Court caseAIR 1978 SC 1263

The respondent, Shyama Devi, had a savings bank account with the appellant bank. Her husband was a friend of an employee of the bank. The husband handed over to this employee some money and cheques to be deposited in his wife's account. He did not fill in any paying-in slip, did not hand the money over at the counter in the normal course of the bank's business, and obtained no receipt from the bank. The employee did not deposit the amount but misappropriated it. When this was discovered, the respondent sued the bank for the amount, contending that the bank was vicariously liable for the fraud of its employee.

The Supreme Court held the bank not liable. For a master to be liable, the servant's wrongful act must be done in the course of his employment, either as an authorised act done in a wrongful way or as an act within his actual or apparent authority. The money had not been received by the employee as a bank servant in the course of the bank's business: no paying-in slip was filled, no receipt was obtained, and the money was handed over privately because the employee was a friend of the depositor's husband. In doing so the employee acted in his personal capacity as a friend, and his misappropriation was not an act done in the course of his employment with the bank.