The question (15 marks)
A bank pays a cheque bearing the forged signature of its customer. Two years later it pays a cheque genuinely signed by the same customer but skilfully raised from Rs. 500 to Rs. 5,000 by his clerk. Advise the bank on its liability in each case. (15 marks)
MU Module 1, head 1.4; pack chapter on the banker-customer relationship; NI Act ss. 31, 85, 89.
Plan your answer on paper before you look at the authorities — issue first, then the rule, then apply it to these facts.
It tests Unit 1 · Banking Structure and the Insolvency and Bankruptcy Code of Law of Banking and Negotiable Instruments.
Authorities you will need
- Canara Bank v. Canara Sales Corporation
- London Joint Stock Bank Ltd. v. Macmillan
- Negotiable Instruments Act 1881, ss. 10, 31, 87, 89
- State Bank of India v. Shyama Devi
- Chatterton v. London and County Bank, and Morgan v. United States Mortgage and Trust Co.
How an answer is marked
A full-marks answer names the issue in one line, states the rule with its section, cites the authority, applies it to these facts and concludes — in that order. The app's model answer for this question is written in exactly that shape, with a checklist to mark your own attempt against.