Facts of the case
- A cheque is made payable to “R or Order.”
- The cheque is stolen by a thief.
- The thief forges R’s signature and presents the cheque to the banker.
- The banker pays the amount in due course to the thief.
Issues in the case
- Whether R can recover the amount paid by the banker against the forged endorsement.
- Whether the banker is liable for making payment on a forged cheque.
Principles associated with the case
- A banker must exercise due diligence in verifying endorsements before making payment.
- Payment made on a forged endorsement is generally considered a wrongful payment.
- Under the Negotiable Instruments Act, payment made under a forged endorsement is not a valid discharge of the banker’s liability to the true payee.
- The true payee (R) can recover the amount from the banker unless the banker can prove payment was made in good faith and without negligence.
Judgement
- R can recover the amount from the banker.
- The banker is liable for the wrongful payment as the payment was made on a forged signature.
- The banker failed to exercise proper care and due diligence in verifying the endorsement, thus cannot deny liability.