If someone forges your signatures on cheque/s and withdraws money from your account, how will you recover the money? Police process is lengthy and uncertain but fortunately there is an easier and effective way.

by Hemant Godbole, IRAS, 30.12.2018 

If someone forges your signatures on cheque/s and withdraws money from your account, how will you recover the money? Police process is lengthy and uncertain but fortunately there is an easier and effective way.

To understand how Railways dealt with such a situation in a particular case, please read on.

<a href="http://irastimes.org/Article_pdf/Article%20%20by%20%20Mr.%20%20Godbole.pdf" target="_blank"> Click here to view Excerpts from an article published in magazine of Railway Staff College </a> <br> <a href="http://irastimes.org/Article_pdf/Letter%20by%20Mr%20%20Singaru%20to%20Railway%20Board.pdf" target="_blank"> Click here to view reference letter by Mr Singaru to Railway Board </a>

Dear friends,

From personal experience, I would narrate a case which dates back to 1995, when some culprit had fabricated cheque stationery, forged Railway Accounts Officer’s signatures and had taken away about Rs 4.95 crore.  Please see, how Railways recovered the money.

1. It was in February 1995, I was transferred from Western Railway HQ to Railway Staff College (RSC as it was then called), Vadodara as a faculty.

2. Sometime in June 1995, one Shri Bedekar, Deputy Financial Advisor &  Chief Account Officer   (Dy FA&CAO) of Western Railway, while speaking to me on phone on some other matters, asked me whether I was aware of the fraudulent encashment of cheques that recently took place in the Central Railway Mumbai. When I said, I was not aware, he narrated it as follows.

  A Manager of a Cooperative Bank’s Branch in Central Mumbai noticed that in previous couple of months, one customer who had recently opened an account with that Branch was depositing cheques issued in his favour by Central Railway, Mumbai and after clearance, he was immediately drawing almost entire amount. This had become a routine. These cheques were drawn on the Drawing Account that Central Railway had with Reserve Bank of India, Mumbai.

  The Manager thought that though the cheques were routinely getting cleared, he should confirm that there was nothing wrong. So he thought of meeting the Central Railway’s Accounts Officer whose signature the cheques bore.

  Therefore, one day, he took some such just deposited cheques and went to the Central Railway HQ at Mumbai CST. He called on one Mr A.G More, Accounts Officer, who had purportedly signed those cheques. The conversation between them was somewhat as follows:

 Manager: Sir, I am -------, Manager of a Branch of -------- Bank at central Mumbai.

 Mr More: OK, please take a seat, what can I do for you?

 Manager: We have an account held by -------- at our Branch for last -----months. The account holder has been receiving cheques drawn on RBI Mumbai, as issued by your office, depositing them in his account with us, and immediately on clearance, withdrawing almost entire amount.  I came to meet you just to check whether the transactions are genuine. Please examine these cheques which seem to be issued by you and confirm that these are your signatures.

 Mr More: (on perusing the cheques), yes these are my signatures.

 Manager: (With a sigh of relief), good, thank you Sir, this lends me some comfort. My concerns are addressed, (shaking hands with Mr More), thanks again, see you Sir.

 Mr More: No mention, see you.

(Suddenly Mr More thinks that he should confirm once more and he asks the Manager to wait for a while)

He says, “Let me confirm from the blank stationery of cheque-books issued by the RBI, which is in my custody”. He checks and to his horror discovers that the very blank cheques bearing the numbers, exactly as were borne by the cheques brought by the Manager were available in his custody. It was obvious that somebody had counterfeited the cheque stationery of RBI, forged the signatures of the Railway’s Accounts Officer (Mr A G More), so cleverly that even that Accounts Officer himself would find it difficult to confirm that the signatures were not his and that the cheque stationery was not genuine.

3. The hell let loose and in a few days’ time as Central Railway’s Accounts Office, with the cooperation of that Manager of the Bank, found that such fake cheques worth Rs 4.95 Crores were so encashed. They were pursuing the matter with the Police Department.  It was around this time that Mr Bedekar of Western Railway HQ, Churchgate, by chance, happened to mention about this issue to me on phone The conversation between him and me was broadly as under:

 Mr Bedekar: Incidentally, Sir, are you aware of a fraud played on Central Railway by some culprit recently?

 I:  No. I am not.

 Mr Bedekar then narrates the conversation between the Manager of the Bank and Mr More, the Accounts Officer of the Central Railway, as detailed above.

 I: Mr Bedekar, there is an arrangement of Railways with the Banks that  3 months after the encashment by the Banks, they are required to send the paid cheques to the respective Railways. As the matter is quite recent, hope that the paid cheques are still not received back from the RBI. Receipt of paid cheques helps us reconcile and find out what cheques are issued, which ones of them are paid by the Banks and which ones are still outstanding. This could also help us find out whether the cheques, not actually issued by Railways, are paid by RBI.

 Mr Bedekar:  Paid cheques are not yet received back.

 I: What is the Central Railway doing about this now?

