DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : G.Rajeswari.
Designation : Senior Lecturer.
Branch : Commercial and Computer Practice
Institute : Government Polytechnic, Srikakulam.
Year/Semester : V semester.
Subject : Banking.
Subject code : CCP 504(B).
Topic : Customer service in Banks
Duration : 50mts.
Sub topic : Legal aspects of entries in the Pass Book
Teaching Aids : PPT, Animation
CCP-504(B).49 1
Objectives:

On completion of this period, you would be able to:

 Understand the legal aspects of entries in the
pass book.

CCP-504(B).49 2
Recap
 In the previous class, you have learnt some of the
important legal aspects of entries made in the Pass
Book.
 They are:
 Pass book is an authentic record.
 It can be treated as an evidence and
unquestionable record.
 But there are different views on the status of
pass book.

CCP-504(B).49 3
Recap

 According to Sir John Paget, when the customer

returns the pass book without any objection, the
bank treats it as a settled account.
 Later, if the customer finds any mistake which is
detriment to the banker, the banker is not liable.
 But there is a divergent view on the status of pass
book entries.
 There is no obligation on the part of the customer
to examine it as and when he receives it.

CCP-504(B).49 4
Recap

 The customer can bring a mistake or omission in

pass book entries whenever he happens to see it.
 This is because, the mistake may be favorable
sometimes to the customer and sometimes to the
banker.
 In such a case either party may detect the error
and get it rectified.

CCP-504(B).49 5
Known to unknown

1. Customer can bring to the notice of the banker

the following aspects.
a) Mistakes and omissions in Pass Book
b) Truth
c) Spelling mistakes
d) Hand writing

CCP-504(B).49 6
Known to unknown

2. According to Sir John Paget, if the customer fails

to observe any mistake and returns the pass
book, then the banker is.
a) Not liable
b) liable
c) Both A and B
d) None

CCP-504(B).49 7
Effects of Entries to the advantage of the
customer:-

 The account of a customer may sometimes

wrongly show a credit balance, which is larger than
the correct balance.
 This is because of the following reasons:
 duplication of credit entries or incorrectly
entering higher amounts for such entries.
 due to omission of any debit entry.

CCP-504(B).49 8
Effects of Entries

 The legal position of the banker and his customer

shall be as follows:
 The pass book is written by the banker and hence
the entries therein may form an evidence against
the banker.
 The customer is rightly entitled to believe them as
correct and to act on the basis of such entries.


CCP-504(B).49 9
Effects of Entries

 If the pass book shows a higher balance and the

customer withdraws such balance treating it as his
own and subsequently spends it away, the banker
shall not be entitled to recover such amount
wrongly paid to the customer.
 But the customer shall have to prove that…
 …he acted in such manner relying on the
correctness of the balance shown in the pass book
and had no knowledge of the mistakes therein.

CCP-504(B).49 10
Effects of Entries

 This benefit has been given to the customer in

various judgments because of the presumption that
normally a person spends what he presumes to
belong to him.
 If the banker permits him to withdraw excess
money on the above presumption, it would be a
great prejudice to him, if he is called to pay them
back.

CCP-504(B).49 11
Effects of Entries

 There are some exceptions to the above-

mentioned principle of estoppel.
 If the customer regularly maintains his account
books and the bank regularly sends him the
pass book (or statement in lieu of the pass
book) the customer cannot act on the basis of
the above presumption.

CCP-504(B).49 12
Effects of Entries

 Through it is not obligatory for him to check the

pass book (or the statements), but in such
circumstances, it is difficult to establish that he was
ignorant about the mistakes in the pass book.
 This is because he regularly maintained the
account books.
 In such circumstances, a constructive notice of the
mistake is supposed to have been given to him.

CCP-504(B).49 13
Effects of Entries

 The decision of the Madras High Court in Oakley

Bowden and Co. vs. The Indian Bank Ltd., (A.I.R.
1964, Madras 202) may be cited in this connection
 The brief facts of the case were as follows:
 Oakley Bowden and Co. has a current account
with the Indian Bank Ltd. At its head office at
Madras.

