Vicarious Liability of Banks, Post Offices for the Fraud, wrongs by employees during employment: SC

Vicarious Liability of Banks, Post Offices for the Fraud, wrongs by employees during employment: SC

The Supreme Court ruled that there will be vicarious liability of Banks, Post Offices for the Fraud or wrongs done by employees during their employment. 


As per the appellants, in the last week of February 2000, they had approached the PostMaster, Head Post Office Chowk, Lucknow, with the request to transfer the KVPs to the Chowk Post Office, Lucknow. The appellants were asked to apply with the Chowk Post Office. They were informed that the transfer request would be allowed after due verification of the KVPs and the identity/signatures on the transfer application from the record with the issuing post office. The process, they were forewarned, being time-consuming and cumbersome would require several visits to the post office. The PostMaster, Head Post Office Chowk, Lucknow had recommended that they take services of Rukhsana, an agent appointed by the State of Uttar Pradesh and associated with the post office. As per the appellants, they were misled to believe that without the help of an agent like Rukhsana the transfer would not be possible and she would take care of their interest. 


The three judge bench of Justice L. Nageswara Rao, Justice Sanjiv Khanna and Justice B.R. Gavai found that the NCDRC had been rather harsh in holding that the appellants were silent and, therefore, guilty of negligence. The finding overlooks that no one would like to avail services of a stranger or an agent if the work, that is, transfer of KVP certificates, could be otherwise handled and done with ease.

The court said that they had belief that the post office would take care of their interest, act in good faith and would not be negligent.

The court concluded that the payment was made in violation of the statutory mandate of Section 10 of the NI Act and, therefore, there is no valid discharge under clause (c) to Section 82 of the NI Act. 

The court stated that the Post Office, as an abstract entity, functions through its employees. Employees, as individuals, are capable of being dishonest and committing acts of fraud or wrongs themselves or in collusion with others. Such acts of bank/post office employees, when done during their course of employment, are binding on the bank/post office at the instance of the person who is damnified by the fraud and wrongful acts of the officers of the bank/post office. 

The court set aside the impugned order passed by the NCDRC dismissing the consumer case filed by the appellants and issued certain directions by allowing the consumer case. 

Case title: Pradeep Kumar and Anr. v/s Postmaster General and Ors.

Citation: CIVIL APPEAL NOS. 8775-8776 OF 2016

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