Delhi District Court
Punjab National Bank vs Central Bank Of India Through Its Ar on 14 April, 2026
Punjab National Bank Vs. Central Bank of India
IN THE COURT OF SH. JITEN MEHRA: DISTRICT JUDGE-10:
CENTRAL DISTRICT
TIS HAZARI COURTS: DELHI.
CS DJ NO. :- 279/2023
CNR NO. DLCT01-017726-2022
IN THE MATTER OF :-
PUNJAB NATIONAL BANK
A Body Corporate, constituted
under the Banking Undertaking Act, 1970
(Act No. 5 of 1970).
Having its Head Office at:
Plot No. 4, Sector-10, Dwarka,
New Delhi.
Having it's Branch Office at:
Centralised Draft payable centre
cum service branch at Paharganj,
New Delhi
Through its Manager/ Authorised
Representative Mr. Pramod Kumar Dubey
.........Plaintiff
VERSUS
CS DJ NO.:- 279/2023 Page 1 of 53
Punjab National Bank Vs. Central Bank of India
CENTRAL BANK OF INDIA
A Body Corporate with perpetual
succession, incorporated and
constituted under the Companies Act.
Having it's Head Office at:
Chander Mukhi, Nariman Point Mumbai - 400021
Having it's service Centre at:
B-1/29, Community Centre, Near Super Bazar,
Janakpuri, New Delhi
.........Defendant
Suit for recovery of Rs.6,03,578/- (Rupees Six Lacs Three Thousand Five
Hundred seventy Eight Only) together with costs and interest, Pendentelite
and Future.
Date of Institution of the Suit : 16.03.2023
Date on which Judgment was reserved : 14.04.2026
Date of Judgment : 14.04.2026
::- J U D G M E N T -::
1.
This is a suit for recovery of Rs. 6,03,578/- filed by plaintiff bank
against the defendant bank.
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Punjab National Bank Vs. Central Bank of India
PLAINTIFF’S VERSION AS PER THE PLAINT:
2. As per the plaint, the plaintiff bank is a body corporate, constituted
under the Banking Companies (Acquisition and Transfer of Undertakings
Act, 1970, having its Head Office at Plot No. 4, Sector-10, Dwarka, New
Delhi and having a branch, amongst others, at Centralised Draft Payable
Centre cum Service Branch at Paharganj, New Delhi. The suit is filed by
Mr. Pramod Kumar Dubey, presently posted as Manager at Centralised
Drafts Payable Centre (CDPC) cum service Branch at PNB House, of
plaintiff bank at Paharganj, New Delhi. Mr. Pramod Kumar Dubey is duly
authorised and empowered to sign, verify and institute the plaint,
applications, claims pleadings, affidavits, vakalatnama, execution and other
application etc.
3. The defendant bank is a body corporate with perpetual succession,
constituted under the Companies Act, 1956 and a banking company within
the meaning of Banking Regulation Act, 1949 having its registered office
and corporate office at Chander Mukhi, Nariman Point Mumbai – 400021
and service centre at B-1/29, Community Centre, Near Super Bazar,
CS DJ NO.:- 279/2023 Page 3 of 53
Punjab National Bank Vs. Central Bank of IndiaJanakpuri, New Delhi.
4. It is stated the the plaintiff bank processed the payment of following
five cheques, totally amounting to Rs. 4,75,900/- on the strength of
truncated image transmitted by the defendant bank (service branch) through
Cheques Truncation System (CTS) of clearing of cheques, by debiting
account no. 1913002100019447 of its customer M/s GIGL CA
compensation AC MBPL Section 7 Haryana which has been maintaining its
bank account in the Plaintiff’s branch office at sector-16, Gandhi Nagar.
Gujarat. The details of the cheques are as follows:
S.No. Cheque No CTS ClearingAmount in Rs. In Favour of
Date
1. HJE 455883 16.01.2021 96,500/- Rohit Kumar
2. HJE 455884 15.01.2021 96,400/- Rohit Kumar
3. HJE 455913 19.01.2021 96,000/- Rohit Kumar
4. HJE 455920 19.01.2021 95,000/- Rohit Kumar
5. HJE 455922 19.01.2021 92,000/- Saurabh Goel
CS DJ NO.:- 279/2023 Page 4 of 53
Punjab National Bank Vs. Central Bank of India
5. It is stated that the Plaintiff Bank processed the payment of following
five cheques total amounting to Rs.4,75,900 (Rupees Four Lacs Seventy
Five Thousand Nine Hundred Only) on the strength of truncated image
transmitted by Defendant bank (Service Branch) through Cheque
Truncation System of clearing of cheques, by debiting account No.
1913002100019447 of its customer M/s GIGL CA compensation AC
MBPL Section 7 Haryana which has been maintaining its bank account in
branch office at sector 16, Gandhi Nagar, Gujarat.
6. It is stated that the said cheques were purported to be drawn in
favour of above named account holders who have been maintaining their
accounts with Defendant Bank. However, later on a complaint was
received from the above-said customer M/s GIGL CA Compensation AC
MBPL Section 7 through email dated 20.01.2021 & letter dated 04.02.2021
at Sector 16, Gandhi Nagar Branch of Plaintiff Bank at Gujarat, informing
about the fraudulent encashment from their account since unissued and
undated cheques meant for compensation to the farmers, are still in its
CS DJ NO.:- 279/2023 Page 5 of 53
Punjab National Bank Vs. Central Bank of Indiacustody and possession. The plaintiff bank also annexed the Original
cheques along with the plaint which were in the custody of GIGL.
7. It is further stated that upon receiving the complaint from their
Gandhi Nagar Branch, Gujarat, the Plaintiff Bank immediately informed
their Fraud risk Management committee for further course of action and the
plaintiff bank also informed the Defendant Bank vide e-mail and through
letter dated 14.06.2021 about the above said unauthorized withdrawals in
respect of above-mentioned cheques and the Defendant bank was requested
to refund the amount of Rs.4,75,900 (Rupees Four Lacs Seventy Five
Thousand Nine Hundred Only), which was illegally and unauthorisedly
being debited from the account of their customer M/s GIGL CA
Compensation AC MBPL in favour of the account holders of the Defendant
Bank. It is stated that the Plaintiff Bank further asked the Defendant Bank
to provide the necessary details of the account holders, Disputed Cheques
in their possession on the basis of which amount was collected in order to
crystallize the nature of fraud by plaintiff bank’s technical committee,
CCTV footage, to advise the balance in their customers’ account after
CS DJ NO.:- 279/2023 Page 6 of 53
Punjab National Bank Vs. Central Bank of Indiafreezing the same and also to apprise the status of KYC Compliance
pertaining to their abovementioned customers.
8. As per the plaintiff bank, the Defendant Bank, despite repeated
follow ups by the Plaintiff Bank vide numerous letters never refunded the
amount of Rs.4,75,900 (Rupees Four Lacs Seventy Five Thousand Nine
Hundred Only), which was wrongly debited from the account of M/s GIGL
CA Compensation-AC MBPL, therefore, it is crystal clear that the above
account holders of Defendant bank namely Mr. Rohit Kumar and Mr.
Saurabh Goel, had played fraud with the Plaintiff Bank by
manufacturing/replicating/cloning the above-mentioned cheques and had
caused wrongful loss to the tune of Rs.4,75,900 (Rupees Four Lacs Seventy
Five Thousand Nine Hundred Only), to the Plaintiff Bank.
