The High Court · 2025

THE HONOURABLE SMT. JUSTTCE K' SUJANA APPEAL STIIT NO.18A3 oF 2@2 JTIDGMENT: This appeal is frled by the appellant-plaintiff No'2 aggrieved by the judgment and decree dated 17 'M '2OO2 passed in O.S.No.65 of 1993 on the file of Senior Civil Judge at Jagtial' The suit is filed for recovery of an amount of Rs'2,10,000/- from the defendant-State Barrk of Hyderabad on the basis of fraudulent encashment of the cheque stolen from the offrce of the Executive Engineer, Panchayath Raj, Jagtial-plaintiff No'2 and for passing of the cheque by the defendant ofhcials' For the sake of convenience the parties hereinafter be referred to as arrayed in the suit.

2. The facts of the case are ttrat the Zllla Praja Parishad' Karimnagar, is the first plaintiff in the suit and the Executive Engineer, Panchayat Raj, Jagtial is the second plaintiff' The second plaintiff, who works under the overall control of the ltrst plaintiff, opened a savings account with the defendant bank and deposited funds allotted to Zilla Praja Parishad, Karimnagar' The defendant bank issued a cheqrre book to the second plaintiff for drawing amounts from its account as needed' 2

3. A cheque leaf bearing No. 854396 along r .ith counterfoil was removed and stolen from the cheque ..ook by some unknown persons during the tenure of Sr T.N. Chary, Executive Engineer, P.R. Jagtial. He was the Executive Engineer till 24.O4.1993. The theft was not detected immediately. On 04.03.1993, a cheque bearing I o. 854395 was used for drawing the amount, and it was only , n 05.05. 1993, the missing cheque leaf was detected. When the < efendant bank was informed about the same, they informed tht: ,hen Executive Engineer that the stolen cheque leaf bearing t o.854396 was used for drawing Rs.2,1O,OO0/- and was :n-cashed on 03.03. 1993, by one K. Prakash Rao, a contracto - The plaintiffs alleged that Sri T. N. Chary, did not issue tl e cheque No. 854396 dated 03.03.1993, to K. Prakash Rao for ?s. 2,1O,OOO/- and the signatures on the cheque were forged. Further, the cheque was returned at the first instance wh :n there were spelling mistakes regarding quantum of amcr nt written in words as "lwo Laks Ten thousands only'. Thereal:r it was again re-presented after correcting the spelling r ristakes. The employees ol the defendant bank dealt 'a,it r the matter recklessly and made the payment without tal Lng necessary care. The plaintiffs further alleged that the r t fendant bank 3 could have easily detected the forgery and intended cheating if they had been more careful, especially when the cheque was initially presented with spelling mistakes in describing the amount in words. The plaintilfs claimed that the conduct of defendant bank and its employees was callous and speaks about their collusion and collaboration in perpetrating forgery' cheating, and fraud. Hence, the plaintiffs alleged that the d.efendant bank was liable for the loss caused due to their negligence and recklessness.

4. The defendant denied all allegations made in the plaint and submitted that they had no knowledge about the cheque bearing No. 854396 being stolen from the plaintiff s oflice' Upon inquiry, ttre defendant revealed that the stolen cheque was honoured on O3.O3.1993, and payment was made to one K. Prakash Rao. The defendant claimed that tJrey were unaware of any forgery at that time and informed the plaintiffs of the same on O5.O3. 1993. The defendant explained that after passing the cheque, it was sent to the Sub-Treasury Office in as per usual practice. The Bank manager noticed Jagtial spelling mistakes in the cheque, which was returned for correction.Afterduecorrection,thechequewasre-presented with the full signature of the drawer, and the offrcer-in-charge of 4 the defendant bank satished and compared thc signature with the specimen signatures of the drawer. 'fhe pa.z nent was made in good faith and after taking sufhcient care at I precaution in the normal course of banking business. It wir further stated that the Executive Engineer, being a Gazettec officer, would likely depend on his staff for writing cheques, mz king it possible for mistakes in spellings. The defendant claime J that there was no negligence on the part of Bank manager, r,r,h r acted in good faith and released the cheque amount to the pa5 ee after careful scrutiny. It was further stated that if the cJ.r:que had been stolen, the plaintiff should have informed the ba rk immediately to stop the cheque and that the cheque presentl I by the payee, K. Prakash Rao, bore a genuine signature of I e drawer, and there was no question of forgery being detected. I{ence, pra.yed to dismiss the suit.

