The plaintiff has brought this suit for recovery of Rs. 28,145 against the defendants on the allegation that a Bank Draft issued by the Sargodha Branch of plaintiff payable to Darul Uloom Arbia in the sum of Rs. 25 bearing handwritten No. LA-19/104/JB and printed No. 272808 was intercepted by defendant No. 1 and after making unauthorised alterations in the draft by inserting his name in place of payee Darul Uloom Arbia and by obliterating, the amount of Rs: 25 and substituting it with Rs. 23,700 and adding over the words Muslim Commercial Bank, the words "Exact Rs. 23,700." and further changing the handwritten number of draft from LA/19/104/JB/to L.A. 19/105/JB managed to encash the Bank draft through defendant No. 2 by putting it in his Account No. 867 which he had with defendant No. 2. It is further alleged that the defendant No. 2 acted mala fidely, negligently and otherwise than in the ordinary course of business in collecting the proceeds of the above draft and making a payment of a sum of Rs. 18,000 out of its proceeds to defendant No. 1, immediately on the encashment of said draft. The defendant No. 2, it is alleged, is therefore, liable for conversion and for making payment to defen--dant No. 1, who had no title to the said Bank Draft. A decree accordingly in the sum of Rs. 23,700 for the principal amount and interest amounting to Rs. 4,445 up to the date of filing of the suit and future interest at 9 % per annum from the date of the institution of the suit till the amount is realized is claimed against the defendants jointly and severally. The defendants were duly served in the matter but the suit is contested by defendant 2 only. Defendant No. 1 has remained absent throughout. By order dated 31-1-1972 a learned Single Judge of this Court after holding service of summons on defendant No. 1 as good, decreed the suit against him with costs and interest at the rate of 9 % per annum, and thereafter the suit proceeded against defendant No. 2 only.
2. In the written statement filed on behalf of defendant No. 2 the allega--tions of conversion and acting otherwise than in due course of business are denied. It is asserted by defendant No. 2 that the demand draft put in the account of defendant No. 1 was in his name and was for Rs. 23,700 which was collected in due course of business and a sum of Rs. 18,000 was paid to defendant No. I in the ordinary course. The allegations with regard to inter--ception of the draft by defendant No. I and alterations made in the demand draft are not admitted by defendant No:
2. In the alternative it is pleaded that defendant No. 2 is fully protected under section 131 of the Negotiable Instruments Act, as a collecting bank and that plaintiff its.-If acted with neg--ligence which resulted in the alleged loss, if any. It is also denied that there was any negligence on the part of defendant No. 2 in opening the account of defendant No. 1, which was opened with defendant No. 2 by defendant No. 1 on or about 30th November, 1967 and therefore it is asserted that it could not be in contemplation of the alleged culpable act of defendant No. 1. On the above pleadings of the parties the following consent issues were framed by the .Court.
(1) Whether the Demand Draft was for Rs. 25 and payable to Darul Uloom Arbia ?
(2) Whether thedefendant No. 1 intercepted the said Demand Draft, made alterations as alleged and specified in para. 3 of the plaint ?
(3) Whether the account of the defendant No. 1 was opened without re--quisite introduction and its effect one way or the other?
(4) Whether the account of the defendant No. 1 was opened with the defendant No. 2 much before the alleged Culpable act? If so, its effect?
(5) Whether the defendant No. 2 acted mala fidely, negligently or other--wise in the ordinary course of business. If so, its effect in the matter of opening the account of the defendant No. 2 and in the matter of collection of the Bank Draft? If so, effect thereof.
(6) Whether the loss, if any, to the plaintiff was on account of its own negligence ?
(7) Whether the plaintiff is estopped from making the claim against the defendants or any of them
(8) Whether the defendant No. 2 is protected under section 131 of the Negotiable instruments Act?
(9) What should the decree be?
