AI Drafter 
TaxTMI 
TaxTMI 
1953 (9) TMI 35
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.... then put into his account the cheque drawn by the plaintiff on 24-11-1943 and the same was cashed by the Bank in the usual course of business through the clearing house on 7-12-1943. Matha Prasad Gupta operated on this account by issuing a cheque for Rs. 200, Ex. P. 4(a) and another cheque for Rs. 2,225 Ex. P. 4(b) both dated 6-12-1943 and drawn in favour of one Seetharam. On 7-12-1943 he drew a cheque for Rs. 126 in favour of a watch-maker. Ex. P. 4(d) and on 9-12-1943 himself drew a cheque for Rs. 2,800 Ex. P. 4(c), and thereafter disappeared. The balance remaining to the credit of his account at that time was Rs. 124-9-0. 2. The plaintiff discovered the loss of the cheque in March 1944 and lodged a complaint with the police. Investigation which followed thereon revealed that the person who had cashed the cheques, Exs. P. 4 and P. 4(b), and signed his name as Seetharam was in truth a person called R. P. Misra of Benares; that the person who gave-out his name as Matha Prasad Gupta was In fact a person called jawahar Lal; that they along with others had conspired to commit theft of cheques and to cash them by forging signatures; that in pursuance of this conspiracy one Jai Nara....
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....ly with reference to chattels and in strict theory, therefore, no action will lie in conversion by a customer in respect of money standing to his credit in a bank as he has no property in specific coins. To get over this difficulty the theory has been adopted that the piece of paper called the cheque might be treated as converted and an action in conversion could be maintained for its value - vide - 'Morison v. London County and Westminster Bank Ltd.', 1914 3 KB 356 (A) and - 'A.L. Underwood Ltd. v. Bank of Liverpool, 1924 1 KB 775 (B). The result then is that the receipt of the stolen cheque would itself be conversion even without reference to cashing and if Section 131 is not applicable at that stage the bank will be without protection even if it acts 'bona fide' and without negligence. That clearly could not have been the intention of the Legislature in enacting Section 131 and therefore, when the section speaks of receipt of payment it has obviously in mind all the preceding stages leading up to the encashment of the cheque and in that view the requirement that the bank should act in good faith and without negligence would apply to all those stages. Th....
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....ounter-signature, these being the two officers, who have the authority to permit opening of a new account. The account is then opened and a cheque book and a pass book are issued to the customer. The application presented by Matha Prasad Gupta was, as already stated, recommended by Mr. Krishnaswami and it bears the initials of the Chief accountant. D. W. 3 deposes that it did not come to him for approval and that he did not see either Matha Prasad Gupta or make any enquiries , about him. The Chief accountant has not been examined nor Krishnaswami. Thus apart from what appears on the face of the application there is no independent evidence to show that the bank had made any enquiries in the matter. ' 6. It was argued for the appellants that as the application had been recommended by Krishnaswami it must be held that the customer had been properly introduced but Krishnaswami had not been examined in these proceedings and his deposition in the Criminal court which has been marked as Ex. D. 2 does not very much assist the appellants. He stated therein: "I was a clerk in the Bharat Bank at Mount Road, Madras in 1943. One Matha Prasad Gupta opened a current account on 6-1....
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....not be an answer to a claim in conversion though that would be a material element in establishing that the Batik had acted without negligence as required by Section 131. 8. It is next contended by Mr. M. Sundaram that what Section 131 requires is absence of negligence in the realisation of the cheque, that even construing it as including negligence in the "preliminary operations leading upto the receipt of the money", it cannot include negligence in the opening of accounts and the decision of the Privy Council in - 'Commrs. of Taxation v. English, Scottish and Australian Bank Ltd.', AIR 1920 PC 88 (D) is strongly relied on in support of this contention. There, the facts were that on 6-6-1917 one Mr. Friend drew a cheque on the Australian Bank of Commerce for the amount of Income Tax payable by him and delivered it to the Commissioner of Taxes. A person calling himself Thallon appeared before the Accountant of the respondent bank and wanted to open a current account. He complied with the usual formalities and paid GBP 20 and an account was opened on the 7th. Next day he put into his account the cheque of Mr. Friend and the same was cashed in the usual course. On the 9t....
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.... 111 LT 43 (F) a cheque payable to Jobson was stolen and a person pretending to be Jobson opened an account with the defendant bank with that cheque. The cheque was cleared in the usual course or business and the amount was drawn by the pretender, Jobson. In an action in conversion by the drawers of the cheque the bank relied by way of defence on Section 82 of the English Bills of Exchange Act. Bailhache J. in overruling the same, referred to the evidence which established that it was the practice of the banks to make enquiries before opening new accounts and observed:-"It was true that banks were willing to take cheques, but before they would allow them to be operated upon they must be satisfied as to the respectability of the intended customer. Sometimes that was done by references, and sometimes by an introduction through a customer.... The defendant, in fact, did fall short of that degree of care ordinarily exercised by bankers, and therefore, he was guilty of negligence". It was observed in AIR1946Bom482 (E) that this decision could not be regarded as good law in view of the later decision of the Privy Council in AIR 1920 PC 88 (D). In (1923) 39 TLR 229 (G) which was dec....
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....ce in the opening of the account will, however, be relevant under Section 131 to this extent that if the opening of the account and the deposit of the cheque are really part of one scheme, as where the account itself is opened with the cheque in question or where it is put into the account so shortly after the opening of the account as to lead to the inference that it is part of it, then negligence , in the matter of Opening the account must be treated as negligence in the matter of realisation of the cheque. It might happen that even when an account is opened without a proper enquiry it might continue to be operated upon satisfactorily for sometime but long afterwards a cheque might be put into the account which might turn out to be forged. In such a case it cannot be laid down as an inexorable rule that negligence in the opening of an account must be treated as negligence in the receipt of the amount of the cheque. In all the decisions in which negligence in opening the account was held to preclude a defence under Section 82 of the English Act, the opening of the account and the deposit of the cheque were contemporaneous or so close in point of time as to be regarded as one tr....