Company responsible for fraud by agent

Account holders cannot be made to suffer for an act of omission by agents

A principal cannot escape his liability for a fraud perpetrated by his agent-the principal can be held liable and the money recovered from him. Narendra Kawde, on behalf of a Maharashtra State Commission bench, pronounced this judgment on January 28.

Jayant Prabhakar Aradhye had opened two recurring deposit accounts at the Solapur post office. The accounts were opened through Sunita Pradip Ghate, an agent of the post office. The agent had been authorised to collect money from account holders on a monthly basis and deposit the sum in the accounts of the account holders concerned.

Aradhye had opened a recurring account on July 25, 2003. When the deposits matured in July 2008, the proceeds weren't paid by the postal authorities. Following this, he filed a complaint before the Solapur district forum.

The postal department contested the complaint, saying the agent had misappropriated the amount collected by her. The account holders didn't realise this because the agent had made entries in their savings bank passbooks by forging the signatures of postal department officials and misusing rubber stamps to which she had access. Since the passbook entries appeared to be in order, account holders didn't suspect something was amiss.

The agent's fraud was detected during the maturity of the recurring deposits, when deposit holders claimed the maturity value. An investigation followed and it was found the agent had tampered with the passbooks of several customers. The investigation revealed the funds of 472 recurring deposit account holders had been misappropriated---the sum amounted to Rs 19,67,490. The postal department filed a criminal case against the agent under various provisions of the Indian Penal Code. This case was pending and the postal authorities had been unable to recover the misappropriated funds from the agent. The department, therefore, pleaded it was unable to pay the maturity value to account holders.

The district forum, however, said this wasn't a valid reason to deprive the account holders of their funds. The post office was directed to pay Rs 2,40,000 per deposit, nine per cent interest from the date of maturity till the actual payment, and costs of Rs 1,000. In an appeal before the Maharashtra State Commission, postal authorities challenged the order. It said the agent, Sunita Ghate, was appointed by the Solapur collector to carry out various tasks, under the provisions of the Mahila Pradhan Kshetriya Bachat Yojana. The department argued it was not, in any way, responsible for misappropriation by the agent.

The commission said though the district collector appointed agents to boost small savings under the scheme, it was the postal department's responsibility to implement the Mahila Pradhan Kshetriya Bachat Yojana. Passbook entries showed a post office employee had made the entries and used the rubber stamp on these.

The department had merely filed a criminal complaint against the agent; it didn't adduce any evidence to disprove the genuineness of the signatures or postal rubber stamp in the passbook, the commission said. It concluded mere filing of a police complaint, without taking any step to recover the alleged misappropriated amount, would not absolve postal authorities from releasing the maturity proceeds to account holders.

The commission added the funds deposited were to be held by postal authorities, who were obliged to render services to account holders on a day-to-day basis. Therefore, they couldn't shirk their responsibility to hold the funds and release the proceeds on maturity. Account holders couldn't be made to suffer for the act of omission or commission of the postal department and its agents, it said, adding the postal department was vicariously liable for the acts of its agents. The state commission upheld the order of the district forum, holding the post office liable to pay the maturity proceeds to Aradhye, and dismissed the appeal.

Impact:
Consumers whose money is lost due to similar circumstances can pin down the principal and recover their funds.

The writer is a consumer activist