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Bank Of Maharashtra v. Race Shipping & Transport Co. Pvt. Ltd. And Another
Factual and Procedural Background
Race Shipping and Transport Co. Pvt. Ltd. (“Respondent 1”) maintained Current Account No. 318 with the Nariman Point branch of the Bank of Maharashtra (“the appellant-Bank”). As per the mandate, cheques had to be signed jointly by G.L. Bhatia and Managing Director Ashok Chattopadhyay. On 26-8-1992 a bearer cheque for Rs 95,000 (No. 425395) bearing Bhatia’s admitted signature and a disputed second signature purportedly of Chattopadhyay was encashed. The Bank claims it paid the amount to an employee, Mr Jadhav, after taking his endorsement on the reverse of the cheque.
Respondent 1 notified the Bank on 3-9-1992 that Chattopadhyay’s signature was forged and demanded reimbursement. The Bank lodged an FIR on 4-9-1993 and denied liability pending investigation. Respondent 1 then filed Writ Petition No. 1245 of 1993 in the Bombay High Court seeking reversal of the debit or, in the alternative, interim credit of Rs 95,000 against an indemnity.
On 7-7-1993 the High Court, at the stage of admission, directed the Bank to credit Rs 95,000 “forthwith”, recording an undertaking from Respondent 1 to return the amount if so ordered. The Bank complied on 9-7-1993. Challenging that interim order, the Bank filed the present civil appeal before the Supreme Court.
Legal Issues Presented
- Whether the Bombay High Court was justified in granting interim relief that effectively awarded the substantive amount claimed, notwithstanding serious factual disputes and questions about the maintainability of the writ petition under Article 226.
Arguments of the Parties
Appellant-Bank’s Arguments
- The respondent’s claim concerns contractual banking liability and should be tried in a civil suit, not a writ petition.
- There is a disputed question of fact—whether Chattopadhyay’s signature is forged—which requires evidence and cannot be summarily decided in writ proceedings.
- The Bank followed normal procedure in honouring the cheque, and any negligence lay with Respondent 1 in safeguarding its cheque book.
- The High Court wrongly assumed the forgery was undisputed and improperly discredited the affidavit of cashier R.V. Pinglay.
Respondents’ Arguments
- The appeal is against an interim order; the writ petition itself is still pending, and objections to maintainability will be addressed by the High Court.
- Because one of the joint signatures was forged, the cheque was a nullity and the Bank is obliged to reimburse the debit immediately.
- Reliance was placed on Bihta Coop. Development Cane Marketing Union Ltd. v. Bank of Bihar and Canara Bank v. Canara Sales Corporation to support the Bank’s strict liability for payment on a forged cheque.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Bihta Coop. Development Cane Marketing Union Ltd. v. Bank of Bihar (1967 1 SCR 848) | Bank’s liability to reimburse amounts paid on a cheque bearing a forged signature. | Cited by respondents to argue that the appellant-Bank must restore the debit. |
| Canara Bank v. Canara Sales Corporation (1987 2 SCC 666) | Same principle—bank cannot debit a customer’s account on a cheque with a forged signature. | Relied on by respondents for the same proposition. |
| Asstt. CCE v. Dunlop India Ltd. (1985 1 SCC 260) | Courts should not grant interim relief that effectively grants the final relief solely on a prima facie showing. | Invoked by the Supreme Court to illustrate why the High Court’s interim order was improper. |
| State of Rajasthan v. Swaika Properties (1985 3 SCC 217) | Same caution against granting near-final relief at the interim stage. | Used alongside Dunlop India to support setting aside the High Court’s order. |
Court's Reasoning and Analysis
The Supreme Court expressly refrained from deciding the maintainability of the writ petition, noting that the High Court must still adjudicate that question. It observed, however, that the Bank’s objections to maintainability were not frivolous and therefore should have influenced the exercise of judicial discretion at the interim stage.
