In Principal-Agent relationship, a responsibility is imposed on the Principal on the acts of Agent. The responsibility is based on common law principle “respondeat superior” (“let the master answer”).
|Case name:||Mumthas C V/S Tahsildar|
|Case number:||Civil appeal number-32296 of 2016|
|Court:||Kerala high court|
|Bench:||Justice N. Nagaresh|
|Decided on:||FEBRUARY 11, 2021|
BRIEF FACTS AND PROCEDURAL HISTORY:
- Petitioners 1 and 2, who are Primary Departmental Teachers working in Ugrapuram and Manjeri in Malappuram District, have filed this writ petition seeking to quash Exts.P1 and P2 communications issued by the 2nd respondent- Manager, Pandikkad Branch of the Kerala State Financial Enterprises Limited, directing the employers of the petitioners to recover the entire loan dues of the 5 th respondent, who is a subscriber of a chitty, from the salary of the petitioners at the rate of `10,000/- per month.
- The petitioners state that they have no transactions with the 2nd respondent-Pandikkad Branch though they are subscribers of chitty conducted by the KSFE, Manjeri Branch. The petitioners were enrolled in the chitty by one Rahmathulla, who is the husband of the 6 th respondent.
- The 6th respondent is a Staff Nurse in Government service. The 6th respondent is also a subscriber of chitty of KSFE. The petitioners state that Rahmathulla, the husband of the 6th respondent, compelled the petitioners to stand as surety for the chitty prized by the 6th respondent. The petitioners gave their salary certificates as surety for the chitty of the 6th respondent.
ISSUE BEFORE THE COURT:
- Whether the late persons are also held liable for any fraud between the principal agent relationship?
- The court held after hearing all the learned counsels that Rahmathulla, who is alleged to have manipulated the transactions, was an Agent of the 2nd respondent, is not seen disputed by the respondents. The specific case of the petitioners is that they were made to believe that they are being supplied as sureties to the 6th respondent, who is the wife of Rahmatullah, for the purpose of enabling them to avail money from the chitty which he required to conduct the marriage of his daughter. The said documents were manipulated by the deceased Rahmatullah and submitted in the office of the 2nd respondent, making them appear that the petitioners have stood as sureties to the 5th respondent.
- The 5th respondent in his counter affidavit has stated that he himself was cheated by deceased Rahmathulla. After obtaining signatures of the 5th respondent, the late Rahmathulla, without the knowledge of the 5th respondent, opened a chitty account in the name of the 5th respondent and obtained a cheque in favour of the 5th respondent and then handed over it to the 5 th respondent pretending that the cheque is being given to the 5 th respondent in discharge of the dues payable by Rahmathulla. It was only when revenue recovery proceedings were initiated by the 1st respondent for default in repayment of chitty amounts that the 5th respondent came to know that he has been made the victim of a fraud.
- It has also come out that complaints were made to the Vigilance and Anti Corruption Bureau, which has made discreet enquiries in the matter and recommended a thorough investigation in the subject. It is an admitted position that Police has registered a Crime in respect of the fraudulent transactions carried out by Rahmathulla. Who are all involved in the fraudulent transactions will come out only after the culmination of criminal proceedings. While the facts are so, it will be a travesty of justice if the 2nd respondent is permitted to proceed to recover amounts from the salary of the petitioners, who are victims of the fraud.
- In the counter affidavit filed by the 2nd respondent, the 2nd respondent has not denied the allegation that the deceased Rahmathulla was an Agent of the 2nd respondent. The only defence of the 2nd respondent is that as per their records, the petitioners have signed documents to stand as sureties of the 5th respondent. It is to be noted that making of the 5th respondent as a chitty subscriber by itself, is by fraud. The deceased Rahmathulla being an Agent of the 2nd respondent, the 2nd respondent cannot pretend to be oblivious of the manipulative transactions made by the Agent and feign ignorance of the fraud committed by the late Rahmathulla whether it is with or without the connivance of the officials of the 2nd respondent-Branch.
- The late Rahmathulla is admittedly an Agent of KSFE and was working for the 2nd respondent. If the said Rahmathulla has committed any manipulations or fraud during the course of his engagement as Agent of KSFE, the KSFE has vicarious liability.
- The court stated that in Principal-Agent relationship, a responsibility is imposed on the Principal on the acts of Agent. The responsibility is based on common law principle “respondeat superior” (“let the master answer”). Employers are vicariously liable for acts and omissions of their employees. The imposition of liability is based on three reasons. Firstly, the Principal selects the Agent; secondly, the Principal has delegated performance of certain acts to the Agent and when the Principal enjoys the benefits of the acts of his Agent, he should bear the risk also; and thirdly, the Principal has given the Agent general authority to act.
- The court observed that the allegation of the petitioners is that late Rahmathulla was an Agent of the 2nd respondent-KSFE. They have asserted the same in Exts.P2 to P4 complaints. The 6th respondent, who is the wife of late Rahmathulla, has stated in her affidavit as well as in Ext.R6(a) complaint filed before the Court of the Chief Judicial Magistrate, Manjeri that the Rahmathulla was an Agent of the KSFE. The 2nd respondent has not denied the fact that late Rahmathulla was an Agent of KSFE.
- The 2nd respondent has also not disputed the material allegations made by the petitioners as regards the conduct of Rahmathulla. Therefore, the 2nd respondent cannot be heard to contend that these are disputed questions of fact. The 2nd respondent is vicariously liable to the misconduct or fraudulent conduct of their Agent. In the circumstances of the case, it would be a travesty of justice if the 2nd respondent is permitted to recover the amount defrauded by their Agent from the salary of the petitioners.
- DECISION HELD BY COURT:
- At last the court held that the writ petition is allowed. Exts.P1 and P2 communications are set aside.
- The 2nd respondent will be at liberty to recover the amounts due to KSFE by any means known to law, other than by way of recovering the amounts from the salary of the petitioners.