c/1228981/ Supreme Court of India State Bank Of India vs Shyama Devi on 5 May, 1978 Equivalent citations: 1978 AIR 1263, 1978 SCR (3)1009 Bench: Sarkaria, R Singh PETITIONER: STATE BANK OF INDIA Vs. RESPONDENT: SHYAMA DEVI DATE OF JUDGMENT05/05/1978 BENCH: SARKARIA, RANJIT SINGH BENCH: SARKARIA, RANJIT SINGH UNTWALIA, N.L. KAILASAM, P.S. CITATION: 1978 AIR 1263 1978 SCR (3)1009 1978 SCC (3) 399 ACT: Vicarious liability-- Legal principale witch governs the vicarious liability of an employer for the loss caused to a customer through the misdemeanour or negligence of an employee. HEADNOTE: The respondent opened a Savings Bank Account being No. 90001 with the appellants predecessor, the Imperial Bank of India at its Allahabad Branch, having been introduced to the Bank by one Kapil Deo Shukhla, an employee of the bank and a close neighbour of the respondent and a friend of her husband, Bhagwati Prasad. On a suspicion about the entries in the respondents Pass Book made by the employees of the Bank, which had been confirming and ratifying them from time to time, the respondent sent a notice dated August 13, 1948 to the defendant bank. The appellant bank replied by its letter dated 14-8-1948 explaining the deposit of several items making up to Rs. 1932-2-0 and denied the alleged deposits of Rs. 105, Rs. 4000, Rs. 8000/- and Rs. 100/said. to have been deposited through Kapil Dev Shukla. On November, 30, 1948, the respondent filed a suit in forma pauperis for the recovery of Rs. 1.5,547-10 As. together with pendente lite and future interest from the appellants predecessors. The Trial Court found, except for the items of Rs. 105 and. Rs. 4000/- entered in the pass-book the respondent had deposited other amounts mentioned in it and that the bank was bound by those entries. Holding that the rules were strictly enforced by the bank and if the bank had accepted an amount larger than the sum of Rs. 5,000/- in contravention of its Rules, the respondent was not debarred from claiming such deposit, the Trial Court decreed the respondents suit (in respect of two items) for Rs. 10,040- 10 As. together with simple interest on this amount from January 1st 1946 to August 14, 1947 @ Rs. 1-8-0 per cent per annum and from August 15, 1947 to December, 1948 at Rs. 7% per annum. It was further ordered that the respondent would get simple interest on the decretal amount after deducting Rs. 1986-2-As. which have been paid during the pendency of the suit, at 6% per annum. Proportionate costs was also awarded to the respondent. Aggrieved by the said orders, the bank appealed to the Allahabad High Court and the respondent filed cross-objections in respect of the amount of Rs. 4,000/- and Rs. 105/disallowed by the Trial Court. The High Court, on reappreciation of the evidence dismissed the banks appeal and allowed the respondents cross objections decreeing the suit for Rs. 14145-10 annas together with simple interest thereon from January 1, 1946 to August 14, 1947 @ Rs. 1-8-0 % per annum and from August 15, 1947 to December 1, 1948 at 6% per annum. It was further directed that respondent could get pendente lite simple interest from the appellant on, the decretal amount at 6% per annum and as the amount of Rs. 1,986-2-0 had been paid to the respondent on September, 1950 it would be deducted from the total amount found due to the respondent and the decretal amount scaled down pro tanto. Allowing the defendants appeal by certificate and dismissing the plaintiffs claim with regard to Rs. 11,000/- (consisting of items of Rs. 4,000/- plus Rs. 7,000/-) and interest thereon, the Court HELD : (1) The legal principle which governs the vicarious liability of an employer for the loss caused to a customer through the misdemeanour or negligence of an employee are : (a) The employer is not liable for the act of the servant if the cause of the loss or damage arose without his actual fault or privity or without the fault or neglect of his agents or servants in the course. of their employment; (b) the damage complained of must be shown to have been caused by any wrongful act of his servant or agent done within the scope or cou rse of the servant or agents employment even if the wrongful Act 1010 amounted to a crime; and (c) a master is liable for his servants fraud perpetrated in the course of masters business whether the fraud was for the masters benefit or not, if it was committed by the servant in the course of his employment. There is no difference in the liability of the master for wrongs whether for fraud or any