Key elements of the Court’s analysis:
- Nature of interim relief: The High Court’s direction to credit Rs 95,000 virtually granted the ultimate relief sought in the writ petition. Citing Dunlop India and Swaika Properties, the Court reiterated that such orders are disfavoured, especially when issued merely on a prima facie view.
- Existence of serious factual disputes: Whether Chattopadhyay’s signature was forged remains under police investigation and is emphatically disputed by the Bank. The Court held that in the face of such contested facts, a mandatory interim order was unwarranted.
- Lack of balance of convenience assessment: The High Court did not evaluate competing equities, public interest, or the Bank’s potential inability to recover the amount if the writ were ultimately dismissed.
For these reasons, the Supreme Court concluded that the interim order could not be sustained.
Holding and Implications
Holding: The appeal is allowed; the Bombay High Court’s interim order directing the appellant-Bank to credit Rs 95,000 to Respondent 1’s account is set aside.
Implications: Respondent 1 must refund Rs 95,000 to the Bank within one month, failing which the High Court shall enforce the undertaking previously given. The substantive writ petition remains pending, and the parties may seek its early disposal. The decision reiterates the principle that interim relief should not prematurely confer the final remedy, especially where disputed facts persist, but it sets no new precedent on bank liability for forged cheques.
S.C Agrawal, J.— Leave granted.
2. We have heard learned counsel for the parties.
3. Bank of Maharashtra, hereinafter referred to as the appellant-Bank, is a nationalised bank having a branch providing banking facilities at Nariman Point at Bombay. Race Shipping and Transport Co. Pvt. Limited, Respondent 1 therein, has been operating Current Account No. 318 at the said branch of the appellant-Bank. As per the mandate of Respondent 1 the said account is to be operated jointly by G.L Bhatia and Ashok Chattopadhyay, the Managing Director of Respondent 1. One bearer cheque bearing No. 425395 dated 26-8-1992 for a sum of Rs 95,000 was drawn on the appellant-Bank. The said cheque was encashed at the said branch of the appellant-Bank on 26-8-1992 and the amount of Rs 95,000 was debited to the account of Respondent 1. The case of the appellant-Bank is that the said amount was paid to one Jadhav, whose signatures were appended at the back of the cheque, and who was an employee of Respondent 1. The said cheque admittedly contains the signatures of G.L Bhatia. The other signature purports to be of Ashok Chattopadhyay, the Managing Director of Respondent 1. The said signature is on the face of the cheque as well as on the back. Respondent 1 claims that the said signature is not of Ashok Chattopadhyay and the same is forged. This fact was brought to the notice of the appellant-Bank by Respondent 1 on 3-9-1992. Thereupon the appellant-Bank lodged a first information report with regard to the alleged forgery, as claimed by Respondent 1, at Police Station at Cuffe Parade, Bombay on 4-9-1993 and the matter is being investigated by the police. It is not disputed that the said cheque is from the cheque book issued to Respondent 1 by the appellant-Bank. Respondent 1 claimed reimbursement of the said sum of Rs 95,000 from the appellant-Bank on the basis that the signature of Ashok Chattopadhyay on the cheque was forged and thus the appellant-Bank was liable to reimburse the said amount paid by the appellant-Bank from the account of Respondent 1 against the said cheque. The said claim of Respondent 1 was contested by the appellant-Bank on the ground that the question whether the signature of Ashok Chattopadhyay on the said cheque was forged was still under investigation and till the said signature is found to be forged there was proper mandate for payment on the basis of the said cheque. Thereupon the respondents on 21-4-1993 filed a writ petition (Writ Petition No. 1245 of 1993) in the Bombay High Court wherein it has been prayed as under:
“(a) Writ of mandamus or a writ or order or direction in the nature of mandamus under Article 226 of the Constitution directing the petitioner-Bank to reverse the debit entry dated 26-8-1992 for Rs 95,000 in their Current A/C No. 318 or direct the petitioner-Bank to make payment of Respondent 1-Company herein of a sum of Rs 95,000 with interest thereon at the rate of 18% from the date of the said amount had been withdrawn from the account.
