P L D 1961 (W (PLP)

(3) Whether it was the practice of the Executive Engineer to issue Order or Crossed Cheques only and never to issue bearer cheques? (4) Whether any written instructions were given by the Government to the defendant as alleged in paragraph 10 (d) of the plaint with regard to identification of payees and identifiers? If so, whether the defendant‑Bank acted contrary thereto? (5) Whether the defendant Bank made enquiry about the identification of the payee, or, kept record of the identifier? (6) Whether the signature on the cheque was verified by the paying officer of the defendant Bank? (7) To what relief, if any, is the plaintiff entitled? (8) General". The main question which falls for decision in this case is whether the cheque in question was a forged one. If the answer to that question is in the affirmative the further question, which has to be determined, is whether the plaintiff is precluded from recovering the money of the cheque from the defendant by reason of the negligence of the Executive Engineer Mr. Mirchandani. This forms the subject‑matter of issue No. 1, to which the other questions, which are contained in the remaining issues, must be subordinated. I shall, therefore, proceed to deal with the first issue.

5. The cheque in question Exh. A. It is a special kind of cheque printed for use by the Government of Sind. The word `order' on the cheque has been scored out and in its place the word `bearer' has been written in the hand of the same person who has written the body of the cheque. Two signatures purporting to be that of Mr. Mirchandani appear on the cheque one at the bottom and the other at the point where the word `order' has been scored out and replaced by the word `bearer'. On the back of the cheque the name and address of Abdul bhai Salim is written purporting to have been written by the person in whose favour this bearer cheque was drawn. There is no evidence that this man was got identified before the payment was made to him and he has not been traced. In all probability, he was a fictitious person. Mr. Mirchandani migrated to India after partition some time in May 1948 and, joined the service of the Government of India as Executive Engineer at Delhi and was promoted to the post of Superintending Engineer in 1950 and retired as such in 1952. He was examined on commission in Bombay. He has stated that in January 1948, he was the Executive Engineer in the Sind P. W. D. and was in charge of the Karachi Building Division. The procedure about the receiving of the cheque book and the issuing of cheques and the practice that was followed between the Government and the Imperial Bank in the matter of payment of these cheques, has been stated in detail by this witness. Briefly, the practice was thus: That the Treasury Officer used to issue blank cheque book on a requisition by him. These cheques were drawn on the Imperial Bank at Karachi. When the cheque book in use was nearing completion the requisition was prepared by the Accounts Department and initialled by the Divisional Accountant and signed by the Executive Engineer. After he had signed such a requisition it was taken to the Treasury to obtain a new cheque book, and before the cheque book was put into use an intimation used to be sent to the bank that this new book was being brought into use. In this intimation the numbers of the first and the last cheques used to be given. The bank would honour the cheque after it had received such an intimation. He goes onto say that on 15th January 1948; he signed a requisition slip for the issue of a new cheque book from the Treasury Officer as the old cheque book was about to finish. This new cheque book was brought to him on the 17th of January at 5 p.m. along with the register of the cheque books for his initials. He found that the total number of the cheques had been first shown to be 50 but later on that figure was corrected into

48. He questioned the Divisional Accountant who had brought the register and the cheque book to him and he told him that one Bacharam, his assistant, had received the cheque book and made the entry of the figure 50, but when the book was brought to him he checked and found two leaves short and thus made the correction. The accountant had brought the cheque book with the first 3 cheques written for payment to contractors and on being reprimanded by Mr. Mirchandani he told him that as the contractors mere waiting for payment, he had made use of this cheque book and that there was no danger of any fraud, because even if the cheque book had come incomplete from the Treasury office no intimation had been sent to the bank about this new cheque book having been put into use and, therefore, the bank would not make any payment. Mr. Mirchandani then signed these three cheques and also signed the intimation sheet informing the bank of this new cheque book having been put into use and about the two leaves being shoo. He dictated a letter to that effect at that very time and directed a copy of the same to be sent to the Controller of Accounts, Sind and the Chief Engineer. The next day was a Sunday and, according to him, ‑the following one or two days were holidays. This letter actually reached the bank on the 26th, and the explanation given of this is that in the wake of Partition the office was working with depleted staff due to migration of Hindus and for that, reason the delivery of the letter had been delayed. On the 27th about mid‑day the Accountant Mr. Mirza came to him and said that he had received an urgent telephone call from the Imperial Bank to see them immediately as one of the missing leaves had been cashed. He then took the Accountant and the Assistant Bacharama and went directly to the bank, where he was shown the cheque in question which had been cashed. He pointed out to the officer, who showed him the cheque, that it was a forgery and that he had not signed that cheque; that the cheque originally was an order cheque and the word `order' was scored off and the word `bearer' was written, and that this cheque was not written by any member of his staff. Neither of the two signatures were his and that he would never have issued a bearer cheque even for Rs. 50 much less for such a large amount of Rs. 97,751, and that the cheque did not bear the rubber stamp on the top which was the usual practice. He further stated that it was the usual practice of his office to ask the contractors to open account in the Imperial Bank so that when a cheque was issued in their favour there should be no difficulty of identi fication. The officer told him that this was a bearer cheque and the bank had paid it without identification. He then sent for the book which contained the specimen signature and according to Mr. Mirchandani the officer himself admitted that the signature on the cheque in question did not tally with the specimen signature which was in the bank. Inquiries were then made from the clerk on the counter and it appeared that one of the clerks had disappeared as from 17th of January. Another clerk, however, stated that the money was paid as this was a bearer cheque. Mr. Mirchandani then asked the officer as to how this cheque was cashed when he had not received the intimation about the new cheque book having been brought into use, to which the latter replied that due to the exodus of Hindus the bank was working with depleted staff, and hence this cheque was cashed by oversight. Mr. Mirchandani then took the bank officer to the Treasury office and the Treasury Officer informed them that the cheque book in question was issued to a peon of the office of the Executive Engineer on the 15th of January. Mr. Mirchandani then immediately went to his office and phoned to the C. I. D. Police and the Chief Engineer and other authorities. He then made a written complaint as directed by the C. I. D. Officer. A thorough inquiry was made by the C. I. D. who completely exonerated Mr. Mirchandani and prosecuted Bhacharam in the Court of the Second A. C. M., Karachi, but before that case could be decided Bhacharam was transferred to .India as the result of an arrangement between the two Govern ments with regard to the exchange of undertrial prisoners.