CCP-504(B).49 14
Effects of Entries

 The company had dealings with two customers at

Guntur, who used to pay into the Guntur branch of
the Bank amounts payable by them to the head
office which used to credit the said amounts to the
current account of the company with it.
 The Guntur branch of the bank received two
deposits for the credit of the company in 1952.

CCP-504(B).49 15
Effects of Entries

 Each of these credits was advised by a telegram

by the Guntur branch to the Head Office, which
credited the account of the company accordingly.
 The very same two credits were advised by the
Guntur branch to the Head Office by ordinary
post also.
 The Head Office did not apparently realize that
the two credits advised by post related to the
identical credits covered by the telegrams.

CCP-504(B).49 16
Effects of Entries

 The head office advised the company by mistake

of four credits instead of two.
 The mistake for the recovery of the amounts
covered by the meanwhile credit entries.
 The Company in the meanwhile settled its
accounts with the customers at Guntur on the basis
of these entries communicated to it by the bank.

CCP-504(B).49 17
Effects of Entries

 The company, therefore, raised the point that the

bank was stopped from claiming that the two
entries were duplicate entries.
 The Trial Court and the first Appellate Court held
that the Company had the means of knowledge
and, therefore, every opportunity to know the real
position and, therefore, it could not plead estoppel
against the Bank.

CCP-504(B).49 18
Effects of Entries

 The Courts were of the view that it was possible for

the Company to have detected the duplicate credit
from perusal of the accounts.
 On appeal, the Madras High Court held that
“Generally speaking, a bank owes a duty to its
customer to maintain proper and accurate
accounts of credits and debits.

CCP-504(B).49 19
Effects of Entries

 If a bank makes wrong credit entries without

knowing fact at the time the entries were made
and intimates to its customer the credit entries
and the customer acting upon the intimation of
credit entries, alters his position to his
prejudice, the bank, therefore, will be stopped
from contending that the credit entries were
wrongly made and that the amounts covered by
them should be refunded to it by the customer.

CCP-504(B).49 20
Effects of Entries

 Such an intimation by the bank is obviously a

representation made to the customer, which the
customer is at liberty, in fact entitled, to act upon.
 The court observed that if the company had even
cursorily scrutinized the periodic statements
received by it from its two customers, it would have
detected that two of the credit entries aware in fact
only duplicate entices.

CCP-504(B).49 21
Effects of Entries

 The court held that the company was negligent in

scrutinizing the accounts and that it had
constructive notice of the duplicate entries and ,
therefore, it could not raise the plea of estoppel
against the bank
 It was held that the bank could recover the
amounts in question

CCP-504(B).49 22
Summary
 The account of a customer may sometimes
wrongly show a credit balance, which is larger
than the correct balance.
 This is because of the following reasons:
 duplication of credit entries or incorrectly
entering higher amounts for such entries.
 due to omission of any debit entry.
 The legal position of the banker and his customer
shall be as follows:

CCP-504(B).49 23
Summary

 The pass book is written by the banker and hence

the entries therein may form an evidence against
the banker.
 The customer is rightly entitled to believe them as
correct and to act on the basis of such entries.
 If the customer believes that the balance is
correct and spends that amount, the banker
cannot recover that amount from the customer.

CCP-504(B).49 24
Summary

 But if the customer has knowledge of the entries

and if he uses it, he is liable to refund the amount
to banker.

CCP-504(B).49 25
 Quiz

1.The mistakes in the pass book may be

a) Favorable to customers
b) Favorable to the banker
c) Favorable to others
d) Both A and B

CCP-504(B).49 26
Quiz

2. The pass book of customer shows excess credit

balance due to which of the following reasons?
a) Wrong credits
b) Due to omission of debit entries
c) Due to duplication of credit entries
d) All the above

CCP-504(B).49 27
 Quiz

3. If a customer spends the amount which was wrongly

credited by the banker in his account, he has to
a) Prove it that this credit has altered his position
b) Go to a Court of law
c) Fight with the banker
d) Keep silence

CCP-504(B).49 28
Frequently asked questions

1. Explain the effect of entries advantageous to

customers.
2. What are the exceptions to the mistakes in favour
of customer?

CCP-504(B).49 29