Effect 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 because of the duplication of credit entries or incorrectly entering higher amounts for such entries or due to omission of any debit entry. The legal position of the banker and his customer shall be as follows:
(i) 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 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 (a) 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, and (b) he altered his position by spending the same,. This benefit has been to the customer in various judgements because of the presumption that normally a person spends what he presumes to belong to him and if the banker permits him to withdraw excess money on the above presumption, it would be great prejudice to him, if he is called to pay them back. [Skyring v. Greenwood (1825) and Holt v. Markham (1923)]
(ii) 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. Though 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, because he regularly maintained the account books. In such circumstances, a constructive notice of the mistake is supposed to have been given to him.
The decision of the Madras High Court in Oakley Bowden and Co. v. The Indian Bank Ltd. (AIR, 1964, Madras 202) says that “generally speaking, a bank owes a duty to its customer to maintain proper and accurate accounts of credits and debits. If a bank makes wrong credit entries without knowing the fact at the time the entries were made and intimates to its customers 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. 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. Once it is acted upon by the customer bonafide, of course, it will then be too late for the bank to realize from the credit entries they made mistakenly and seek to have recompensed by means of adjustment in the accounts or recovery of the amounts from the customer.” 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 were in fact only duplicate 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.
In S. Kotrabasappa v. Indian Bank (1990) 69 Company Case 683, the Karnataka High Court held that the customer who has taken unfair advantage of a mistaken credit made by the bank is bound to return or repay the amount Effect of Entries to the Advantage of the Customer :