3. I have heard Mr. G. H. Malik, the learned counsel for the plaintiff and Mr. Mansoorul Arfin, the learned counsel for defendant No. 2. My findings on the above issues are as follows :-- Issues Nos. I and 2
4. I will deal with both these issues together as they are inter-connected. The original draft which is subject-matter of dispute has not been produced in evidence. However, a photostat of the draft is produced in the evidence which is marked as "X-1'. It is not possible to give any finding as to the alleged interpolation and alterations in, the draft in the absence of the original. Mr. Mansoorul Arfin, the learned counsel for defendant No. 2 submitted that the document Exh. X-1 is inadmissible in evidence as the plaintiff has failed to establish the circumstances which could entitle him to produce secondary evidence of this document. Mr. G. H. Malik on the other hand, maintained that the photostat of the draft should be accepted in evidence as non-production of the original draft is not attributable to any negligence or default on the part of plaintiff. The law relating to production of secondary evidence is contained in section 65 of the Evidence Act. One of the conditions mentioned in clause (c) of section 65 of the Evidence Act is that before secondary, evidence of a document is allowed to be produced, the party offering secondary evidence must show that the original has been destroyed or lost or where the party offering evidence of its contents cannot, for any other reason not arising from his own default or neglect, produce it in reasonable time. The plaintiff in this case has not alleged loss of original. It is, however, asserted on behalf of plaintiff that its non-production is not on account of any default on the part of plaintiff. The witness Anwar Zeb, a S. 1. P. Of C: I. A. Who was examined by plaintiff in this case stated in his evidence that the original draft is not available in the, record of police station which may be available in the file of the City Court. The plaintiff failed to produce or summon the original from the City Court By order dated 30- 4-1980 my learned brother Ajmal Mian, J. Who recorded evidence in this case closed the plaintiff's side on account of non-production of evidence. It will be useful to reproduce here the order passed by my. Learned brother on 30-4-1980 in this regard :-- "On 22-1-1980 the plaintiff produced only one witness instead of examining their entire evidence.
The case was however adjourned at the request of the learned counsel for plaintiff. On 18-2-1980 when the case came, up for evidence again, the plaintiff again examined one witness and requested for time. At the request of the learned counsel for the plaintiff the case was adjourned on the condition that no further time would be granted on the next date of hearing. When the case came up for hearing a third time on 11-3-1980 again the learned counsel for the plaintiff requested for adjournment. I adjourned the case on the condition that no further date would be. Given. I had granted adjournment on the above dates, as the evidence for the -defendant was also not present. Today Mr. G. H. Malik has produced an affidavit of one Abdul Ghaffar stating therein that the witness whom the plaintiff bad summoned had refused to accept the summon. It appears that the plaintiff had taken the summon cover-in-hand and did not get the summon served through the bailiff of this Court through the witness who was sought to be summoned was the Officer Incharge of the record room of the City Court, who -could have been easily served through the bailiff. As I had given several opportunities to the plaintiff I was not inclined to grant another opportunity to the plaintiff and therefore 1 closed their side. Mr. Mansoorul Arfin has examined one witness and has closed his side. The case is, therefore, adjourned to a date in office for arguments."
On the face of the above order it cannot be! Argued that the non-production of the original draft is not attributable to the default and neglect of plaintiff: I accordingly hold that document 'X-1' is not admissible in evidence. The plaintiff has however also relied upon Exh. 6/5 to prove that the demand draft issued by its Sargodha Branch was payable to Darul Uloom Arbia and was in the sum of Rs. 25 only. This document is relied by defendant No. 2 as well. According to Exh. 6/5, the Sargodha Branch of plaintiff issued demand draft bearing No. 19/104/272808 in the sum of Rs. 25 payable to Darul Uloom Arbia. The plaintiff's witnesses have specifically stated that it was this draft which was wrongfully converted into a draft of Rs. 23,700 payable to defendant No. 1, by making unauthorised alteration in the draft. This assertion of plaintiff has not been controverted b defendants. Even defendant No. 2 who contested the suit did not challeng this part of evidence in the cross-examination. No evidence has been led by the defendants to show that any other draft bearing No. 19/105/272808 was issued by the Sargodha Branch of plaintiff in favour of defendant No. 1, I accordingly hold that the Demand Draft issued in favour of Darul Uloom Arbia by Sargodha Branch of plaintiff was for Rs. 25 and that it was this draft which was altered and converted into a draft payable to defendant No. 1, in the sum of Rs. 23,700. Issues Nos. 1 and 2 are answered accordingly.
