( 1 ) IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION SUIT NO.1469 OF 1986 SUIT NO.1469 OF 1986 SUIT NO.1469 OF 1986 The West Bengal State Co-operative Bank Ltd., a Co-operative Bank registered under the West Bengal Co-operative Societies Act, 1973 having their registered office at 24.A, Waterloo Street, Calcutta 700 069 ..Plaintiff V/s. 1. The Maharashtra State Co-operative Bank, a Co-operative Bank registered under the Maharashtra Co-op. Societies Act, 1960, and having their registered office at 9, Nagindas Master Road, Bombay 400 023. 2. Union Bank of India, a body Corporate constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 and having their registered office at Union Bank Building, 239 Backbay Reclamation, Bombay 400 021, and a branch office at Santacruz West Branch, Santacruz (West), Bombay 400 054 3. The New India Assurance Co. Ltd. a limited company incorporated in India under the Companies Act, 1956 a Subsidary of the General Insurance Corporation of India, having their registered office at New India Building, 87 Mahatma Gandhi Road, Fort, Bombay 400 001 and also having their Divisional Office at City Divisional Unit-3140, 23 Ganesh Ch. Avenue, Calcutta 700 013 ..Defendant ( 2 ) ALONGWITH ALONGWITH ALONGWITH SUIT NO.1486 OF 1986 SUIT NO.1486 OF 1986 SUIT NO.1486 OF 1986 The West Bengal State Co-operative Bank Ltd., a Co-operative Bank registered under the West Bengal Co-operative Societies Act, 1973 having their registered office at 24.A, Waterloo Street, Calcutta 700 069 ..Plaintiff V/s. 1. The Maharashtra State Co-operative Bank, a Co-operative Bank registered under the Maharashtra Co-op. Societies Act, 1960, and having their registered office at 9, Nagindas Master Road, Bombay 400 023. 2. Union Bank of India, a body Corporate constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 and having their registered office at Union Bank Building, 239 Backbay Reclamation, Bombay 400 021, and a branch office at Santa Cruz (West) Branch, Santa Cruz (West), Bombay 400 054 3. The New India Assurance Co. Ltd. a limited company incorporated in India under the Companies Act, 1956 a Subsidary of the General Insurance Corporation of India, having their registered office at New India Building, 87 Mahatma Gandhi Road, Fort, Bombay 400 001 and also having their Divisional Office at City Divisional Unit-3140, 23 Ganesh Ch. Avenue, ( 3 ) Calcutta 700 013 ..Defendant Girish Desai i/b. Gordhandas Fozdar for the plaintiffs Mr.Prashant Naik for the defendant No.1 Mr.H.C.Toor i/b. Ms. N.I.Bakale for the defendant No.2 Mr.F. Dubhash with Ms. Meeta Dagli i/b. Mulla & Mulla for the defendant No.3. CORAM : R.Y. GANOO, J. CORAM : R.Y. GANOO, J. CORAM : R.Y. GANOO, J. DATED : 6th March, 2009 DATED : 6th March, 2009 DATED : 6th March, 2009 ORAL JUDGMENT.: ORAL JUDGMENT.: ORAL JUDGMENT.: 1. These suits can be disposed of the common judgment as the points involved therein are common. The facts though different, common evidence is recorded. Suit No.1469 of 1986 is filed by the plaintiffs to recover from the defendants Rs.1,26,343/- alongwith interest @18% per annum on Rs.89,910/- and for other reliefs. Suit No.1486 of 1986 is for recovery of Rs.98,715/- alongwith interest @18% p.a. on Rs.69,930/- and for other reliefs. Plaintiffs is a Co-operative bank having their office at Calcutta. Defendant No.1 is also a Co-operative Bank having their business in Maharashtra. Defendant No.2 is a nationalized bank and they have two branches at Vile Parle and Santacruz. Defendant No.3 is an Insurance Company with whom plaintiffs had entered into a contract and a Insurance Policy has been issued in favour of the ( 4 ) plaintiffs. The plaintiffs have their banking business in Calcutta and the plaintiffs have an account with defendant No.1 in Bombay at Fort. According to the plaintiffs one Mr. Mishra, client of the plaintiffs, approached plaintiffs on 11th November, 1983 and requested for issuance of pay order in the sum of Rs.90 in favour of Asian General Agency. Plaintiffs claim that they issued pay order in favour of M/s. Asian General Agency for Rs.90 bearing No.68,060 dated 11th November, 1983. Similarly, said Mishra requested the plaintiffs to issue pay order in the sum of Rs.70 in the name of M/s. Precious Trading Company and plaintiffs claim that they issued the pay order bearing No.68062 dated 12th November, 1983 to said Mishra in favour of M/s. Precious Trading Company. 