P L D 1975 Karachi 252 (PLP)

5. The defendant filed a written statement in which it denied that the signature of the plaintiff on the said cheque was forged. It pleaded in the alternative in paragraph 3 of the written statement, that the "forgery was committed to the knowledge and with the consent and connivance of the plaintiff himself, under a conspiracy" between the plaintiff and the forger of the said cheque in order to defraud the bank. Again, in the alternative, it pleaded that the forgery was the result of gross negligence of the plaintiff amounting to the breach of his legal and contractual duty to the defendant Bank as its customer. The defendant also pleaded limitation and that the suit was bad for non joinder of necessary party. Accordingly, it pleaded that the plaintiff had no cause of action against the defendant and prayed for dismissal of the suit.

6. On these pleadings consent issues were adopted by the Court on 14‑10‑1968, but when the matter came for hearing before me, the issues were recast by consent as follows :‑ (1) Whether cheque No. 109100 dated 4‑6‑1964, in suit was stolen from the plaintiff and his signature was forged thereon? (2) Whether the forgery, if any, was a result of gross negligence by the plaintiff amounting to breach of the plaintiff's legal and contractual duty to the defendant? (3) Whether the defendant agreed to pay the amount of the cheque in suit, if the case of forgery was investigated and a finding of the Court was obtained on the issue of forgery? (4) Whether the defendant is liable to pay damages to the plaintiff as claimed in the suit? If suit in what amount? (5) Whether the suit as barred by limitation? (6) Whether the suit is bad for non joinder of necessary party? (7) To what reliefs, if any, is the plaintiff entitled? (8) General.

7. The plaintiff examined himself as (P. W. 1) and one A. B. Chughtai (P. W. 2), a handwriting expert. The defendant examined Shaikh Muhammad Ibrahim (D. W. 1), who at relevant time was in service Nrith the defendant Bank as a Commercial Book Keeper; Buryin Kotwall (D. W. 2) who was serving as Assistant Cashier of the defendant‑Bank and Cyril G. Bhan (D. W. 3) a Handwriting Expert.

8. I have considered the evidence and the submissions of the counsel and my findings on the issues are as follows :‑

9. Issue No. 1.‑This issue raises the question whether the signature on the disputed cheque Exh. is/3 is a forgery. The plaintiff in his testimony categorically denied that the signature or the handwriting on the cheque were his. The disputed cheque is No. 109100 and is dated 1‑6‑1964 and was drawn in favour of one "Mr. Ghaffar or bearer" in the sum of Rs. 25,000 and is purported to have been signed "for Malihabad Bus Service, A. A. Khan", the plaintiff herein. It is not disputed that this cheque was presented at the bank for encashment on 4‑6‑1964 and was paid over the counter to the bearer who signed as Ghaffar on the reverse of it in "Urdu". The case of the bank is that the signature on the disputed cheque appeared to be genuine when compared with the plaintiff's signatures on the specimen ‑signature card Exh. 6/21 as well as with the signature marked R/2 in Circle on the plaintiff's letter dated 3rd June 1964, Exh. 8/4 and, accordingly, the cheque was passed for payment. With regard to this alleged signature of the plaintiff R/2 on the letter Exh. 8/4, the bank's witness Shaikh Muhammad Ibrahim, D. W. 1 has deposed that on 4th June 1964, about two hours before .the disputed cheque was presented for encashment, the plaintiff had come personally to the bank and handed over his letter dated 3rd June 1964, Exh. 8/4 to Mr. Roomi, an officer in the Accounts Department. By this letter ,the plaintiff advised the bank that he was depositing Rs. 90,000 in. order to meet a cheque which he had issued to M/s. Ashraf Transport Services Limited No. 109076 dated 3‑4‑1964, for Rs. 50,000 in settlement of their bill for purchase of 9 buses and therefore requested the bank to kindly pay the amount of the said cheque to the said, company without delay. Shaikh Muhammad Ibrahim further stated as follows:‑ "Mr. Roomi, called me and asked me to produce the specimen signature card of Mr. Ansar Ahmed. As there was discrepancy in the specimen signature, we asked him to again sign the letter, which he did at the place marked R/2 in Exh. 8/4. This signature was written in my presence and in presence of Mr. Roomi. This signature tallied with the specimen signature card. I see Exh. 8/3 it is a cheque dated 1‑6‑1964 for Rs. 25,000 drawn by the plaintiff in favour of one Mr. Ghaffar. Since the amount of this cheque exceeded my jurisdiction I took it to Mr. Kotwali with specimen signature card of Mr. Ansar Ahmad as well as the letter Exh. 8/4. 'He verified the signature on the cheque and compared it with the signature on the specimen signature card as well as the signature marked R/2 in Exh.