Issue No. 3 ;
5. The burden of proof of this issue is on the plaintiff. The plaintiff has failed. To bring evidence on record to show that the account of defendant No. 1 was opened without the requisite introduction.
The plaintiff also failed to show what were the requisite introduction for opening an account which were not fulfilled by defendant No. 2 at the time of opening of account of defendant No. 1. P. W. 3 Zarifuddin Siddiqui in his evidence stated that after encashment of the draft he visited the office of defendant No. 2 and when the account opening form was taken out he found that an officer of the Australasia Bank of the statuts of accountant had introduced the account opener. He further stated that thereafter. He approached the. Accountant concerned but the latter informed him that he did not know the address of. Account-opener and that he introduced him without knowing his particular. This statement of the witness was challenged in the cross--examination but. No effort was made either to summon and produce the account opening form or to produce the accountant who had allegedly introduced the defendant No. 1 at the time of opening of account.
Apart from it this part of the evidence appears to be an improvement made by the witness at the time of giving evidence in Court as in the letter Exh. 6/1 which the witness had addressed to defendant No. 2 immediately after the encashment of draft, and after his above visit, this fact was not mentioned.
I may also mention here that the learned counsel for plaintiff very much stressed during his submissions on this issue that the introduction of defendant No. 1 by an employee of defendant No. 2 without knowing his particulars and address is a very material fact as it has an important bearing on the issue involved in this suit, but strangely enough this . Important fact was neither mentioned in the letter addressed by plaintiff to defendant No. 2 soon after he came to know of this fact nor this fact was pleaded in the plaint. Be that as it may, the fact remains that it was for the plaintiff to have proved this fact which he failed to do. I accordingly hold that the plaintiff' failed to prove this issue.
Issue No. 4
6. The evidence on record disclosed that the defendant No. 1 had opened the account with defendant No. 2 on 30-11-1967. This fact is not disputed by the learned counsel for the plaintiff. I accordingly hold that the amount of defendant No. 1 was opened with defendant No. 2 on 30-11- 1967 which was before encashment of the draft by defendant No. 1 in the above account.
Issue No. 5
7. This issue as framed also places burden on the plaintiff. This issue is in two parts. The first part deals with acts of .Defendant No. 2, as mala fide, negligent and otherwise than in the ordinary course of business. The plaintiff has failed to show in what manner the collection of the proceeds of the draft in the name of defendant No. 1 was mala fide, negligent or otherwise than in the ordinary course of the business. It is an admitted position on record that at the time the above draft was sent for collection to Jodia Bazar Branch of plaintiff, the advice of the plaintiff's Sargodha Branch who had issued the above draft was available in the Jodia Bazar Branch. P. W. 2, who was examined on behalf of the plaintiff clearly stated B in his evidence that when the above draft was presented for encashment be examined the draft but did "not" notice any alteration in the said draft. (In the evidence the word 'not' in-between the word 'did' and "notice" is not mentioned but it appears to be an omission as without the word "not" the sentence will not be complete and otherwise amounts to an admission on the part of witness which does not fit in the tenure of evidence). In these circumstances it cannot be argued that the collecting bank (defendant 2)acted negligently or otherwise in the ordinary course of business in forwarding the above draft for collection and receiving its proceeds. The latter partl of this issue deals with the opening of account by defendant 1 with defendant 2 and the matter of collection of draft by the Bank. The plaintiff was unable to show in what manner the opening of account was not proper or that how the collection of the proceeds of the Bank draft by defendant N. 2 was otherwise than in the ordinary course of the business. I accordingly hold that the plaintiff has failed to prove this issue as well.
Issues Nos. 6 and 7 ;
8. The burden of these two issues are on defendant 2. It is contended by the learned counsel for defendant No. 2 that encashment of the above draft and payment made against it by the plaintiff was an act of gross negligence and it had the effect of making defendant No. 2 to alter and change his position with regard to the above draft and therefore the plaintiff is estopped from making any claim in this regard against defendant No. 2.