9. It is further stated that the Plaintiff Bank has, time and again, taken
up the matter with the Defendant Bank, despite repeated requests on
various occasions by the Plaintiff Bank, the Defendant bank never cared to
remit back the amount of Rs.4,75,900 (Rupees Four Lacs Seventy Five
CS DJ NO.:- 279/2023 Page 7 of 53
Punjab National Bank Vs. Central Bank of IndiaThousand Nine Hundred Only) and the Defendant Bank dealing with the
opening of account of their customers for the collection of cheques and its
payment, did not care to be cautious and dealt with the whole affair as a
routine matter.
10. It is submitted that the cheques presented by Defendant Bank were
forged ones, right from cheques’ proforma, signature, cheque number
everything was forged, therefore there is no mandate for Plaintiff Bank’s
account holder to pay the amount; in fact, those were not cheques in law
but were forged instruments and the payment was collected by Defendant
Bank on the basis of fake instruments.
11. It is stated that since the payment processing was done on the basis
of images, the onus of due diligence shifts to the presenting Bank that
instrument deposited is genuine one and is being collected for a bonafide
customer of the bank, as provided under explanation II to section 131 of
Negotiable Instrument Act.
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Punjab National Bank Vs. Central Bank of India
Explanation II “it shall be the duty of the banker who receives
payment based on an electronic image of a truncated cheque held with him,
to verify the prima facie genuineness of the cheque to be truncated and any
fraud, forgery or tampering apparent on the face of the instrument that can
be verified with due diligence and ordinary care.”
12. It is also stated that the Defendant bank which collected the payment
on behalf of their account holders must have exercised due diligence as per
the conditions laid down in the amended Negotiable Instrument Act. That
the Defendant bank utterly failed to enforce KYC (Know Your Customer)
norms in letter and spirit. That the defendant Bank also failed to observe all
precautions which a prudent banker does under normal circumstance, e.g.,
to check the apparent tenor of the instrument, physical feel of the
instrument, any tampering visible to the naked eye with reasonable care,
etc.
13. It is submitted that the Defendant Bank instead of co-operating and
resolving the matter failed to even reply to the numerous letters written by
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Punjab National Bank Vs. Central Bank of India
Plaintiff Bank and the Plaintiff Bank besides requesting to hand over the
disputed cheques also requested to Debit freeze the account of their
customers & advise the plaintiff Bank about the available balance in their
accounts. That the attitude of defendant bank shows that they have no
intention to pay back the amount which was wrongly and by mistake being
debited from the account of M/s GIGL CA Compensation AC MBPL due
to fraud being played by cloning the instrument and forging the drawer’s
signatures. It is stated that the documents presented by Defendant bank
were in cheque form which carries false representation that these were
valid cheques duly signed by the drawer and the said misrepresentation
appeared on the face of documents which were purported to be cheques.
Therefore, the Plaintiff Bank was being deceived and could not detect fraud
being played by forgery of drawer’s signature. The plaintiff bank has also
annexed the its technical committee report dated 07.09.2021 of above-
mentioned five cheques.
14. It is stated that the Plaintiff Bank issued a Legal Notice(s) dated
14.09.2021 to the Defendant bank, thereby calling upon to the Defendant
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Punjab National Bank Vs. Central Bank of India
Bank to remit the aforesaid amount of Rs.4,75,900 (Rupees Four Lacs
Seventy Five Thousand Nine Hundred Only), together with interest at the
rate of 18% and other consequential/incidental charges within 15 days from
the date of receipt of the said notice. That the Legal Notice had duly been
served upon the Defendant Bank, but the Defendant Bank did not release
the said amount in favour of Plaintiff bank.
15. The plaintiff bank submits that it appears that the Defendant Bank
has allowed the account holders to operate their aforesaid account with the
Defendant Bank without KYC compliance and since the account holders
have forged and fabricated the aforesaid cheques and got collected the
amount of the said cheques in their respective accounts with the Defendant
Bank illegally and unauthorizedly, hence the Defendant Bank/collecting
bank is liable to refund an amount of Rs.6,03,578 (Rupees Six lacs Three
thousand Five hundred seventy eight only) which is inclusive of interest of
Rs. 1,27,678 (One lakh twenty seven thousand six hundred seventy eight
only) for the period from 19.01.2021 to 30.11.2022 charged @14.35% p.a
in respect of collecting the amount of Rs.4,75,900 (Rupees Four Lacs
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Punjab National Bank Vs. Central Bank of India
Seventy Five Thousand Nine Hundred Only) on the basis of forged and
fabricated cheques. It is stated that the Defendant bank is further liable to
pay the pendente lite & future interest at the rate of 14.35% p.a. with effect
from 1st December, 2022 till the repayment of the said entire amount to the
Plaintiff Bank.
16. It is stated that on receipt of the Technical Committee Report, the
competent authority of the plaintiff bank sanctioned the settlement of the
customer’s account and an amount of Rs.4,75,900 (Rupees Four Lacs
Seventy Five Thousand Nine Hundred Only) inter alia other, was refunded
to the customer’s account on 30.09.2022. That the value of the present suit
for the purposes of court fee and jurisdiction is Rs.6,03,578 (Rupees six
lacs three thousand five hundred seventy eight only) on which amount the
prescribed ad-valorem court fee is also affixed.
17. Hence, it is prayed that this Court may pass a Decree in favour of the
Plaintiff Bank and against the Defendant bank, for recovery of Rs.6,03,578
(Rupees six lacs three thousand five hundred seventy eight only) along with
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Punjab National Bank Vs. Central Bank of India
pendente-lite and future interest on the said amount at the monthly
compounding rate of 14.35% per annum till realization thereof. Such other
or further order as this Hon’ble Court may deem just and proper in the facts
and circumstances of the present case may also kindly be passed in favour
of the Plaintiff Bank and against the Defendants. Costs of the present suit
may also be awarded to the Plaintiff Bank, and against the Defendants.
DEFENDANT’S VERSION AS PER THE WRITTEN STATEMENT :-
18. In its written statement, the defendant bank stated that it is a body
corporate constituted under the Banking Companies (Acquisition &
Transfer of undertaking) Act 1970, having its central office at
Chandermukhi, Nariman Point, Mumbai-400021 and branch office at SSB
Branch, Central Bank of India, Janakpuri, Delhi.
19. That Mr. Gyanender Prakash Bhagat holds General Power of
Attorney dated 10.04.2012 in his favour from the Bank which is valid and
hence he is fully authorized and empowered by the defendant bank to sign,
verify and institute, sign pleadings, file documents, as may be just
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Punjab National Bank Vs. Central Bank of India
necessary in the interest of the defendant bank and to do each and every co-
related acts on behalf of the defendant bank as he deem fit and proper in the
interest of the defendant bank in connection with the present case.
20. In the preliminary objections, it is stated that the present suit as
framed by the plaintiff against the defendant is not maintainable and there
is no cause of action in favour of the plaintiff and against the defendant,
therefore, the present suit is liable to be rejected u/o 7 rule 11 CPC. The
suit is also stated to be bad for non-joinder and misjoinder of parties. It is
further stated that it is the case of the plaintiff bank as pleaded by it in para
9 of the suit “that one Mr. Rohit Kumar and Mr. Saurabh Goel had played
fraud with the plaintiff bank”. It is further submitted that the plaintiff has
filed the present suit seeking recovery of money cheated allegedly by the
above-mentioned persons, however, interestingly, the plaintiff has failed to
make them party to the present suit who are the principal and necessary
party to the suit therefore the present suit is liable to be dismissed for non-
joinder and misjoinder of parties.
