Read Time: 12 minutes

Noting that employees, as individuals, are capable of being dishonest and committing acts of fraud or wrongs themselves or in collusion with others, a three-judge bench of the Supreme Court on Monday held that 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.", added the top court.

In this regard a bench of Justices L Nageshwar Rao, BR Gavai and Sanjiv Khanna went on to rely on the dictum of State Bank of India (Successor to the Imperial Bank of India) v. Smt. Shyama Devi wherein it was held 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.

The bench further noted that 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.

In the case before court, Pradeep Kumar and Raj Rani had assailed an order of the NCDRC whereby their complaint registered against the Post Master General, U.P. Circle, Lucknow, Uttar Pradesh, Senior Superintendent of Posts, Lucknow Division, Post Master, Head Post Office Chowk, Lucknow and M.K. Singh, Sub-Post Master, Post Office, Yahiyaganj, Lucknow has been dismissed.

Kumar and Rani had purchased Kisan Vikas Patras(‘KVPs’) in joint names from various post offices located in the State of Uttar Pradesh in different denominations and with varying dates of maturity. The combined face value on maturity was Rs.32.60 lacs.

They had approached the Post Master, Head Post Office Chowk, Lucknow, with the request to transfer the KVPs to the Chowk Post Office, Lucknow.

The Post Master, Head Post Office Chowk, Lucknow had the recommended that they take services of Rukhsana, an agent appointed by the State of Uttar Pradesh and associated with the post office.

Kumar and Rani submitted that they were misled to believe that without the help of an agent like Rukhsana the transfer would not be possible and she would take care of their interest.

After the appellants signed the original KVPs on the backside and handed them over to Rukhsana, and never reverted to them which then made the appellants realise that they were cheated.

The top court held that the NCDRC had been rather harsh in holding that the appellants were silent and, therefore, guilty of negligence.

"The finding overlooks that no one would like to avail services of a stranger or an agent if the work, that is, transfer of KVP certificates, could be otherwise handled and done with ease. Further, no one would like to lose money to a stranger. Necessarily, we would accept that the appellants had remained in touch with Rukhsana but were given the impression that the exercise is complex and would take time. Further they had belief that the post office would take care of their interest, act in good faith and would not be negligent."

It was further noted that M.K. Singh who acted in connivance or at the behest of Rukhsana was not a third person but an officer and an employee of the Post Office.

"Post Office, as an abstract entity, functions through its employees...", the bench held.

Referring to the departmental proceeding that were held against Singh, the bench noted that the respondents were faced with a difficult position as they wanted to act against M.K. Singh, and at the same time also protect themselves against any liability and claims of the appellants.

Faced with this dilemma, the respondents acted half-heartedly and took action in the proceedings initiated against M.K. Singh, while they wanted to protect their commercial interests and defend themselves against claims made by the appellants, held the court.

Accordingly, while allowing the appeal the bench ordered thus,

1. Respondent Nos. 1 to 4 would be jointly and severally liable to pay the maturity value of the KVPs as on the date the KVPs were presented to the post office for encashment, along with 7% simple interest per annum from the said date till the date of payment.
2. The appellants would be entitled to a compensation of Rs. 1,00,000/- and costs of Rs. 10,000/-.
3. The amounts as directed above would be paid within eight weeks from the date of pronouncement of this judgment. In case of failure to pay the compensation amount within the aforesaid time, the respondents would be additionally liable to pay simple interest @ 7% per annum on the compensation amount of Rs.1,00,000/- from the date of pronouncement of this judgment till the date of payment.

Cause Title: PRADEEP KUMAR AND ANOTHER v POST MASTER GENERAL AND OTHERS