Case Summary: National Bank of Lahore Ltd. vs. Sohan Lal Saigal and others

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This article is written by Shally Yadava first-year law student of Hidayatullah National Law University, Raipur.

Title of case: National Bank of Lahore Ltd. Vs. Sohan Lal Saigal and Others

Citation: AIR 1962 P H 534

Court: High Court of Punjab and Haryana

Bench: D. Falshaw and A.N. Grover.

 

Parties:-

Appellant/Petitioner: National Bank of Lahore Ltd.

Respondent: Sohan Lal Saigal and others.

Brief Facts of the case:-

  • Three appeals were filed by the appellant bank in regards to the three suits filed by Sohan Lal Saigal and others, Shrimati Ram Piari and Shrimati Durga Devi.
  • The appellant-Bank used to maintain a safe deposit vault in the Bank premises at Jullundur City where it kept locker cabinets for the safe custody of the jewellery and other valuables of its customers who might wish to hire the lockers.
  • The vault was to remain under the joint control of the cashier and the custodian. If no separate custodian was appointed, it had to remain under the joint control of the manager and the cashier. The Master-key and keys of unleased lockers overnight were always to remain under the joint control of the cashier and the Manager like the Bank’s cash and other articles. Lockers had to be operated in the presence of two representatives of the Bank. As and when the lockers fell vacant, the licks had to be replaced new keys were to be obtained from the company which were to be received duly sealed and the seals had to be broken in the presence of the client only. If there were more than two keys belonging to a safe and the door of the strong room, one key in each case was to be given to the Accountant.
  • Notwithstanding all this the Bank authorities entrusted the task of being the custodian of the deposit vault in the Jullunder Branch of the Bank to its Manager, Baldev Chand, alone.
  • In all the three suits certain lockers were taken by the plaintiffs on different dates for depositing their jewellery and valuables but those articles kept by the plaintiff in their respective lockers were ultimately found missing.
  • Manager Baldev Chand was in possession of all the keys of the lockers of the plaintiffs and the key for the strong room of the bank. The plaintiffs contend that the manager had filed off the levers of the lockers and that they had no knowledge of this prior to renting the lockers and the manager also resided on the upper portion of the bank’s premises

Issue:-

  • Whether the appellant Bank is responsible for the fraudulent acts of the employee.
  • Whether article 36 or article 95 or some other article of the Indian Limitation Act, 1963 should be applied in the case.

Argument of the Appellant/Petitioner:-

  • The counsel for the appellant states that the acts of the Manager, which were responsible for the lockers being in a defective condition and for the loss of the valuables of the plaintiffs in those lockers, could not be said to fall within the ambit of Section 238 of the Indian Contract Act, 1872, which reads as “Misrepresentation made or frauds committed, by agents acting in the course of their business for their principals, have the same effect on agreements made by such agents as if such misrepresentations or frauds had been made or committed by the principals; but misrepresentations made, or frauds committed, by agents, in matters which do not fall within their authority, do not affect their principals.” The acts were of such a nature as were out of the authority of the manager and thus he was not in the course of employment while doing such fraudulent acts.
  • It is further contended by the counsel for the appellant that the term “the company shall not be liable for any loss etc.” in the contract between the respondents and the bank ensures that the bank was not responsible for the loss of the valuables of the respondents.
  • It is further submitted that Article 36 of the Indian Limitation Act, 1963 which prescribes a period of two years for bringing such suits from the date when the wrong was committed, should have been applied instead of Article 95. The respondents however filed for a suit later than the prescribed period of two years from the date of commencement of the fraud. Hence the appellant bank is not liable for the fraudulent acts committed by the manager and should not be made to pay any costs to the respondents.

Argument of the Respondent:-

  • Although the Bank authorities were not aware of the acts of Baldev Chand but the fraud, which he perpetrated, was facilitated and was the result of the gross negligence on the part of the Bank authorities. The bank had authorized the manager to be the sole custodian of the lockers even though in the guidelines it was clear that they were not supposed to do so. And it has been observed by the court that in the case Lloyd v. Grace “A principal is liable for the fraud of his agent acting within the scope of his authority, whether the fraud is committed for the benefit of the principal of for the benefit of the agent”.
  • The argument that the term “the company shall not be liable for any loss etc.” in the contract between the respondents and the bank ensures that the bank was not responsible for the loss of the valuables of the respondents, is a vague and meaningless condition and it is not possible to see from it as to what kind of loss was meant by it. We cannot spell out of it any stipulation that the company was contracting out of liability for the fraudulent and dishonest acts of its employees.
  • It is contended by the counsel for the respondent that the suit was based mainly on allegations of fraud and the acts of negligence were alleged for the purpose of showing that the fraud by the Manager had been facilitated owing to those acts. It cannot be said that the suit is one for malfeasance, misfeasance and non-feasance only so as to bring it within the ambit of Article 36.

Judgment:-

  • The claim by the appellant bank that the bank was not responsible for the fraudulent acts of the manager is dismissed.
  • The claim that the term “the company shall not be liable for any loss etc.” in the contract between the respondents and the bank ensures that the bank was not responsible for the loss of the valuables of the respondents id dismissed.
  • The claim that article 36 of the Limitations Act should be applied instead of Article 95 is dismissed.
  • All the three appeals fail and they are dismissed with costs.

References:-

https://indiankanoon.org/doc/220064/

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