other wrong committed by a servant in the course of his employment and it is a question of fact in each case whether it was committed in the course of the employment. [1015 G-H, 1016 A, 1017 A-C] Leesh River Tea Co. Lid & Ors. v. British India Steam Navigation Co. Ltd., [1966] 3 All E.R. 593; Lloyd v. Grace Smith & Co., [1912] A.C. 636 and United Africa Co. Ltd. v, Saka Owoada, [1955] A.C. 130 referred to. (2) In the instant case, the appellant bank was not liable to make good the loss of Rs. 7,000/- (part of Rs. 8,000/- entry) caused to the respondent by the act of K. D. Shukla, who was acting as an agent of the dent and not within the scope of his employment with the bank. Nor could the fact that false and fictitious entries to cover his fraud were made by Shukla in the pass-book of the respondent and in the ledger account of Bhagwati Prasad and Sons make the embezzlement committed by Shukla an act committed in the course of his employment with the Bank. [1022 E-G] (b) The cheque for Rs. 7000/- drawn by Bhagwati Prasad was not handed over in the normal course of business in the defendant-bank for transfer to respondents account in the regular manner. K. D. Shukla instead of depositing the cheque with the bank, as per the letter dated 7-10-1946 addressed to the bank manipulated to appropriate it himself. In such a situation, the act which caused the loss to the respondent could not be said to have been committed by Shukla in the course of his employment with the bank. At the most it could be said that the fact of his being an employee of the bank and a friend of Bhagwati Prasad gave him an opportunity to commit the fraud. [1022 B, D-E] Leesh River Tea Co. Ltd. & Ors. v. British India Steam Navigation Co. Ltd., [1966] 3 All E.R. 593 followed. (c) The onus was on the plaintiff to show that she paid the amount to an employee of the bank and was received by that employee in the course of employment. The false and fraudulent entry about the deposit of Rs. 4000/in the pass book could not shift the onus to the bank to prove the contrary. The alleged deposit of Rs. 4000/- by crossed cheque on 17-9-45 is not supported by the testimony of Bhagwati Prasad. There was no entry in the cash scroll and no receipt was produced in token of deposit. The entry is obviously false. [1019 C, H. 1020 A] JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2476 of 1968. From the Judgment and Decree order dated 3-3-6A of the Allahabad High Court of Judicature at Allahabad in First Appeal No. 343 of 1952. Y. S. Chitale, J. S. Arora, Ashok Grover and G. K. B. Chowdry for the Appellant. S. P. Bhargava and M. V. Goswami for the Respondent. The Judgment of the Court was delivered by SARKARIA, J.-This appeal on certificate is directed against a judgment and decree, dated March 3, 1964, of the High Court of Judicature at Allahabad. It arises out of these circumstances : On September 17, 1945, the respondent opened a Savings Bank Account, being No. 9001, with the appellants predecessor, the imperial Bank of India at its Allahabad Branch. She was introduced to the Bank by one Kapil Deo Shukla, who was an employee of the Bank, and admittedly a close neighbour of the respondent and a friend of her husband, Bhagwati Prasad. 1011 On November 30, 1948, the respondent made a petition in forma pauperis for the recovery of Rs. 15,547/10/- together with pendente lite and future interest from the Imperial Bank. This petition was later registered as a regular suit in 1950. The plaintiffs case, as ,pleaded, was as follows : The plaintiff had, apart from 1,932/2/- admitted by the defendand-Bank, the under-noted amounts which were deposited by her :from time to time with the Bank : Rs.105deposited on September 17, 1945 Rs.4000deposited on September 17, 1945 Rs.8000deposited on December 7, 1945 Rs.100deposited on June 20, 1946 ------------------- Rs.12205 ------------------- These amounts were entered in the respondents Pass Book by the ,employees of the Bank which had been confirming and ratifying those entries from time to time. Paragraph 3 of the plaint is material. It may be extracted There was a permanent clerk named Kapil Deo Shukla in the employ of the defendant Bank, who exercised much influence on other employees of the Bank and used to work at different counters. The Bank viewed his actions with approval and acted with negligence. The plaintiff as well as other constituents regarded him as an employee :and a responsible person of the Bank and quite often used to hand over the money and letter of instructions