Question

Principles:
1. An employer shall be liable for the wrongs committed by his employees in the course of employment.
2. Third parties must exercise reasonable care to find out whether a person is actually acting in the course of employment.
Facts: Nandan was appointed by Syndicate Bank to collect small savings from its customers daily. Nagamma, a housemaid, was one of such customers. After a couple of years, Syndicate Bank terminated Nandan’s service. Unaware of this, Nagamma continued to hand over her savings to Nandan, who misappropriated them. She realized this after three months and filed a complaint against the bank.
Possible decisions:
(a) Syndicate Bank shall be liable to compensate Nagamma
(b) Syndicate Bank shall not be liable to compensate Nagamma
(c) Nagamma has to blame herself for her negligence
Possible reasons:
(i) Nandan was not acting in the course of employment after termination.
(ii) A person cannot blame others for his own negligence.
(iii) Nagamma was entitled to be informed by the bank about Nandan.
(iv) The bank is entitled to expect customers to know the actual position.

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

Hint:

Employers should communicate clearly to customers when an employee’s authority ends, especially where the employee handled client funds.

Answer 1

The Correct Option is C

Step 1: Applying Principle 1. If Nandan had still been employed, the bank would be liable.
Step 2: Applying Principle 2. The bank must ensure reasonable care to inform customers when an employee ceases to be authorized.
Step 3: Liability in this case. Since Nagamma was never informed by the bank about Nandan’s termination, the bank breached its duty to communicate this fact, leading to her loss.
Step 4: Conclusion. Decision (a) with reason (iii) is correct — the bank is liable for failing to inform.
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