If a holder obtains payment of a bill which is affected with a forged signature he cannot retain the money. The rightful owner of the bill can demand to have the bill given up to him and can sue the acceptor thereon. The acceptor will have a right of action against the holder for the return of the money he paid to him. The holder will look to the person from whom he obtained the bill for repayment, and that person will then look to his transferor, but the person who actually took the bill through the forged indorsement will have no one to proceed against on the bill. If the holder, in such a case as that referred to, to whom the acceptor paid the forged bill, cannot be found, the acceptor will lose the money as he is liable to the true owner.
If a banker pays a bill bearing a forged acceptance or a forged indorsement (either of the payee or any indorsee) he cannot debit his customer with the amount. A banker ought to know whether his own customer's (the acceptor) signature is genuine, but the banker is not particularly concerned with the genuineness of the drawer's signature, as the acceptor by accepting the bill is pre cluded (Section 54) from denying to a holder in due course the genuineness of the drawer's signature.
If a banker has paid an acceptance and one of the indorsements is subsequently found to have been forged, the banker cannot recover from the person to whom he paid the money, nor can he hold the acceptor liable for the amount.
A forged signature cannot be ratified, but a person may be precluded from saying that his signature is forged if he refrains, when he knows that a banker is relying upon a forged signature, from informing the banker of the fact until his position is altered for the worse.
Where a banker on whom a cheque is drawn pays it in good faith and in the ordinary course of business, he is not liable for the indorsement of the payee or any subsequent indorser, even though the in dorsement is forged. (Section 60, Bills of Exchange Act, 1882.) But if a banker gives cash for a cheque drawn upon another banker, he is not protected by Section 60, and is liable like any other person.
Protection is afforded by Section 80, to a banker on whom a crossed cheque is drawn, if he pays it in accordance with the crossing.
Where a drawer's signature is forged, the banker paying such cheque cannot debit it to the drawer's account. A banker is responsible if he pays a forged cheque, unless he can show that he was misled by his customer.
A banker must give notice of a drawer's forged signature on the day he receives such a cheque.
A banker collecting a crossed cheque for a customer is protected by Section 82 of the above Act.
Where a crossed cheque with a printed form of receipt thereon is payable only when that receipt is duly signed, and the signature on the receipt is forged, the order to pay not being unconditional and the document therefore not a cheque, as recog nised by the Bills of Exchange Act, the banker collecting the money for a customer is not protected by that Act ; but protec tion is given by the Revenue Act, 1883. (See RECEIPT ON CHEQUE.) A banker is protected by Section 19 of the Stamp Act, 1853, against paying one of his own drafts bearing a forged indorsement. Of course, if the banker knows the indorse ment is forged, he must not pay the draft. (See DRAFT ON DEMAND.) Making a false entry in a pass book with intent to defraud is recognised by law as a forgery of an accountable receipt.
If a transfer of stock is made by the Bank of England under a forged power of attorney, the Bank is liable to replace the stock, unless it can be proved that there was such negli gence on the part of the stockholder as to prevent him from disputing the transfer. (See FORGED TRANSFER.) With respect to the forgery of a share warrant or coupon, Section 38 of the Com panies (Consolidation) Act, 1908, enacts that if any person with intent to defraud, forges or alters or utters any share warrant or coupon, or falsely personates any owner of any share or interest in any company, or if any person, without lawful authority, en graves on any plate any share warrant or coupon, he shall be guilty of felony.
The late J. W. Gilbart records that the first instance of the forgery of a bank note occurred in 1758.