Case: Bank of Maharashtra Vs. Automotive Engineering Company

for further scrutiny as to its genuineness, the bank should be held liable for negligence and the protection under section 10 and section 89 of the Negotiable Instruments Act is not available to the bank. He has, therefore, contended that the appeal should be allowed by this court and the judgment and decree of the High Court affirming those of the lower appellate court and the trial court should be set aside and the suit should be decreed. 7. Learned counsel for the respondent, however, disputed the contentions made on behalf of the appellant and it has been contended by learned counsel that the negligence attributable to a banker must depend on the facts and circumstances of each case. In the instant case, the trial court has come to the finding that even on a closer scrutiny without the aid of the ultraviolet ray lamp, some infirmity could have been noticed particularly with reference to the number of the month. The amount under the cheque was quite heavy and in such circumstances the banker was under a legal obligation to exercise further scrutiny before passing the same. It is an admitted position that the cost of an ultraviolet ray lamp was only Rs. 400 and the bank provided such ultraviolet ray lamps to other branches but such lamp was not provided to the branch in question although admittedly such branch is situated in an industrial area on the outskirts of the city of Bombay. It is also on record that the branch was having heavy commercial transactions. In the aforesaid facts, there was no earthly reason why the usual precaution of scrutinising the cheque under the ultraviolet ray lamp was not taken by the bank. If on such lapse, the concurrent findings have been made by the courts below including the High Court that the bank was guilty of negligence and the protection under the Negotiable Instruments Act was not available, such finding is not required to be upset by this court. He has, therefore, submitted that the appeal should be dismissed with costs.After considering the relevant facts and circumstances of the case and the contentions made by learned counsel for the parties, it appears to us that the court of appeal below has categorically come to the finding that on visual examination no sign of forgery or tampering with the writings on the cheque could be detected. There is also evidence on record which has not been upset by the court of appeal below that the then agent of the bank had taken care to verify the serial number of the cheque, the signature on the cheque with the specimen signature of the constituent, namely, the defendant and on a scrutiny of the cheque visually no defect could be detected by him. It also transpires from the evidence that the defendant had sufficient amount in the bank to cover the said payment of Rs. 6, 500 at the relevant date when the cheque was presented for payment. 8. Under section 31 of the Negotiable Instruments Act, the appellant-bank had a liability to honour the said cheque and make payment if the cheque was otherwise in order. "Payment in due course&quot; under section 10 of the Negotiable Instruments Act means payment in accordance with the apparent tenor of the instrument in good faith and without negligence. In the facts of the case, there was no occasion to doubt about the genuineness of the cheque from the apparent tenor of the instrument. There is nothing on record from which it can be held that the payment of the said cheque has not been made in good faith. Although no strait-jacket formula can be laid down to cover each case of negligence of a banker and the question of negligence requires to be decided in the facts and circumstances in each case, it does not appear to us that the appellant-bank can be held to be guilty of negligence simply because an ultraviolet ray lamp was not kept in the branch and the cheque in question was not subjected to scrutiny under the ultraviolet ray lamp. It has not been established in evidence that invariably the other branches of the appellant-bank or the other commercial banks had been following a practice of scrutinising each and every cheque under the ultraviolet ray lamp or that there was any prevalent practice to scrutinise cheques involving more than a particular amount under such lamp by way of extra precaution. In such circumstances, it cannot be contended as a correct legal proposition that the bank in order to get absolved from the liability of negligence, was under an obligation to verify the cheque for further scrutiny under advanced technology or for that matter under an ultraviolet ray lamp apart from visual scrutiny. The cost of the ultraviolet ray lamp was only nominal and it might have been desirable to keep such lamp in the branch in question to take aid in appropriate cases. But even then, it cannot be contended that although no forgery could be detected on visual scrutiny on the apparent tenor of the cheque in question and reasonable care by way of scrutiny of the cheque with reference to its serial number, verification of the specimen signature of the signatory of the cheque had been made, the bank officials should have resorted to scrutiny of the cheque under an ultraviolet ray lamp by way of additional precaution and by not taking such extra precaution the bank may be held guilty of negligence. 