P L D 1957 Dacca 558 (PLP)

CHOWDHURY, J.‑This appeal is by defendant No.

1. It arises out of a suit for recovery of a sum of Rs. 3,150 due on account of cheque No. D. C. 243, dated the 7th of December, 1950, drawn by Laksham Central Co‑operative Bank in favour of the plaintiff, the Eastern Federal Union Insurance Company Limited, on the defendant No. 1, the East Pakistan Provincial Co‑operative Bank Limited. Plaintiff's case is that it handed over the said cheque to their banker, defendant No. 2, Muslim Commercial Bank Limited, for collection, and thereafter for crediting the amount to their account. As the money was not credited, the plaintiff enquired about it, and came to know that the Muslim Commercial Bank crossed the cheque specially, and sent it to the defendant No. 1, the East Pakistan Provincial Co‑operative Bank Limited, for payment, and as they did not pay, they could not credit it, and as such, according to defendant No. 2, the liability rests with defendant No. 1, the East Pakistan Provincial Co‑operative Bank Limited. Hence the suit praying for a decree against defendant No. 1 or defendant No. 2 or against both. The defence of the defendant No. 1, the East Pakistan Provincial Co‑operative Bank Limited, hereinafter described as the Co‑operative Bank for easy reference, is that the said cheque crossed specially with an endorsement on its back, was presented to them by defendant No. 2 on the 13th of December 1950, for collection through a bearer, and in the absence of any special instruction, as was customary between defendants Nos. 1 and 2, they paid the amount over the counter to the bearer of defendant No. 2, under token No. 25, dated the 13th of December 1950, after taking a signature of the bearer on the back of it, and as such bury, the payment was made in due course, and their liability is discharged. The defendant No. 2 disown the bearer to whom the alleged payment was made, and contends that they sent the cheque with the Memo. No. C. C. 3/263 attached containing instruction to remit the proceeds to the defendant No. 1 for collection on the 12th of December 1950, in a packet contain ing two other documents concerning one case of automobile parts and two cases of automobile cables, and the payment in cash over the counter is not a valid payment to discharge the liability of the payee Bank. The defendant No. 1 denied to have received any such instruction. From the pleading of the parties it appears that the plaintiff, the Eastern Federal Union Insurance Company Limited, hereinafter referred to, as the Insurance Company for easy reference, is entitled to get a decree for the amount when both the defendants Nos. 1 and 2 admitted that they received the cheque. Question is : Which of the two defendants is liable to pay the amount. Both the Courts below decreed the suit against defendant No. 1, the Provincial Co‑operative Bank, holding that the cheque being specially crossed, it contemplates Bank to Bank payment, and the payee Bank had no right under the law to pay in cash over the counter, and should have paid it through another Bank; that as the payment over the counter was in violation of the provisions of law it was not a payment in due course to discharge the liability of the payee Bank ; and that the defendant No. 1 was not entitled to claim protection under section 128 of the Negotiable Instruments Act. Hence this appeal by the defendant No.