6. Mr. Mirchandani .was cross‑examined at considerable length, but he stood it extremely well and his testimony in the main remained unshaken. I have carefully read his evidence and was impressed by its forthrightness and strength. His conduct on the discovery of the fraud was straightforward and he took immediate steps to have it investigated by the competent authorities including the C. I. D. Police, who after full inquiry, completely exonerated him of any blame. He had no particular reason to favour the plaintiff, whose service he had left and gone over to India. At the time that he gave evidence he had even retired from his service in that country. His own connections with the Imperial Bank of India were very old inasmuch as the said bank had been his personal banker for 35 years. Further more, Mr. Mirchandani's evidence does not stand alone. It is strongly supported by circumstances, the truth and force of which is indisputable. The first of these circumstances is the fact that his signatures on the cheque in question were forged, a finding to which I have come without the slightest hesitation and to which I shall revert presently in some detail. There is then the fact that a very large sum of money was paid out by the defendant bank on a bearer cheque without the slightest attempt at identifying the payee. I believe Mr. Mirchandani's evidence when he says that he would not have issued a bearer cheque for Rs. 50 much less for Rs. 97,

751. No attempt was made by the bank to prove that any bearer cheque had been issued by the Sind P. W. D. in the past. Considering that the Government was challenging the debit the bank must certainly have been conscious of the case going to Court and it appears to me that the question that bearer cheques had been issued in the past would have been of considerable importance and if the bank did have such cheques it would have certainly preserved them for use in the event of the case going to Court. Mr. Ahmed, who gave evidence on behalf of the defendant, has been posted to the Karachi branch of the bank only in December 1959 and has no personal knowledge of the ‑facts. Rule 158 of the Treasury Rules, which enables the bank to cash bearer cheques provided they are not in favour of a Government Officer clearly provides that "the Treasury Officer may decline to pay it, if he is unable to satisfy himself of the identity of the person claiming payment". No attempt was made by the bank in this case to verify the identity of the person in whose favour the cheque was drawn and it is a matter of admission that when the fraud was discovered the bank was not able to trace the person to whom the payment had been. made. There is then the further fact that the bank had not received the information about the particular cheque book having been put into operation when the cheque in question was presented and paid out. Rule 151 of the Treasury Rules provides that the drawing officer shall notify to the treasury upon which he draws the number of each cheque book which from time to time he brings into use and the number of cheques it contains. It was admitted by Mr. Ahmed that the Government used to send intimation to the bank that a particular cheque book had been put into use. The information with regard to this particular cheque book was not received in the bank until the 26th of January 1948, while the cheque was allowed to be cashed on the 17th of January. That the Government used to issue instructions to guard against fraudulent payment by the bank is also supported by Exh. 6 dated 9‑6‑47, on which date the bank had acknowledged a communication from the plaintiff regarding fraudulent payments: The bank was not able to produce this letter but the nature of the communication, which is indicated in the despatch book and which was admittedly received by the bank, clearly shows that the communication was regarding fraudulent payments. It is, therefore, not difficult to understand the conduct of Mr. Mirchandani that when he came to know on the 17th evening of the 2 missing leaves from the new cheque book and was assured by the Divisional Accountant that there was no apprehension .of any mischief because the intimation with regard to the bringing into use of the particular cheque book had not till then been sent to the bank.

