ALLAHABAD BANK Vs. METAL PACK INDUSTRIES & ANR.

JUDGEMENT

(1.) "Whether in view of the provisions of Section 18 of the Negotiable Instruments Act, 1881, it is obligatory on the part of the bank to honour a cheque where the figures denoting the amount of the cheque differ in words and figures and whether the Bank can be held guilty of deficiency in service for returning such a cheque unpaid"? is the important question which needs determination in the present case.

(2.) THE facts and circumstances leading to the present revision petition are that M/s. Metal Pack Industries (respondent No. 1) was availing Cash Credit Hypothecation limit from the Allahabad Bank to the tune of Rs. 4.60 lacs against the stocks of raw material, work in stocks, finished goods, plant and machinery. One of the conditions of the said loan was that respondent No. 1 shall keep the goods insured at all times during the period of loan from an Insurance Company. To that end, respondent No. 1 had issued a cheque bearing No. 290121 dated 24.11.1990 in the sum of Rs. 1,663 towards insurance premium for the period 24.11.1990 to 23.11.1991. The said cheque was presented to the petitioner -bank, who in turn returned the check unpaid to the Insurance Company for the reason "words and figure differ". Insurance Company returned the cheque to respondent No. 1 vide their communication dated 7. 1.1991 calling upon respondent No. 1 to deposit the amount of premium with cash within seven days from the receipt of the said letter with the stipulation that if the amount is not paid as above, the Insurance Company would not be responsible for any compensation or damages during the said period. According to respondent No. 1, there was a burglary at his factory F -23, Surajpur B (Industrial Area) Surajpur, Ghaziabad on the night of 26.4.1991 when certain miscreants numbering 3 -4 including one Nawab Thekedar r/o Loni had entered the factory premises and removed tin plates weighing about 8 -10 tonnes from the store, though a guard was present at the factory. A police report was lodged with the concerned police station which after investigation submitted a final report in the matter concluding that no crime as reported was found to have been committed during the course of investigation. Insurance Company being informed appointed a Surveyor -cum Investigator V.K. Anand who based on the fact finding inquiry and the report filed by the police also expressed great deal of doubt in regard to the burglary at the premises of respondent No. 1 on the alleged date, time and place. Insurance Company declined to indemnify respondent No. 1 for the alleged loss on that ground as well on the ground that there was no effective insurance during the relevant period, respondent No. 1 having failed to remit the amount of premium. Respondent No. 1 filed complaint against the Bank as well as against the respondent No. 2 -Insurance Company, alleging deficiency in service on their part. It was alleged that the Bank failed to honour the cheque unjustifiably, that there was difference in words and figures in the amount appearing in the cheque. Consequence of which was that the Insurance Company took the plea that there was no insurance during the relevant time of alleged peril. The complaint was resisted by the Bank and the Insurance Company. The Bank taking the plea that it has committed no deficiency in service by returning the cheque because they acted strictly in consonance with the guidelines issues by the Reserve Bank of India. Insurance Company of course taking the plea that insurance policy did not become effective due to non -payment of requisite insurance premium. In the first instance, the District Forum dismissed the said complaint vide order dated 29.3.1995 with the following observations:

(3.) AGGRIEVED by the said order, respondent No. 1 filed appeal No. 993/SC/1995 before the State Commission. State Commission vide order dated 2.5.1997, remanded the matter back to the District Forum by observing as under: