Bank of Baroda Officer Cleared 47 Cheques with Forged Signatures, Now Court Gives Order

The Kerala High Court has ordered Bank of Baroda to refund customers who lost money after forged cheques were cleared by the bank. An officer at Bank of Baroda (earlier Vijaya Bank) cleared 47 cheques that had forged signatures. Out of these: 32 cheques were paid to third parties, making the money difficult to recover and 15 cheques were account payee cheques, which were eventually recovered.

The fraud went undetected for three months, causing huge financial losses to several customers. These customers first complained to the bank and later filed cases in court.

The bank said that it followed all proper procedures while clearing the cheques and should not be held responsible since an insider or someone close to the customers may have committed the forgery.

However, the Kerala High Court rejected all these arguments.

Key Points from the High Court Judgment

The High Court said that:

1. The Bank Was Negligent
   The court said that the bank did not properly verify the signatures on the cheques. Many of the forged cheques:
   • Did not match the specimen signatures kept by the bank.
   • In some cases, no specimen signatures were even available.
2. Forgery Confirmed by Vigilance Reports
   A vigilance officer’s report, accessed by the customers under the Right to Information Act (RTI), 2005, clearly showed that the cheques were forged. This report became a key piece of evidence in court.
3. Bank’s Refusal to Accept the Report Was Rejected
   The bank said the vigilance report was invalid because proper procedure wasn’t followed. But the court ruled that:
   • The bank did not prove what was wrong with the procedure.
   • The burden was on the bank to prove that the report was incorrect, but it failed to do so.
4. Legal Principle from the Supreme Court Applied
   The High Court cited the Supreme Court case Canara Bank vs. Canara Sales Corporation (1987), which said:
   • If a cheque’s signature is forged, the bank has no legal right to process or pay it.
   • Even if the customer was careless (e.g., lost cheque book), the bank still cannot escape responsibility unless the customer knowingly allowed the fraud.

Final Court Order

The trial court’s earlier decision was overturned. Bank of Baroda was ordered to refund the full amount of the forged cheques. The Court ordered bank to pay 6% interest per year from the date the case was filed until full recovery. The bank was also ordered to pay legal costs.

Why Court ruled against Bank

1. Burden of Proof on the Bank

The court clarified that once a forgery is proved:

• The bank must prove it wasn’t at fault.
• The bank cannot blame the customer unless it proves the customer was involved or ignored signs of fraud.

2. Internal Reports Can Be Used as Evidence

The bank’s own internal vigilance reports were used in court against it. The judgment makes it clear that if a report points to negligence, the bank must prove why it is wrong—just denying it is not enough.