Post Offices/Banks Are Liable For Employees’ Fraudulent Acts

By - Sachin Priya Daniel on March 31, 2022

On February 7th 2022, the Hon'ble Supreme Court of India, in the matter of Pradeep Kumar and Another Vs. Post-Master General and Others, has held that that post office and banks liable for employee fraud or wrongs committed by their employees in Civil Appeal No. 8775 & 8776 of 20161 which arose out of the order of Hon’ble NCDRC.  

Banks Liable For Employee Fraud

The dispute is that the appellants during the years 1995 and 1996 had purchased Kisan Vikas Patras (KVPs) of which the combined face value on maturity was INR 32.60 lakh. In the last week of February 2000, they 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 recommended that they employ the services of Rukhsana, an agent appointed by the State of Uttar Pradesh. In this regard, they were misled to believe that, without the help of an agent like Rukhsana, the transfer would not be possible and further, that she would take care of their interest. In June 2000, the appellants learnt that Rukhsana had cheated several investors and had been arrested by the police.

Thereupon, the appellants made enquiries and discovered that the KVPs had been encashed from the Yahiyaganj Post Office and Lal Bagh Post Office. A sum of INR 25,54,000 was paid in cash to Rukhsana, who pocketed the entire amount. The appellants state that their enquiries revealed the involvement of M.K. Singh, Sub-Post Master, Post Office, Yahiyaganj. Even though the appellants made several representations to the respondents, they did not respond. Hence, the appellant has preferred a consumer case before NCDRC.  

In the impugned order passed by Hon’ble NCDRC, it has been mentioned that the claim that the KVPs were handed over to Rukhsana without a transfer application is unbelievable as appellant No. 1 is a well-educated person. Accordingly, the complaint against the respondents was dismissed. Rukhsana, being a service provider, was held liable to pay INR 25,54,000 with an interest rate of 9% per annum.  

However, contrary to the order of NCDRC, the Hon’ble Supreme Court bench consisting of Hon’ble Justice L. Nageswara Rao, Hon’ble Justice Sanjiv Khanna and Hon’ble Justice B.R. Gavai has allowed the appeal filed by the appellants and held that the post office/bank can be held liable for the fraud or wrongs committed by its employees. As such, the respondents will be held liable for the acts of M.K. Singh during the course of his employment. 

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