9. We do not think that there was any justification for the courts below to proceed on the footing that the bank had failed to take reasonable care in passing the cheque for payment without subjecting it to further scrutiny under an ultraviolet ray lamp because the branch was on the outskirts of the metropolitan city of Bombay and in an industrial area where such forgery was rampant, particularly when other branches of the appellant-bank were provided with such a lamp.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]In the instant case, the trial court has come to the finding that even on a closer scrutiny without the aid of the ultraviolet ray lamp, some infirmity could have been noticed particularly with reference to the number of the month. The amount under the cheque was quite heavy and in such circumstances the banker was under a legal obligation to exercise further scrutiny before passing the same. It is an admitted position that the cost of an ultraviolet ray lamp was only Rs. 400 and the bank provided such ultraviolet ray lamps to other branches but such lamp was not provided to the branch in question although admittedly such branch is situated in an industrial area on the outskirts of the city of Bombay. It is also on record that the branch was having heavy commercial transactions. In the aforesaid facts, there was no earthly reason why the usual precaution of scrutinising the cheque under the ultraviolet ray lamp was not taken by the bank. If on such lapse, the concurrent findings have been made by the courts below including the High Court that the bank was guilty of negligence and the protection under the Negotiable Instruments Act was not available, such finding is not required to be upset by this court. He has, therefore, submitted that the appeal should be dismissed with costs.After considering the relevant facts and circumstances of the case and the contentions made by learned counsel for the parties, it appears to us that the court of appeal below has categorically come to the finding that on visual examination no sign of forgery or tampering with the writings on the cheque could be detected. There is also evidence on record which has not been upset by the court of appeal below that the then agent of the bank had taken care to verify the serial number of the cheque, the signature on the cheque with the specimen signature of the constituent, namely, the defendant and on a scrutiny of the cheque visually no defect could be detected by him. It also transpires from the evidence that the defendant had sufficient amount in the bank to cover the said payment of Rs. 6, 500 at the relevant date when the cheque was presented for payment.Under section 31 of the Negotiable Instruments Act, thehad a liability to honour the said cheque and make payment if the cheque was otherwise in order.ot; under section 10 of the Negotiable Instruments Act means payment in accordance with the apparent tenor of the instrument in good faith and without negligence. In the facts of the case, there was no occasion to doubt about the genuineness of the cheque from the apparent tenor of the instrument. There is nothing on record from which it can be held that the payment of the said cheque has not been made in good faith. Although noformula can be laid down to cover each case of negligence of a banker and the question of negligence requires to be decided in the facts and circumstances in each case, it does not appear to us that thecan be held to be guilty of negligence simply because an ultraviolet ray lamp was not kept in the branch and the cheque in question was not subjected to scrutiny under the ultraviolet ray lamp. It has not been established in evidence that invariably the other branches of theor the other commercial banks had been following a practice of scrutinising each and every cheque under the ultraviolet ray lamp or that there was any prevalent practice to scrutinise cheques involving more than a particular amount under such lamp by way of extra precaution. In such circumstances, it cannot be contended as a correct legal proposition that the bank in order to get absolved from the liability of negligence, was under an obligation to verify the cheque for further scrutiny under advanced technology or for that matter under an ultraviolet ray lamp apart from visual scrutiny. The cost of the ultraviolet ray lamp was only nominal and it might have been desirable to keep such lamp in the branch in question to take aid in appropriate cases. But even then, it cannot be contended that although no forgery could be detected on visual scrutiny on the apparent tenor of the cheque in question and reasonable care by way of scrutiny of the cheque with reference to its serial number, verification of the specimen signature of the signatory of the cheque had been made, the bank officials should have resorted to scrutiny of the cheque under an ultraviolet ray lamp by way of additional precaution and by not taking such extra precaution the bank may be held guilty of negligence.We do not think that there was any justification for the courts below to proceed on the footing that the bank had failed to take reasonable care in passing the cheque for payment without subjecting it to further scrutiny under an ultraviolet ray lamp because the branch was on the outskirts of the metropolitan city of Bombay and in an industrial area where such forgery was rampant, particularly when other branches of thewere provided with such a lamp.