CS DJ NO.:- 279/2023 Page 14 of 53
Punjab National Bank Vs. Central Bank of India
21. It is stated that the suit filed by the plaintiff is without any cause of
action as it is the case of the plaintiff that the payment against the alleged
cheques were made after its due verification and the defendant bank as per
banking protocol defined by RBI, truncated the image of the cheque to the
plaintiff bank (which is the established practice in the banking sector), who
on due verification cleared the cheque. Therefore, defendant bank is not
liable for any loss caused to the plaintiff bank, hence the suit is liable to be
dismissed on this ground alone.
22. It is also submitted that by filing the present suit under reply, the
plaintiff is maligning the reputation of the defendant bank and falsely
accusing it of wrongdoing which perhaps is on the part of the officials of
the plaintiff bank. It is also stated that it is the officials of the plaintiff bank
who did not act prudently and now the plaintiff bank is trying to shift the
blame of its wrongdoing on the plaintiff bank and hence, the suit of the
plaintiff is liable to be dismissed on this ground alone. It is stated that the
defendant has exercised due caution and care and has acted as per the
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Punjab National Bank Vs. Central Bank of India
banking practice/protocol and truncated the image of the cheque to the
plaintiff bank since the cheques belonged to the customer of the plaintiff
bank. That the plaintiff bank on its hand should have verified from its
customer before releasing the payment against the alleged cheques. It is
stated that the plaintiff has admitted its negligence/ mistake whereby it
settled the claim of its customer and now in order to defame and arm twist
the defendant bank, a false and frivolous litigation has been initiated and
therefore, the suit of the plaintiff is liable to be dismissed on this ground
too.
23. It is stated that the perusal of the plaint strongly suggests that there
was a leak in the management of M/s GIGL CA, the customer of the
plaintiff bank and the said company failed to identify the said leak which
resulted in the alleged cheque transaction. However, it is stated that the
complicity of the officials of the plaintiff bank cannot be ruled out. That the
plaintiff bank instead of fixing accountability of its officials shifting the
entire blame on the defendant bank in order to save its skin.
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Punjab National Bank Vs. Central Bank of India
24. It is also stated that the plaintiff bank did not exercise due care while
processing the cheques and now in order to save itself, is shifting all the
blame on the defendant bank. That the perusal of the plaint along with
documents also suggest that one more account of the same customer M/s
GIGL CA bearing account no. 1913002100019447 maintained with the
plaintiff bank faced similar issue in the past as faced in the present account
no. 1913002100019447, however the plaintiff bank did not exercise due
care while processing the cheques of its customer. It is stated that the same
also shows the leak in the company of its customer or at the level of the
plaintiff bank. It is stated that the customer of the plaintiff bank was
negligent in securing/ safeguarding its cheque books. Therefore, the suit
filed by the plaintiff is nothing but an attempt to arm twist the defendant
bank and the same be dismissed on this ground alone.
25. The defendant bank states that the perusal of the plaint with
documents shows that to verify the genuineness of the alleged cheques, the
plaintiff bank constituted a technical committee and that technical
committee scrutinized the alleged cheques in detail and on various
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Punjab National Bank Vs. Central Bank of India
parameters and then came to a conclusion that the said cheques were not
genuine. That the same rather clearly demonstrates that it is impossible for
any bank official to differentiate between the fake and real cheque in
normal course. It is also submitted that as per the provisions of the Section
10 & 31 of the Negotiable Instrument Act, the liability of the banks is
limited/ restricted to the extent of visual defect apparent on the cheque at
the time of clearing the same and nothing beyond these verifications,
therefore on the basis of satisfaction of the bank official regarding the
genuineness of the presented cheques after taking into consideration the
visual authenticity connected with the cheques, the bank is obliged/ bound
to encash/ honor the presented cheque in favour of the person as
represented in the cheques.
26. It is also pointed out by the defendant bank that the working speed of
the plaintiff bank can be gauged from the fact that allegedly the said
cheques were used in the month of January 2021, but the plaintiff bank
informed the defendant bank of the same for the first time vide letter dated
14.06.2021 which is after good five months of alleged fraud. Therefore, no
fraudster would wait for five months to withdraw the money earned
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Punjab National Bank Vs. Central Bank of India
through fraud in his/her account. The duty is casted upon the plaintiff bank
to inform the defendant bank immediately. It is submitted that even the
emails annexed with the plaint suggest that the customer of the plaintiff
bank informed it on 20.01.2021 about fraudulent transaction however it is
the plaintiff bank who grossly failed to take corrective step least it can do is
to inform the defendant bank at the earliest. However, merely blaming the
defendant bank won’t absolve the plaintiff bank of its wrongdoing. Hence,
it is submitted that the plaintiff has concealed the material facts from this
Court and has filed the present suit by concocting a false story.
27. It is also stated that the present suit filed by the plaintiff is based
upon a commercial dispute and is governed by the Commercial Courts,
Commercial Division and Commercial Appellate Division of High Court
Act, 2015, therefore the present ordinary suit is not maintainable. It is
stated that the plaintiff and the defendant are bank institutions and are
squarely covered under the above-mentioned definition of the commercial
dispute therefore the filing of ordinary suit is bad in law and beyond the
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Punjab National Bank Vs. Central Bank of India
jurisdiction of this Court and warrants an outright dismissal with exemplary
cost in favour of the defendant and against the plaintiff.
28. That the present suit as filed by the plaintiff is deficient in terms of
Order 6 Rule 15 (A) of Code of Civil Procedure as amended by the
Commercial Courts, Commercial Division and Commercial Appellate
Division of High Court Act, 2015.
29. It is submitted that as per section 27 of CPC read with order 5 rule 1
of CPC, the Commercial Court could have issued summon to the defendant
only when the suit was duly instituted and that the suit duly instituted has
to comply with the requirement of Section 26(2) CPC as amended by the
Act of 2015 which provides the form and the manner of an affidavit
required under Order 6 Rule 15 A that corresponding provisions of section
26 CPC is Order 4 Rule 1 CPC which deals in institution of the suit and
start with the heading “Suit to be commenced by plaint”. It is also stated
that further, Order 4 Rule 1(3) CPC specifically provides that the plaint
shall not be deemed to be duly instituted unless it complies with
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Punjab National Bank Vs. Central Bank of India
requirement specified in sub-rule 1 and 2. That sub-rule 2 provides that
every plaint shall comply with the rules contained in Order 6 and 7 CPC.
That in order to a suit to be “duly instituted” the affidavit in the form and
manner provided under Order 6 Rule 15 A of Commercial Court Act is
mandatory requirement to be complied with as per the condition inserted in
clause 2 of section 26 CPC by adding proviso under the Act of 2015.
30. The defendant bank states that the heading of Rule 15 (A) of Order 6
states verification of pleadings in commercial disputes and the Rule 1 of
Rule 15 (A) start with “Non-obstante Clause” by providing that every
pleadings in the commercial disputes shall be verified by an affidavit in the
manner and the form prescribed in the appendix to the schedule which in
the present case, plaint admittedly did not contain the prescribed affidavit,
therefore, the said suit cannot be said to be “duly instituted”, therefore the
said suit is liable to be dismissed.
