Coyajee, J. -
(1.)THE plaintiff has filed this suit against the defendants who are a bank carrying on business in Bombay for conversion of the proceeds of a draft in the following circumstances.
(2.)THE plaintiff who carries on business at Vizianagram sends drafts to his commission agents in Bombay as well as hundies and other documents in payment of goods forwarded to him by his commission agents from Bombay. Pursuant to this practice of his the plaintiff on March 10, 1944, sent from Vizianagram a demand draft for Rs. 4,400 which was purchased by him from the Imperial Bank of India at Vizianagram, being draft No. AV 08020, and he sent the said draft which was drawn in favour of one Shantilal Lalchand Shah or order to his commission agents by ordinary post. It appears that the plaintiff's commission agents in Bombay to whom he was forwarding the same did not receive the said document. By his letter of March 14, 1944, the plaintiff informed his commission agents about the same but he was informed by Shantilal Lalchand Shah that they had not received the said draft or hundies enclosed with the draft. Inquiries were made thereafter and it appears that the said draft was stolen. This position is not contested by the defendants, namely, that the draft was stolen. On March 14, 1944, the draft was delivered to the defendants for collection by one of their customers, Nagindas Premji Shah, in whose name there appears to be a current account with the defendants' branch office at Jhaveri Bazar in Bombay. THE branch office realised the draft from the Imperial Bank of India and having obtained the payment for the same credited that amount to the account of Nagindas Premji Shah on March 16, 1944, THE branch office thereafter allowed the customer Nagindas Premji Shah to withdraw a sum of Rs. 5,300 from that account.
It appears that the defendant bank opened a branch at Jhaveri Bazar, Bombay, on October 26, 1943. On that day according to the evidence of Sadanand Anand Bastodkar there was a rush to open accounts and he opened accounts of several applicants. One N. P. Shah also applied on the same day and presented to him with the application form which is marked exhibit No.1 in this suit a sum of Rs. 300 in cash. It appears there was no name on the form against the column "introduced by". One of the rules of the bank on the application form states that a current account will he opened for approved parties only on an initial deposit of Rs. 300 or more. It is the evidence of Sadanand that he opened this account as the party looked respectable, but he made no inquiry in connection with the party. Be admits that there is a special rule of the bank that a current account will be opened for approved parties only and the rule says that applications for new accounts must be made on the bank's own forms. The witness admits that there is a rule for safety among banking circles that an account should normally be opened on a proper introduction of the applicant. He says in this instance in spite of the recognised practice he opened the account because the applicant did not present a cheque but cash, and he says that he had not been instructed by the manager or by the directors to open an account without a reference if the applicant deposited cash, although the party was not known to him before the day of his application nor was he known to any officer of the bank, and he says that the first rule printed on the back of this application form had not been complied with in this instance. A copy of the account of Nagindas Premji Shah has been tendered in evidence and marked exhibit No.3. It appears from this that after depositing a sum of Rs. 300 the party withdrew amounts from time to time leaving a balance of Rs. 16-8-0 on December 30, 1943. Thereafter a further withdrawal of Rs. 10 left a balance of Rs. 6-8-0 on January 10, 1944, after which there is a deposit of Rs. 100 in cash. After this comes the amount of the proceeds of the draft in suit, namely Rs. 4,400 on March 14, and on the same day a deposit of Rs. 1,000 was made, and it appears that within twenty four hours thereafter there is a withdrawal of Rs. 5,300 by a cheque in favour of one Chhaganlal Vishram leaving a balance of Rs. 106-14-0, which amount is still held by the bank unclaimed by Nagindas Premji Shah. It appears that the draft was drawn in favour of one Shantilal Lalchand Shah. It purports to be signed by Shantilal Lalchand Shah and it is directed that the same he paid over to Nagindas Premchand Shaha which is spelt as Shaha and not Shah. So that comparing the applicant's name and the endorsement it appears that there is on the face of the endorsement a clear difference, namely, the name of the applicant-the client of the defendant bank is Nagindas Premji Shah whilst the party's name on the document Ex. M is Nagindas Premchand Shaha. There is evidence before the Court that during the investigation a certain photograph was recognised by the witness Sadanand at the C. I. D. office as that of the party who had opened a bank account with the defendants under the name of Nagindas Premji Shah, which according to the police-officer giving evidence was a party known on the records of the police by the name of Nanalal Narbheram Bhudtani. I shall discuss the evidence in this connection when I come to the questions involved in this case.
Two questions arise in this suit, and the first question is whether the document exhibit M a draft is under the Negotiable Instruments Act a cheque and therefore the defendants are entitled to claim protection under Section 131 of the Negotiable Instruments Act, 1881. The second question is whether the defendants prove to the satisfaction of the Court that they dealt with this document bona fide and without negligence.