7. Let me now turn to the cheque itself.' The two signature of Mr. Mirchandani, which appear on this cheque, have been described by the plaintiff's hand‑writing, expert Muhammad Khalil Khan, P. W. 1, who is the official consultant to the Government of Pakistan in matters relating to questioned docu ments, to be full of inherent signs of forgery and having a dead and lifeless look, full of unnatural pen‑pauses, pen‑lifts, re-informed strokes, patched up bits, blunt endings and lackness of fluency and speed. On the other hand, the admitted signatures of Mr. Mirchandani are described by him as fluent, springly, normally executed and completely devoid of unnatural character istics. The witness has then gone on to point out the numerous features of the disputed and admitted signatures and the glaring difference in their execution and appearance, on the basis of which he gave his opinion that the two sets of signatures are written by two different persons. As it often happens another expert Mr. Chughtai, who was produced by the defendant, gave his opinion that the two sets of signatures are written by the same person. I, however, find it impossible to accept this opinion. Mr. Chughtai himself had to admit the various dissimilarities of the admitted and the disputed signatures and the laboured and slow writing in the words of the disputed signatures. Looking at the two disputed signatures with their thick, heavy, halting, laboured and artificial writing in it and comparing it with the set and fluent writing of the admitted signatures, and having regard to the glaring dissimilarities between the two sets of signatures, I have not the slightest hesitation in holding that the two purported signatures of Mr. Mirchandani on the cheque, Exh. A, are forgeries and I might add that they are clumsy forgeries at that. I shall now proceed to examine as to what must be the effect of this forgery in relation to the liability of the bank which made the payment on the basis of the cheque with the forged signatures.

8. A cheque is in the nature of a mandate from the customer to the bank directing it to pay out from his account. If, therefore, the signature of the customer on cheque is forged then it is not his mandate or order to pay. From this it must follow that any payment by the bank upon the basis of such a cheque is a payment without authority and would not bind the customer. The question which next arises is whether a customer becomes disentitled 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. But even adoption and estoppel cannot be effective against the customer if it is established that the bank itself was guilty of negligence which led to the payment on the forged cheque and the resulting loss. Where the negligence of the bank itself had facilitated the fraud it would not be open to it to clothe the customer with liability for a payment which was not authorised by him upon a plea of estoppel or adoption. The negligence of the customer himself such as not keeping the cheque book under lock and key or not reporting its loss promptly can be of little avail to the bank in avoiding its liability for having made an unauthorised payment. It is true there is a duty cast upon the customer not to act in a manner which might facilitate a fraud upon the bank just as there is a duty cast upon the bank to exhibit in its task as .a banker the skill and prudence required in the course of the business of a banker to make payments in good faith to detect forgeries and to take all necessary steps to guard against fraud and protect the interest of the customer. Yet it is not every negligence of a customer which would afford immunity to the banker. 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, that is to say, that the customer will not be allowed to plead want of authority when it is established that it was his own conduct which induced the bank to act upon a. document which purported to have proceeded from the customer and upon which the bank acted without any negligence on its own part.

