, in fact, was forcefully pressed before me was in regard to the maintainability of this O.A. on the ground that it was not a case of 'debt' as defined in section 2(g) of the RDDBFI Act and so this O.A. was not maintainable. Section 2(g) of the RDDBFI Act where the 'debt' has been defined to mean any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or financial institution etc. Thus, the 'debt' means a liability which arose during the course of a business activity undertaken by the bank. It is rightly observed by the Tribunal that the encashment of the demand draft is in the course of a business activity and if a forged demand draft is presented, then obviously the person who presented the same or encashed or received money would incur liability. There is no fault in the finding recorded by the Tribunal that when this forged or fictitious demand draft, which was stolen, was presented, it would have been difficult for the clearing bank to ascertain whether this draft was genuine or forged one. Considering the wide definition of 'debt' in section 2(g) of the Act, I would have no hesitation to hold that by presenting this draft the appellant had gained a sum of Rs. 8.50 lacs which would lead to a liability on the ground that the instrument which was presented was forged, fake or false one. The amount claimed thus would fall within the definition of 'debt' and the O.A. was rightly held maintainable before the Tribunal below.

Once there is not much dispute that in fact this demand draft was presented by the appellant, that it was not a genuine instrument and was a forged one, then the only issue which left to be adjudicated was whether the appellant had been able to discharge the burden resting on him to prove that he was innocent participant of the transaction and was not a party to any fraud. The draft being fake and prepared on a stolen leaf is not a subject matter of any dispute. The case set up by the appellant himself is that even the police investigation found Mr. Virender Pratap Singh and another person involved in this fraudulent act and therefore have charge-sheeted them for the purpose of their prosecution under the criminal law. The only plea raised by the appellant, which has been appreciated by the Tribunal below, is that it was a business transaction where he was holding a demand draft for a valid consideration and, therefore, he was not liable to discharge this liability. The Tribunal has found that the appellant has failed to prove the case as has been projected by him. The Tribunal has made reference to an additional affidavit filed by the appellant where reference was made to Vigilance Department, Head Office, Calcutta letter dated 14.2.2000. In this letter, the circumstances of losing the DD form were stated and explained. The incidence of loss was not earlier noticed which may be a careless or casual approach on the part of dealing officials. That was on the part of the staff of the branch of the bank from where the demand draft form was stolen or had gone missing. This will not indicate any negligence on the part of respondent No. 1 bank. The Tribunal has discussed the evidence threadbare and has found that the demand draft stolen was from leaves which were meant for issuing on Mumbai branch. Somehow or other, the letter issued advising the branch to exercise necessary caution against the fraudulent missing demand draft could not reach the Connaught Circus branch. All these facts coupled with evidence led by the appellant would not go to show in any manner that he was able to establish his innocence. The judgments relied upon by the appellant have all been considered and distinguished, on facts. The law has to be applied keeping in view the facts of the case. The evidence in the present case does not indicate in any manner that the appellant could prove his defence. The burden to prove his assertions that he had also been defrauded was on the appellant as he had pleaded so in his defence. The appellant, in my view, could not succeed in discharging this burden resting on him in any satisfactory manner. The evidence relied upon by him is infirm and so the appellant has failed to prove his pleas.

I do not find any reason to interfere with the order passed by the Tribunal below and, therefore, would dismiss the appeal.

Copy of this order be furnished to the parties as per law.