B was having an account with Universal Bank. The bank got confirmation from B for the balance in the account. Later on, B brought to bank’s notice a fact that two forged cheques have been debited to his account. The bank, however, claimed that the customer has already confirmed the balance.

If a bank pays out on the basis of a forged signature on a cheque, it does so without its customer’s mandate and is generally required to make good any loss that the payment causes the customer. It does not matter how good the forgery is; a skilful forgery is no more valid than a crude one. That may seem unfair to a banking firm that acts in good faith on the basis of a skilful forgery – but if it were otherwise, a person could be bound by anyone who was able to make a good copy of their signature. Thus, the bank is liable for the forged cheques and it has to reverse the entry.