2. It is the case of the plaintiffs that plaintiffs received the statement of accounts from defendant No.1 and they realised that in regard to pay Order bearing No.68060 the sum of Rs.90,000/- was debited to their account. They also discovered that in regard to Pay Order bearing No.68062 a sum of Rs.70,000/- has been debited to their account and that both these pay orders were credited to by the defendant No.2 to their customer’s account. The plaintiffs realised that the original pay orders have ( 5 ) been tampered with and have been converted into pay orders of Rs.90,000/- and Rs.70,000/- respectively and that is how plaintiffs entered into correspondence with defendant No.1 and defendant No.2 to ascertain as to under what circumstances plaintiffs account was debited to the extent of Rs.90,000/- and Rs.70,000/- respectively. As the plaintiffs were not satisfied with the stand taken by the defendant Nos.1 and 2, plaintiffs issued notice dated 9.7.1984 at Exhibit P-25 to defendant No.1 calling upon them to pay Rs.1,59,840/- along with interest at the rate of 18% per annum in regard to the said pay orders. The plaintiffs by notice dated 7.7.1984 at P-23 called upon the defendant No.2 to pay Rs.89,910/- along with interest at the rate of 18% per annum. Advocate for the defendant No.1 by reply dated 15.9.1984 Exhbit P-26 denied the liability to pay the amount demanded. The defendant No.2 by reply dated 18.10.1984 Exhibit P-24 denied the liability to pay the said amount. This correspondence is on record and there is no dispute about the correspondence. 3. According to plaintiffs the two pay orders were tampered with and the figures therein were altered and that defendant No.1 did not take necessary precaution at the time of passing the pay ( 6 ) orders and that payment made by the defendant No.1 to defendant No.2 was not in due course of business. According to plaintiffs the defendant No.1 neglected in the matter of honouring the said pay orders which caused monetary loss to the plaintiffs. 4. So far as the defendant No.2 is concerned, it is the case of the plaintiffs that the defendant No.2 did not conduct themselves in a prudent manner as a collecting banker and they had not taken necessary care while crediting the amount to the payees account in as much as the accounts were opened in the fictitious name, namely Asian General Agency at Santa Cruz Branch and Precious Trading Company at Vile Parle Branch and that the defendant No.2 accordingly credited the amounts to the said account thereby causing loss to the plaintiffs. 5. According to the plaintiffs, defendant No,3 had insured the business of the plaintiffs and therefore it was the duty of the defendant No.3 to honour the claim put up by the plaintiffs with defendant No.3 as regards loss suffered by the plaintiffs to the tune of Rs.1,59,840/-. According to the plaintiffs the refusal to grant claim by defendant No.3 was contrary to the provisions of law and that defendant No.3 ought to have granted the ( 7 ) claim put up by the plaintiffs with defendant No.3 based on the policy purchased by the plaintiffs. 6. Suit No.1469 of 1986 pertains to instrument bearing No.68060 which according to the plaintiffs was drawn for the sum of Rs.90/-. Suit No.1486 of 1986 pertains to the instrument bearing No.68062 which according to the plaintiffs was drawn for Rs.70/-. 7. The writ of summons was served upon the defendants and all three defendants have filed their written statements. Defendant No.1 has disputed the claim of the plaintiffs and have contended that the suit pay orders were sent by defendant No.2 for collection to the defendant No.1 and that the suit pay orders were passed in due course of the business of defendant No.1 on the basis of the apparent tenor, in good faith and without negligence and there were no suspicious circumstances on the basis of which defendant No.1 could have declined to accept the pay orders. According to defendant No.1 notice under Section 164 of the Maharashtra Co-operative Societies Act has not been given and therefore institution of the suits is bad in as much as the suits are not maintainable. It was also the stand of the defendant No.1 that the suits are barred by period of ( 8 ) limitation and suffer on account of defect in nature of misjoinder of causes of action. It was also contended by defendant No.1 that the correct title of defendant No.1 is Maharashtra State Co-operative Bank Limited and not Maharashtra State Co-operative Bank and therefore suit against Maharashtra State Co-operative Bank could not make defendant No.1 liable in regard to the suit claim. According to defendant No.1 the plaintiffs have no cause of action against defendant No.1 and that if there is any cause of action it is against defendant No.2. It was also the stand of the defendant No.1 that pay orders were not altered and the pay orders were in fact for the sum of Rs.90,000/- and 70,000/- respectively. In substance, defendant No.1 have disputed the claim of the plaintiffs. 