Central Bank of India v V Gopinathan Nair (1968) | Crossed Demand Draft & Banker's Protection

Banking Law Case 17 of 29 by Law Easy, for LL.B., CLAT PG, UGC NET Law and Judiciary exams. Case: Central Bank of India v V. Gopinathan Nair (1968), Kerala High Court (Justice K. K. Mathew). FACTS: The plaintiff bought a demand draft for Rs 4,000 at the bank's branch in Alappuzha. It was drawn on the bank's own branch in Kolkata and payable to a Kolkata firm that had kept an account with that branch for about 20 years. The draft was intercepted in transit. A fraudster forged the payee's endorsement and collected the money through an account he held in another bank. The plaintiff sued both banks. LEGAL ISSUE: Were the paying bank and the collecting bank protected, or did negligence take away the protection? JUDGMENT: The High Court held that neither bank was protected. The paying branch knew its old customer well, and the unusual endorsement should have put it on enquiry. The collecting bank had opened the fraudster's account in breach of its own rules, on a weak introduction, and asked no questions about how he came to hold a draft endorsed to him by a stranger. Both appeals were dismissed. PRINCIPLE TO REMEMBER: In India a banker is protected only if he pays in due course, that is in good faith and without negligence, and the burden of proving absence of negligence lies on the banker. Good faith and proper care must exist together. Conduct at account opening can matter when judging a later collection. PROVISIONS: Negotiable Instruments Act, 1881: Section 85A (paying banker, drafts drawn by one branch on another), Section 131A (collecting banker, drafts), Section 131 (collecting banker, crossed cheques). EXAM NOTE: Bank protection is conditional, not automatic. Suspicious transactions call for inquiry. Fraud alone does not settle the issue; negligence has to be examined. PLAYLIST (all 29 cases in order): https://www.youtube.com/playlist?list=PLbhYsrMKgACA COMPLETE LECTURE (all 29 cases with timestamps): https://youtu.be/ayAN7RLlfPM PREVIOUS CASE (16, Bharat Barrel v Amin Chand Payrelal): https://youtu.be/s7uuxlBZUj0 More law notes: https://www.thelaweasy.com If this helps your exam preparation, please subscribe to Law Easy. This video is for education and is not legal advice. #BankingLaw #NegotiableInstrumentsAct #CollectingBanker #CLATPG #Judiciary #LLB #LawEasy