Question

Principles:
1. A master shall be liable for the fraudulent acts of his servants committed in the course of employment.
2. Whether an act is committed in the course of employment has to be judged in context.
3. Both master and third parties must exercise reasonable care in this regard.
Facts: Rama Bhai, a widow, opened an SB account with Syndicate Bank with the help of her nephew Keshav, who worked as a clerk in the bank. After a year, Keshav was dismissed from service. Unaware, Rama Bhai continued giving him her savings, which he misappropriated. She later sought compensation from the bank.
Possible decisions:
(a) Bank shall be liable to compensate Rama Bhai
(b) Bank shall not be liable to compensate Rama Bhai
(c) Rama Bhai cannot blame others for her negligence
Possible reasons:
(i) Keshav was not an employee when the fraud was committed.
(ii) The bank was not aware of the special arrangement between Rama Bhai and Keshav.
(iii) The bank must take care of vulnerable customers.
(iv) Rama Bhai should have checked about Keshav.

• (a) (iii)
• (c) (iv)
• (b) (ii)
• (b) (i)

Hint:

For vicarious liability, the wrongful act must occur during the course of authorized employment — after termination, liability ceases.

Answer 1

The Correct Option is C

Step 1: Principle application. Since Keshav was no longer a bank employee, the bank is not vicariously liable.
Step 2: Reason. The arrangement between Rama Bhai and Keshav was personal; the bank had no knowledge or involvement.
Step 3: Conclusion. Decision (b) with reason (ii) — the bank is not liable as it had no awareness of the private arrangement.
\[ \boxed{\text{Correct answer: (c) (b) (ii)}} \]