Forged Instruments and Forged Indorsements

Forgery is the fraudulent making or alteration of a writing to the prejudice of another man’s right. The indorsement through which a holder in due course claims must he genuine. This principal is of universal application. A forged indorsement is not considered as an indorsement. 

If a bill or note be negotiated by means of a forged indorsement, a person claiming under that indorsement, though he may be a purchaser for value in good faith, cannot claim the right of a holder in due course. There is a vital distinction between defect in title and no title at all, the latter being the case where the indorsement is forged. The payee of a certain hundi not payable to bearer, who employed a broker for sale was induced by him to indorse the hundi in favour of X. The broker then successively forged the indorsement of X and of some fictitious persons, and sold the hundi to Y. Later Y realised the amount from the drawee. In a suit by the payee against the broker and Y for the amount of the hundi, held, that the plaintiff was entitled to a decree against both. Though Y is a bonafide purchaser for value, he was not a holder in due course and could not escape liability.

Estoppel: A forged signature cannot be validated by ratification, but a person may, by his conduct, be precluded from setting up that his signature or the signature of any other person is a forgery.

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