Is this answer correct??
Ques : A induced B by fraud to draw a cheque payable to C or order. A obtained the cheque, forged C’s
endorsement and collected proceeds to the cheque through his Bankers. B the drawer wants to recover the
amount from C’s Bankers. Decide in the light of the provisions of Negotiable Instruments Act, 1881-
a. Whether B the drawer, can recover the amount of the cheque from C’s Bankers?
b. Whether C is the Fictitious Payee?
c. Would your answer be still the same in case C is a fictitious person?
Sol: According to Section 42 of the Negotiable Instruments Act, 1881 an acceptor of a bill of exchange drawn in a
fictitious name and payable to the drawer’s order is not, by reason that such name is fictitious, relieved from
liability to any holder in due course claiming under an instrument by the same hand as the drawer’s signature,
and purporting to be made by the drawer.
The word ‘fictitious payee’ means a person who is not in existence or being in existence, was never intended by
the drawer to have the payment. Where drawer intends the payee to have the payment, then he is not a fictitious
payee and the forgery of his signature will affect the validity of the cheque.
Applying the above, answers to the questions asked can be as under:
a. In this case B, the drawer can recover the amount of the cheque from C’s bankers because C’s title was
derived through forged endorsement.
b. Here C is not a fictitious payee because the drawer intended him to receive payment.
c. The result would be different if C is not a real person or is a fictitious person or was not intended to have the
payment.
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