8. Defendant No.2 have filed written statement in both the suits. They have contended that they were collecting bankers for Asian General Agency at Santa Cruz Branch and collecting bankers for Precious Trading Company at Vile Parle Branch and have collected the proceeds of pay orders in good faith and that defendant No.2 are not liable to pay an any amount to the plaintiffs. According to defendant No.2 if at all anybody is liable it is the defendant No.1 and not defendant No.2 ( 9 ) 9. Defendant No.3 have filed written statement and have contended that defendant No.3 are not liable to make payments to plaintiffs as the policy claim did not fall within the ambit of the terms of the policy. In substance, defendant No.3 have opposed the relief sought in the suit. 10. Based on the pleadings as aforesaid, the issues came to be framed on 14.3.2006. Issues in Suit No.1469/1986 are as follows: . 1. Whether the suit is bad In the negative for want of compliance with section 164 of the Maharashtra Co-operative Societies Act, 1960? 2. Whether the suit is bad In the negative as against defedant No.1 for non-compliance with Section 36 of the said Act? 3. Whether the suit is In the negative barred by law of limitation? ( 10 ) 4. Whether the suit is bad Does not survive for misjoinder of parties and case of action? 5. Whether the suit is In the negative misconcieved as it fails to disclose any cause of action against defendant No.3? 6. Whether the plaintiffs In the negative prove that the defendant No.1 and 2 are jointly and severally liable to it for the amount of Rs.126343/- as per the particulars of claim together with interest thereon? 7. Whether the plaintiffs In the negative prove that they had issued cheque for Rs.90/- drawn on defendant No.1, and that it was altered to Rs.90,000/? 8. Whether the plaintiffs In the negative ( 11 ) prove that the said altered cheque for Rs.90,000/- was honoured by defendant Nos. 1 and 2? 9. Whether defendant No.1 Does not survive proves that they have made payment of the cheque for Rs.90,000/- according to the apparent tenor of the instrument, with due deligence? 10. If the plaitniffs suceed in establishing the alteration of the said cheque a) Whether defendant No.1 Does not survive proves that the plaintiffs per se were firstly negligent in issuing dispute cheque for a small amount and secondly, selling the same to a party unknown to them? ( 12 ) b) Whether defendant No.1 pproves that defendant No.2 Does not survive was grossly negligent in firstly opening a Bank account in the name of bogus and fictitious party unknown to them, secondly, collecting from defendant No.1 payment of cheque for and on behalf of such a ficititous party, thirdly crediting such payment to the account of such fictitious party and fourthly in allowing such fictitious part to withdraw such payment from the credit balance from such account? c) Whether in the third Does not survive party notice taken out by defendant No.1 against defendant No.2, defendant No.2 is liable for the amount, if any, claimed in such third party notice ( 13 ) against defendant No.2? d) Whether defendant No.3 Does not survive is liable for the suit claim? 11. Whether it is proved In the negative that the plaintiffs claim falls within the scope of the bankers Indemnity Insurance Policy No.5314200099 issued by defendant No.3 in favour of the plaintiffs and if so whether the defendant NO.3 is bound and liable to make payments under the same and to what extent? My answer to each of the issue is mentioned against the respective issue. Issues in Suit No.1486/1986 are as follows: 1. Whether the suit is bad In the negative ( 14 ) for want of compliance with section 164 of the Maharashtra Co-operative Societies Act, 1960? 2. Whether the suit is bad In the negative as against defedant No.1 for non-compliance with Section 36 of the said Act? 3. Whether the suit is In the negative barred by law of limitation? 4. Whether the suit is bad Does not survive for misjoinder of parties and case of action? 5. Whether the suit is In the negative misconcieved as it fails to disclose any cause of action against defendant No.3? 6. Whether the plaintiffs In the negative prove that the defendant No.1 and 2 are jointly and ( 15 ) severally liable to it for the amount of Rs.98,715/- as per the particulars of claim together with interest thereon? 7. Whether the plaintiffs In the negative prove that they had issued cheque for Rs.70/- drawn on defendant No.1, and that it was altered to Rs.70,000/? 8. Whether the plaintiffs In the negative prove that the said altered cheque for Rs.70,000/- was honoured by defendant Nos. 1 and 2? 