9. Mr. Fazal ur Rehman, the learned counsel, relied upon the judgment of the House of Lords in the case of London Joint Stock Bank Ltd. v. Macmillan and Arthur (1918 A C 777). In that case a firm, who were customers of a bank, entrusted to a confidential clerk, whose integrity they had no reason to suspect, the duty of filling in their cheques for signature. The clerk presented to one of the partners of the firm for signature a cheque drawn in favour of the firm or bearer. There was no sum in words written on the cheque in the space provided for the writing and there were the figures "2.0.0" in the space intended for figures. The partner signed the cheque. The clerk subsequently added the words "one hundred and twenty pounds" in the space left for words and wrote the figures "1" and "0" respectively on each side of the figures " 2" which was so placed as to leave room for the interpolation of the added figures. The clerk presented the cheque for payment at the firm's bank and obtained payment of 120 pounds out of the firm's account. Upon these facts it was held that the firm had been guilty of a breach of the special duty arising from the relation of banker and customer to take care in the mode of drawing the cheque; that the alteration in the amount of the cheque was the direct result of that breach ; and that the bank were therefore entitled to debit the firm's account with the full amount of the cheque. The judgment in this case bad to be very elaborate, because both the Courts below had held that the case of Young v. Grote ((1827) 4 Bing. 253) which arose out of similar facts, was no longer of authority. The leading judgment in the House of Lord's case 1918 A C 777 was read by Lord Finlay, L. C. who after examining a very large number of authorities pronounced his opinion that the decision in Young v. Grote was sound in principle and must be treated as good law. Their Lordships then came to the conclusion which I have reproduced earlier. And if I may say so, upon the facts of that case, I find myself in respectful agreement with the view taken by their Lordships, But the facts of that case are so different from the facts of the case before me. In that case, the signature of the customer was a genuine signature. The sub sequent addition bad been made by the same clerk who had made the original entries on the cheque. Therefore, when the cheque was presented for payment to the bank it bore the genuine signature of the customer on it and the entries with regard to the figures etc. were mad a by the same person, who was normally authorised to make those entries, and it is no doubt that the addition of the figures and words by the same clerk in the cheque was made possible by the obvious negligence of the partners in the mode of the drawing of the cheque leaving room for additions which eventually came to be made in that .case. Their Lordships held in favour of the bank upon the finding that the alteration in the cheque was the direct result of the negligence of the customer in the mode in which it was drawn .by him and which led the bank to make the payment which it did without any negligence on its part. Examining these facts it appears to me that the principle, upon which the customer's liability was fixed, was the same as stated by me earlier, namely, that it was the customer's own act which induced the bank to act in the manner in which they did, and for that reason the customer was precluded from relying upon the invalidity, in fact, of his order. But, even in such cases where the customer has been guilty of negligence in the mode of drawing the cheque, the question may still remain for consideration as to how closely was that negligence related to the payment. That must always remain a question of fact. For instance; if in the subsequent addition or alteration in a cheque duly signed by the customer there are signs of interpolation which might have. been easily discoverable from the face of the document and which might have put the bank officers on enquiry, and yet they made the payment disregarding the suspicious circumstances of the alterations or additions, it appears to me that the bank would still be liable, because the immediate and proximate cause of the loss would be their own negligence though there might have been the initial negligence of the drawer in the mode of the drawing of the cheque. The case, therefore, cited by Mr. Fazal ur Rehman does not assist him.

10. Coming to the facts of the present case from the finding which I have recorded earlier that the signature of Mr. Mirchandani on the cheque, Exh. A, was forged it must follow that the cheque did not constitute a valid mandate or order to the bank to pay and the payment, which was made by it, was without authority and is not binding upon the plaintiff. l further find that the defendant has failed to establish negligence on the part of Mr. Mirchandani. But even if there was some negligence I am clearly of the opinion that it was not such as to constitute an estoppel against the plaintiff which would preclude the plaintiff from making the claim against the bank. As the signature on the cheque was a forged one the question of any negligence in the mode of its drawing of it does not arise. The delay in notifying to the bank the fact of the missing of the two leaves is of no consequence in the circumstances of the present case, because the payment on the cheque had been made by the bank even before the fact of the missing of the two leaves from the new cheque book was brought to the notice of Mr. Mirchandani which was done on the evening of 17th January 1948. I further find that apart from, the absence of authority of the customer there was negligence on the part of the bank which was the proximate cause of the loss. This negligence consists of the following: (i) The concerned officer or officers of the bank either failed to detect the obvious forgeries in the signature of Mr. Mirchandani or deliberately chose to ignore it; (ii) they failed to observe that Mr. Mirchandani as an Executive Engineer was not in the habit of issuing bearer cheques. This fact should not have gone unnoticed particularly because the cheque was for a very large sum of money; (iii) that the payment was made without any, attempt at identifying the payee; and (iv) that the instructions and the practice with regard to a new cheque book having been put into circulation were ignored. In view of these glaring circumstances I must hold that the bank failed in its duty, which it owed to its customer, to bring upon its task the skill and prudence required in the course of its business as a banker.

11. In view of my above findings, my answer to the first part of issue No. 1 is in the affirmative. The answer to the second and third parts of the said issue is in the negative.

12. Issues Nos. 2 & 3.‑--In view of the discussions above and the evidence of Mr. Mirchandani with which I have dealt earlier, I hold that there was an obligation on the defendant bank as stated in sub‑para. A of para. 10 of the plaint and that the bank acted in violation of those instructions and the usual practice. I further hold that it was the practice of the Executive Engineer to issue order or crossed cheques only and that he did not issue bearer cheques.

13. Issue No. 4.‑

On this issue I find that the evidence of Exh. 6 is not sufficient to enable me to hold that the Government had issued written instructions to the defendant with regard to the identification of payees. I do, however, hold, as I have done already, that it was the duty of the paying officer in the circum stances to satisfy himself of the identity of the person claiming payment. I hold accordingly.

14. Issue No. 5.

‑On this issue my finding is that the bank did not make any inquiry about the identification of the payee, nor did it keep any record of the identifier.

15. Issue No. 6.‑

There is no evidence that the signature on the cheque in question was verified by the paying officer of .the defendant bank. My answer to this issue is therefore in the negative.

16. As a result of my findings I decree the Plaintiff's claim for Rs. 97,751. with interest at 3% from the date of suit till payment and costs of the suit. This decree shall be treated as a decree in favour of the Province of West Pakistan. A. H. Suit decreed.