5. Basing on the pleadings, the trial Cort .t framed five issues. On behalf of the plaintiffs, pws. 1 to 4 r 'ere examined, Exs.A. 1 to ,{.6 were marked and on behalf o" the defendant Dw. I was examined and Exs.B.L to El.3 were r arked. After going through the evidence on record and after ir, aring both the parties, the trial Court dismissed the suit stati.-r; that there is 5 no negligence on ttre part of defendant-Bank. Aggrieved by the said judgment the presenr appeal is filed by plaintiff No.2.

6. Heard Sri G.Thirupathi Reddy, learned Government Pleader for the appellant-plaintilf and Ms.p.Deepthi, learned counsel appearing for Sri A.Krishnam Raju, learned counsel appearing for the respondent-Bank.

7. The contention of learned counsel for the appellant is that the trial Court ought to have seen that the cheque on the face of it appear to be not written by the Executive Engineer. Even tl,re words l,akhs and Thot-rsand were misspelt as .Laks and thousand'. After noticing such spelling mistakes, the Bank should have exercised due diligence by referring it to the drawer to verify the genuineness of the cheque, having noticed that cheque issued was not crossed by the payee, the Bank Officer shou.ld have immediately become vigilant and the cheque issued by the Zllla Praja parishad, for an amount of Rs.2,lO,0OO/_, would not have been paid obviously through a bearer cheque. The report of the forensic expert establish that cheque was forged and the trial Court erred in finding fault with the plaintiffs and not impleading the said prakash Rao who has en_ cashed the cheque. The trial coLrrt ought to have seen that the plaintiffs immediately informed their banker soon after 6 discovery of missing leaf, but by that time, the mischief has taken place

8. The contention of learned counsel for the ap rellant herein is that it is the minimum responsibility of the ber k authorities when a cheque is presented before the Bank it l- as to see the genuineness of cheque before honouring it. Furll er, there is a spelling mistake in tJre cheque, even though it u'e I honoured by taking attestation on the said cheque. When a ch' que is issued by a public authority it is not possible to cor 1 ct the errors immediately and itttakes time to correct the same as there is a process for re-submitting the same. But the rec:': 'd shows that on the same day the cheque was sent by the bar k which itself shows that the Bank authorities are either neglige rt or colluded with the drawer of cheque. He further cont( r ded that the public authorities having trust on the defendant E ank deposited their amount ald making transactions. Therr I rre, the bank authorities are responsible for such a fraudulen act and they have to inform the plaintiffs if there are €rny iregr'rlarities or there is any suspicion in the signature ln the t ormal course, even for normal persons, the bank will not hono'.t ' the cheque if there is any discrepancy in the cheque. Whr: L a cheque is submitted by the drawer issued by a- public aurh 'ritY, the bank 7 must be diligent but there is no such diligence on the part of the defendalt-Bank. Therefore, the ptaintiffs are entitled to recover the amount from the bank authorities ald prayed this Court to allow this appeaf by setting aside ttre judgment of trial Court.

9. On the other hald, learned counsei for the respondent_ defendant-Bank would submit that it is the negligence on the part of Executive Engineer. Earlier also, one cheque was missed from the plaintiffs and they informed the Bank ad Bank took notice of the same and not honoured the said cheque, whereas in the present instance, there are no such instructions from ttre plaintiffs for stopping paJment of cheque bearing No. g54396. As t-here are no instructions from the plaintiffs the Bank honoured the cheque by taking attestation for the corrections made. He further submitted tLrat no document is filed by the plaintiffs to show that they gave instructions to the Bank authorities only to honour the crossed cheque. In the absence of any specific instructions, the Bank cannot to honour the cheque presented by the dra.wer. In fact the negligence, if any, is on the part of plaintiff No.2. Earlier when the cheque was missed from the oflice, he has to be more diligent and he has to keep the said cheque book under lock and key, but no such steps were taken by the second plaintiff. Therefore, there {enV 8 is no negligence on the part of defendant-Bank Lnd it is the negligence on the part of plaintiff authorities anrl they have to recover the amount from Prakash Rao. As suc r, prayed to dismiss this appeal.

