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Introduction
The Banking Industry in India has grown to a level which no one could have imagined some decades ago. One of the incidents of this development is the exponential rise in circulation of Cheques. Cheques are issued by Customers of the Banks on the promise by the Bank that after due diligence they will fulfil the promise and pay the person presenting the cheque on behalf of their customer.
Dishonour of the Cheque, which is colloquially called Bouncing of the Cheque, by the Bank due to its negligence, is a serious act which creates doubt in the mind of the person who was given the cheque by you, about your financial status and credibility. It is more pronounced in the case of the people who hold good esteem in society, as bouncing of Cheque may create a dent in their image. So, if a cheque is bounced it should be taken seriously as not only it can tarnish your goodwill but can also foist upon you unwanted cases like criminal cases under Section 138 of Negotiable Instruments Act, 1881 & Section 420 of Indian Penal Code, 1860 or civil cases like money recovery cases or Summary Suits under Order XXXVII of Civil Procedure Code, 1908. Therefore one should be cautious while dealing with Cheque bounce cases and take utmost care in their dealings with banks and third parties when a bank bounces it.
In the present case we are going scrutinise a matter in which a person have to go through a series of horrors, including losing his job, due to negligent act of the Bank.
Brief Facts
I V Rajagopal (hereinafter referred to as the Respondent), who worked in a Prestigious company named M/s Lakshmi Mills Company Limited (hereinafter called the Employer), had a simple task on his hand i.e. payment of office Telephone bill. So, he issued to the Telephone Exchange a cheque of Rs.294 – 40 (the older form of currency: 294 Rupees and 40 Annas) to realise the bill. The Telephone Exchange deposited the said Cheque with the Canara Bank (hereinafter referred to as “the Bank”) for encashment, but the Bank dishonoured the cheque, in spite of the fact that the Respondent had more money, namely Rs. 653 – 83 in the Bank’s Current Account held by him. (Note: Whenever a Customer opens an Account with a Bank, it is the duty of the Bank to honour that Customer’s every Cheque provided the Customer has more available balance in his Bank Account than the Cheque amount. It is generally called the liability of a Drawee on a Bill of Exchange. It is the one of the oldest form of business transactions whereby if A holds money on behalf of B and B directs, through a Bill of Exchange, A to pay money to C, then A must pay the said money to C. The only precondition is that A must accept the Bill of Exchange and he will accept only when he have more money in his hand than the tenor of the Bill of Exchange. Now, Cheque is a Bill of Exchange with a distinct stipulation that the Drawee is always a Bank and there is no requirement on the Bank to accept the Cheque as it is agreed by the Bank at the beginning i.e. at the time of opening of bank Account, that it will always pay the person whom the customer directs it to pay with the condition that the customer have sufficient balance). So, the Bill remained unpaid due to which the Telephone Exchange disconnected the telephone line. As employer was a big name in the business, dishonouring of cheque and consequent disconnection of Telephone line offended the Company bosses too much, as it was question of goodwill. The management held the Respondent responsible for the default and therefore they fired the Respondent form the job.
According to the Respondent it was not due to his fault but due to the Bank’s negligence in paying the money against the Cheque due to which line was disconnected by Telephone Department/Exchange. Based on this reasoning he filed a case against the Bank in Forma Pauperis (Forma Pauperis which comes under Order XXXIII of Civil Procedure Code, 1908 is a kind of situation in which a person claims that he does not have enough money to file the case and hence if on proper investigation it is found by the court that he is telling the truth, then the court waives his Court Fees for the time being. But there is a rider. If the said person wins the case, then he has to pay the full court fees on the money which he won in the case like any other person. This procedure is very similar to the cases of Probate or Succession Certificate or Partition where rather asking for Ad Valorem Court Fees at the beginning of a case the Plaintiff or Petitioner is only directed to pay when he wins and only up to that amount which he wins). The claim of the Respondent was for recovery of Rs. 50,000/- : Rs.36,000/- towards Special Damages (Special Damages are the ones which can be calculated by some mathematical formula. So as the Respondent earned Rs. 600/- per month, and he believed he could have normally worked for the next five years then his special damages will be 600 x 12 x 5 = Rs.36,000. This is often called “Future Loss of Income”) and Rs. 14,000/- towards General Damages (General Damages are the ones which cannot be calculated by simple mathematical formula as they as they are difficult to be assessed in concrete terms like mental agony and pain in an Motor Accident case, pain, loss of prestige and goodwill in a Trademark Case. These kinds of claims are more often seen in cases of road accidents which falls under the Motor Accidents Claims Tribunal Act 1988 where the victim can ask for harassment, mental agony).
