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Delhi High CourtIndian Cases

Canara Bank vs Vijay Kumar Arora And Ors. on 27 November 2003

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Delhi High Court
Canara Bank vs Vijay Kumar Arora And Ors. on 27 November, 2003
Equivalent citations: AIR2004DELHI304, [2005]123COMPCAS800(DELHI), 108(2003)DLT729, 2004(72)DRJ381, AIR 2004 DELHI 304, (2004) 15 ALLINDCAS 191 (DEL), 2004 (2) CTLJ 202, (2004) 72 DRJ 381, (2004) 2 BANKJ 572, (2005) 123 COMCAS 800, (2003) 108 DLT 729, (2004) 1 BANKCLR 798
Author: R.S. Sodhi
Bench: R.S. Sodhi

R.S. Sodhi, J.

1. This appeal is directed against the judgment and order dated 31st March, 1998 of the Additional District Judge, Delhi in appeal against the judgment of the Civil Judge dated 11th April, 1997, whereby the learned Appellate Court has allowed the appeal while setting aside the judgment of the Trial Court.

2. The brief facts of the case as noted by the Additional District Judge are as follows :

“In brief the facts are that the plaintiff was employed in Libya from 1979 to 1985. He returned to India on 26/1 /86. While he was in Libya, the plaintiff has opened a NRI account with defendant No. 1 and he gave to defendant No. 1 for realisation a bank draft dated 18/7/84 US $ 1560 purchased by defendant No. 3 and issued by defendant No. 2 bank. Defendant No. 1 credited the amount equivalent to Indian Rs. 17904.40P in the NRI account of the plaintiff/ appellant on 10/8/84. However on 5/2/85, the defendant No. 1 sent to the plaintiff a copy of the communication allegedly addressed by it to Marine Midland Bank, NA, 140 Broadway, New York wherein defendant No. 1 informed about the loss of draft in transit. The plaintiff approached the defendant No. 1 thereafter on several occasions. On 26/2/85, the plaintiff/ appellant was told that his draft was lost and the defendant debited the amount already credited after about year of the crediting.
3. The plaintiff filed this suit contending that the debit entry made by defendant No. 1 in his NRI account was wrongly made and the plaintiff was entitled to the amount of Rs. 17905.40P.

4. Defendant No. 1 who was the only contesting defendant took the plea that after receipt of draft, the credit entry of Rs. 17905.40P was made in the account of the plaintiff purely as a loan transaction between the plaintiff and the defendant No. 1. The defendant No. 1 had sent the said draft to its correspondent bank in New York namely Marine Midland Bank for collection/realisation. When in four months the said draft was not realised, the defendant No. 1 sent a letter to this correspondent Bank on 28/12/84 requesting the to investigate the matter. On 13/1/85 a cable was sent to correspondent Bank for knowing about the whereabouts of the draft. On 5/2/85 another letter was sent to the correspondent Bank giving full particulars of the draft and requesting them to investigate the matter. On 14/2/85 a cable was received by defendant bank from correspondent bank showing inability of the correspondent bank to locate the draft. On 15/2/85 the defendant Bank wrote a letter to the drawer bank requesting to issue a duplicate draft as the said draft was assumed to be lost in transit. The drawer bank by its letter dated 20/3/85 advised drawee bank to record stop payment. All this correspondence entered into by defendant No. 1 with its correspondent bank and the prior bank resulted in zero result. When the defendant No. 1 could not locate the draft it debited the plaintiff on 15/9/85. It is also stated that there was no wrongful debiting of the account of the plaintiff on 15/9/85 and nothing was due to the plaintiff.

5. The trial Court framed the following issues:

i) Whether the debiting of the draft amount by the defendant No.1 is according to the banking procedure and rules? If so its effect?OPD1
ii) Whether the defendant No. 1 is collecting agent, if so, what are the liabilities of defendant No. 1.?

iii) Whether the plaintiff is entitled to interest, if so, at what rate and for what period?


iv) Whether the defendant No. 1 is liable to pay the suit amount with interest?


3. The Trial Court has held that the bank was merely a collecting agency and therefore, the draft lost in transit was not the responsibility of the bank. The First Appellate Court while not agreeing with the reasoning of the Trial Court has held that the account opening form which is produced by the bank is a blank form and it does not bear the signatures of the plaintiff and so it does not amount to a contract between the plaintiff and the defendant. Reliance of the the Trial Court on this account opening” form was therefore not justified. The bank if wanted to rely upon the contract between it and the appellant, must have proved the actual contract between the plaintiff and the bank, the defendant No. 1. In absence of this contract having been proved by the bank, the First Appellate Court has reversed the finding of the Trial Court.
4. I am given to understand that in this matter the draft submitted for encashment was discounted by the bank and, thereafter, in transit the instrument was lost. The mere fact that after discounting of the instrument the bank would virtually become owner of the value instrument its lost in transit would not be considered to the detriment of the respondent herein. I can understand a situation where a foreign bank would have rejected to accept its instrument, in which case the bank would be at liberty to hold the respondent liable, but no such position emerges from the evidence on record in this case. Consequently, the findings of the First Appellate Court, which has reversed the findings of the Trial Court, are upheld.
5. RSA 110/1998 is dismissed. No orders as to cost.