1. Certain facts relevant for the purpose of determination of the question arose is this appeal are necessary to be stated here. They are as follows. The cheque issued by the Laksham Central Co‑operative Bank was an open cheque, and the only word `bearer' in the cheque has been penned through. The plaintiff Insurance Company sent the cheque to the defendant No. 2, Muslim Commercial Bank Limited with a blank endorsement on the back of it without crossing it. But the Muslim Commercial Bank Limited crossed it special to itself. Both the Courts below proceeded on the assumption that the cheque was crossed by the plaintiff, and sent it to defendant No. 2, who presented it to the defendant No. 1, that is, the Co‑operative Bank, over the counter without any instruction. The story set up by the defendant No. 2, the Muslim Commercial Bank Limited is that there have sent it with a Memo. attached being Memo. No. C. C. 3/263 containing instruction to remit the proceeds. The Courts below neither accepted nor rejected it, and proceeded on the basis that the cheque was presented over counter without any instruction. There is another fact. There is a seal on the face of the cheque containing C. C. 3/263. It also appears that the Muslim Commercial Bank Limited all through, was under the impression that it was an out station cheque from the Laksham Central Co‑operative Bank of which the defendant No. 1, Provincial Co‑operative Bank, Dacca, is the Head Office, and treated it as such. There are certain negotiations between defendants Nos. 1 and 2 to show this impression, and dealing under this impres sion on the part of the defendant No. 2, the Muslim Commer cial Bank Ltd. The contention of defendant No. 2, Muslim Commercial Bank Limited in the lower Courts as well as before us is that when a cheque is crossed, the fact of the crossing by itself, is a warning and direction to the payee Bank not to pay in cash over the counter, and in fact under the law such payment cannot be made, and it made, it will be at the risk of the payee Bank, and will not discharge it from the liability. The contention of defendant No. 1 on the other hand, is that when such a cheque is presented at the counter by the banker to whom it is crossed, payment can be made over the counter, and that is a practice which has become customary between defendants Nos. 1 and 2 to pay such cheque over the counter in the absence of any specific instruc tion. In support of this practice they relied on Exh. D series. They also contended that if the payment was made to the banker, it is not in contravention of any provisions of law, and it is a payment in due course, and is sufficient to discharge the liability of the drawee Bank. In this appeal Mr. Ranjit Kumar Bose, the learned Advocate for the appellant also contended that the defendant No. 2 was not a holder as defined in section 8 of the Act within the meaning of section 125 of the Negotiable instru ments Act, and as such, the defendant No. 2 was not entitled to cross the cheque, and the payee Bank can disregard such a crossing. His further contention is that even if defendant No. 2 can cross it generally or specially they cannot cross it specially to themselves. We regret our inability to accept the finding of the Courts below that a crossed cheque cannot be paid in cash over the counter even to a banker to whom it is crossed. Section 126 of the Negotiable Instruments Act provides for payment to such banker as follows: "Where a cheque is crossed generally the banker on whom it is drawn shall not pay it otherwise than to a banker. Where a cheque is crossed specially, the banker on whom it is drawn shall not pay it otherwise than to the banker to whom it is crossed, his agent for collection." Section 129 of the Act provides as follows: "Any banker paying a cheque crossed generally otherwise than to a banker, or a cheque crossed specially otherwise than to the banker to whom the same is crossed, or his agent for collection, being a banker, shall be liable to the true owner of the cheque for any loss he may sustain owing to the cheque having been so paid." So it appears from both the sections that the drawee Bank can pay a crossed cheque to the banker to whom it is crossed or its agent for collection. From section 129 of the Negotiable Instruments Act it appears that agent contemplated should be a banker. Now the question is: how a payment is to be made to the banker to whom the cheque is crossed, by the banker on whom it is drawn. It is contended by Mr. Siddiky, the learned Advocate for the plaintiff respondent No. 1 that the very fact that the cheque is crossed contemplates payment through another Bank, and a payment in cash over the counter, is pro hibited, but at the same time he supports payment of such cheque over the counter, if it is by cheque as it would be `Bank to Bank payment.' We are unable to accept this contention of Mr. Siddiky as sound. The payment to the banker to whom the cheque is crossed is con templated both under sections 126 and 129 of the Act, and payment means either in cash or by cheque. In `Questions on Banking Practice' by the Institute of Bankers (Ninth Edition, 1952 at page 152), question No. 385 runs as follows: "Would a Bank be justified in paying cash over the counter for a crossed cheque presented by a loan office styling itself a Bank." Answer : "A Bank paying cash over the counter for a crossed cheque presented by an institution styling itself a Bank would do so at its own risk, unless the institution was in fact carrying on the business of banking. Section 2 of the Money Lenders Act, 1911 prohibits a money lender from using any name including the word `Bank', or implying that he carries on the business of banking." This is in consonance with the provisions of sections 126 and 129 of the Negotiable Instruments Act. Mr. Siddiky contends that the established practice is not to pay crossed cheque in cash over the counter. There is nothing on the record in support of such a practice, nor anything in law has been shown‑ to us to that effect. Exhibit D series clearly show that payments of crossed cheques were made to this defendant No. 2, Muslim Commercial Bank Limited by the defendant No. 1, Provincial Co‑operative Bank over the counter though sometimes it was paid in cheques, and some times it was paid in cash. In present case the cheque was crossed specially by defendant No. 2 to itself. Therefore, it is a crossing by a Bank to itself, and it can receive payment as a banker from the drawee Bank, and the payee Bank can pay it to the Bank to whom it is crossed as contemplated by sections 126 and 129 of the Act. It is a "Bank to Bank" payment. If the Muslim Commercial Bank Limited did not want any payment over the counter, there was no reason for them to send the cheque by a bearer to the counter of the drawee Bank. If they intended payment of the Cheque through another Bank, they might have sent it to the drawee Bank through another Bank. This fact itself shows that they intended payment over the counter. But Mr. Siddiky's con tention is that that payment ought to have been made by another cheque drawn on another Bank, and not in cash in the absence of any instruction. It is admitted by the Advocates of the parties that defendant No. 1 is not a member of the clearing house. If defendant No. 2 wanted payment by cheque, there should have been an instruction to that effect. If the cheque was presented at the counter without any instruction, we think, the payee Bank is entitled to make payment in whatever way it thinks better, that is, either in cash or by cheque. Even accepting that there was instruction, the instruction, according to defendant No. 2, was 'to remit the proceeds,' which may mean `pay in cash.' Therefore, in our opinion a crossed cheque presented by the banker to which it is crossed at the counter of the drawee Bank, can be paid over the counter, and the payment may either be in cheque or in cash, and in the absence of any instruction, the drawer Bank is entitled to pay it in whatever way they think better, and it would be payment in due course, if it is paid in good faith and without negligence on the part of the drawee Bank. Now the question for consideration is whether the disputed payment was in good faith and without negligence, in other words, if it was a payment in due course. Section 10 of the Negotiable Instruments Act provides as follows: "Payment in due course' means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive pay ment of the amount therein mentioned." In the circumstances of the present case we have got no doubt that the payment was made by defendant No. 1 in good faith. But can it be called a payment without negli gence on the part of the drawee Bank? From the evidence it appears that the payment was received by one Kaloo. The amount under the cheque is Rs. 3,

150. It appears further from the evidence of D. W. 1, Assistant Manager of defend ant No. 1, the Provincial Co‑operative Bank as well as from the evidence of D. W. 2, Cashier of the said Bank, as discussed in the judgment of the lower appellate Court at page 16 of the Paper Book, that they did not know the man who took payment from the Bank, and they did not try to ascertain that the man was from the Muslim Commercial Bank, Limited, and they never Saw Kaloo, and cannot recognise any peon of the Muslim Commercial Bank, Limited. Now this defendant No. 2, the Muslim Commercial Bank, disown this man Kaloo as their bearer. Without ascertaining the position whether they are actually paying the amount to the Bank to whom the cheque was crossed, they paid the amount of Rs. 3,150 on account of this cheque to one Kaloo, whom they did not know. In these circumstances, this pay ment to a person alleged to be a bearer of the Muslim Commercial Bank Limited, cannot be justified. By law certain duties have been imposed upon the payee Bank. Not only they will pay the amount in good faith, but also without negligence. The provision of the Negotiable Instru ments Acton this point is more stringent than the provision in the Bill of Exchange Act which speaks of only good faith, and root of negligence. It is contended by Mr. Bose that good faith and without negligence are interchangeable words, and the one cannot be separated from the