LEGAL News
HC: Banks liable for effecting payment on forged cheques
Kerala high court has held that banks are liable for effecting payment on forged cheques and, in one case, directed the Bank of Baroda to return the lost amount of Rs 57 lakh to the petitioners, along with 6% interest per annum, for having encashed cheques bearing forged signatures.
A bench of Justices Sathish Ninan and P Krishna Kumar passed the order on June 13 while allowing the petitions filed by Minar Textile Industries, Kozhikode, and its sister concerns. The petitioners had challenged the trial court’s order dated Jan 30, 2015, which dismissed their suits seeking recovery of the amount.
According to the petitioners, cheques bearing forged signatures of the authorised signatory were negligently honoured by Vijaya Bank (now merged with Bank of Baroda). While 47 cheques were encashed in total, 32 were found to have been paid to third parties, causing a loss of Rs 57 lakh to the petitioners. The suits were instituted for the recovery of these amounts, but the trial court dismissed them, prompting the appeal.
In response, the bank contended that the forgery had been committed by an employee of the petitioners and that it could not be held liable. High court rejected this defence, holding that the contention was unsustainable in view of the binding principles laid down by the Supreme Court regarding a banker’s liability on forged cheques.
The court relied on the apex court’s ruling in Canara Bank vs Canara Sales Corporation (1987), which held that if the signature on a cheque is not genuine, there is no mandate to the bank to make payment, and the bank cannot evade liability by citing customer negligence, such as carelessly leaving a cheque book accessible to third parties.
HC also noted that all incidents related to the forged cheques took place within a span of three months, and that the petitioners acted promptly upon discovering the fraud. There was no evidence to suggest that the petitioners were aware of the forgery before the encashment of the cheques. Accordingly, the court held that the bank was liable for having effected payment on forged cheques and set aside the trial court’s order.
Taking into account prevailing interest rates in banking transactions, HC directed the Bank of Baroda to return the amount of Rs 57 lakh to the petitioners with interest at 6% per annum from the date of the suit till the date of realisation.
SC declines to quash FIR against HDFC Bank MD
The Supreme Court refused to grant any interim protection to HDFC Bank Managing Director and CEO Sashidhar Jagdishan in a bribery case linked to the governance dispute at Mumbai’s Lilavati Hospital, directing him instead to raise all arguments before the Bombay High Court, where his plea to quash the criminal case is scheduled to be heard on July 14.
A bench of Justices PS Narasimha and R Mahadevan, while declining to intervene at this stage, noted that although the matter had seen repeated judicial recusals in the high court, it was now finally listed for hearing.
“We are informed that the matter is listed before the Bombay High Court on July 14. In view of this, we are not inclined to entertain this petition,” the court said in its order. It added that Jagdishan’s quashing plea was earlier listed on June 18, 25, and 26, but could not be taken up due to judges recusing themselves. “In this background, we hope and trust that the high court will take up the matter on the designated date.”
Senior advocate Mukul Rohatgi, appearing for Jagdishan, sought urgent relief from the Supreme Court, contending that a “frivolous FIR” had been filed to “harass” the bank’s top executive. “I am the MD of the bank and I have nothing to do with the inter se disputes among the trustees of Lilavati. A frivolous FIR has been filed against me. No proceedings should be taken out against me. I am suffering and the bank is suffering,” Rohatgi told the bench. He further expressed apprehensions of coercive action, stating, “The idea is to summon the MD to the police station and create havoc for the bank.”
But the court was not convinced. “You make all these arguments before the high court. It is unfortunate that many judges have recused, but it is listed now on July 14,” the bench retorted.
The apex court’s order came a day after it agreed to hear Jagdishan’s petition seeking quashing of an FIR lodged against him by the Mumbai Police on the basis of a complaint filed by the Lilavati Kirtilal Mehta Medical Trust, which runs the prestigious Lilavati Hospital in Bandra.