31. It is also submitted that Section 12 A of Commercial Court Act
provides pre-institution mediation and settlement and the same provides
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Punjab National Bank Vs. Central Bank of India
that the suit under the Act cannot be executed without exhausting the
remedy of pre-institution mediation in the present case and the said
mandatory provision has not been complied with. Therefore, the suit could
not have been instituted properly, therefore, the present suit is liable to be
dismissed. It is also stated that no cogent reason has been given by the
plaintiff as to why pre-institution mediation has not been followed. It is
submitted that the present suit is bad in law and the same has been filed to
harass, defame, and extort money from the defendant and this Court has no
territorial jurisdiction to hear and decide the present suit as there is no
cause of action which has been arisen within the territorial jurisdiction of
this Hon’ble Court. The defendant bank prays that the suit being an abuse
of process of Law should be dismissed along with costs upon the plaintiff
bank.
ISSUES FRAMED
32. Vide order dated 22.02.2024 the following issues were framed:
1. Whether the plaintiff is entitled to a decree of recovery of
Rs. 6,03,578/- as prayed in the plaint? (OPP)
2. Whether the plaintiff is entitled to costs of the suit? (OPP)
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Punjab National Bank Vs. Central Bank of India
3. Whether the suit of the plaintiff is without any cause of action?
(OPD)
4. Whether the present suit is liable to be dismissed for the purpose
of non-joinder and mis-joinder of parties? (OPD)
5. Whether the plaintiff has suppressed material facts? (OPD)
6. Whether the suit of the plaintiff belongs to commercial court and
does not fall under the jurisdiction of this court? (OPD)
7. Whether the suit of the plaintiff is not maintainable in the
present form? (OPD)
8. Relief.
It is apparent that the issues no.4 and 6 contain some inadvertent
typographical errors, which are corrected below as follows:
4. Whether the present suit is liable to be dismissed for non-joinder
and mis-joinder of parties? (OPD)
6. Whether the suit of the plaintiff should have been instituted before
the commercial courts and does not fall under the jurisdiction of this
court? (OPD)EVIDENCE LED BY THE PLAINTIFF
33. Thereafter the matter was fixed for plaintiff’s evidence. In order to
prove his case, plaintiff bank examined Sh. Pramod Kumar Dubey, it’s Sr.
Manager posted at CDPC cum Service Branch, Paharganj as PW-1, who
tendered his evidence by way of affidavit as Ex. PW-1/A, in which he
reiterated the contents of the plaint, which are not being repeated herein for
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Punjab National Bank Vs. Central Bank of India
the sake of brevity. He relied on the following documents in support of his
case:
1. Copy of GPA in his favour as Ex.PW1/1 (OSR).
2. Original five cheques as Ex.PW1/2 (colly).
3. The disputed cheques as Ex.PW1/3 (colly).
4. Office copy of letter dated 14.6.2021 as Ex.PW1/4.
5. Copy of plaintiff’s bank technical committee report as Mark
B.
6. Office copy of legal notice along-with postal receipts as
Ex.PW1/5 (colly).
7. True copy of statement of account along-with certificate u/s
65B of the Indian Evidence Act, 1872 as Ex.PW1/6 (colly).
34. PW-1 was then cross examined by the Ld. Counsel for defendant on
31.07.2025, during which he admitted the suggestion that Rohit Kumar and
Saurabh Goel have played a fraud on the plaintiff bank and they have not
been made parties in the present suit. He stated that the five fraudulent
cheques Ex.PW1/3 (colly) in question belong to plaintiff bank and the
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Punjab National Bank Vs. Central Bank of India
drawer of the said cheques is M/s GIGL who is the account holder of the
plaintiff bank. He admitted the suggestion that fraudulent amount of
Rs.4,75,900/- has already been refunded to account holder M/s GIGL. He
admitted the suggestion that the said account holder M/s. GIGL has
suffered fraudulent debit of Rs.33,74,700/- through eight different banks
including Central Bank of India. He admitted the suggestion that M/s.
GIGL, account holder of plaintiff had already informed the plaintiff bank
about the present fraudulent transactions vide email dated 20.1.2021 and in
respect of several other fraudulent transactions in the past vide due
communications dated 04.1.2021. He admitted the suggestion that M/s.
GIGL was maintaining two account no.1913002100019456 and
1913002100019447 and several fraudulent transactions were reported in
the past in account no. 1913002100019456 and later on in account
no.1913002100019447.
35. Upon being asked that what remedial action had been taken at their
end, since several fraudulent transactions were reported in the account of
M/s GIGL, to which the witness stated that they had informed their higher
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Punjab National Bank Vs. Central Bank of India
authorities and also advised the customer M/s GIGL to be vigilant. He
denied the suggestion that plaintiff bank had failed to put in place adequate
checks and securities which caused losses to the plaintiff bank and to its
customer and for which, defendant cannot be held liable.
36. Thereafter, the attention of the witness was drawn to letter dated
04.2.2021, Ex.PW1/DX1, wherein, the details of cheques was mentioned
as Annexure 1. The witness admitted that the said Annexure I was not part
of the record. He denied the suggestion that the plaintiff bank has filed
incomplete documents in the court.
37. He stated that the plaintiff bank came to know of the fraudulent
transactions on 21.1.2021 and vide letter dated 14.6.2021, sent vide
registered speed post on 16.6.2021, the defendant bank was informed in
writing for the first time about the fraudulent transactions which led to the
filing of the present case and volunteered to state that the Central Bank of
India was also immediately informed telephonically when the incident
came to knowledge of plaintiff. He denied the suggestion that intimation to
the defendant bank being given after five months of the alleged transaction
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Punjab National Bank Vs. Central Bank of India
shows that the plaintiff bank was not serious and was slow and had never
addressed the concerns of its customers properly.
38. The witness was then asked as to what the procedure followed by the
plaintiff bank on receipt of the truncated images of cheques, to which he
stated that on receipt of truncated images of cheques, the bank verifies from
its records whether the cheque is drawn in order or not, like name of payee,
date, amount in words and figures and signatures and name of the drawer.
39. He was also asked that while paying the cheque, do they also verify
the 6 digit cheque serial number, to which he answered that the system is
such that if serial number is incorrect, it is automatically rejected.
40. He admitted the suggestion that a police complaint in respect of
alleged fraudulent transaction was made after nearly 5 months of the said
fraudulent transaction. He admitted the suggestion that date of police
complaint is 13.7.2021, copy of the same is already on record and was
exhibited as Ex.PW1/DX2. He admitted the suggestion that Ex.PW1/DX2
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Punjab National Bank Vs. Central Bank of India
is in respect of total amount Rs.33,74,700/- which has been cheated by
several accused through eight banks. He denied the suggestion that filing of
police complaint after five months of the alleged fraudulent transactions
shows that the plaintiff bank was never serious to take up the matter with
the concerned authorities or never really cared to recover the alleged
fraudulent amount. He also admitted that in the police complaint dated
13.7.2021, Ex. PW-1/DX2, the plaintiff bank had specifically stated that
some customers of the collecting bank had cheated the plaintiff bank and
no allegations have been raised against the defendant/collecting bank.