(b) To direct the petitioner herein to credit a sum of Rs 95,000 in the Current Account No. 318 during the pendency of the writ petition on Respondent 1 herein furnishing an indemnity for the same.”
4. In the said writ petition an affidavit dated 6-7-1993 of Rajiv V. Pinglay, who is employed as Advance Ledger Posting Machine Operator with the appellant-Bank, was filed on behalf of appellant-Bank. In the said affidavit it is stated:
“I say that the employees of Petitioner 1 Company regularly visited the Branch for the banking transactions, and one of such employees is one Mr Jadhav. On 26-8-1992 a cheque bearing No. 425395 for Rs 95,000 was presented for cash withdrawal. I thereupon asked the said Mr Jadhav, who had come to collect the payment, to sign on the reverse of the cheque in front of me, which was duly done by him. I say that I had seen the said Mr Jadhav on few other occasions prior to 26-8-1992. I say that on cheque being signed as aforesaid by the said Mr Jadhav, as per the normal usual banking practice, I posted the cheque and sent it for further process in accordance with the usual practice in that behalf. I say that the aforesaid signature of the said Mr Jadhav appears on the copy of the cheque being Exhibit ‘B’ to the petition.”
The said writ petition was placed for preliminary hearing before a Division Bench of the High Court on 7-7-1993 and the following order was passed on that date:
“P.C: Rule. The respondents are directed to credit sum of Rs Ninety-five thousand only in the Current Account No. 318 of the petitioners forthwith.
The petitioner through their counsel gives undertaking to bring back the amount if Court so desires.
We have perused all papers and prima facie we are satisfied that the Bank did not take precautions before making payment of large amount. The fact that cheque was forged is not in dispute and the complaint filed by the Manager before the police nowhere claims that payment was made to any employee of the petitioners. The affidavit filed by R.V Pinglay the cashier appears to be prima facie false and an afterthought.”
5. In accordance with the said order of the High Court the appellant-Bank credited a sum of Rs 95,000 to the account of Respondent 1 on 9-7-1993. From the counter-affidavit of Capt. Ashok Kumar Aggarwal filed on behalf of Respondent 1 it appears that Respondent 1 has withdrawn a substantial part of the said amount leaving a balance of about Rs 6001.65
6. Feeling aggrieved by the said order of the High Court, the appellant-Bank has filed this appeal.
7. Shri Rana, the learned counsel for the appellant-Bank, in the first place, has urged that the dispute between the parties relates to the liability of the appellant-Bank to reimburse Respondent 1 the sum of Rs 95,000 debited to the account of Respondent 1 on the basis of Cheque No. 425395 dated 26-8-1992 that was encashed by the appellant-Bank which is claimed to be forged in the sense that the signature of Ashok Chattopadhyay, the Managing Director of Respondent 1, on the said cheque is forged. The learned counsel has urged that the said liability is being fastened on the appellant-Bank on the basis of the law governing banking operations and that the proper remedy for enforcing the said liability is to file a civil suit and that it is not a matter which can be agitated through a writ petition under Article 226 of the Constitution. It has also been urged that the matter involves adjudication of disputed questions of fact inasmuch as the appellant-Bank disputes that signature of Ashok Chattopadhyay on the cheque is forged. The learned counsel for the appellant-Bank has submitted that the learned Judges of the High Court were not right in proceeding on the basis that the appellant-Bank did not take precautions before making payment of large amount and the fact that cheque was forged is not in dispute and that the affidavit filed by R.V Pinglay appears to be prima facie false and an afterthought. It has been pointed out that in the correspondence with Respondent 1 the appellant-Bank did not accept the contention of Respondent 1 that one of the signatures of the joint signatories, namely, Ashok Chattopadhyay, the Managing Director of Respondent 1, was forged and further that the case of the appellant-Bank is that the payment of the cheque was made in the ordinary course of business and that the procedure for honouring the cheque by the bank officials was correctly followed in the matter of encashment of the cheque. The appellant-Bank has also denied the allegations made by Respondent 1 that there was collusion of bank staff with an outside unknown person for payment of the cheque and it was asserted that it was obvious negligence on the part of Respondent 1 not to keep the cheque book in the proper custody and that Respondent 1 was making false allegations against the appellant-Bank. The submission of the learned counsel was that various questions that arise in the case can be properly determined only on the basis of evidence that is adduced and that such determination cannot be made in a writ petition and it can be more appropriately adjudicated in a regular civil proceeding.
