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Allahabad Bank v/s Metal Pack Industries & Another

    Revision Petition No. 1234 of 2004 in Appeal Nos. A/3057/SC/2001, A/3092/SC/2001

    Decided On, 23 February 2009

    At, National Consumer Disputes Redressal Commission NCDRC

    By, MEMBER

    For the Petitioner: C. Mukund, P. Jain, Amit Kasera, Advocates. For the Respondents: Prabodh Kumar, S.K. Bharti, Ms. Rani Kishan, Laxmi Narain, Manoj Gorkela, Advocates.

Judgment Text

R.C. Jain, Presiding Member:

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. 1vide 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 complaintvide order dated 29.3.1995 with the following observations:

'Further, we have carefully gone through a very detailed report paper No. 16/C/3 to 16 prepared by Sh. V.K. Anand, Surveyor and Loss Assessor. A perusal of this report would raise some doubts upon the genuineness of the factum of burglary. There was contradictory version of the witnesses about the theft. Neither any lock or ‘kunda’ or door of the factory was found broken nor it was clear as to how the burglars entered the factory premises when there were watch and watch personnel posted for night duty. A suspicion has also been raised that 3-4 miscreants would commit burglary by whisking away 12 metric tons plates just in or around 3 hours. Nawab Thekedar who was stated to be the man behind the burglary was admittedly complainant’s own man who was working with it. There were contradictory statements regarding quantify of the stock as shown in the stock-book of the factory and as claimed to have been taken away. The relevant documents particularly purchase bills/invoice of the items which were allegedly stolen were not produced before the Valuer for verification. The account-books were not allowed to be inspected by the Assessor. The Valuer has also complained that the complainant’s authorities did not cooperate in assessing the loss. Further the FIR was silent regarding the items and quantity thereof. All this raised a suspicion about the genuineness of the burglary.

Further the claim since has been hotly disputed, cannot be summarily decided in the Forum. Better such a dispute is litigated in the Civil Court.

With these observations, we are of the opinion that the complaint deserves to be dismissed.'

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


It has been prayed by the learned Counsel for the complainant that the matter may be sent back to the District Forum which may require the production of the cheque from the appropriate quarter and thereafter proceed to decide the matter in the light of the admitted position that the amount of premium had not been received by the Insurance Company. We are not inclined to accept the prayer.

The appeal is allowed and order of the District Forum is set aside.

The complaint is remanded back to the District Forum for disposal afresh in accordance with law after notice to the parties and having regard to the observations made in this order.'

4. On remand of the matter, District Forumvide order dated 3.11.2001 allowed the complaint of respondent No. 1 holding the petitioner-Bank guilty of deficiency in service for dishonouring the cheque issued by the complainant and passed an Award of Rs. 3,00,000 (Rs. three lacs) against the petitioner-Bank. The District Forum also directed the Insurance Company to pay a sum of Rs. 1 lakh with interest and cost.

5. Aggrieved by the said order of the District Forum, both the petitioner-Bank as well as Insurance Company filed appeals before the State Commissionvide the impugned order dated 14.5.2004, the State Commission has allowed the appeal No. A/3092/SC/2001 filed by the Oriental Insurance Company holding that they were not liable to pay any compensation to the complainant but dismissed the appeal filed by the petitioner-Bank and upheld the Award made by the District Forum against them.

6. We have heard Mr. C. Mukund, Advocate, learned Counsel representing the petitioner and Mr. Laxmi Narain, Advocate, learned Counsel representing the respondents and have given out thoughtful consideration to their respective submissions.

7. Learned Counsel for the petitioner-Bank has assailed the findings of the District Forum as affirmed by the State Commission in regard to the obligation of the petitioner-Bank to pay the amount of cheque having discrepancy in the words and figure in the amount of the cheque. In this connection it is pointed out that petitioner-Bank had returned the cheque to the payee viz., Insurance Company because the amount as specified in the cheque in words and figures did not tally, following the guidelines issued by the Reserve Bank of India to disburse such type of cheque. As against this, the contention of the respondent is that despite such discrepancy in the cheque, Section 18 of the Negotiable Instruments Act,1981 obligates on the bank to pay the amount of cheque going by the description of the amount in words and consequence of not honouring the said cheque by the Bank makes them liable for the consequence contained in Section 31 of the said Act. Section 18 and 31 of the Negotiable Instruments Act, 1981 read as under:

18.Where amount is stated differently in figures and words-If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid.

31. Liability of drawee of cheque.The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do and, in default of such payment, must compensate when the drawer for any loss or damage caused by such default.

8. A conjoint reading of the above provisions would lead to the conclusion that the petitioner-Bank ought to have paid the amount of cheque despite the so-called difference in figures and words of the amount of cheque. To that limited extent, the Bank can be said to be deficient in service. However, the ultimate question is as to whether this limited deficiency on the part of the Bank has resulted into any loss to respondent No. 1 and if so to what extent it is liable to be compensated. Going by the material placed on record, more particularly the letter dated 7. 1.1991 issued by the Insurance Company to the respondent No. 1 with copy to the petitioner-Bank informing the respondent about its dishonour and affording an opportunity to pay the amount of the premium in cash within seven days from the receipt of the said letter and the fact that no action was taken by the respondent No. 1 on the said letter, the petitioner-bank cannot be held liable for the entire loss claimed to have been suffered by respondent No. 1 due to non-indemnification of the loss by the Insurance Company on account of their be

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ing no valid insurance cover for the relevant period as no premium was paid for the relevant period. In any case there is ample material on record which would show that the loss claimed by the respondent No. 1 on account of the alleged burglary was not established by means of any cogent evidence, and therefore, respondent No. 1 was not entitled to be indemnified by the Insurance Company even if the insurance policy had been in vogue after making the payment of the insurance premium. 9. For the above stated reason, we are of the opinion that impugned order passed by the State Commission cannot be sustained and is liable to be set aside. However, in the facts and circumstances of the case and the limited deficiency which has been found on the part of the petitioner-Bank, we consider that a token compensation of Rs. 10,000 would adequately meet the ends of justice. In the result revision petition is partly allowed and impugned order is set aside. We direct the petitioner-Bank to pay a sum of Rs. 10,000 only to respondent No. 1. Revision petition stands disposed of accordingly. R.P. partly allowed.