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2022 (3) TMI 1 - SC - Indian LawsUnauthorized and illegal encashing of Kisan Vikas Patras (KVPs) - Fraud / Cheating - endorsement of KVP - Presumptions as to negotiable instruments - Negligence on the part of appellant / contributory negligence - KVPs were simple bearer instruments or a bearer instrument with conditions - HELD THAT:- The presumption under clause (g) to Section 118 would not apply as Rukhsana is not an indorsee and the instrument was in the name of the appellants. Further, Rukhsana is not a ‘holder in due course’, for she had, and the respondents accept, obtained possession of the instrument from the lawful owners, i.e. the appellants, by means of an offence or fraud. It is an admitted case of the parties that Rukhsana was convicted and sentenced for the fraud committed. However, Section 78 uses the expression ‘holder’ and not ‘holder in due course’. Rukhsana was not the ‘holder’ as defined under Section 8 of the NI Act. She was not entitled to sue the maker, acceptor or indorser of the instrument of the amount due thereon in her name. Sections 8 and 11 of the GSC Act have no application in the present case. Section 8 states that payment would be in full discharge when payment is made in accordance with the foregoing provisions of the GSC Act, that is, payment, where the certificate is held by or on behalf of the minor, in terms of Section 5 and payment on the death of a holder in terms of Section 7. The expressions ‘minor’, ‘his parent’ or ‘guardian’ in Section 8 of the GSC Act are persons referred to in Section 5 of the GSC Act and the word ‘nominee’ and ‘any other person’ are persons referred to in Section 7 of the GSC Act - sub-section (1) to Section 8 would come to the aid of the respondents only when the payment is made where the savings certificate is held by or on behalf of the minor and to the nominee or to a person mentioned in sub-section (5) of Section 7 on death of the holder. It is not a provision of general or universal application and does not discharge the respondents of their liability when Sections 5 and 7 of the GSC Act do not apply. Section 8(1) does not protect payments not covered and governed by Sections 5 and 7 of GSC Act. Sections 5 and 7 do not apply to the present case. To decide whether the KVPs were simple bearer instruments or a bearer instrument with conditions, it is essential to glean the relevant 1988 Rules - in terms of Rule 9, an identity slip is to be issued to the holder or the holders of the certificate when they request to the said effect when and after the KVPs are issued. The holder/holders have to sign the identity slip. Sub-rule (2) to Rule 9 states that the identity slip shall be surrendered at the time of final discharge of the certificate, or in case of loss, a declaration of the said loss shall be furnished to the post office. Rule 11 states that a certificate shall be encashable at the post office which issued it. However, a KVP can also be encashed at any other post office if the Officer-in-charge of that post office is satisfied, on production of the identity slip or on verification from the post office of issue, that the person presenting the certificate for encashment is entitled to encashment. Thus, it cannot be said that the KVPs are simple bearer instruments payable to anyone who presents the same for encashment and discharge. Whether the respondents would be liable for the wrongs and act of M.K. Singh, respondent No. 4, in connivance or at the behest of Rukhsana? - HELD THAT:- This Court in STATE BANK OF INDIA VERSUS SHYAMA DEVI [1978 (5) TMI 124 - SUPREME COURT] held that for the employer to be liable, it is not enough that the employment afforded the servant or agent an opportunity of committing the crime, but what is relevant is whether the crime, in the form of fraud etc., was perpetrated by the servant/employee during the course of his employment. Once this is established, the employer would be liable for the employee’s wrongful act, even if they amount to a crime. Whether the fraud is committed during the course of employment would be a question of fact that needs to be determined in the facts and circumstances of the case. The findings recorded in the inquiry report, which became the basis for the order of dismissal, which punishment was subsequently converted to compulsory retirement, would equally apply to the encashment of all the KVPs. No valid distinction can be drawn between the case that became the subject matter of departmental enquiry and other cases of encashment of the KVPs. Hence, the post office/bank can be held liable for the fraud or wrongs committed by its employees. Accordingly, the respondents will be held liable for the acts of M.K. Singh during the course of his employment. Respondent Nos. 1 to 4 would be jointly and severally liable to pay the maturity value of the KVPs as on the date the KVPs were presented to the post office for encashment, along with 7% simple interest per annum from the said date till the date of payment - the appellants would be entitled to a compensation of ₹ 1,00,000/- and costs of ₹ 10,000/- - appeal allowed - decided in favor of appellant.
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