814. Accordingly the cheque was paid." Mr. Kotwall, D. W. 2 of the Bank has supported this witness. He has, stated that when the disputed cheque was presented on the counter it came to him along with the specimen signature card as well as the letter Exh. 8/4 and that he compared the plaintiff's signature on the specimen signature card as well as the signature R/2 on the letter Exh. 8/4 which he stated was signed: by the plaintiff in the Bank two hours before in the presence of Mr. Roomi: and Shaikh Muhammad Ibrahim.

10. The plaintiff has denied that the signature R/2 was written by him) on Exh. 8/4 at the time he went to deliver that letter to Mr. Roomi. On: this point his statement is consistent with the statement in paragraph 3 of his, affidavit Exh. 6/39 which he swore on 14‑7‑1964 soon after reporting the forgery to the bank in which he stated that it was also a forgery. Mis statement is also consistent with his testimony in the Sessions Court which was produced to confront him on some other points. Mr. Roomi was not examined as he was said to be out of country and, therefore, it cannot be, known why it was necessary for Mr. Roomi to call for the specimen card. It seems to me most an unusual and extraordinary precaution. The letter Exh. 8/4 was only a letter of intimation and request to pass the cheque without delay to M/s. Ashraf Transport Services Limited. The letter was admittedly signed by the plaintiff whose name was typed below the signature and, it seems to me, that there was no reason to arouse any suspicion especially as the letter was personally handed over by the plaintiff to Mr. Roomi. Again, it is a matter of coincidence that the letter Exh. 8/4 was. brought into the Bank on 4‑6‑1964, two hours before the disputed cheque was presented for encashment, the more so, as the cheque itself was dated 1st June 1964 and was three days old. It is a matter of further coincidence as stated by Shaikh Muhammad Ibrahim, D. W. 1 in cross‑examination, that: when the cheque Exh. 8/3 came to him, he had the plaintiff's letter Exh. 8/4 "in front of him". Both the Bank's witnesses, Shaikh Muhammad Ibrahim,. D. W. 1 and Kotwall, D. W. 2 have justified payment on the disputed cheque by trying to show that the signature R/2 on letter Exh. 8/4 was there and was compared with and tallied with the plaintiff's specimen signature card and that is why the disputed cheque was passed. This seems to me an, extraordinary way of passing a bearer cheque presented for encashment over the counter. There is also a strong conflict of opinion between the two expert witnesses examined on behalf of the respective parties with regard to the signature R/2. Chughtai, P. W. 2, the handwriting expert examined by the plaintiff, categorically stated that signature R/2 is not that of the plaintiff. On the other hand, Cyril G. Bhan, D. W. 3, the handwriting expert examined on behalf of the Bank, stated that it was the signature of the plaintiff. It is significant that the disputed cheque Exh. 8/3 was not sent up to these experts for comparison with the specimen signature card, which alone, was in my opinion, strictly material. Instead, they both rivetted their attention on signature R/2. The expert evidence is not binding on me. Chughtai's opinion was disbelieved by Faruqui, J. in The Province of Sin d v. The Imperial Bank of India (P L D 1961 Kar. 185) and the evidence of Mr. Bhan was disbelieved by Shabir Ahmed, J. in Syed Ali Nawaz Shah Gardezi v. Lt.‑Col. Muhammad Yusuf Khan, Commissionner, Quetta Division (P L D 1962 Lah. 558). 11. 1 have myself examined the handwriting and the signature on the disputed cheque and have compared it with the admitted handwriting and signatures in plaintiff`s letters Exhs. 5 and 3/2 and other admitted signatures and have reached the conclusion that neither the handwriting nor the signature on the disputed cheque is that of the plaintiff and that the Exh. 8/3 is the forged cheque. I am supported in my view by several circumstances. As stated earlier the cheque is dated 1‑6‑1964. It is significant that on that date the bank balance mentioned in statement of account (Exh. 5) in Sessions Case No. 83/66) shows only a paltry amount of Rs. 275.50. It therefore seems astonishing that the plaintiff should draw a bearer cheque on 1‑6‑1964 for a large amount of Rs. 25,000 which would certainly have been dishonored upon presentation on that day or even on the following day,. when the bank‑balance was only Rs. 46.50. Again, the disputed cheque' No. 109100 was the last cheque in the cheque book in question and there No. 23 other unused cheques as on 1‑6‑1964. The cheque book shows that cheque No. 109075 was drawn on 30‑5‑1.964, and the next cheque No. 109076 was drawn on 3‑6‑1964. Granted that the bank is not concerned with the serial number of cheques drawn out of a cheque book which are presented for encashment or clearance. Nevertheless, no explanation has been elicited from the plaintiff in cross‑examination as to this strange circumstance. The' plaintiff's conduct in reporting the forgery to the bank immediately on dis covering it on 27‑6‑1964 and in lodging criminal complaint promptly, is, another circumstance in his favour. In fact, the suspect Habibullah Khan. ,was convicted by the Sessions Court although his conviction was set aside on appeal because there was doubt on the evidence that he was a forger. But the plea of the bank in the written statement that the plaintiff connived and conspired with the forger, in order to defraud the bank of Rs. 25,000" is, to say the least, preposterous. The plea finds no support whatever in the correspondence nor in the evidence and the defendant's counsel did not even suggest an issue on it. In the result, my finding on this issue is that the signature of the plaintiff on the disputed cheque was forged.