The learned counsel pointed out from the cross-examination of witness' P. W. 2 that the advice dated 13-12-1967 was available in the plaintiff's Jodia Bazar Branch on 16-12-1 67, while the draft was sent for collection on 18-12-1967. It was further pointed out from the evidence of P. W. 3, who was Manager of the plaintiff's Jodia Bazar Branch in 1967, that if an advice with regard to a bank draft is available in the branch then it is checked up as to whether the Bank draft corresponds with such advice or not before making payment. It is also pointed out that this witness admitted in cross- examination that when the draft was compared with the advice the printed number on the advice as well as on the Bank Draft was the same j but the other particulars were different and on the basis of the printed number he was able to detect the forgery. The comparison of the advise with the draft, it is pointed by the learned counsel was made by the witness on 19-12-1967 when the advice was available since 16-12-1967 and draft was sent for collection on 18-12-1967, In view of these admissions by the plaintiff's witness there is no doubt that the plaintiff had the means to avert encashment of the above draft as the advice relating to the draft was admittedly available with the plaintiff on 18-12-1967 when the draft was presented for collection by defendant 2. The learned counsel for defendant No. 2 in this connection relied upon the case of Official Assignee, High Court of West Pakistan v. The Lloyd Bank Ltd., Karachi PLD 1969 .5 C 301The facts in the above- cited case were that the Bank who was served with an attachment order in respect of an account, later on made payment to the account-holder on the basis of a forged letter intimating that attachment has been raised. When finally the execution was issued for realising the attached amount, the Bank took the plea that it had acted bona fide in paying the amount to the account- holder relying on the seal of the Court on the letter produced before the Bank. The Supreme Court while dealing with this contention of the Bank at page 308 of the report observed as follows;-- "Apart from this, I think this is one of those cases wherein, even if it were assumed that the Bank has acted innocently, there is another innocent party involved in the transaction whose interest has to be put into the balance and safeguarded. In such cases, one that could prevent the loss must suffer. The rule of equity which applies as between the two innocent persons in such cases is that the one who could prevent the loss must suffer and not the other who was powerless to do so. (See observation of Lord James of, Hereford in Ruben and another v. Fingell Consolidated and others and Paget's Law of Banking, page 365). While the Bank in this case could prevent the loss by a little more care and caution; the appellant who was completely in the dark as to how the transaction went through the Bank, could do nothing in the matter."
The above-quoted passage in my humble view fully supports the contention of defendant No. 2 in this case as in-between the two, the plaintiff had the means to stop and avoid the loss by acting- even in the usual and ordinary course whereas defendant No. 2 had no such means to check it being completely in dark. I accordingly hold that the plaintiff is not entitled to claim the suit amount from the defendant No. 2.
Issue No. 8
9. The defence raised in this issue by defendant No. 2 is based on section 131 of the Negotiable Instruments Act. This section gives protection to a Collecting-Bank if it has acted in good faith and without negligence in collecting the proceeds of a cross cheque "A/C Payee" on behalf of his customer who ultimately is found to have no title or defective title to such cheque. Provision of section 131 also applies equally to a Bank Draft by virtue of section 131-A of the Negotiable Instruments Act. Mr. G. H. Malik, the learned counsel for the plaintiff has very vehemently argued that in order to claim protection of this section the plaintiff must positively show that they have acted in a bona fide manner and without negligence in collecting the proceeds of the Bank 'Draft.