to him, while this clerk used to obtain the signature of the officer on the Pass Book as usual. The plaintiff used to believe that the money had been deposited and she was satisfied on perusal ,of the Pass Book. She had never any occasion for sus- picion. In August 1946, the plaintiffs husband felt some suspicion in the Banks affairs. She thereupon sent a notice, dated August 13, 1948 to the defendant Bank. The Bank replied by letter, dated August 14, 1948, in which it accepted the deposit of Rs. 1,932/- and denied the deposit and payment of the four items detailed above. The defendant-Bank was responsible for the acts and omissions of its employees which they did during their service, and if Shukla or any other employee of the Bank had committed embezzlement and defrauded the plaintiff, the Bank was responsible for making good that loss. The defendant-Bank in its written statement admitted that Kapil Deo Shukla was one of its employees and he used to work at the ,counter, but not at the Savings Bank counter, where the Savings account of the plaintiff was dealt with. Shukla was no longer in the service of the Bank. The Bank further pleaded that the amount of Rs. 12,205/- as detailed above, was never deposited with it, nor 1012 were the alleged deposits constituting this amount ever confirmed or ratified by it. The Bank further stated that only an aggregate amount of Rs. 1,932/- had been deposited by the respondent on the diverse dates, as indicated below : Rs.50- deposited on September 17, 1945 Rs.400- deposited on January 31, 1946 Rs.432- deposited on February 4, 1946 Rs.1000- deposited on April 23, 1946 Rs.50- deposited on July 23, 1946 The Bank further averred that the plaintiff was introduced to, the Bank by the said Kapil Deo Shukla who was her close neighbour and a fast friend of her husband, Bhagwati Prasad, and that if the plaintiff-respondent selected him as her agent or instrument for depositing money in the Bank and he had defrauded her, or if Kapil Deo Shukla acting in collusion with her husband, showed wrong amounts in her Pass Book, the Bank was not liable for any loss that might have accrued to her. The parties went to trial on these bases (1) Did the plaintiff deposit with the defendant the various sums of money mentioned in Para 4 of the plaint ? (2) Are these amounts mentioned in the plaintiffs Pass Book ? If so, is the defendant bound by the entries therein ? (3) Did the plaintiff make any deposit in contravention of any rule of the Bank ? If so, to what effect ? On Issues (1) and (2), the trial court found that, except for the items of Rs. 105/- and Rs. 4,000/- entered in the Pass Book, the respondent had deposited the other amounts mentioned in it and that the Bank was bound by those entries. On Issue No. (3), it was held that the Rules were not strictly enforced by the Bank, and if the Bank had accepted an amount larger than the sum of Rs. 5,000/in contravention of its Rules, the respondent was not debarred from claiming such deposit. In the result, the trial court, on July 8, 1952, decreed the respondents suit (in respect of two items) for Rs. 10,040/40/-, together with simple interest on this amount from January 1 1946, to August 14, 1947 @ Rs. 1/8/- per cent per annum, and from, August 15, 1947 to December 1948 @ Rs. 71-1- per cent per annum. It was further ordered that the respondent would get simple interest: on the decretal amount (after deducting Rs. 1,986/2/- which had been paid during the pendency of the suit) @ 6% per annum. Proportionate costs were also awarded to the respondent. 1013 Aggrieved, the Batik carried an appeal to the High Court of Judicature at Allahabad, and the respondent filed cross- objections in respect of the amounts of Rs. 4,000/- and Rs. 1051-, disallowed by the trial court. The High Court observed that the disputed amount of Rs. 8,000/shown in the Pass Book consisted of two items, the bigger of which was an amount of Rs. 7,000/- in the form of a cheque drawn by Bhagwati Prasad on the account of Bhagwati Prasad & Sons in Bharat Bank Ltd., Allahabad, and that Bharat Bank paid the amount of the cheque to Dass Bank Ltd., Allahabad, who credited it to the account of Lala Babu alias Kapil Deo Shukla, the aforesaid employee of the Imperial Bank. On these premises, the High Court found that the amount of the cheque was not actually deposited, first, in the account of Bhagwati Prasad & Sons, nor later in the Savings Account of the respondent, and that Kapil Deo Shukla had fraudulently taken the money of the cheque and