12. Issue No. 2.‑The plea of the bank in the alternative is that assum ing that the plaintiff's signature on the disputed cheque is a forgery, the plaintiff was guilty of gross negligence amounting to breach of his legal and' contractual duty to the defendant‑Bank as its customer. That, therefore the plaintiff is precluded and estopped from setting up the forgery. Mr. Liaquat Merchant, learned counsel for the defendant referred to section 29‑B of the‑' Negotiable Instruments Act, 1881. That section deals specifically with, inter' alia, forged signature on a cheque. The relevant portion of that section, my so far as it relates to a forged cheque is as follows:‑ "Subject to the provisions of this Act, where a signature on a cheque is forged , the forged signature is wholly inoperative, and no right to enforce payment thereof against any party thereto can be acquired through or under that signature, unless the party against whom it is sought to enforce payment of the instrument is precluded from setting up the forgery " This section corresponds to section 24 of the English Bills of Exchange Act, 1882 and was introduced into our Negotiable Instruments Act in the year 1962 by the Negotiable Instruments (Amendment) Ordinance, 1962. But the introduction of this new section did not alter the law on the point. It only gave statutory recognition to it. Even before the amendment, the English law was applied in a number of cases by the Courts in British India, which have ruled that a fogged cheque is a nullity and confers no title. The true reason for this rule is said to be that the Bank cannot debit its customer's account with moneys paid away without his mandate or authority. A cheque on which the customer's signature as drawer is forged, is not a cheque at all and a banker who pays money on it cannot debit the customer's account with any payment made thereon unless the banker can establish estoppels of adoption in which case, the drawer will be precluded, from setting up the forgery or from pleading that the signature is not his. This rule of English law was applied in L. Pirbhu Dayal v. The Jwala Bank (A I R 1938 All. 374) and Province of Sind v. Imperial Bank of India Ltd. (P L D 1961 Kar. 185).

