TMI Blog2009 (6) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... fer deed attested by a Notary Public Thiru.K.Chandran, a lawyer from Madras and presented them for sale to the appellant/ plaintiff on 17.3.1992. (ii)The appellant/plaintiff is a leading stock and share Broker for more than 40 years and he is a senior member of the Madras Stock Exchange. The first respondent/first defendant posing himself as T.Sathyanarayana of H6K, Poonambalam Colony, K.K.Nagar, Madras presented the 350 shares of the second respondent/ second defendant company along with the duly completed share transfer application form on 17.3.1992. The appellant/ plaintiff never had the inclination that the first respondent/first defendant had impersonated some one and brought the stolen scrips and the duly completed transfer form contained the attestation of a notary public and the appellant accepted the same for trading and placed it for sale in the market. The certificates were sold in the market and the sale proceeds were realised to an extent of ₹ 4,01,500/-. Later the first respondent/first defendant collected a sum of ₹ 4,01,500/- by way of three cheques drawn on Bank of Baroda in the name of T.Sathyanarayana and the details are as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant/plaintiff was forced to borrow on heavy interest to clear the dues etc. The first respondent/first defendant and the second respondent/second defendant are jointly and severally liable to compensate the appellant. Hence, the appellant had laid the suit praying for a judgment and decree against the respondents/defendants jointly and severally for a sum of ₹ 6,06,265/- together with interest at 18% per annum from the date of plaint till realisation and for costs of the suit. (vi)Before the trial Court, the first respondent/first defendant remained exparte. (vii)The second respondent/second defendant filed a written statement inter alia pleading that the first respondent/first defendant was not working in the secretarial division of the second respondent/second defendant company but was employed in the Speciality Coatings Division and that the second defendant's registered office was shifted from 826, Anna Road, Tharapur Towers to 124 Greams Road, Chennai from 16.12.1991 after satisfying the statutory requirements and also after intimating the shareholders individually and that even though the registered office was shifted but the Speciality Coatings Divis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted the first respondent/ first defendant to pay a cost of ₹ 24,948/- to the appellant/plaintiff. 4.Dissatisfied with the judgment and decree made in O.S.No.185 of 1995 by the trial Court, the appellant/ plaintiff has projected this appeal before this Court. 5.The point for arises for determination in this appeal is: Whether the liability to pay a sum of ₹ 6,06,265/- along with interest at 18% per annum as claimed in the suit can be fastened on the second respondent/second defendant (employer) for the tortious act of the first respondent/ first defendant (Ex-employee) on the principle of vicarious liability in law? 6.The learned counsel for the appellant/plaintiff contends that the second respondent/second defendant company an employer of the first respondent/first defendant is vicariously liable for the tortious act committed by the first respondent during the course of his employment with the second respondent/second defendant and that the trial Court has committed an error in not taking note of the negligence aspect of the second respondent/second defendant and that as an employer the second respondent/second defendant failed in its duty to take diligent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent/second defendant was to pay the suit amount to the appellant because of its negligence relies on the decision of Director of Public Prosecutions V. Kent and Sussex Contractors, Limited 1944 Company Cases page 133 wherein it is held as follows: The agents of a company made a return in compliance with the Motor Fuel Rationing (No.3) Order, 1941, which return to their knowledge was false in material particulars: Held, that the company was guilty of an offence against regulation 82 of the Defence (General) Regulations, 1939, notwithstanding that it is only through its human agents that a company can have the intent to deceive or can make a false statement knowingly. 10.He also further relies on the observations made in page 135 and 136 of the aforesaid judgment which are extracted hereunder: The respondents were charged with producing a return false in a material particular with intent to deceive and, secondly, with making a statement which they knew to be false in a material particular. I should add this, that Mr.James Henry Orpin was charged with analogous offences or an offence at any rate connected with the offences said to have been committed by the first- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t I think it is a little easier than it would have been, because counsel has not disputed the proposition that the company can in the abstract be found to have the intention to do something wilfully. The position of a company, so far as criminal offences are concerned, is that it cannot be charged with or rather it cannot be found guilty of certain criminal offences, such as treason, nor other offences for which it is provided that death or imprisonment is the only punishment. The law has been stated in a way which has made it, I think, clearer as time has passed that there are a number of criminal offences for which a company can be convicted. There is a convenient citation from the judgment in R.V.Cory Brothers Co. (96 L.J.K.B., at P.764; (1927) 1 K.B., at p.816). In that judgment there is a citation from the judgment of Patteson, J.. in R. v. Birmingham and Gloucester Railway (11 L.J.M.C., at p.136); 3 Q.B., at p.232) as follows (it begins with a note by Holt, C.J.: 'A corporation is not indictable but the particular members of it are.' ): 'What the nature of the offence was to which the observation was intended to apply does not appear; and as a general propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations made in page 141 of the aforesaid judgment which are as below: It has been laid down over and over again that where a statute absolutely prohibits the doing of an act it is sufficient to show that the person accused did the forbidden act intentionally and that it is not necessary to go further and prove what is commonly known as mens rea or any intention other than to do the thing forbidden . In the cas with which we are dealing the first charge was one of doing something with intent to deceive. The second charge was that of making a statement which the company knew to be false in a material particular. 13.Further, in the aforesaid decision at page 142, it is held as follows: I see nothing whatever in any of the authorities to which we have been referred which requires us to say that a company is incapable of being held guilty of those offences 14.Further, he relies on the decision of the Hon'ble Supreme Court in Sitaram V. Santanuprasad Jaishanker Bhatt in AIR 1966 Supreme Court 1697 whereby and whereunder it is held as follows: A master is not responsible for the negligence or other wrongful act of his servant simply because it is committed at a ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt but is doing something for himself the master is not liable. There is a presumption that a vehicle is driven on the master's business and by his authorised agent or servant but the presumption can be met. It was negatived in this case, because the vehicle was proved to be driven by an unauthorised person and on his own business. The de facto driver was not the driver or the agent of the owner but one who had obtained the car for his own business not even from the master but from a servant of the master. Prima facie, the owner would not be liable in such circumstances. 17.Besides this, the learned counsel for the second respondent also cites the following observations made in paras 30 and 31 of the aforesaid judgment at page 1704 and 1705 which are as follows: 30.In Rickett's and Engelhart's cases, 1915-1 KB 644 and 1897-1 QB 240 (respectively) each servant was acting, on the mater's business at the time. If the two servants in the Engelhart's case had gone for a picnic or the boy had borrowed the cart to give a joy ride to his friends, the master would not have been liable although the effect cause would still have been the elder servant's ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grate in the teachers' common room and the child was burnt. It was held that the teacher's duty was to provide education in the widest sense and included expecting obedience from the pupils and this was an act of negligence in the discharge of such duty. 18.He also presses into service another decision of Hon'ble Supreme Court in State Bank of India V. Shyama Devi in AIR 1978 Supreme Court 1263 at page 1264 wherein it is among other things held that 'In such a case, the fact that false and fictitious entries to cover up his fraud were made by the employee in the Pass Book of the client and in the Ledger Account of the husband could not make the embezzlement committed by the employee an act committed in the course of his employment with the bank. Consequently, the bank was not liable to make good the loss caused to the client by the act of the employee because the latter in such a case would be deemed to have acted as an agent of the client and not within the scope of his employment with the bank. 19.The learned counsel for the second respondent has referred to Sec.51, 53 and 108 of the Companies Act which refers to service of documents on company, service o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the first respondent/first defendant alone is liable and that the second respondent company is not liable. 22.It is the candid evidence of D.W.1 (Manager of second respondent company) that the first respondent/first defendant has impersonated the shares in the name of Sathyanarayana and that Ex.B.16 is the termination order of the first respondent. Ex.B.22 is the xerox copy of the final report filed before the criminal Court against the first respondent/first defendant by the Inspector General of Police, Central Crime Branch, Egmore. In short, the charge in Ex.B.22 against the first respondent/first defendant is to the effect that he after stealing the share certificates to the value of ₹ 4,01,500/- and forged the signature and the instruments received three cheques to an extent of ₹ 2,10,000/-, ₹ 60,000/-, ₹ 1,31,500/- amounting in all to an extent of ₹ 4,01,500/- by impersonating himself as Sathyanarayana and encashed the same by opening an account in the Bank of India, Thousand Lights Branch, Chennai. 23.One cannot loose sight of an important fact that for the master's liability to arise, the act must be a wrongful one authorised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ond defendant had terminated his services for his involvement in connection with the fraudulent and forged share transfer. The second respondent/ second/defendant company had also lodged a FIR with the police and action was also taken by them when they came to know of the fraud committed by the first respondent/first defendant and one cannot ignore a vital fact that after lodging a police complaint the fraud matter was brought to the notice of SEBI and all Stock Exchangers authorities. 27.On a careful consideration of respective contentions and on an overall assessment of the facts and circumstances of the case in an integral fashion, this Court is of the considered view that the first respondent/first defendant employee had committed the fraud after being in possession of the documents, transfer deeds and share certificates sent by N.Dhami and even though the first respondent/first defendant was employed under second respondent/second defendant, the second respondent/second defendant company could not be saddled with the liability to pay the suit amount claimed by the appellant/plaintiff because of the fact that the acts of misdeeds, omissions and commissions pointing out to th ..... 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