Effect of Wrong Entries in Favour of the Banker :
When a credit entry has been totally omitted or its figure has been wrongly stated or any debit entry has been erroneously made in the account of the customer. Such entries are favourable to the banker and against the customer. The customer is entitled to get the mistake rectified as soon as he happens to detect it. This right of he customer does not lapse even if he returns the Pass Book without raising objection regarding any entry or he remains silent after the receipt of the Pass Book because, as already noted, the customer is not bound to examine the Pass Book periodically and regularly. He is entitled to recover the amount wrongly debited to, or omitted to be credited to his account. The right of the customer to get the mistake rectified is, however, subject to one limitation. If the customer comes to know about the forgery in the cheque and he does not inform the bank, it will constitute negligence on his part. The customer will, therefore, not be entitled to recover the amount paid by the banker on the forged cheque.
The most important point to note is that the negligence on the part of the customer should have been actually proved. In Canara Bank vs. Canara Sales Corporation and Others (AIR 1987 SC 1603) the Supreme Court held that after reasonable opportunity was given to the customer to examine the Bank’s statements; its debit entries should be deemed to be final and should not be open for reconstruction to the detriment of the Bank. The Supreme Court rejected the appeal and held that the bank can escape liability only if it can establish knowledge to the customer of the forgery in the cheques. Inaction for continuously long period cannot by itself afford a satisfactory ground for the bank to escape the liability. The Court further held that there was no duty for a customer to inform the Bank of fraud committed on him of which he was unaware. Nor can inaction for a reasonably long time in not discovering fraud or irregularity be made a defense to defeat a customer in an action for loss.
It is pertinent to note in this connection that the current accounts rules of the banks usually lay such obligation on the customer. For example,
“On a Pass Book or Statement of Account being received by a customer, the entries should be carefully examined and any error or omission should immediately be brought to the notice of the bank; otherwise, the return of the Pass Book or rendering of the Statement of Account to the customer will be treated as settlement of the account and acknowledgement of its correctness to date. The Bank will not be responsible for any loss arising from the neglect of these precautions.” (Bank of Baroda Current Account Rule)
Similarly, the State Bank of India requires that –
“The entries should be carefully examined by the constituent, and, if any errors or omissions are discovered, the attention of the Bank must be drawn to them immediately. The Bank will not be responsible for any loss arising from neglect of this precaution.”
It is thus apparent that the current account rules, which form the basis of agreement between the banker and the customer, impose a duty on the customer to carefully examine the entries. If he is negligent in performing this duty and thereby some loss is caused, the banker shall not be liable for the same.