Post Office/Bank Can Be Held Liable For Frauds Or Wrongs Committed By Its Employees During The Course Of Their Employment

In PRADEEP KUMAR AND ANOTHER vs POST MASTER GENERAL AND OTHERS, appeal was filed before the Supreme Court against the judgment of the NCDRC dismissing their complaint registered as Consumer Case No. 148 of 2001 against the Post Master General & Senior Superintendent of Posts  of UP, Post Master and M.K. Singh, Sub-Post Master, Post Office, Yahiyaganj, Lucknow.

Background

The appellants during the years 1995 and 1996 had purchased Kisan Vikas Patras of  Rs.32.60 lacs; however, the KVPs were encashable at the post offices before the maturity date at a lower value after the stipulated/lock-in period of holding. Intending to transfer the KVPs to Chowk Post Office, Lucknow, the appellants used the service of an agent named Ruksana and signed the original KVPs on the backside and handed them over to her. Subsequently, the appellants learnt that Rukhsana had cheated several investors and had been arrested by the police. Thereupon, the appellants made enquiries and discovered that the KVPs had been encashed from the Yahiyaganj Post Office and Lal Bagh Post Office. A sum of Rs. 25,54,000/- was paid in cash to Rukhsana, who had pocketed the entire amount. The appellants state that their enquiries reveal involvement of M.K. Singh, Sub-Post Master, Post Office, Yahiyaganj, the fourth respondent, who, contrary to the rules, had paid the maturity proceeds in cash and not by cheque in the names of the appellants. Not getting any response from the Respondents, the appellants filed a complaint before the NCDRC. Through a written statement, the Respondents contested the complaint stating that the appellants, having signed the KVPs in token of receipt of the discharge value, cannot complain. That Rukhsana was not an agent appointed by the post office. The contract and understanding were between the appellants and Rukhsana, and the fraud having been committed by Rukhsana in her individual capacity, the respondents are not vicariously liable.

In the impugned judgment, the NCDRC, while accepting that some negligence could be attributed to the respondents in making the payment, dismissed the complaint against the respondents holding that they had acted in accordance with Rules 14 and 15 of the Kisan Vikas Patra Rules, 1988. Rule 19, requiring payment by cheque when discharge value 

Elucidation on the aspect of care required to be exercised by the bankers to seek statutory protection under Section 10 of the NI Act is to be found in Indian Overseas Bank v. Industrial Chain Concern,11 wherein extensive reference has been made to the earlier case laws, Halsbury’s Laws of England and English decisions. When deciding whether the bank is negligent it is necessary to see whether the rules or instructions of the bank are followed or not, though this may not always be conclusive. Till an account is opened, banker and customer relationship is not created, but once the account is opened contractual relationship is created. Moreover, mutual rights and obligations between the banker and customer are also created under law. In case of fraudulent encashment of cheques, the collection and payment embraces the is more than Rs. 20,000/-, came into force and is effective from 28- 29th August 2001, whereas in the present case, the KVPs were encashed at an earlier point of time. Not completely believing the Appellants, the NCDRC held that the appellants have acted with open eyes and at their own peril and risk having depended upon an unknown agent. 

Judgement

The Supreme Court disagreed with the NCDRC. On the issue of whether a Post Office/Bank would be liable for the wrongs and act of its employees, the Supreme Court referring to judgment in State Bank of India (Successor to the Imperial Bank of India) v. Smt. Shyama Devi, held that 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. Such acts of bank/post office employees being within their course of employment will give a right to the appellants to legally proceed for injury, as this is their only remedy against the post office. Thus, the post office, like a bank, can and is entitled to proceed against the officers for the loss caused due to the fraud etc., but this would not absolve them from their liability if the employee involved was acting in the course of his employment and duties. In this matter, the employee M. K. Sinh had connived with Rukhsana to commit the fraud. For the employer to be liable, it is not enough that the employment afforded the servant or agent an opportunity of committing the crime, but what is relevant is whether the crime, in the form of fraud etc., was perpetrated by the servant/employee during the course of his employment. Once this is established, the employer would be liable for the employee’s wrongful act, even if they amount to a crime. Whether the fraud is committed during the course of employment would be a question of fact that needs to be determined in the facts and circumstances of the case.