10. Considering the submissions made by botl the learned counsel and the material on record, the suit is fiL: of Rs.2,1O,OOO/- with interest @ 6Y. p.a' It is th'r plaintiffs that the cheque was misplaced fror authority and when they informed the Bank abc cheque, by that time, the same was honoured' I for recovery contention of L the public rt missing of The plaintiffs have already filed a criminal case against Prakash Rao, wherein, the forged signature on the said cheque and ,he specimen signature were sent to Forensic laboratory and thr report shows that the specimen signature and the signature I different. The FSL report was marked as Ex'A'2 I n cheque are ,efore the trial Court. Ex.A.S is the opinion of expert who wzLr examined as Pw.4. According to Pw.4 the disputed signaturt s with that of standard signatures pertaining to Cr'No'55/93 t re not tallied. The standard signatures did not represent th€ signature on cheque and basing on the evidence, Prakash Rao ,vas convicted. This fact shows that the signature on the chec ue was forged 9

11. Now the points tl.at arise for consideration are l. Whether, the cheque ? cheque bearing No.g54396 is a forged

2. Whether- tl.e plaintiffs are entitled for recovery of suit amount from the defendant_Bank ?

3. Whether the interference ? POINT NOs.1 To 3: judgment of trial Court needs any

12. The evidence on record shows that when the cheque was presented before the Bank, there was a spelling mistake with regard to amount written in words. On noticing the same, the Balk returned the cheque to drawer and immediately, the drawer rectified the sarne and also got attestation on the said cheque, re-presented before the Bank and the same was honoured. The argument on behalf of plaintiff No.2 in this regard is that the cheque was issued by the public authority and not a private individual When a public authority has issued cheque there cannot be any mistakes in writing, even if there is mistake, the said mistake has to be rectihed through proper charlnel. A process is meant for re_submitting the cheque by the public au thority. It has to go through various sections and then only it can be rectifred. There is no possibility 10 to rectify the same immediately then and there ul noticed by tJle Bank Manager, whereas the ': defendant is that after rectiffing the mistakes by e signature, they honoured the cheque' As rightly I the plaintiffs, the Bank has to be diligent while de z cheques issued by the public authority' Whr:: mistake it has to be recLifred by the said authorit the cheque ancl it requires process' When the ct presented immediately, the bank arrthorities or doubted and informed the same to public art' honouring the same as there is a mistake in the t was not done by the Bank' Further as the Bar authority and several transactions are done' it is : ich was not ,ntention of :testing with ontended bY ling with the , there is a . who issued eque was re- Lght to have hority before heque. This k is a Public :sponsible for the same. payee may be forged.

13. Section 85 of the Negotiable Instrument Act provides that under this secLion a banker who pay in due c'l lrse a cheque drawn upon him is protected, through the endrl sement of the But it is not clear whet-l er the banker by paYment in due co'r 'se to person . The would be Protected claiming under a forged signature of drawer himself protection given to the banker by this section dct s not extend to cases in which the drawer's signature is forgtx ' "for it is the 11 duty of the banker to be. acquainted with his customer,s hand *itirg, and the banker and not the customer must suffer, if a payment be made without authority .But, where the forgery of the drawer,s sigrrature is due to the negligence on the part of the customer himself, he and not the banker will be liable to make the payment over again." L4' The negrigence on t-rre part of banker would clearry show that the signature on cheque is a forged one and there are corrections in the subject cheque which were immediately rectifred and attested by the drawer and the concerrred oflicer of the defendant-Bank had not t_aken care of il-. Though learned counsel for tJle defendant submitted ttrat the appellant should be careful by keeping the cheque book r:nder proper lock and key, which is not the subject matter of tJ.is appeal. As the appeal is frred craiming negrigence on the pail of Barrk and as the report of pw.4 clearly shows that the signature on t-fre a forged one, not only forgery, there are spelling cheque is mistakes in the cheque which was immediately rectilied, all these aspects shows negligence on the part of defendant_Balk. Hence, the respondent_Bank is liable for paJrment oI Rs.2,fO,OOO/- to the appe.llant. Accordingly, all the points are answered. . I I L2 (