(3.)THE first question was argued when the case was opened by Mr. Purshottam and has been further argued by Mr. Desai who appears now on behalf of the defendant bank. THE argument in short is this. THE document sued upon according to the defendants although called a draft is on a reading of different sections of the Negotiable Instruments Act a cheque and therefore the defendants are protected under Section 131 of the Negotiable Instruments Act. My attention has been drawn first to Section 6 of the Act which defines a cheque, namely, a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. Section 5 defines a bill of exchange as an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument. It is argued on this that the draft which was drawn by the Vizianagram branch of the Imperial Bank of India on its head office in Bombay is also a bill of exchange and being crossed and payable on demand on presentation amounts to a cheque within the meaning of Section 6 of the Negotiable Instruments Act, and therefore the defendants are entitled to protection under Section 131 of the Act, In this connection it is necessary to look at the scheme of the whole Act and the manner in which the Legislature has amended the Act from time to time in connection with drafts, bills of exchange and cheques. First of all I shall refer to Chap. VII of the Negotiable Instruments Act which refers to discharge from liability on notes, bills and cheques. Under that chapter there is Section 85 which says that where a cheque payable to order purports to be endorsed by or on behalf of the payee, the drawee is discharged by payment in due coarse. This section was followed by an amendment by Act XXV of 1930 whereby Section 85a was enacted, under which it is provided that where any draft, that is, an order to pay money, drawn by one office of a bank upon another office of the same bank for a sum of money payable to order on demand, purports to be endorsed by or on behalf of the payee, the bank is discharged by payment in due course. Now Section 85 refers to discharge from liability under a cheque, and if a draft of the nature set out under Section 85a was a cheque as contended for under Sections 5 and 6 of the Act, the amendment would have been redundant. THE distinction I make is this. A bank draft may be a bill of exchange of the nature as contended for by counsel for the defendants if it is drawn by bank A on bank B. But it is not a bill of exchange or cheque in my opinion where it is drawn by bank A on its branch or by the branch on bank A. THE reason for this distinction is to be found in the judgment of Lord Justice Lindley in Capital and Comities Batik v. Gordon; London City and Midland Bank v. Gordon  A. C. 240, and at p. 250 Lord Justice Lindley points out that the third class of documents the Appeal Court was considering consisted of four drafts of the appellant bank and not crossed. He then stated that he agreed with the Court of Appeal in thinking that the bank which was both drawer and drawee of these instruments was (p. 250) : not entitled to treat them as bills of exchange as defined in Section 3 of the Bills of Exchange Act, although a holder may sue the bank upon them, and treat them either as bills of exchange or as promissory notes : see. 5 Sub-section (2 ). An instrument on which no action can be brought by the drawer can hardly be a bill of exchange within Section 3 of the Act, whatever it may be called in ordinary talk. In other words the test is whether the drawer can at any time bring an action on that instrument against the drawee. Mr. Desai who argued this matter with his usual ability pointed out to the Court that the words used under Section 5 of the Negotiable Instruments Act show that the direction was to "a certain person" to pay a certain sum of money, that therefore there was a sufficient indication as to who the drawee was and that the words used under the corresponding section of the English Act are "third parties or third person". THE answer to that is that the words "a certain person" are not used in Section 5 in that sense, because if a reference is made to Section 4 of the Act, it will appear that there also the same words are used in connection with a promissory note "a certain person". Now under Section 4 there could be no doubt that the other party to the promissory note was bound to be a third person. In this connection Mr. Desai has drawn my attention to the judgment of Mr. Justice Bailhache in Ross," v. London County Westminster and Parr's Bank, Ltd.  1 K. B. 678 where contentions were advanced on this point by eminent counsel and Mr. Justice Bailhache in a short reference to the argument at p. 687 says as follows: One of the instruments in question was drawn upon a bank by that bank itself, and it was said on behalf of the plaintiff that an instrument so drawn was not a 'cheque' within the meaning of the Bills of Exchange Act, 1882, and therefore that Section 82 did not apply to it. I think that instrument was a cheque, and for this purpose comes within the same category as the others. THE manner in which the learned Judge has: dealt with this point is short and no reasons are assigned how the learned Judge came to that conclusion, and it appears that the decision of the House of Lords which I have already referred to, namely, Capital and Counties Bank v. Gordon, was evidently not cited nor discussed by the learned Judge. It is true that as far as the English law is concerned an amendment has been introduced there whereby the law has now been brought in accordance with the view taken by Mr. Justice Bailhache and not in accordance with the view taken by the House of Lords, and that the effect of that amendment is that the principle laid down in Boss' case is recognised now in practice though hitherto believed to be wrong in law. That is a matter of statutory amendment in England. This Court is bound to consider the position as it stands under the Negotiable Instruments Act. I have pointed out above how Section 85a has been deliberately enacted by the Legislature for the purpose of giving protection as regards discharge of bills, notes and cheques to the collecting bank in connection with the drafts drawn by the bank on its own branch, That is as regards discharge only. THE Legislature has not thought fit to further amend the Act by adding to Section 131 a rider to the effect that the protection given under Section 131 shall be extended to drafts of the nature I have discussed above, namely, one drawn by a bank upon its own branch office, as was the case with reference to Section 85.
In these circumstances the position appears to be that as regards such drafts collected by banks in India there is no statutory protection. In the absence of statutory protection common law must apply, and any party converting to its own use or on behalf of its client, the customer, the proceeds of a draft in the circumstances stated above would be liable. As there is no statutory protection, the defendant bank would be liable to the plaintiff for the amount of the draft collected by them and no further consideration of the case would have been necessary. But I shall proceed to consider the other question also as the trial Court should give its finding on the evidence before it also, namely, had there been a statutory protection under the Act whether the defendants have proved to the satisfaction of the Court that they had not been guilty of negligence.