Post Office/Bank Can Be Held Liable For Frauds Or Wrongs Committed By Its Employees: Supreme Court

On Monday, the Supreme Court held that once it is established that fraud or any wrongful act was perpetrated by an employee of a post office during the course of their employment, the post office would be vicariously liable for the wrongful act of such employee. The Apex Court clarified that the post office is entitled to proceed against the concerned officer, but the same would not absolve them from their liability. A Bench comprising Justices L. Nageswara Rao, Sanjiv Khanna and B.R. Gavai allowed an appeal challenging the order of the National Consumer Disputes Redressal Commission ("NCDRC"), which held that filed against postal department authorities cannot be held vicariously liable for the fraud committed by a postal agent with respect to enashment of Kisan Vikas Patras."...the post office/bank can be held liable for the fraud or wrongs committed by its employees", the Supreme Court observed in appeal against the NCDRC order."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", the Supreme Court held(Pradeep Kumar And Anr. v. Post Master General And Ors).Factual Background During the period 1995 to 1996, the appellants purchased Kisan Vikas Patras ("KVP") valued at Rs. 32.60 lakhs. In February, 2021, the appellants approached the Post Master, Head Post Office Chowk, Lucknow, requesting them to transfer the KVPs to the Chowk Post Office, Lucknow. The Post Master suggested that the transfer process being too cumbersome, the appellants could avail the services of one Rukhsana, an agent appointed by the State of Uttar Pradesh. On 03.03.2000, 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, the appellant came to know that Rukhsana had been arrested for cheating several investors. Upon enquiry, it was learnt that she had encashed the appellants' KVPs and pocketed an amount of Rs. 25,54,000, which was paid to her in cash by Yahiyaganj and Lal Bagh Post Office. It came to the knowledge of the appellants that M.K. Singh, Sub-Post Master of Yahiyaganj Post Office was working hand in gloves with Rukhsana. Eventually, the appellants filed a complaint under the Consumer Protection Act before the NCDRC seeking direction for payment of Rs. 25,54,000, interest @ 18% per annum along with compensation for mental agony, interest for the same and litigation expenses. The NCDRC allowed the complaint against Rukhsana and directed her to pay Rs. 25,54,000, interest @ 9% per annum along with compensation of Rs. 1,00,000 and Rs. 10,000 as litigation expenses. But, NCDRC found that there was no involvement of the officers of the post office who had been arrayed as respondents in the complaint before it. Analysis by the Supreme Court Negligence by officers of Post Office The Court observed that as Rukhsana had not entered appearance or contested the order of NCDRC before the Apex Court, the same had attained finality for her. It was noted that the KVPs were not presented for encashment at the Post Office where it was issued. Under Rule 11 of the Kisan Vikas Patra Rules, 1988 it could be so encased only after duly verifying that the person presenting the KVPs for encashment were entitled to do so. Under Rule 9, surrendering identity slip at the time of discharge is mandatory. But, the Court observed that there was no document on record to suggest that the concerned officials had complied with the said Rules. On perusal of Sections 8 and 78 of the Negotiable Instruments Act, 1881 ("NI Act"), the Court observed that though the KVPs, which are negotiable instruments, were in possession of Rukhsana, she had no right to recover the amount and therefore, was not a 'holder'. As per Clause 23(1) of the Post Office Bank Manual, in case a holder seeks to encash KVPs from a Post office other than the issuing one, they have to provide an application with requisite details appended with their signature. No such application was filed. Under Clause 23(2), the post master is to verify the signature and satisfy ...

Post Office/Bank Can Be Held Liable For Frauds Or Wrongs Committed By Its Employees: Supreme Court

Sohini Chowdhury

Dishonest 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 affected person.

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