9. Whether defendant No.1 Does not survive proves that they have made payment of the cheque for Rs.70,000/- according to the apparent tenor of the instrument, with due deligence? 10. If the plaitniffs ( 16 ) suceed in establishing the alteration of the said cheque a) Whether defendant No.1 Does not survive proves that the plaintiffs per se were firstly negligent in issuing dispute cheque for a small amount and secondly, selling the same to a party unknown to them? b) Whether defendant No.1 Does not survive pproves that defendant No.2 was grossly negligent in firstly opening a Bank account in the name of bogus and fictitious party unknown to them, secondly, collecting from defendant No.1 payment of cheque for and on behalf of such a ficititous party, thirdly crediting such payment to the account of such fictitious party and ( 17 ) fourthly in allowing such fictitious part to withdraw such payment from the credit balance from such account? c) Whether in the third Does not survive party notice taken out by defendant No.1 against defendant No.2, defendant No.2 is liable for the amount, if any, claimed in such third party notice against defendant No.2? d) Whether defendant No.3 Does not survive is liable for the suit claim? 11. Whether it is proved In the negative that the plaintiffs claim falls within the scope of the bankers Indemnity Insurance Policy No.5314200099 issued by defendant No.3 in favour of the plaintiffs and if so Does not survive ( 18 ) whether the defendant NO.3 is bound and liable to make payments under the same and to what extent? My answer to each of the issue is mentioned against the respective issues. 11. At the stage of recording of evidence in both the suits, plaintiffs have examined Mohammed Ala Qureshi as P.W.1. He was at the relevant time acting as Managing Director of the plaintiffs. No other witness has been examined by the plaintiffs. On behalf of the defendants Mr. Raghunath Gurav, employee of defendant No.1 has been examined as Defendant No.1. No other witness has been examined on behalf of the defendant No.1. No evidence is led before the Court on behalf of the defendant Nos.2 and 3. 12. I have heard learned Advocates on both the sides and they have taken me through the entire record. Counsels on both the sides have advanced their respective submissions and in the course of their respective submissions they have relied upon the some judgments. I shall deal with those submissions and judgments at the appropriate stage. ( 19 ) 13. I now turn to decide the various issues which have been framed in the suits. Since issues framed in both the suits are common in principle except the amount which is claimed in the respective suits, the discussion in respect of each of the issue should be common. Issue No.3 Issue No.3 Issue No.3 in both the suits 14. This issue pertains to the question of suit being barred by period of limitation. The suit pay orders were issued on 11.11.1983 and 12.11.1983. The present suits are filed in February 1986. The present suits are for recovery of loss of money on the basis of what transpired in regard to the pay orders. Considering the fact that the monies were debited to the account of the plaintiffs between November 1983 and 6.l2.1983 being the date of the statements, the institution of the suit in the month of February 1986 is well within the period of limitation and therefore there is no question of the suits being barred by the period of limitation. Hence the issue No.3 in both the suits is answered in the negative. Issue No.4 Issue No.4 Issue No.4 in both the suits ( 20 ) 15.. This relates to the misjoinder of parties and cause of action. Though pleadings to that effect were available on record no party has pressed the respective contention in so far as this issue is concerned and therefore issue No.4 in both the suits is answered as does not survive. Issue No.1 Issue No.1 Issue No.1 in both the suits 16. This issue came to be framed on account of the stand taken by the defendant No.1 that notice required under Section 164 of Maharashtra Co-operative Societies Act has not been issued and therefore suit is not maintainable. In support of this contention learned Counsel Mr. Naik appearing on behalf of the defendant No.1 had relied upon the judgments in case of Suprabhat Co-op. Hsg. Soc. & Suprabhat Co-op. Hsg. Soc. & Suprabhat Co-op. Hsg. Soc. & Anr. vs. Span Builders & Anr. reported in 2002(6) Anr. vs. Span Builders & Anr. reported in 2002(6) Anr. vs. Span Builders & Anr. reported in 2002(6) Bom.C.R.257 and in the case of Mohan Meakin Limited, Bom.C.R.257 and in the case of Mohan Meakin Limited, Bom.C.R.257 and in the