Post offices, banks vicariously liable for fraud, wrongs by employees during employment: Supreme Court

The Supreme Court on Monday observed that a post office can be held vicariously liable for the acts of its employees done during the course of their employment [Pradeep Kumar And Another v. Postmaster General And Others]. .A three-Judge Bench of Justices L Nageswara Rao, Sanjiv Khanna and BR Gavai clarified that the post office shall be entitled to proceed against the defaulter officers for the loss caused due to the fraud or wrongful act, but this would not absolve them from their liability."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," the Bench stated. However, in order to hold a post office or bank vicariously liable for the acts of servant/employee, it shall be necessary to establish that the latter perpetrated a fraud or wrongful act during the course of employment.The Court was hearing an appeal assailing the order of the National Consumer Disputes Redressal Commission (NCDRC) that had dismissed the complaint filed against the post office authorities, and held that authorities cannot be held vicariously liable for the fraud committed by their employee with respect to encashment of Kisan Vikas Patras (KVPs)..BackgroundAround the year 1995 and 1996, the appellants had purchased Kisan Vikas Patras with the combined face value on maturity of ₹32.60 lakh. 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.In February 2000, the appellants had approached the postmaster, Head Post Office Chowk, Lucknow, with the request to transfer the KVPs to the Chowk Post Office, Lucknow. The officer informed the appellant that the transfer process would be time-consuming and cumbersome and would require several visits to the post office. The officer recommended the appellant take the services of Rukhsana, an agent appointed by the State of Uttar Pradesh and associated with the post office.On March 3, 2000, as per Rukhsana's instructions, the appellants signed original KVPs on the backside and handed over the same along with Monthly Income Scheme passbook to her, against which she provided a document confirming receipt of the KVPs.In June 2000, after learning that Rukhsana had cheated several investors and had been arrested by the police, the appellants made several enquiries and found that the KVPs were already cashed. Moreover, it was revealed in the inquiry that the sub-postmaster of the post office was also hand in glove with Rukhsana..Aggrieved, the appellants moved the NCDRC seeking the prayer that the respondents (including the post office) and Rukhsana should be directed to pay the appellants ₹ 25,54,000/- along with interest @ 18% per annum.However, the NCDRC did not find involvement of the officer of the post office in the case, as has been arrayed in the instant case by the appellants.Aggrieved, the appellants moved the present appeal before the Supreme Court..Findings of the Supreme CourtThe Supreme Court considered the question of whether the wrongs committed by the officer of the post office will ensure the liability of the post office as well.Relying on its 1978 decision in State Bank of India (Successor to the Imperial Bank of India) v. Smt. Shyama Devi, the top court took the unanimous view that 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.While holding the post office vicariously liable for the acts of its employee, the Court observed that:"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, therefore, set aside the order passed by the NCDRC dismissing the consumer complaint. .Advocate-on-Record Namita Choudhary, advocates Aditya Kumar Choudhary, Gurmehar Vaan Singh and Rajesh Singh Chauhan appeared for the appellants.Advocates-on-Record Gurmeet Singh Makker and Kedar Nath Tripathy appeared for the respondents..[Read Judgment]