other. Ibis argu ment is probably based on the definition of good faith in the Law of Limitation. Section 2(7) of the limitation Act provides: " `Good faith': Nothing shall be deemed to be done in good faith which is not done with due care and attention." If it was the intention of the Legislature to import the meaning of `good faith' as defined in the Limitation Act in the words `good faith' in section 10 of the Negotiable Instruments Act, then there would not have been any necessity of specific mention of the words `and without negligence' in the section. We believe that the words `good faith' are used in section 10 in the sense of honesty. A payment may be honest still it may be without care and caution. In our opinion the disputed payment though honest and in good faith, it was not without negligence. So, it cannot the held that the payment was in due course. The defendant No. 1, therefore, is not entitled to claim protection under section 128 of the negotiable Instruments Act which provides: "Where the banker on whom a crossed cheque is drawn has paid the same in due course, the banker paying the cheque, and (in case such cheque has come to the hands of the payee) the drawer thereof, shall respectively be en titled to the same rights, and be placed in the same position in all respects, as they would respectively be entitle to and placed in, if the amount of cheque had been paid to and received by the true owner thereof." In view of this conclusion, the appeal is bound to fail. There remains another question raised by Mr. Bose, namely, whether the Muslim Commercial Bank Limited (defendant No. 2) is a holder, and is entitled to cross it specially. Section 8 of the Negotiable Instruments Act defines `bolder' as follows:‑ "The `holder' of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof, and to receive or recover the amount due thereon from the parties thereto . . . . . ." The relevant, portion of section 125 of the Act provides its follows: "Where a cheque is uncrossed, the holder may cross it generally or specially . . . . ." Mr. Bose's contention is that defendant No. 2, the Muslim Commercial Bank Limited is not a holder within the meaning of section 8 of the Act, as it is not entitled in its own name to the possession thereof, and to receive and recover the amount due thereon from the parties thereto. His contention is that the Muslim Commercial Bank Limited not being a holder for value, but a mere agent for collection, is not entitled to possess the same or to receive or recover the amount in its own name, and as such, is not a holder within the meaning of the Act. We are unable to accept this con tention of Mr. Bose as sound. If it is a holder for value, it will be a holder in due course under section 9 of the Act which provides: " `Holder in due course' means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer . . . . " Therefore, we are of opinion that the holder means and includes an endorsee, and also includes `holder in due course' and as such, defendant No. 2 can cross it generally or specially under section 125 of the Act. Mr. Bose then refers to section 76 (6) of the Bill of Exchange Act, and absence of similar provision in the Nego tiable Instrument Act, and contends that under the Negotiable instruments Act defendant No. 2 though can cross it generally or specially it cannot cross the cheque specially to itself. Mr. Siddiky, the learned Advocate for the plaintiff respondent No. 1, on the other hand, refers to section 76 (1) of the Bill of Exchange Act, which provides that a drawer of a cheque can cross it, whereas there is no such provision in the Negotiable Instruments Act. Still, in Pakistan, he contends, the drawer is crossing the cheque every day, and it is not questioned ever. So also is the case in respect of crossing a cheque specially by a Bank to itself. We do not understand why a Bank which can cross it specially to, another Bank should not be able to cross it specially to itself, being a banker. It appears that subsection (6) is incorporated in section 76 of the Bill of Exchange Act in 1922, not to authorise, but simply to give recognition to such a crossing, which had already been established in practice in England. We, therefore, hold that defendant No. 2 as holder can cross it specially to itself under section 125 of the Negotiable Instruments Act making it payable to itself, that payment of such a cheque can be made either through a Bank or over the counter in cash or by a cheque if presented by the Bank to whom it is crossed, and that if such payment over the counter is made in cash, but not with due care and caution, will not be payment in due course though paid in good faith to discharge the liability of the payee Bank. The result, therefore, is that this appeal' is dismissed, and the judgment and decree of the Courts below are affirmed though on ground partly different from the ground on which the lower appellate Court based its decision. In the circumstances of the case, we direct that the parties will bear their own costs in this Court as well as in the lower appellate Court. HASAN, J.‑I agree. K. B. A. Appeal dismissed.