1. Two Legal Domains Where This Fails

A. Bank Paying on Instructions of Rogue Director / Agent

B. Corporate Officer Signing Document Without Board Authority

2. Leading Global Principle - Quincecare Duty - UK

Case 1: Barclays Bank plc v. Quincecare Ltd [1992] 4 All ER 363 - Foundation

Facts: Quincecare Ltd's Chairman, as agent, fraudulently diverted company's £400k to his own account. Bank executed instruction though it was on inquiry notice that director was defrauding company.

Held - Steyn J: Bank owes implied duty to exercise reasonable care and skill when executing customer's instructions, which includes not executing payment instructions if bank is put on inquiry that instruction is attempt to misappropriate funds. Bank must make inquiries to verify customer authorisation.

This is Quincecare Duty.

Case 2: Philipp v Barclays Bank UK plc [2023] UKSC 25 - Supreme Court Narrows Duty

Facts: Mrs Philipp, victim of Authorised Push Payment (APP) fraud, instructed Barclays to transfer £700k to UAE account controlled by fraudster. Claimed bank should have verified authority behind instruction and refused.

Held - Unanimous Supreme Court (Lord Leggatt):
Duty is limited to internal fraud paradigm - where agent of customer defrauds customer. Quincecare duty does NOT apply where customer herself, even if deceived, gives clear instruction. Bank's duty is to obey customer's instruction unless agent lacks apparent authority.

Court clarified:

Provided instruction is clear and is given by customer personally or by agent acting with apparent authority, bank must execute. Failure to verify authority of agent = liability, but failure to protect customer from her own mistake = no liability.

Case 3: Hamblin and another v Moorwand Ltd [2025] EWHC 817 (Ch)

Payment Service Provider failed to verify authority behind instructions in APP fraud. Court applied Quincecare - PSP must verify where reasonable grounds to believe agent is defrauding customer. Derivative action allowed.

Case 4: PT Asuransi Tugu Pratama Indonesia v Citibank NA [2023] HKCFA 3 - Hong Kong Court of Final Appeal

Landmark on verifying authority of authorised signatory.

Facts: Indonesian insurance company's Finance Director Mr. Harsono and another director gave dishonest payment instructions to Citibank to transfer $51m to their own accounts. Bank had information that directors were defrauding company.

Held: Bank liable. Bank was in possession of sufficient information to appreciate or suspect instructions were given fraudulently. Bank failed to make inquiries that reasonable person would have made to verify authority. This is modern application of Quincecare in Asia.

3. Indian Law - Failure to Verify Board Authority

Indian Courts apply Doctrine of Indoor Management - Turquand Rule with exceptions.

Case 5: V. Shankar v. SEBI - SAT Mumbai - Appeal No. 283 of 2022 - 5 May 2025 - Compliance Officer Liability

Facts: V. Shankar, Company Secretary & Compliance Officer of Deccan Chronicle Holdings Ltd (DCHL), signed buyback public announcement on 6 May 2011 based on manipulated financials approved by board. SEBI imposed Rs. 10 lakh penalty for misleading disclosure, holding he signed without verifying accuracy of accounts.

Held - SAT reversed SEBI:
Tribunal held Compliance Officer is NOT liable for fraudulent accounts unless proven he was party to fraud. Role of compliance officer under SEBI Buyback Regulations does not extend to re-auditing or verifying financial accounts approved by BOD and certified by statutory auditors.

Ratio for Authority: Person signing on behalf of company based on board-approved documents is entitled to rely on apparent authority of board / auditors, unless he has reason to suspect fraud. Failure to verify is not automatic liability if verification was beyond scope.

But contrast:

Case 6: RBI Circular on Fraud - Laxmi Vilas Bank / Karur Vysya Bank Cases - Banks Executing Instructions Without Board Resolution

RBI inspection reports 2022-24 penalized banks for executing corporate customer's instructions (e.g., invocation of Letter of Credit, change in authorized signatory) based on email from single director without board resolution or verification of authority.

Penalty: Rs. 1-2 Crore under BR Act Section 47A.

Example: Canara Bank v Canara Sales Corporation (1987) 2 SCC 666 - Supreme Court - Bank paid cheques with forged signatures of company, without verifying authority. SC held bank liable for negligence - cannot debit customer account if failure to verify authority behind instructions.

Case 7: Morris vs Kanssen [1946] AC 459 - UK - Exception to Indoor Management

Indoor management rule says outsider can assume internal procedures complied with. But exception: If outsider has knowledge of irregularity or is put on inquiry, he must verify authority.

Applied in India in Lakshmi Ratan Cotton Mills v J.K. Jute Mills - AIR 1957 All 311 - Company secretary issued share certificate without board authority. Court held third party who knew secretary had no authority cannot rely on indoor management.

4. Checklist - What Verification Is Required?

To avoid liability, courts expect:

For Banks:

1. Maintain updated board resolution / mandate for authorised signatories
2. Verify change in signatory with board resolution + MCA Form MGT-7 verification
3. If instruction from single director for large value, call back to another director / CFO
4. If on inquiry notice (unusual amount, to personal account, foreign account), make inquiry under Quincecare

For Company Officers:

1. Check Articles, Board Resolution, Delegation of Power
2. Ensure instruction in writing with apparent authority
3. If instruction from promoter to sign false disclosure, refuse and document dissent