 Mr Bedekar:  They are pursuing the matter with the Police Authorities.

 I: Why not approach the RBI, Mumbai and ask for the money to be paid back to Railways?

 Mr Bedekar: It’s a criminal case and culprit has to be proceeded against for recovery of money; how can we ask for the money back from the RBI as they also were the victims of such a fraud?

 I; Mr Bedekar, I am aware of some case law pertaining to High Court and Supreme Court cases, wherein the Bank that has paid moneys based on forged signatures,  are liable to pay the money involved,  to the customers.

 Mr Bedekar: How come you know such Court Cases?  Have you done LL B?

 I:  Though I had not done LL B, I had come across such cases while preparing for UPSC’s Civil Services Examination in early 1980s, taking Law as one of the Optional subjects. I will try to find out the case law.

 Mr Bedekar: That will be good.  Thank you

4. Next day, I received a call from Mr S. M Singru, FA&CAO of Western Railway who had been my boss a few months ago in Western Railway and who had also been my teacher in RSC 9 years ago in Railway Staff College.  He was a well-respected Officer for his disciplined and yet humane personality.  The conversation between him and me was somewhat like this:

 Mr Singru: Hemant, I learn that you know some case law related to Banks’ liability in event of encashment of forged cheques?

 I: Yes Sir, I had read some cases about a decade ago while preparing for Civil Services.

 Mr Singru: What is the gist?

 I: Sir, payments are required to be made by the Banks on behalf of the customers only if the customers have given the mandate to the banks by issuing the cheques. If the signatures on the cheques are not genuine, there is no such mandate. It is the Banks’ responsibility to check whether the signatures are genuine and honour the cheques only thereafter, if they are otherwise OK. In the current case, the signatures are not genuine and therefore, Central Railway should not bear the loss. It’s the RBI which should bear it.

 Mr Singru:  But the signatures were so much alike that even the Accounts Officer whose signatures were forged, found it difficult to differentiate them from his own signatures. How the RBI’s Officers can be expected to so differentiate?

 I: Sir, It’s true that the signatures were so similar that no suspicion arose in the minds of the Cheque Passing Officers of the RBI. Nevertheless, it’s a case of occupational hazard that RBI has to contend with. They can’t debit the Railways as forged signatures on the cheques gave no mandate to the RBI, howsoever genuine the signatures looked. Courts have held that no “mandate” can be claimed by the Banks based on forged signatures. Forged signature is   a “nullity” and Banks have to bear the loss.

 Mr Singru:  Great! Can you find out the case law? I am going to be at Baroda after a couple of days; kindly have it given to me then.

 I: Yes, Sir, I would certainly find out the latest case law. I am going out of Baroda that time, but I will have it given to you through somebody.

 Mr Singru:  Good, Thank you. 

 I: Thank you Sir.

5. Next day, with the avid assistance from an enthusiastic and ever helpful colleague, Mr Nigam Prasad, the Officer in charge of Staff College Library, I could find out a couple of latest cases from the books and also the actual Judgments from the All India Reporters, neatly preserved in the library. 

6. Before I went out of station. I left the relevant Judgments  with another ever enthusiastic and willing colleague of mine; Mr Hemant Deshpande of the Accounts Office of the RSC,  asking him to come on the weekend to deliver the papers to Mr Singru who was to be in the town.

7. Mr Singru then interacted with the Officers of the Central Railway and Railway Board, citing these Judgments. Copy of his letter to the Railway Board in July 1995 is attached.

8. Few months later, Mr Singru mentioned to me that he had happened to converse with the concerned Officer in the Railway Board, dealing with the legal matters (If I remember right, it was one Mr Subramanian), who had mentioned to Mr Singru that the case law given by me was quite relevant and useful.

9. Sometime in the middle of 1996, based on the claim and follow up by Central Railway and Railway Board,  RBI agreed to pay the entire amount to the Central Railway with the undertaking  that in case the Railways  get back the money through Police or any other sources; they will pay it to the RBI.  This undertaking was given and Railways got back the amount.

10. I also wrote an original Article in Hindi in October-December 1996 issue of  the Railway Staff College Patrika (an in-house Quarterly of RSC), clarifying various concepts regarding the relationship between the Banker and the Customer, and citing the cases evidencing the liability of the Bankers while honoring the cheques having forged signatures.  (Article in Hindi is attached)

Interested readers may do google search for the case law given in my Hindi article  as  specified below:

(1. Canara Bank vs Canara Sales Corporation & Others, AIR 1987, SC-1603 and

  2. Babulal Agarwalla vs State Bank of Bikaner and Jaipur, AIR 1989 Cal 92)

Though these days, due to net banking, the necessity of issuing cheques has reduced substantially, even now, large number of cheques are still issued / received by organizations and individuals. Therefore, I thought that knowing of relevant law could still be an interesting proposition and hence this post.

Thanks a lot for patiently reading.

Regards

Hemant Godbole

30.12.2018

x

Your PNR:

Flushed PNR or PNR not yet generated.