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banking_law:notes:pass-book

Bank Pass Book

Passbook or Bank Statement is a copy of the account of the customer as it appears in the bank’s books. When a customer deposits money and cheques into his bank account or withdraws money, he records these transactions in the bank column of his cashbook immediately.

Correspondingly, the bank records them in the customer’s account maintained in its books. Then they are copied in a passbook and given to the customer. With the computerization of banking operations, bank statements (in lieu of passbook) are issued to the customers periodically.

Thus passbook is a record of the banking transactions of a customer with a bank. All entries made by a customer in his cashbook (bank column) must be entered by the bank in the passbook.

Hence, the balances as per bank column of the cashbook must agree with the balance as per passbook. Of course the balances will be equal and opposite in nature. For example, if the cash book shows a debit balance of Rs.5000, then the passbook must show a credit balance of Rs.5000 and vice versa. But in most cases, these two balances may disagree on account of various reasons.

Causes for Disagreement

The major cause for the disagreement is that certain items have been entered in one book only (i.e., cash book or pass book only). In other words certain debits or credits made in one book (say in cashbook) are omitted to be entered in the other book (say in passbook) and vice versa.

Such items may be listed as follows

  1. Cheques sent for collection or deposited into the bank but not yet collected. When a customer deposits cheques into bank, he makes entries (debit bank account) immediately in his cashbook. But the bank will credit the customer account in the passbook only when the cheques are realized. In that case the balances will disagree and cashbook balance will be more than the passbook balance.
  2. Cheques issued by the customer but not presented to the bank for payment. When a customer issues cheques to his suppliers/creditors, he will enter the transaction (credit bank account) immediately in his cashbook. But the banker will debit customer account only when the suppliers/creditors present the cheques for payment. Due to this gap, the two balances will disagree and cashbook balance will be more than the passbook balance.
  3. Bank charges and interest on overdraft are first debited in the passbook and recorded in the cashbook afterwards. This will cause for the disagreement and cashbook balance will be more than the passbook balance.
  4. Interest on bank credit balance and interest on investment, dividends, etc., and bills collected by the bank on behalf of the customer are first credited in the passbook and recorded in the cashbook later on. This makes the two balances to disagree and cashbook balance will be less than the passbook balance.
  5. Items like direct payments made by the bank as per standing instructions of the customer and dishonour of a bill discounted with the bank, etc., are first debited in the passbook and recorded in the cashbook later on. This will make the two balances to disagree and cashbook balance will be more than the passbook balance.
  6. Commitment of errors such as errors of omission or commission or in casting, carry forward, balancing, etc either in the passbook or cashbook or in both will cause for the disagreement in these two balances.

Entries in Pass Book

It is difficult to define precisely the decisive legal effects of entries shown in the pass book. When it is issued to customer and if he does not raise any objection, obviously it becomes “account stated” or “settled account” between him and the banker. But there has been a conflict of opinion regarding conclusiveness of the pass book regarding entries made therein. Sir John Paget is of the view that “the proper function of a pass book is to constitute a conclusive, unquestionable record of the transactions between banker and customer, and it should be recognised as such.” He cites Daveyness Vs Noble case in support of his view. In this case, it was stated that on delivery of the pass book to the customer, he examines it and if there appears an error or omission, sends it back for rectification or if not, his silence is regarded as an admission that the entries are correct. In Vagliana Brothers Vs Bank of England, also it was held that “the return of a balanced pass book by the customer without comments amounts to settlement of account.” So, the return of pass book by the customer renders as a stated and settled account as on the particular date of balancing.

But the legal position both in England and in India is quite different. According to recent judicial decisions in England and India, the entries in the pass book cannot be regarded as a conclusive proof of their accuracy and as settled account. Any entry in the pass book is open to comparison and verification by customer. The customer can legitimately question the entries at any time whenever he notices them. The banker is bound to make the suitable corrections. The entries wrongly made or included may be advantages either to the customer or the banker. Both the parties can indicate the mistakes or omissions to get them rectified.

So entries made up to date are prima facie evidence and not conclusive evidence. In Keptigulla Rubber Estates Co. Vs National Bank of India, it was held that “When a pass book is returned to the bank by the customer without objection, the account cannot be regarded as settled account and it is not binding on both the banker and customer”. In Mowji Vs Registrar of Cooperative Societies, Madras, it was stated that “the entries in the pass book can be regarded as prima facie evidence and not conclusive evidence.”

Thus entries in the pass book are not conclusive evidence of their correctness, in stating the position of customer’s account. They are subject to alternation on the basis of real facts.


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