41. PW-1 also admitted that the name of the drawer on the alleged
fraudulent cheques is mentioned as “GIGL CA Compensation AC MBPL
Section 6B Haryana”, whereas on the original cheques, the name of the
drawer has been mentioned as “GIGL CA Compensation AC MBPL
Section 7 Haryana”. He denied the suggestion that due to error and laxity
on the part of the plaintiff bank, the said mismatch in the name of the
drawer had gone undetected, which led to the clearance of the alleged
cheques for which the defendant bank cannot be held liable. He denied the
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Punjab National Bank Vs. Central Bank of India
suggestion that it is only the plaintiff bank who had all the resources at its
disposal to verify the contents/veracity of the cheques, however, it grossly
fails in its duty and it is falsely accusing the defendant bank. He admitted
the suggestion that even in his affidavit Ex.PW1/A, he has specifically
stated that fraud has been played upon the plaintiff bank by Rohit kumar
and Saurabh Goel and not the defendant bank.
42. He further stated that he was not in a position to say if M/s GIGL
took due care of the cheque book issued to it by plaintiff bank nor he could
tell if M/s GIGL reported to the plaintiff bank about loss of any cheque
book or any cheque leaf. He denied the suggestion that the liability of the
defendant bank/presenting bank is limited to the visual defect only as it has
no access to the contents of the cheque which is only available with the
paying bank.
43. He denied the suggestion that the present case is governed by the
provisions of the Commercial Courts Act and the present suit in its form is
not maintainable and is bad in law. He further denied the suggestion that
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the necessary parties to the case have not been joined, hence, the suit is bad
for non-joinder of necessary parties and denied that there is no cause of
action against the defendant. Thereafter, PW-1 was discharged as a witness
and the plaintiff bank also closed it’s evidence on 31.07.2025 itself and the
matter was listed for the defendant’s evidence.
EVIDENCE LED BY THE DEFENDANT
44. In order to prove it’s case, the defendant bank examined Sh.
Gyanender Prakash Bhagat, its AGM with SSB Branch, Janakpuri branch
as DW-1 on the strength of a power of attorney, Ex. DW-1/1 (OSR), who
tendered his evidence by way of affidavit as Ex.DWI/A. In which he stated
that the defendant bank had sent the truncated image of the cheque after
duly verifying the same to the plaintiff bank and hence it did not commit
any fault or fail to exercise due care or caution while handling the cheque
instruments in question and is not liable to pay any amount to the
defendant.
45. He deposed that the defendant bank had no prior intimation from the
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Punjab National Bank Vs. Central Bank of India
plaintiff bank in respect of any fraudulent transaction in the account of it’s
customer M/s GIGL CA as well. He further deposed that the letter dated
04.02.2021 written by M/s GIGL CA, the plaintiff bank’s customer to the
plaintiff bank itself shows the said customer was facing fraudulent
transactions using the same modus operandi of fake cheques from another
account no. 1913002100019456 which was maintained with the plaintiff
bank and still did not put in place necessary safeguards with respect to the
present bank account of the plaintiff’s customer, i.e. account no.
1913002100019447 and failed to exercise due care and caution while
processing the cheques of it’s customer.
46. DW-1 further deposed that the plaintiff bank’s own documents
suggest that the plaintiff bank sat over the alleged fraudulent transactions
and did not take any prompt action on the same. The plaintiff bank has
itself pleaded that it came to know of the fraudulent transactions on
21.01.2021, whereas, it informed the defendant bank about the same only
on 14.06.2021, i.e. after almost five months. He deposed that even then, the
defendant bank immediately froze the said accounts of it’s customers, but
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Punjab National Bank Vs. Central Bank of India
to no avail as the money had already been withdrawn from the said
account.
47. He further deposed that the plaint itself admits that a total amount of
Rs. 33,74,700/- has been fraudulently withdrawn using fake cheques from
various banks, including the plaintiff bank, and has only singled out the
defendant bank without any cause. He further deposed that the nature of the
fraud itself shows that the same could not have been committed without the
complicity of some officials and employees of the plaintiff’s customer as
well and points to negligence on it’s part also.
48. He deposed that the liability of the defendant bank under sections 10
and 131 of the Negotiable Instruments Act, 1881 is limited to inspecting the
visual defects if any apparent on the instrument.
49. He further deposed that the plaintiff itself admits that it constituted a
technical committee in the aftermath of the fraud, which came to the
conclusion that the cheques in question were forged only after scrutinizing
the same in detail, hence it was impossible in the normal course of business
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Punjab National Bank Vs. Central Bank of India
for the officials of the defendant bank to have verified the same by way of
visual appearance only. Further the report of the technical committee of the
plaintiff bank itself notes that chequebook for the cheque series 455871 to
455970 was printed for the Account of ‘GIGL Compensation AC MBPL
Section 7 Haryana’ bearing account no. 1913002100019447, however the
name of the account printed on the said cheques was ‘GIGL Compensation
AC MBPL Section 6B Haryana’ and still the plaintiff bank failed to verify
the same when the truncated image of the cheque was passed on to it.
Hence, the plaintiff bank itself has displayed gross negligence while
verifying and approving the payments against the said cheques.
50. The plaintiff bank has also not disclosed as to what additional steps it
took to secure the account of it’s customer who was repeatedly facing
fraudulent transactions. He also deposed that admittedly the fraud in
question was committed by the individuals, i.e. Rohit Kumar and Saurabh
Goel, who despite being necessary parties, had not been impleaded in the
present suit. He also deposed that the present suit was a commercial suit
between the parties.
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Punjab National Bank Vs. Central Bank of India
51. PW-1 was cross-examined by the ld. Counsel for the plaintiff on
20.11.2025 during which he stated that he has been working with the
defendant bank since 1991. He stated that the SSB in the affidavit stands
for Service Support Branch and was not personally involved in receiving,
processing and examining the cheques and volunteered to state that he is
posted in SSB branch, whose job it is to receive the truncated image of the
cheques from the collecting branch and thereafter, forward it to the NPCI
for clearance.
52. He stated that he did not know whether the cheque was duly verified
by the concerned official at the collecting branch. He stated that the
disputed cheques were presented for collection at Kaushambhi, Ghaziabad;
Naya Bans, Ghaziabad; Shahadara; Karol Bagh and Gokulpuri. He stated
that he was not aware as to who were the officers who had collected and
processed the disputed cheques. He stated that he can identify the features
of different cheques like watermark, microlettering etc, and stated that the
genuineness of the cheque can be identified by naked eyes.
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Punjab National Bank Vs. Central Bank of India
53. He further stated that generally, on an average, 20-25 cheques are
being processed in the branches from which the disputed cheques were
processed. He stated that he could bring the officers in question who had
processed the cheques. He denied the suggestion that he has no personal
knowledge of the present case as he has not dealt with the cheque in
question personally. He denied the suggestion that he was deposing falsely.
54. Thereafter, vide separate statement of Sh. Ankur Aggarwal, Ld.
counsel for the defendant, evidence was closed on 20.11.2025 and the
matter was listed for final arguments.
ARGUMENTS OF THE PARTIES
55. Ms. Rama Arora, ld. Counsel for the plaintiff has argued that the
plaintiff bank has duly proved that the defendant bank had not displayed
reasonable care in handling the cheques in question and had also not taken
due care in opening the accounts of it’s account holders by verifying the
KYC documents, owing to which the plaintiff bank had wrongly debited
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Punjab National Bank Vs. Central Bank of India
the account of it’s customer on the basis of the CTS. Hence, the suit of the
plaintiff bank be decreed as prayed for.
