Question

Principles:
(i) A master is liable for the wrongful acts of his servant.
(ii) A person can be called a servant only if there is a relationship of employment and he acts under the order and on behalf of his master.
Facts:
X Bank launched a saving scheme for poor sections of society allowing deposits of Rs.\ 10 per day. Y, an unemployed youth, collected money from several customers and, on their behalf, deposited the money at the Bank every day. The Bank gave Y a small commission. After some time, Y disappeared without depositing the customers’ money. The customers sue, alleging the Bank is liable. Decide:

• A. the Bank is liable because it paid commission to Y
• B. the Bank is liable because Y was their servant
• C. the Bank is not liable because Y was not their servant
• D. No of is liable

Hint:

Vicarious liability tracks control plus representation; commission or benefit without control does not equal a master–servant relationship.

Answer 1

The Correct Option is C

For vicarious liability, there must be a master–servant relationship in which the servant acts under the master’s control and on the master’s behalf.
Here, Y collected funds from customers and then on their behalf deposited them in the Bank; Y’s primary agency was for the customers, not for the Bank.
Receiving a small commission from the Bank for deposits does not by itself establish employment or control; it is an incentive/fee, not evidence of orders, supervision, or integration into the Bank’s service.
There is no indication that the Bank directed Y’s collection routes, times, methods, or maintained disciplinary control—classic indicia of employment are absent.
Therefore, Y cannot be characterised as the Bank’s servant within principle (ii); without a servant, principle (i) cannot attach vicarious liability to the Bank.
Option (a) mistakes commission for control; payment alone does not create a master–servant nexus.
Option (b) assumes the very point in issue and is unsupported by the facts or principle (ii).
Option (d) is untenable because someone is liable—Y misappropriated the funds and is personally liable to the customers.
Thus, the correct conclusion is that the Bank is not vicariously liable since Y was not its servant, making option (c) correct.