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    Question

    A issues a cheque to B. B loses the cheque. C finds the

    cheque and forges B’s signature to endorse it to D, who takes it in good faith and for value. Under the NI Act, 1881: 
    A D is a Holder in Due Course and can sue A. Correct Answer Incorrect Answer
    B D is not a Holder in Due Course because a forged signature is a nullity. Correct Answer Incorrect Answer
    C A is liable to D because D took it for value. Correct Answer Incorrect Answer
    D The bank is liable to pay D regardless of the forgery. Correct Answer Incorrect Answer
    E C is discharged from all liability. Correct Answer Incorrect Answer

    Solution

    Forgery conveys no title. Section 58 of the NI Act and common law principles dictate that a person claiming through a forged endorsement cannot be an HDC, as the chain of title is broken. A forged signature on a negotiable instrument is considered "wholly inoperative" under the law. This means that no right to retain the instrument, give a discharge for it, or enforce payment against any party can be acquired through or under that forged signature

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