Bank Vicariously Liable For Conduct Of Its Employees: Supreme Court

The Supreme Court recently held that recipients of a fixed deposit cannot suffer at the cost of the criminal conduct of the Bank officials and that, in such an event the Bank would be held vicariously liable for the conduct of their employees.The bench of Justices P.S. Narasimha and Aravind Kumar, while hearing an appeal against the order of the National Consumer Disputes Redressal Commission (NCDRC), observed that the impugned order overlooked crucial findings of the District Forum on the aspect of criminal conduct by Bank employees which prevented the appellants from retrieving the Fixed Deposit amounts. The matter pertains to a consumer dispute between the District Cooperative Bank Ltd. in Varanasi and their customer (appellants) over the non-release of fixed deposit receipts worth Rs. 1,60,000. The appellants claimed that the bank wrongly prevented them from withdrawing their deposited money. The matter was then filed before the District Consumer Forum, which favoured them, ordering the bank to return the money with 15% interest and an additional Rs. 25,000 for damages. Aggrieved by the said decision, the bank appealed to the State Commission Consumer Dispute Redressal Forum in Lucknow. However, this appeal was rejected. The bank then preferred a revision before the NCDRC, which overturned the previous decisions on 21.10.2020.According to the NCDRC, records from the bank did not show any money being deposited on the date the fixed deposits were supposedly made (10.07.1993). They suggested that the fixed deposit receipts (FDRs)might have been obtained through fraudulent means since there's a record of the deposit amount being transferred in the bank's ledger, but no corresponding record in the day book or supplementary book. This discrepancy was discovered during an internal investigation by the bank. It was also noted that the FDRs which were issued did not bare the signature from the manager who was not given authority to issue the particular FDRs from the Bank Authorities. The Supreme Court in the appeal filed by the bank customers however observed that as per the findings of the District Forum, the appellants had in fact handed over Rs. 1,60,000/- to the Bank's officials. It was further noted that as per an enquiry committee set up by the Bank, criminal proceedings were also initiated against the concerned bank officials followed by a due course adopted by the bank.“It is seen from the record that the District Forum was satisfied that the appellants had in fact handed over Rs. 1,60,000/- to the Bank's officials. This is evidenced from the Bank's ledger. The record further discloses that an enquiry committee had been set up by the Bank that recommended initiation of criminal proceedings against certain officials and the Bank had adopted that course. It is also a fact that the FDRs were renewed from time to time.” The Court expressly held that NCDRC overlooked the District Forum's findings as noted above and that the Bank was vicariously liable for the acts of its employees. “The findings of the NCDRC are contrary to record and cannot be sustained. The Bank is vicariously liable for the acts of its employees.” The court proceeded to set aside the decision of the NCDRC and allowed the appeal. The original decision of the District Forum was thereafter restored. “In view of the above, while agreeing with the conclusions drawn by this Court in its order dated 03.10.2023, we are of the opinion that the appeal must be allowed by setting aside the judgment of the NCDRC in Revision Petition No. 2161 of 2014 dated 21.10.2020, and we hereby restore the order of the District Forum in Case No. 105/1995 dated 20.10.1997. We further direct the Bank to comply with the terms of the District Forum's order within eight weeks from the passing of this order, failing which the appellants are free to initiate execution proceedings.” Case Details : LEELAWATI DEVI & ANR. v. DISTRICT COOPERATIVE BANK LTD. CIVIL APPEAL NO.6564/2023 Counsel for the Appellants : Ms Deepika Mishra, Mr Abhishek Misra, Mrs Rachna Gupta AOR Counsel for the Respondents : Mr Murari Kumar, Mr Neeraj Shekhar AOR, Mr. Animesh Kumar, Adv. Ms. Lisha Saha, Adv. Mr. Shiv Shankar, Adv. Mr. Kartik Yadav, Adv. Mrs. Kshama Sharma, Adv. Mr. Kartik Kumar, Adv. Mrs. Priya Parmar, Adv.Citation : 2024 LiveLaw (SC) 346Click here to read the order

Bank Vicariously Liable For Conduct Of Its Employees: Supreme Court

Anmol Kaur Bawa

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Bank Vicariously Liable For Conduct Of Its Employees: Supreme Court

Anmol Kaur Bawa

This is a premium content Available exclusively to Our subscribers

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