56. On the other hand, Sh. Ankur Aggarwal, ld. Counsel for the
defendant has argued that the plaintiff bank has failed to implead the
necessary parties, i.e. the account holders of the defendant bank Rohit
Kumar and Saurabh Goel. Further, that the present dispute is a ‘commercial
dispute’ under section 2 (1) (c) (i) of the Commercial Courts Act, 2015. He
has also submitted that the plaintiff bank has failed to discharge it’s duty
and responsibility of care since, as per the disputed cheques in question,
Ex.PW1/3 (colly), the same have been issued for account no.
‘1913002100019447’ with respect to account of ‘GIGL CA
COMPENSATION AC MBPL SECTION 6B HARYANA’, whereas the
plaintiff bank has displayed gross negligence by debiting the account of
‘GIGL CA COMPENSATION AC MBPL SECTION 7 HARYANA’
instead. Hence, the present suit be dismissed as prayed for.
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Punjab National Bank Vs. Central Bank of India
ISSUE-WISE DECISION AND REASONS
Issue no.4
57. I shall first decide issue no.4, which is being reproduced below for
the sake of convenience:
4. Whether the present suit is liable to be dismissed for non-joinder
and mis-joinder of parties? (OPD)
58. After the 1976 amendment to the CPC, Order 1 rule 9 CPC reads as
follows:
9. Misjoinder and non-joinder.–No suit shall be defeated by reason of the
misjoinder or non-joinder of parties, and the Court may in every suit deal with
the matter in controversy so far as regards the rights and interests of the parties
actually before it:
[Provided that nothing in this rule shall apply to non-joinder of a necessary
party.]
(Emphasis supplied.)
59. Order 1 rule 13 CPC further provides that all objections on the
ground of non-joinder or misjoinder of parties shall be taken at the earliest
possible opportunity and, in all cases where issues are settled, at or before
such settlement, unless the ground of objection has subsequently arisen,
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Punjab National Bank Vs. Central Bank of India
and any such objection not so taken shall be deemed to have been waived.
In the present case, it is not in dispute that the defendant bank has raised
the objection with respect to the non-impleadment of it’s account holders
Rohit Kumar and Sourabh Goel in it’s written statement itself, hence the
provisions of Order 1 rule 13 CPC are not attracted to the present case.
60. The Hon’ble Apex Court has held in the decision of Mumbai
International Airport Private Limited vs. Regency Convention Centre and
Hotels Private Limited, (2010) 7 SCC 417 that a ‘necessary party’ is a
person who ought to have been joined as a party and in whose absence no
effective decree could be passed at all by the court. If a ‘necessary party’ is
not impleaded, the suit itself is liable to be dismissed. A ‘proper party’ is a
party who, though not a necessary party, is a person whose presence would
enable the court to completely, effectively and adequately adjudicate upon
all matters in dispute in the suit, though he need not be a person in favour
of or against whom the decree is to be made. If a person is not found to be a
proper or necessary party, the court has no jurisdiction to implead him,
against the wishes of the plaintiff.
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Punjab National Bank Vs. Central Bank of India
61. The Hon’ble Supreme Court has further reiterated the twin-test as to
who is a ‘necessary party’ in the decision of Kasturi vs. Iyyamperumal,
(2005) 6 SCC 733, being that (i) there must be a right to some relief against
such party in respect of the controversies involved in the proceedings; and
(ii) no effective decree can be passed in the absence of such party.
62. In para no.9 of the present plaint, the plaintiff bank has itself
pleaded:
“9. That from the above facts it has become crystal clear that the above account
holders of Defendant bank namely Mr. Rohit Kumar and Mr. Saurabh Goel, had
played fraud with the Plaintiff Bank by manufacturing/replicating/cloning the
abovementioned cheques and had caused wrongful loss to the rune of Rs.
4,75,900 (Rupees Four Lacs Seventy Five Thousand Nine Hundred Only), to the
Plaintiff Bank.”
63. here is no allegation in the entire plaint by the plaintiff bank that the
defendant bank is jointly and severally liable along with it’s account
holders to be liable compensate the plaintiff bank for the entire value of the
fraud committed by it’s account holders. Hence, in such a case, the account
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Punjab National Bank Vs. Central Bank of India
holders in question, i.e. Rohit Kumar and Sourabh Goel were also
necessary parties who were required to be impleaded as there was a right to
relief against them and in their absence, no effective decree could be passed
in the matter.
64. Accordingly, the issue no.4 is decided against the plaintiff bank and
in favour of the defendant.
Issues no.6 and 7
65. I shall next decide issues no. 6 and 7, which are being reproduced
below for the sake of convenience:
6. Whether the suit of the plaintiff should have been instituted before
the commercial courts and does not fall under the jurisdiction of this
court? (OPD)
7. Whether the suit of the plaintiff is not maintainable in the
present form? (OPD)
66. Section 2(1)(c)(i) of the Commercial Courts Act, 2015 defines a
‘commercial dispute’ as a dispute arising out of:
(i) ordinary transactions of merchants, bankers, financiers and traders such as
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Punjab National Bank Vs. Central Bank of Indiathose relating to mercantile documents, including enforcement and interpretation
of such documents;
67. The Hon’ble High Court of Delhi has held in the decision of IHHR
Hospitality (Andhra Pvt. Ltd) vs. Seema Swami and Ors,
2022/DHC/004648, that if the nature of transaction and the recovery is
sought on the averments of embezzled amounts, the same cannot be termed
as a “business transaction” or having arisen “in the course of business” and
such a suit does not qualify as a commercial dispute as defined under
Section 2(i)(c) of the Act.
68. The Hon’ble High Court of Gujarat has also held in the decision of
Kantubhai @ Kantilal Ghelabhai Shah vs Harshadlal Amrutlal Shah ,
2024:GUJHC:6417 that where the dispute is essentially regarding a
fraudulent transaction, there is no element of a commercial transaction and
the said dispute does not qualify to be a ‘commercial dispute’ under the
69. Admittedly, in the present case, there is an element of fraud and
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Punjab National Bank Vs. Central Bank of India
embezzlement, which is involved in the present case and in view of the
decision of the Hon’ble High Court of Delhi quoted above, the same will
not qualify to be a commercial dispute. Accordingly, the issues no.6 and 7
are decided against the defendant.
Issues no. 1-3
70. I shall next decide issues no.1 – 3 together, being connected issues,
which are reproduced below for the sake of convenience:
1. Whether the plaintiff is entitled to a decree of recovery of
Rs. 6,03,578/- as prayed in the plaint? (OPP)
2. Whether the plaintiff is entitled to cost of the suit? (OPP)
3. Whether the suit of the plaintiff is without any cause of action?
(OPD)
71. Section 128 of the Negotiable Instruments Act, 1881 (NI Act)
provides for the duties of a paying bank as follows:
128. Payment in due course of crossed cheque.–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 entitled to the same rights, and be placed in the
same position in all respects, as they would respectively be entitled to and
placed in if the amount of the cheque had been paid to and received by the true
owner thereof.
(Emphasis supplied)
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72. Section 131 of the NI Act provides the duties of a collection bank as
follows:
131. Non-liability of banker receiving payment of cheque.–A banker who has
in good faith and without negligence received payment for a customer of a
cheque crossed generally or specially to himself shall not, in case the title to the
cheque proves defective, incur any liability to the true owner of the cheque by
reason only of having received such payment.