15. ln view of the above discrrssion' the irnpu6 liable to be set aside' Accordingly' the Appeal St setting aside the judgment and decree dated 17'0'1 in O.S.No.65 of 1993 on the file of Senior Civil Ju< The defendalt-Bank is directed to pay Rs'2' L interest @ 60/o p.a., to the appellant from tlre date < till the date of realization' There shall be no order i red order is it is allowed 2OO2 passed ge at Jagtial. ),OOO/- with f filing of suit s to costs. Miscellaneous petitions' pending' if anlr shall stand closed. Sd .K. SRINIVASA RAO JOINT REGISTRAR L.- SECTION OFFICER ,[RUE COPY// To, l I I I I I I I I I

1. The Senior Civil Judge, Jagtial , Karimnagar.District ' i. il" cd;d cCFoh npFEnLS, Hish court for the {i Hyderabad. vith records ) ate of Telangana at

3. One CC to SRl. A. KRISHNAM RAJU, Advocate [OP(J )] 4. Two CD CoPies kUYPSL HIGH COURT oATED|14t0712025 +DECREE JUDGMENT APPEAL SUIT No.1883 of 2002 t, STAfF o(J r$ ?$l{ G) J. lri11/ .a ,.f :i1 i::;t' I L ) : t ALLOWING THE APPEAL SUIT WITHOI]T COSTS * IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD MONDAY,THE FOURTEENTH DAY OF JULY TWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SMT JUSTICE K. SUJANA APPEAL SUIT NO: 1883 OF 2002 Between: The Executive Engineer, Panchayat Raj, Jagtial ...APPELLANT/ Plaintiff No. 2 AND

1. The State Bank of Hyderabad, Jagtial Branch rep. by its Branch Manager .. ..Respondent / Defendant

2. The Zilla Praja Parishad, Karimnagar, rep. by District Development Officer Karimnagar ...RESPONDENT/ Plaintiff No.1 Appeal Under Section 96 of C.P.C. against the Judgment and decree dated 17-04-2002 in O.S.No. 65 of 1993 on the file of the Court of the Senior Civil Judge, Jagtial ORDER : This appeal coming on for hearing and upon perusing gmunds of appeal, the Judgment and Decree of the Lower Court and the material papers in the Suit and upon hearing the arguments of Sri G. Thirupathi Reddy, Govemment Pleader for Appeals on behalf of the Appellant and Ms. P. Deepthi, leamed counsel appearing for Sri A. Krishnam .the Raju, Advocate for Respondent No.1 and Nohe appeared for Respondent No.2 This Court doth Order and Decree as follows : l. That the Appeal be and hereby is allowed.

2. That the Judgment dated 17-04-2fi)2 in O.S.No. 65 of 1993 on the file of the Senior Civil Judge, Jagtial be and hereby is set aside.

3. That the defendant -Bank is directed to pay Rs. 2,10,1001- with interest @ 6oh p.a. to the appellant from the date of fiIing cl suit till the date of realization.

4. That there shall be no order as to costs in this Appeal. 't RUf <c'?yl/ Sd/- (SRINIVASA RAO . OINT REGISTRAR C ( 7 rot oFc (c(, A To

1. The Senior Civil Judge, Jagtial , Karimnagar District. 2. Two C.D.Copies KuVPSL HIGH COURT DATED:1410712O25 DECREE APPEAL SUIT No.1883 of 2002 ALLOWING THE APPEAL SUIT \I/ITHOUT COSTS