case of Mohan Meakin Limited, Bombay vs. Pravara Sahakari Sakhar Karkhana Ltd. Bombay vs. Pravara Sahakari Sakhar Karkhana Ltd. Bombay vs. Pravara Sahakari Sakhar Karkhana Ltd. Pravara Nagar, Ahmednagar reported in 1987 Pravara Nagar, Ahmednagar reported in 1987 Pravara Nagar, Ahmednagar reported in 1987 Mh.L.J.503. Mh.L.J.503. Mh.L.J.503. Learned Counsel Mr.Naik had submitted that the aforesaid judgments under Section 164 of the Maharashtra Co-operative Societies Act provide that non compliance with provisions of Section 164 of Maharashtra Co-operative Societies Act is fatal to ( 21 ) the suit. He contended that plaintiffs have not placed before the Court adequate material to show that notice is purported to have been issued on 19.12.1985. P-34 and P-35 have been duly served upon the Registrar of the Co-operative Societies. He therefore submitted that the suits be dismissed as not maintainable. In respect of this submission, learned Counsel Mr.Girish Desai appearing on behalf of the plaintiffs had taken me through paragraph 2 of the written statement filed by the defendant No.1 in both the suits and had contended that reading of the said paragraph as a whole would clearly go to show that the defendant No.1 admits that notice under Section 164 of the said Act was given and if that submission is accepted the suit should be held as maintainable. 17. I have considered the rival submissions and perused the judgments and text of paragraph 2 of the written statement as well as the text of the notices at Exhibit P-34 and P-35. Paragraph 2 of the written statement if read as a whole would clearly go to show that defendant No.1 admit that notices were issued to the Registrar in regard to the two suits which plaintiffs intended to file. If that is the position, even though the plaintiffs have not placed before the Court adequate material to show that the ( 22 ) notices were in fact served upon the Registrar, it would be proper to hold that the plaintiffs had served the notices in accordance with the provisions of Section 164 of the Maharashtra Co-operative Societies Act. 18. Then comes the question whether the notices have been issued in accordance with the provisions of Section 164 of the Maharashtra Co-operative Societies Act. I have perused the said notices at Exhibit P-34 and P-35. Reading of the same would go to show that they have been issued in accordance with the provisions of Section 164 of the Maharashtra Co-op. Societies Act. Hence the stand taken by the defendant No.1 that the suit is bad for want of notice under Section 164 of the Maharashtra Co-operative Societies Act cannot sustain and accordingly issue No.1 is answered in the negative in both the suits. Issue No.2. Issue No.2. Issue No.2. in both the suits 19. The defendant No.1 have come out with a contention that in accordance with the provisions of Section 36 of the Maharashtra Co-operative Societies Act the suits ought to have been instituted against Maharashtra State Co-operative Bank Limited being the ( 23 ) correct title of the said bank whereas the plaintiffs have instituted the suits against Maharashtra State Co-operative Bank. According to Mr. Naik, learned Counsel for the defendant No.1 institution of the suits against Maharashtra State Co-operative Bank is not proper and therefore institution of the suits is bad and therefore Maharashtra State Co-opeerative Bank Limited cannot be made liable to pay the suit claim. 20. Learned Counsel Mr. Desai appearing on behalf of the plaintiffs contended that it was open for the Maharashtra State Co-operative Bank Limited to raise this point at the first available opportunity. He submitted that now that Maharashtra State Co-operative Bank Limited have filed appearance before the Court, filed written statement, participated in the trial, it will not be open for them to say that the suits are not maintainable. 21. After having considered the rival submissions I am inclined to observe that the stand taken by Maharashtra State Co-operative Bank Limited as regards not mentioning correct title and contending that the suits are not maintainable is bad cannot be accepted. The Maharashtra State Co-operative Bank participated in the suits, appeared before the Court, ( 24 ) cross examined the witnesses and argued the matter as if it is suit filed against the Maharashtra State Co-operative Bank Limited. This factual situation cannot be disputed by Counsel for the defendant No.1. If this be so, the institution of the suits in the name of Maharashtra State Co-operative Bank cannot be faulted upon and on this count the suits cannot be dismissed. Hence issue No.2 in both the suits is answered in negative. Issue No.5.