Explanation I.– A banker receives payment of a crossed cheque for a customer
within the meaning of this section notwithstanding that he credits his customer’s
account with the amount of the cheque before receiving payment thereof.
Explanation II.–It shall be the duty of the banker who receives payment based
on an electronic image of a truncated cheque held with him, to verify the prima
facie genuineness of the cheque to be truncated and any fraud, forgery or
tampering apparent on the face of the instrument that can be verified with due
diligence and ordinary care.
73. As per section 131 of the NI Act, the receiving bank, who has in
‘good faith and without negligence’ received payment on behalf of a
customer of a cheque, whose title proves defective, does not incur any
liability to the true owner of the cheque only by reason of having received
such payment. As per Explanation II, the receiving bank is also required to
verify prima facie, the genuineness of the cheque and any fraud, forgery or
tampering apparent on the face of the instrument, which can be verified
with due diligence and ordinary care.
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74. Section 10 of the NI Act provides as follows:
10. “Payment in due course”.–“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
payment of the amount therein mentioned.
75. The Hon’ble Apex Court has exhaustively discussed ‘good faith’ and
duties of the collecting bank in the judgment of Kerala State Co-operative
Marketing Federation vs. State Bank of India, 2004 ALL SCR 50:
“4. Section 131 of the Negotiable Instruments Act reads as follows:
“131. Non-liability of banker receiving payment of cheque.- A banker who has
in good faith and without negligence received payment for a customer of a
cheque crossed generally or specially to himself shall not, in case the title to the
cheque proves defective, incur any liability to the true owner of the cheque by
reason only of having received such payment.”
5. It is thus to be seen that a banker, who encashes a cheque, in respect of which
his client had no title, would become liable in conversion or for money had and
received. However, Section 131 of the Negotiable Instruments Act protects the
banker, provided he has received payment in good faith and without negligence
of a cheque crossed generally or specially.
6. In the case of Indian Overseas Bank vs. Bank of Madura Ltd. reported in
(1992) Vol. 75 Company Cases 481, the receiving banker was held guilty of
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negligence and lack of good faith inasmuch as it had allowed the opening of an
account with a small amount and shortly thereafter, i.e. within 9 days allowed
withdrawal of a sum of Rs. 9,500/-. It was held that the opening of the account,
the presentation of the draft and withdrawal of the amount were part of one
integral scheme. The fact that the person who introduced the account holder had
not been examined in the suit was held against the Bank.
7. In the case of Syndicate Bank vs. United Commercial Bank reported in (1991)
70 Company Cases 748, it was held that the Appellant bank had to prove that it
had acted in good faith and without negligence. It was held that the fact that the
customer had just opened the account and had only one transaction with the
bank, namely the encashment of the cheque, showed that the bank had not acted
in good faith and without negligence.
8. In the case of Brahma vs. Chartered Bank reported in AIR 1956 Calcutta 399,
it has been held that the onus of proving “good faith” and “absence of
negligence” is on the banker claiming protection under Section 131 of the
Negotiable Instruments Act. It is held that in deciding whether a collecting
banker has or has not been negligent it becomes necessary to take into
consideration many factors such as the customer, the account and the
surrounding circumstances. It is held that if the cheque is of a large amount, then
the bank has to be more careful unless the customer was a customer of long
standing, good repute and with great personal credit and was one who regularly
deposited and withdrew cheques of large amounts.
9. The same principles are reiterated in the cases of Central Bank of India Ltd. v.
Gopinathan Nair reported in 1972 Kerala Law Times 518 and Indian Bank vs.
Catholic Syrian Bank Ltd. reported in AIR 1981 Madras 129.
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Punjab National Bank Vs. Central Bank of India
10. This Court has also considered this question in the case of Indian Overseas
Bank vs. Industrial Chain Concern reported in (1990) 1 SCC 484. In this case,
on the basis of evidence lead by the bank (evidence of the Manager and the
accountant of the bank) the bank was exonerated. However, principles which
governed such cases were noted from various decisions. The relevant portion
reads as follows:
“9. What is the standard of care to be taken by a bank in opening an account ? In
the Practice and Law of Banking by H. P. Sheldon, 11th edn., in chapter 5 at
page 64 it is said :
“Before opening an account for a customer who is not already known to him, a
banker should make proper preliminary inquiries. In particular, he should obtain
references from responsible persons with regard to the identity, integrity and
reliability of the proposed customer. If a banker does not act prudently and in
accordance with current banking practice when obtaining references concerning
a proposed customer, he may later have cause for regret.”
10. M. L. Tannan in Banking Law and Practice in India, 18th edn. at page 198
says :
“Before opening a new account, a banker should take certain precautions and
must ascertain by inquiring from the person wishing to open the account, if such
person is unknown to the banker, as to his profession or trade as well as the
nature of the account he proposes to open. By making necessary inquiries from
the references furnished by the new customer, the banker can easily verify such
information and judge whether or not the person wishing to open an account is a
desirable customer. It is necessary for a bank to inquire, from responsible
parties, given as references by the customer, as to the latter’s integrity and
respectability, an omission of which may result in serious consequences not onlyCS DJ NO.:- 279/2023 Page 46 of 53
Punjab National Bank Vs. Central Bank of Indiafor the banker concerned, but also for other bankers and the general public.”
11. One of the tests of deciding whether the bank was negligent, though not
always conclusive, is to see whether the Rules or instructions of the banks were
followed or not. We may accordingly consult those instructions. Ex. B-6
contains the general instructions regarding constituent accounts for bank. Mark
II deals with opening with opening of accounts. It says :
“Except at large branches where the sub-agent or accountant may be authorised
to open Current Accounts, no new Current Account shall be opened without the
authority of the agent manager who is solely responsible for all Current
Accounts being opened in the proper manner. A written application on the
appropriate from must be submitted and will be initialled by the agent at the top
left corner after he has satisfied himself of the respectability of the applicant(s).
It is important that every party must be introduced to the Bank by a respectable
person known to the Bank, who must normally call at the Bank and sign in the
column specially provided for the purpose in the account opening form. In all
cases his signature must be verified with the specimen lodged and attested. The
agent or accountant may introduce constituents to the Bank provided they are
known to him personally and in such cases he should sign the application from
at the appropriate place in his personal capacity. When the introduction of any
other member of the staff is accepted, the agent must invariably make
independent inquiry and record his findings on the account opening form for
future reference if the need arises …”
12. Mark IV deals with accounts of proprietary concerns. It says :
“An individual trading in the name of concern should fill in Form F.S. 5 and sign
it in his personal Name and also affix his signature on behalf of he concern as
proprietor in the space provided.”
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If the banker was negligent in following up the references given at opening of
account and subsequently cheques etc. are collected for the customer paid into
that account and those happened to be of someone else the Bank may be liable
for conversion, unless protected by law. In the instant case, Sethuraman having
been known to the Manager who gave the introduction, there was no violation of
any instruction or rules.
13. It was held in Commissioners of Taxation v. English, Scottish and Australian
Bank (1920 AC 683), that a negligence in collection is not a question of
negligence in opening an account, though the circumstances connected with the
opening of an account may shed light on the question whether there was
negligence in collecting a cheque.
