Liability of drawee bank for forged check

Q: Can my bank recover the amounts they paid to a forged check?

A: No. Banks are precluded from recovering the amount they paid because a forged signature is wholly inoperative and payment made through or under such signature is ineffectual or does not discharge the instrument (Section 23, Negotiable Instruments Law). Banks are in a superior position to detect the forgery considering that they have your signature card on file from which they can compare the signature appearing in the check. However, if you are guilty of contributory negligence, the loss can be apportioned between you and the bank. Furthermore, if the proximate cause of the forgery can be attributed solely to your own negligence (e.g. completely entrusting your checkbooks and verification of statement of accounts to your secretary), you are precluded from setting up the forgery and the bank can recover the amount it paid through or under such forged signature.