13. As evidence of gross negligence on the part of the plaintiff, Mr. Liaquat Merchant referred to his testimony in cross‑examination in which he has admitted that he remained ill in the month of May 1961 and, entrusted his cheque book to his Accountant Ahmed Hadi with whom it remained until 25th June 1964, by which time the forgery had been committed, Hadi was employed by the plaintiff in the bus garage as a Cashier and was suspected of the forgery. The plaintiff also admitted that while he was sick in the hospital on or about 3rd June 1964 he gave the key of his safe to Habibullah Khan requesting him to bring his cheque book from the safe. Habibullah Khan was not only suspected of the forgery but was prosecuted and convicted by the Sessions Court. The plaintiff also admitted that he was aware that the cheque book should be kept in safe custody under lock and key. Assuming that the plaintiff had been negligent in failing to take sufficient care of his cheque book, that by itself, will not amount to estoppel. As observed by Scrutton, L. J. in Greenwood v Martins Bank Ltd. ((1932) 1 K B 371): "It is not every breach of duty, or every carelessness, which will found an estoppel". To found an estoppel the bank must establish that the plaintiff had knowledge of the forgery and that he deliberately kept silent and omitted to disclose it to the banker, in breach of his duty to do so, thereby representing impliedly to the banker that the cheque was in order, and that as a result of such representation, the banker was induced to make payment on the forged cheque to his detriment, as was the case in the Greenwood's case abovementioned. In that case, a husband who came to know that his wife had forged his signature to several cheques, kept silent for several months. It was held that the husband owed a duty to the bank to disclose the forgeries when he became aware of them and so enable the bank to take steps towards recovering the money wrongfully paid on the forged cheque. By his failing to fulfill this duty, he was held to have teen estopped from asserting that the signature to the cheques were forgeries and he was not entitled to recover. The judgment of the Court of appeal in that case was upheld by the House of Lord and is reported in 1933 A C 51, where a classical definition of estoppel is given by Lord Tomlin. In L. Pirbhu Dayal's case above referred to a similar contention was urged, but it was rejected. The Court observed "The only negligence imputed to the customer in the present case is that he did not take sufficient care of his cheque book and because of that some one was in a position to steal a form from the cheque book which was utilised in drawing money from the defendant‑Bank The main reason for dismissing the claim of the plaintiff was that he was negligent in leaving his cheque book in an unlocked box. This negligence to my mind was not the proximate cause of the loss to the defendant‑Bank. It was the duty of the employees of the bank to be able to identify the signatures of their customers and if they failed to discharge their duty and thereby suffered loss, there is no reason why the plaintiff should make good that loss. 1n Ahmed Moola Dawood v.Finn Pereinan Chetty (A I R 1924 Rang. 264) on similar facts it was held that the money paid by the bank under a forged cheque could not be debited to the customer merely on the ground that the customer was negligent to this extent that he allowed his cheque book to remain unlocked." It was observed by Faraqui, J. in the Province of Sind's case above referred to as follows at page 192:‑ "The question which next arises is whether a customer becomes disen titled from making a claim for reimbursement on the ground of his own negligence or conduct. In my opinion the customer is not so disentitled unless it is established either that he adopted the forgery or he is by his own conduct estopped from making a claim against the bank. The negligence of the customer himself, such as not keeping the cheque book under lock and key or not reporting its loss prompt ly can be of little avail to the bank in avoiding its liability for having made an un authorised payment The negligence of the customer in a case where a forged cheque has been honoured must be shown to be such which may preclude him from pleading that the payment by the bank was without authority " , For these reasons in my opinion, the plea of the defendant‑Bank cannot be sustained.

14. Mr. Liaquat Merchant next submitted that the Bank made payment on the disputed cheque in due course "in accordance with the apparent tenor of the instrument in good faith and without negligence" as defined in sec tion 10 of the Negotiable Instruments Act, 1881, and that, therefore, even if the cheque is altered and is a forgery, the Bank is discharged under section 89 of the said Act. This submission cannot be accepted because, in the first place, payment cannot be "a payment in due course" if it is made to a person not entitled to receive payment. In the second place, section 89 is not attracted as that section applies to a case of forged alteration of a cheque after it has been signed by the drawer, which is not the case in point. In the result, my finding on this issue is in the negative.

15. Issue No. 4.‑The plaintiff has claimed damages of Rs. 50,000 as a consequence of non‑payment of the amount of the cheque for Rs. 25,

000. However, in his oral evidence he stated that he requested for a credit facility to the extent of Rs. 25,000 of which he was deprived on account of the forgery. He has admitted that the bank declined his request as he could not furnish the required security with the result that he could not pay the hire‑purchase installments on the 9 buses purchased by him. The purchase price of the 9 buses was Rs. 2,40,000 and at that time he had already paid Rs. 80,000 towards the installments leaving a balance of Rs. 1,60,

000. Clearly, therefore, the non‑payment of Rs. 25,000 to the plaintiff cannot be the direct or proximate cause for his failure to pay the hire‑purchase installments as a result of which the 9 buses were taken away from him. This issue is therefore decided against the plaintiff.

16. Issue No. 5.‑This issue relates to the limitation of the suit. Clearly Article 60 of the Limitation Act, 1908 applies and the period is 3 years from the date of the demand. Mr. Liaquat Merchant submitted that the suit is barred because the demand was made on 27‑6‑64, Exh. 5, whereas the F suit was filed on 20‑2‑1968, beyond 3 years. Mr. Chishti for the plaintiff rightly submitted, in my opinion, that Exh. 5 did not contain the demand but was only an intimation of the forgery. As rightly pointed out by him the first demand is contained in Legal notice Exh. 6/34 dated 1st March 1965, in which case the suit is well within time.

17. Issue No. 6.‑Mr. Liaquat Merchant submitted that the suit is bad for non‑joinder of Gaffar, the payee of the forged bearer cheque and that the only relief to which the defendant is entitled is against him. No author ity has been cited in favour of this point and this submission is without substance. The plaintiff's cause of action is primarily against the bank for breach of his mandate as the bank's customer. It is, however, for the ban' to recover the amount of the forged cheque from the person to whom it has wrongfully paid it.

18. In the result, I would decree the plaintiff's suit with costs to the sum of Rs. 25,000 with interest at 6 per cent from the date of the suit till realisation. S. A. H. Suit decreed.