8. Shri P.H Parekh, the learned counsel appearing for the respondents, has, on the other hand, urged that this appeal is directed against the interim order only and the main writ petition is still pending adjudication before the High Court and the question of maintainability of the writ petition would be gone into by the High Court in the light of the objections that are raised by the appellant-Bank. Shri Parekh has, however, urged that in view of the fact that the signature of one of the joint signatories on the cheque is forged the appellant-Bank is liable to reimburse Respondent 1 the sum of Rs 95,000 that has been paid from the account of Respondent 1 on the basis of said cheque which was a nullity. In support of his aforesaid submission Shri Parekh has placed reliance on the decisions of this Court in Bihta Coop. Development Cane Marketing Union Ltd. v. Bank of Bihar (1967) 1 SCR 848, AIR 1967 SC 389 and Canara Bank v. Canara Sales Corpn. (1987) 2 SCC 666, (1987) 2 SCR 1138
9. Since the writ petition is still pending in the High Court and the question of maintainability of the writ petition has yet to be considered we do not propose to go into the said question. All that we wish to say at this stage is that the objections that have been raised by the appellant-Bank against the maintainability of the writ petition are not such that they may be disregarded as lacking in substance. This is a factor which has a bearing on the exercise of discretion by the court while passing the interim order in the writ petition.
10. By the interim order the High Court has directed the appellant-Bank to credit a sum of Rs 95,000 in the Current Account No. 318 of Respondent 1. The High Court has recorded that respondent through their counsel had given an undertaking to bring back the amount if the Court so desires. The said interim order, in substance, grants the relief which the respondent would have been given at the final stage in the event of their writ petition being allowed by the High Court.
11. Time and again this Court has deprecated the practice of granting interim orders which practically give the principal relief sought in the petition for no better reason than that a prima facie case has been made out, without being concerned about the balance of convenience, the public interest and a host of other considerations. [See : Asstt. CCE v. Dunlop India Ltd. (1985) 1 SCC 260; State of Rajasthan v. Swaika Properties (1985) 3 SCC 217.]
12. In the instant case since there is serious dispute on facts it cannot even be said that a prima facie case had been made out for grant of an interim order in favour of the respondents which enables them to have the reimbursement of the sum of Rs 95,000 that was debited to their account in view of the encashment of the cheque in question. We are of the view that this was not a case in which the High Court while admitting the writ petition should have passed an interim order giving such a direction. In the circumstances we are unable to uphold the said interim order passed by the High Court.
13. The appeal is, therefore, allowed, the interim order passed by the High Court regarding crediting the sum of Rs 95,000 in the Current Account No. 318 of the respondents is set aside. Since the appellant-Bank has already deposited the said amount of Rs 95,000 in the current account of respondents in pursuance of the said directions of the High Court it is directed that the respondents will refund the said amount to the appellant-Bank within a period of one month and on their failure to do so the High Court will take steps to enforce the undertaking that has been furnished by the respondents in pursuance of the said interim order. It will be open to the learned counsel for the parties to request the High Court for an early disposal of the writ petition and the High Court will give due regard to such a request if made. No order as to costs.
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