14. In Ladbroke and Co. v. Todd ((1914) 30 TLR 433 : (1914) 111 LT 43 : 19
Com Cas 256), the plaintiff drew a cheque and sent it to the payee by post. The
letter was stolen and the thief took it to the defendant, a banker, and used it for
the purpose of opening an account for the purpose of which he forged the
payee’s endorsement. The defendant accepted believing him to be the payee. He
was not introduced to the bank and no references were obtained. The defendant
opened the account and the cheque was specially cleared at the request of the
thief, and he drew out the proceeds on the next day. On the discovery of the
fraud the plaintiff brought an action against the defendant for conversion. One of
the main questions raised was whether the account having been opened by
payment in all the cheques to be collected the defendant could be properly
regarded as having received payment for a customer. It was held that as account
was already opened when the cheque was collected, payment had been received
for a customer. The drawer thereupon sent another cheque to the real payee and
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Punjab National Bank Vs. Central Bank of India
took an assignment of his rights in the stolen cheque and, as holders of the
cheque or alternatively as assignees, brought an action against the bank to
recover the proceeds collected by the bank as money had and received to their
use. Evidence was given that it was the general practice of bankers to obtain a
satisfactory introduction or reference. It was held that the banker had acted in
good faith, but was guilty of negligence in not taking reasonable precautions to
safeguard the interests of the true owner of the cheque and that therefore he had
put himself outside the protection of Section 82 of the Bills of Exchange Act,
1882. Bailhache, J. also said that the banker would have been entitled to the
protection of the section as having received payment for a customer, but had lost
it owing to his want of due care. It was also held that the relation of banker and
customer began as soon as the first cheque was handed in to the banker for
collection, and not when it was paid.
15. In Turner v. London and Provincial Bank ((1903) 2 Legal Decisions
Affecting Bankers 33 : (1903) XXIV Journal of Institute of Bankers 220),
evidence was admitted as proof of negligence, that the customer had given a
reference on opening the account and that this was not followed up.”
11. The principles governing the liability of a collecting banker have also been
extracted in the impugned judgment. They read as follows:
“(1) As a general rule the collecting banker shall be exposed to his usual liability
under common law for conversion or for money had and received, as against the
‘true owner’ of a cheque or a draft, in the event the customer from whom he
collects the cheque or draft has not title or a defective title.
(2) The banker, however, may claim protection from such normal liability
provided he fulfils strictly the conditions laid down in S. 131 or S. 131A of the
Act and one of those conditions is that he must have received the payment inCS DJ NO.:- 279/2023 Page 49 of 53
Punjab National Bank Vs. Central Bank of Indiagood faith and without negligence.
(3) It is the banker seeking protection who has on his shoulders the onus of
proving that he acted in good faith and without negligence.
(4) The standard of care to be exercised by the collecting banker to escape the
charge of negligence depends upon the general practice of bankers which may
go on changing from time to time with the enormous spread of banking activities
and cases decided a few decades ago may not probably offer an unfailing
guidance in determining the question about negligence today.
(5) Negligence is a question of fact and what is relevant in determining the
liability of a collecting banker is not his negligence in opening the account of the
customer but negligence in the collection of the relevant cheque unless, of
course, the opening of the account and depositing of the cheque in question
therein from part and parcel of one scheme as where the account is opened with
the cheque in question or deposited therein so soon after the opening of the
account as to lead to an inference that the depositing the cheque and opening the
account are interconnected moves in a integrated plan.
(6) Negligence in opening the account such as failure to fulfill the procedure for
opening an account which is prescribed by the bank itself or opening an account
of an unknown person or non-existing person or with dubious introduction may
lead to a cogent, though not conclusive, proof of negligence particularly if the
cheque in question has been deposited in the account soon after the opening
thereof.
(7) The standard of care expected from a banker in collecting the cheque does
not require him to subject the cheque to a minute and microscopic examination
but disregarding the circumstances about the cheque which on the face of it give
rise to a suspicion may amount to negligence on the part of the collecting
banker.
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Punjab National Bank Vs. Central Bank of India
(8) The question of good faith and negligence is to be judged from the stand
point of the true owner towards whom the banker owes no contractual duty but
the statutory duty which is created by this section and it is a price which the
banker pays for seeking protection, under the statute, from the otherwise larger
liability he would be exposed to under common law.
(9) Allegation of contributory negligence against the paying banker could
provide no defence for a collecting banker who has not collected the amount in
good faith and without negligence.”
76. In the present case, the forged and fabricated cheques have been
placed on record as Ex.PW1/3 (colly) and the original cheques have been
placed on record as Ex.PW1/2 (colly). A bare perusal of the said fake
cheques, Ex.PW1/3 (colly) reveals that the five forged cheques have been
issued against A/c no. ‘1913002100019447’ for the account holder ‘GIGL
CA COMPENSATION AC MBPL SECTION 6B HARYANA’ with the
plaintiff bank. The genuine cheques, Ex.PW1/2 (colly) reveals that the
account holder of the said account number is mentioned as ‘GIGL CA
COMPENSATION AC MBPL SECTION 7 HARYANA’ instead. There is
no explanation on the part of the plaintiff bank as to why and how it
proceeded to clear the said cheques Ex.PW1/3 (colly), even though the
name of the account holder in the said cheques was different. The said fact
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Punjab National Bank Vs. Central Bank of India
demonstrates that it is the official’s of the plaintiff bank which have
displayed negligence while clearing the disputed cheques.
77. The plaintiff bank cannot seek to place responsibility on the
defendant bank in the present case, when it’s own officials have glaringly
proceeded to debit the account of ”GIGL CA COMPENSATION AC
MBPL SECTION 7 HARYANA’ whereas the forged cheques were
admittedly having the account name of ‘GIGL CA COMPENSATION AC
MBPL SECTION 6B HARYANA’ instead. Admittedly, the officials of the
plaintiff bank have not verified the account number on the cheques with the
account name associated with it and proceeded to clear the said cheques at
it’s end without any scrutiny. During the cross-examination of PW-1 dated
31.07.2025, he has also admitted that their customer M/s GIGL was
maintaining two accounts, i.e. account no. 1913002100019456 and
1913002100019447 and several fraudulent transactions had been reported
in both the accounts, however despite the same, no concrete action was
taken by them to prevent further fraudulent activities except inform the
higher authorities and advise their customer to be vigilant.
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Punjab National Bank Vs. Central Bank of India
78. Further, while the defendant bank has led no evidence to show that it
had exercised due care while opening the accounts of it’s customer’s in
whose name the fraudulent cheques have been presented, However the said
negligence on the part of the plaintiff bank in debiting the wrong account
itself completely overshadows the negligence, if any, on the part of the
defendant bank.
79. Accordingly, the issues no. 1-3 are decided against the plaintiff.
RELIEF
80. In light of the aforementioned reasons and conclusions, the suit of
the plaintiff is dismissed with no order as to costs. Decree sheet be prepared
accordingly. File be consigned to the record room after due compliance.
Judgment be uploaded after corrections.
JITEN Digitally signed
by JITEN MEHRA
MEHRA Date: 2026.04.15
16:33:21 +0530
Announced in the open Court on (JITEN MEHRA)
14.04.2026 DISTRICT JUDGE-10 (Central)
Tis Hazari Courts, Delhi.
CS DJ NO.:- 279/2023 Page 53 of 53
