Page 19 - Banking Finance August 2025

LEGAL UPDATE

HC: Banks liable for effect-

ing payment on forged
cheques L L L L Lee ee egg gg gaa aa all ll l
Kerala high court has held that banks
are liable for effecting payment on
forged cheques and, in one case, di-
rected the Bank of Baroda to return News
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 make payment, and the bank cannot the matter had seen repeated judicial
filed by Minar Textile Industries, evade liability by citing customer negli- recusals in the high court, it was now
Kozhikode, and its sister concerns. The gence, such as carelessly leaving a finally listed for hearing.
petitioners had challenged the trial cheque book accessible to third parties. "We are informed that the matter is
court's order dated Jan 30, 2015, HC also noted that all incidents related listed before the Bombay High Court on
which dismissed their suits seeking re- to the forged cheques took place July 14. In view of this, we are not in-
covery of the amount.
within a span of three months, and clined to entertain this petition," the
According to the petitioners, cheques that the petitioners acted promptly court said in its order. It added that
bearing forged signatures of the upon discovering the fraud. There was Jagdishan's quashing plea was earlier
authorised signatory were negligently no evidence to suggest that the peti- listed on June 18, 25, and 26, but could
honoured by Vijaya Bank (now merged tioners were aware of the forgery be- not be taken up due to judges recus-
with Bank of Baroda). While 47 fore the encashment of the cheques. ing themselves. "In this background,
cheques were encashed in total, 32 Accordingly, the court held that the
were found to have been paid to third bank was liable for having effected we hope and trust that the high court
parties, causing a loss of Rs 57 lakh to payment on forged cheques and set will take up the matter on the desig-
the petitioners. The suits were insti- aside the trial court's order. nated date."
tuted for the recovery of these Senior advocate Mukul Rohatgi, ap-
amounts, but the trial court dismissed SC declines to quash FIR pearing for Jagdishan, sought urgent
them, prompting the appeal. relief from the Supreme Court, con-
against HDFC Bank MD tending that a "frivolous FIR" had been
In response, the bank contended that
the forgery had been committed by an The Supreme Court refused to grant filed to "harass" the bank's top execu-
employee of the petitioners and that any interim protection to HDFC Bank tive. "I am the MD of the bank and I
it could not be held liable. High court Managing Director and CEO Sashidhar have nothing to do with the inter se
rejected this defence, holding that the Jagdishan in a bribery case linked to disputes among the trustees of Lilavati.
contention was unsustainable in view the governance dispute at Mumbai's A frivolous FIR has been filed against
of the binding principles laid down by Lilavati Hospital, directing him instead me. No proceedings should be taken
the Supreme Court regarding a to raise all arguments before the out against me. I am suffering and the
banker's liability on forged cheques. Bombay High Court, where his plea to bank is suffering," Rohatgi told the

The court relied on the apex court's quash the criminal case is scheduled to bench. He further expressed appre-
be heard on July 14.
ruling in Canara Bank vs Canara Sales hensions of coercive action, stating,
Corporation (1987), which held that if A bench of Justices PS Narasimha and "The idea is to summon the MD to the
the signature on a cheque is not genu- R Mahadevan, while declining to inter- police station and create havoc for the
ine, there is no mandate to the bank to vene at this stage, noted that although bank." T

BANKING FINANCE | AUGUST | 2025 | 17