The learned counsel stretching his argument submitted that while examining the negligence of Bank under section 131 of the Negotiable Instruments Act, it will be seen whether. .The act prior to the receiving of draft by the collecting Bank was also bona fide and without negligence. The learned counsel accordingly contended that if in the process it is found that opening of the account in which the draft was deposited was not properly opened then the act of deposit and collection of the disputed draft in the account will be held to be negligent and protection provided under section 131 will not be available to the collecting Bank. Although I have earlier held while - dealing with Issue No. 3 that the plaintiff has failed to prove that the account of defendant No. 1 with defendant No. 2 was not opened in a regular or requisite manner, but as defendant No. 2 has pleaded protection of section 131 of the Negotiable Instruments Act and to avail this protection, the collecting-Bank must prove that it acted in good faith without negligence, I will once again here examine the above contention of the learned counsel for the plaintiff to find out how far negligence or irregularity in opening of an account will have relevant and bearing on the question of determination of good faith and acting without negligence by a collecting Bank of the proceeds of a Bank draft to which the title of the account holder was later found defective are absent. It is an admitted position that the account was opened on 30-11-1967 while the draft in question was put in for encashment in the account on 18-12-1967. It is true that the negligence which is contemplated under section 131 of the Negotiable Instruments Act is not only the negligence at the stage of encash--ment of the disputed draft but also extends to a stage prior to that which would legitimately include the stage when the said cheque or draft was received by the collecting Bank for encashment. The question, therefore, whether the collecting-Bank had acted in good faith and without negligence in opening of the account will be relevant under section 131 of the Negotiable Instruments Act, only to the extent, if it is shown that the opening of the account and the deposit of the cheque are really the part of one scheme. As where in a case the account itself is opened with the disputed cheque or draft or where it is put in the account so shortly after the opening o the account, that it leads to the inference that it is the part of the same transaction. It is then and in those circumstances alone that the negligence in the matter of opening of an account in my opinion could be treated a negligence within the meaning of section 131. The section 131 referred t above affords complete protection if the collecting-Bank acts in good faith and without negligence. The standard of deligence required in this regard is the one which is derived from the practice prevailing among the Banks. The negligence mentioned in the section is in my view therefore referable to the collection of the cheque and not directly to -the opening of an account unless as stated earlier, it is shown that the opening of the account is so intimately connected with the collection of the cheque that it forms part of the same transaction. One of the tests in finding out whether the collecting Bank acted in a bona fide manner and without negligence, will be whether the transaction of paying in any given cheque/draft coupled with circumstances antecedent and present were so out of the ordinary course that it ought to have aroused doubts in the mind of the banker and caused them to make an enquiry. Negligence ordinarily means want of reasonable care which an ordinary prudent man will take or apply in a given set of circumstances.
On the evidence on record the learned counsel for the plaintiff was unable to point out any extraordinary or unusual course o procedure followed by defendant 2 in this case in collecting the proceeds of the draft or paying it over to defendant No. 1, later. The cheque was` sent in the ordinary course for collection to the payee Bank and it is in the evidence of the plaintiff that the person who checked the draft was himself unable to detect any alteration or manipulation -in the draft, at the time of its encashment which could arouse any suspicion. In these circumstances, it is hardly open to argument that the defendant 2 did not act in good faith and without negligence so as to deprive them of the protection afforded under section. 131 of the Negotiable Instruments Act.
10. Mr. G. H. Malik, the learned counsel for the plaintiff relied upon the case of Mathuri Sanyasihngan v. Exchange Bank of India and Africa AIR 1948 Bom. Iin support of his contention that if the account was negligently opened by the Bank then the protection available under section 131 to the Collecting --Bank is not available. However, on examination of the facts of that case I found that they are quite distinguishable. In the first instance, the name of the account-holder in whose account the disputed draft was credited by the Bank in the above case was Nagindas Premji Shah while the draft was endorsed in favour of one Nagindas Premchand Shaha. There was thus an obvious difference between the name of the person in whose account the draft was credited and the name of the person in whose favour the draft was endorsed. Secondly, it was found by the Court. In that case that the account was opened by the Bank without obtaining a reference, and the manner in which the accounts were operated upon was peculiar and unusual. I fail to see how the above facts are applicable to the present case where the draft when put in the account of defendant No. 1 appeared to be in his name. The plaintiff also failed to point out anything unusual or peculiar in the operation of accounts by defendant No. 1. In so far opening of account in the present case is concerned I have already held that plaintiff has failed to prove that it was not opened in a regular manner. I accordingly hold that defendant 2 is protected under section 131 of the Negotiable Instruments hold and is not liable for the amount claimed in the suit.
11. The result of the above discussion is that the suit against defendant 2 is dismissed but there will be no order as to costs in the circum--stances of the case. The decree will follow against defendant 1 in terms of the order of the Court dated 31-1-1972.