credited it in his own account in the Dass Bank Ltd., Allahabad. Therefore, the respondent had to suffer because of the action of Kapil Deo Shukla, an employee of the Imperial Bank. Repelling the contention of the appellant-Bank, the High Court held on the basis of the evidence of the appellants witnesses Mahadeo Prasad and Narbada Prasad-that it could not be said that Kapil Deo Shukla was not acting in the course of his employment in the Bank. Regarding the entry of Rs. 100/- the High Court held that the initials against this entry purporting to be of L. Anthony, bad not been proved to be forged inasmuch as L. Anthony had not been examined, and that if any fraud had been committed by Kapil Deo Shukla, the Bank was liable for the same. In respect of the disputed deposit of Rs. 4,000/-, the High Court held that the appellant had not, disproved the statement of Bhagwati Prasad by having the accountant of the Calcutta National Bank summoned with the accounts relating to Bhagwati Prasad, and as such, it did not see any reason to disbelieve Bhagwati Prasads statement that the cheque for Rs. 4,000/- was given to the Bank on September 10,1945 to open a Savings Bank account in the name of the res- pondent, and that if K. D. Shukla cashed that cheque, also and had the amount deposited in his own account, the respondent could not be made to suffer for the fraud committed by KapilDeo Shukla in the course of his employment in the Bank. With regard to the item of Rs. 105/- also, the High Court accepted Bhagwati Prasads statement that amount ad been deposited by him on September 7, 1945. The High Court dismissed the Banks appeal and allowed the plaintiff-respondents cross-objections, decreeing the suit for Rs. 14,145/10/-, together with simple interest thereon from January 1, 1946 to August 14, 1947 at the rate of Rs. 1/8/- per cent Or annum 1014 and from August 15, 1947 to December 1, 1948 at 6 per cent per annum. It was further directed that the respondent could get pendente litse simple interest from the appellant on the decretal amount at 6% per annum. As the amount of Rs. 1,986/2 had been paid to the respondent on September 16, 1950, it would be deducted from the total amount found due to the respondent and the decretal amount scaled down pro tanto. Costs of both the courts were also awarded to the respondent. Hence, this appeal by the Bank on a certificate granted by the High Court under Article 133 of the Constitution read with sections 109 and 110 of the Code of Civil Procedure. Dr. Y. S. Chitale, appearing for the appellant, contends that the respondents case, as laid in the plain,, was that the plaintiff had entrusted K. D. Shukla, who was their friend, with moneys from time to time for depositing in her Savings Bank account. In such a situation, K. D. Shukla could not be said to have been acting in due course of his employment or an agent of the Bank but only as an agent of the respondent, and if K. D. Shukla did not deposit those amounts. as directed by the plaintiff, but misappropriated the same and to cover up his fraud made false entries in the Pass Book, the Bank was not liable. Stress has been laid on the fact that the disputed amounts. were never delivered by cheque or otherwise at the Banks counter. In this connection, reliance has been placed on the principles enunciated in Leesh River Tea Co., Ltd. & Ors. v. British India Steam Navigation Co., Lid.(1); Ruben and Ladenburg v. Great Fingall(2); and Morris v. C. W. Martin & Sons Ltd.(3) As against the above, Mr. Bhargav submits that the entries in the Pass Book showing the deposit of these amounts in the Savings Bank account of the plaintiff, had admittedly been made by K. D. Shukla, when he was an employee of the Bank. It is pointed out that there is evidence on the record to show that this K. D. Shukla had mani-pulated the accounts of three other depositors, also, and the Bank had reimbursed those constituents for the loss, and here is no reason why a discriminatory treatment should have been meted out to the plaintiff. It is argued that evidence on the record suggests that K. D. Shukla could be called upon to help other clerks, also, in transactions; with the Bank; that there could be no collusion between Bhagwatr Prasad and K. D. Shukla, because no man in his senses, would collude with another to cause deliberate monetary loss to himself or his wife.. It is emphasised that according to the statement of Bhagwati Prasad, the cheque for Rs. 4,000/- drawn by
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