To the argument of the Bank replied that the act of not releasing the amount towards Cheque is not a negligent act. Further the lawyer for the Bank argued that the reason for the termination of services of the Respondent is not the dishonour of Cheque but the previous conduct of the Respondent in the Company.
Now first of all to prove that the some loss has been caused to a person due to another person’s act (Bank is also a person having an independent corporate existence) the test of “Proximate Cause” is laid down. It usually is found in cases of Tortious Liability. The doctrine of “Proximate Cause” states that if A wants to prove that B’s action have caused him a disadvantage or damage, he must prove that B’s act was closely related and in itself responsible for the loss he suffered. For example, let’s say there is a very important inauguration ceremony of a new branch of an office in which A, a software engineer, worked. For attending the ceremony he had to reach Mumbai before 9:00 a.m. on 10th March, 2020. So A books a flight which leaves Delhi at around 11:00 p.m. on 9th March 2020. Now while A, being extra cautious, left the house in time at 5:00 p.m. to catch the flight, but due to the reckless driving of a person named B, A meets an accident. Though injuries suffered by A are minor in nature and A has a meagre hospitalization bill on that account but due to the accident and subsequent hospitalization A could not catch the flight in time and hence failed to attend the inauguration ceremony in time. This angered his boss, who in his fit of anger fired him. After getting removed from his job, suddenly COVID emergency was declared and A could not get another job till one year. Now A can sue B not only for the hospitalization bill due to his negligent driving but also for the future loss of his income for one year which he would have earned if he has remained in his job (he would have been assigned work from home). This he can do be proving that it is only and only the rash driving of B and nothing else which prevented him from attending the inauguration ceremony and caused termination from his job.
Taking cue from the above example the primary duty of the Respondent is to prove that it is only and only the dishonour of Cheque and nothing else which is responsible for Respondent’s termination from the Company. For this Respondent adduced evidence that before bouncing of the Cheque he was a respected employee of the company and there was not even a whisper of any criticism against him. Further the Respondent also Exhibited (a legal term meaning to give documentary evidence) some letters between the Management and the Respondent through which he proved that the management of the Employer Company was very angry due to bouncing of the Cheque and consequent disconnection of the telephone.
Here it is pertinent to mention that Section 31 of Negotiable Instruments Act, 1881 ( which regulates cases in relation to Cheque Bouncing/Dishonour) very clearly states that if drawee of a Cheque i.e. the Bank, have enough money in the bank account of the Drawer i.e. is the person who signs/issues the cheque, then the Bank must pay the Cheque amount and if the Bank fails to do so and due to it some loss occurred to the Drawer then the Bank have to compensate the Drawer (in this case the Respondent) for such loss.
Further, Section 73 of Indian Contract Act, 1872 very clearly states that if a Contract is breached then the party breaking the contract must compensate the person who has suffered due to such breach. As explained above that the Account Holder who has an account in a Bank have a contract with the Bank that whenever the Account Holder issues a Cheque to a third person and that third person comes to the Bank for encashing the Cheque, the Bank will pay that person money from Account Holder’s bank account (provided of course that Account Holder have requisite account balance).
Now it is amply clear that it was due to the default of the Bank and not the Respondent due to which he was dismissed from the job and he lost any future income and has to suffer immense mental torture of not having a job and regular income. And based on this reasoning the Court allowed the case of the Respondent and directed the Bank to give the Respondent the money which is legally due to the Respondent.
Conclusion
It is often seen that though we are upright and honest in our work we have to suffer due to the lapse on part of some other, be it a Government or Private company, a Construction Contractor, a Principal Debtor etc. In these cases it is nothing but apt to go to Court to get compensation from the people who due to their negligent or mala fide act caused suffering for us. In the above case what may have been a simple negligent act on behalf of the Bank, for which they were not even repentant, cost the Respondent his job which further manifests itself in the form of mental agony and harassment.
Contracts are sacrosanct and that is the reason why we keep so much money in the Banks even though it offers dirt cheap interest rates (currently Banks only offer around 7 % of Fixed Deposits, that too if you deposit money for more than One year, which is not even enough to beat inflation let alone giving some savings to a customer) therefore it is the duty of the Banks also to deal with the Customers with utmost honesty and diligence. And if it fails to do so, then one should not shy away from resorting to Courts and ask the Banks to compensate him/her for the loss occasioned to them due to such conduct of the Banks.
Parveen Semwal
Advocate, High Court of Delhi and Supreme Court of India