TMI Blog1954 (6) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... he officers of the treasury. The answer to the question will depend upon the extent of vicarious liability of the Government for acts or omissions of its subordinate officers or agents. 2. For a proper appreciation of the question ill issue, it is necessary to state how a District Board comes to have a fund of its own kept in deposit with the Government treasury. Under Section 52 of the Bihar and Orissa Local Self Government Act (Bengal Act 3 of 1885), as amended by subsequent Acts, there is formed for each district a fund called the District Fund , and income and proceeds from certain sources are placed to the credit thereof and this District Fund is vested in the District Board and, under Section 53 of the said Act, provisions are made for the application of the District Fund, which it is unnecessary to state at this stage. Under Section 138 of the same Act, the Local Government has been empowered to make rules, consistent with the Act, for any District Board or Local Board for certain purposes. Acting under the provisions of this section, the Local Government have made rules known as the Account and Audit Rules, published in notification No. 2009 T. M. dated 9-11-1901. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque book shall be supplied by the Treasury Officer only, and no other form shall be used, and further that the cheque books and the counterfoils of used cheques shall be kept in the custody of the Accountant, and Rule 40 provides that cheques for sums not exceeding ₹ 500/- shall be signed by the vice Chairman or by the Chairman, or, if both be absent, by a member of the Finance Committee, while cheques for sums exceeding ₹ 500/ shall be signed by the Chairman the Vice-Chairman, and, if one of them be absent, such cheques shall be signed by the Chairman or the Vice-Chairman present and another member of the Finance Committee. It is not necessary to refer to the other rules. 3. Thus each District Board maintains a treasury pass book which is kept in a particular form, a specimen of which is to be found in exhibit 4. The pass book supplied to the District Board contains a requisition for the supply of cheques which is printed on a red form, a specimen of which is exhibit 7 (a), the requisition form being bound along with the other cheques in the cheque book. A requisition for the issue of a fresh cheque book is made by sending this red requisition form to the trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ran Prasad, It has not been disclosed who this Shambhu Saran Prasad was. But it is the case of the plaintiff District Board that this man had never any concern with the District Board, and none of the cheques, exhibits 6 to 6 (g), had been issued by the District Board. It has, however, transpired in evidence that the police, having been informed of these forgeries, had sent up one Chittish Prasad 'alias' Khitish Prasad for trial on the allegation that he had presented these forged cheques before the treasury; but the man was acquitted for want of sufficient evidence of identification. 5. It is abundantly clear that the treasury had issued the cheque book No. 023710 on the basis of a forged requisition form (exhibit 7), that the treasury had also received a forged memorandum (exhibit 3) conveying the intimation that this new cheque book had been brought into use on 18-10-1944, and further that the treasury had made payments on the basis of certain cheques, exhibits 6 to 6 (g), bearing forged signatures of Shri Kamaleshwari Sahay and Shri Nakmeshwari Sahay. Now, it is the plaintiff's case that all the payments under these forged cheques were made because of negligen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated in his evidence in chief that it was his duty to deal with the cheques which used to be received at the treasury from the Bhagalpur District Board. Speaking about the cheque exhibit 6, the witness said that, when some one had gone to him with this cheque, it was after the treasury hours, and he told him that he would not accept the cheque and that he must bring the cheque next day along with an identifier. This cheque was then presented to him on the following day with an endorsement, exhibit 6 (h), from which he thought that the man bringing the cheque had been identified by one Ugra Mohan Babu who was the Cashier at the District Board office. He was then satisfied that it was a genuine cheque. The man who handed over the cheque to rum gave out his name as Shambhu Saran Prasad. Having obtained his signature on the back of the cheque, he wrote out the words Pay. T. O. and put his initials and date in red ink and passed it over to the Accountant, Babu Sitabi Sanu, for verification of the signature of the drawing officer. The Accountant affixed the rubber stamp To Imperial Bank of India and put his initial and returned the cheque to him. The witness then entered it in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount in the treasury. After this deposit, the challan is made over to him. Thereafter, he makes certain entries in the indent register, then he goes with the Treasury Officer to the strong room and a cheque book is taken out and then made over to the party. The witness deposed, that, though there is no rule, as a matter of practice, he has to see that the signature of the drawer on the requisition form is genuine; but he explained that, as he had no specimen signature of the drawer with himself he had no chance of examining the signature on the requisition with reference to the specimen signature of the Chairman while passing the requisition (exhibit 7) in question; but to a question from the Government Pleader, who was examining him, he replied that he was satisfied that the signature of the Chairman on exhibit 7 was a genuine signature. In cross-examination, he made the admission that he is the officer expects ed to receive the requisition directly and he also admitted, I have to determine the genuineness of the signature of the requisitionist on the red requisition. He further said that he did not keep any specimen signature of the requisitionist. Now, if it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsence of negligence is cast upon the treasury. There can be, therefore, no doubt that the various amounts were paid upon the forged cheques by reason of negligence on the part of the treasury staff. 13. The more important question, however, which arises for consideration is the second one, namely, whether, even if the employees of the treasury be found guilty of negligence, the State of Bihar can be made liable for that negligence. Mr. Rajkishore Prasad, appearing for the appellant District Board, contended that , as the Act complained of was committed by the Government officers concerned in course of their employment and in the discharge of their duties which were incidental to the conduct of a business in the nature of a commercial undertaking which even a private individual may equally well undertake, the State of Bihar would be liable because such undertakings are more of a character of private business than affairs of the State. An examination of a number of authorities, since they have been cited at the Bar, is inevitable. 14. The liability of a State to be sued for negligence of its servants first came up for consideration in the case of -- 'Peninsular and Orienta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness or commercial undertaking, was not really a substantive question before the Court. But there are dicta in the judgment of Sir Barnes Peacock to the effect that where an act is done or a contract entered into in the course of the exercise of powers which cannot be lawfully exercised save by the Sovereign, no action would lie against the Secretary of State for India in Council, The case of 'Peninsular and Oriental Steam Navigation Co. (A)' also came in for consideration before the Supreme Court of India in the case of -- 'Province of Bombay v. Khusaldas S. Advani' AIR 1950 SC 222 (D) and Mukherjea, J., while discussing this case, observed as follows: Much importance cannot in my opinion be attached to the observations of Sir B. Peacock in 'Peninsular and Oriental Steam. Navigation Co. v. Secy, of State (A)'. In that case the only point for consideration was whether in the case of a tort committed in the conduct of a business the Secretary of State for India could be sued. The question was answered in the affirmative. Whether he could be sued in cases not connected with the conduct of a business or commercial undertaking was not really a questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was given also in substance the power of civil justice. From that time down to a date which may be put at 1858, the East India Company clearly had a dual character, the character of sovereign and the character of trader and, in 1833, came what is called the Charter Act by which it ceased to be mercantile corporation altogether and really held the Government of India in trust for the Crown. In 1858, came the Government of India Act (Acts 21 and 22 Victoria, Chap. 106), on the transfer of the Government of India from the East India Company to the Crown. In that statute, Section 65 was incorporated, creating the right and liability of the secretary of State for India to sue or to be sued for the first time. Section 65 is as follows: The Secretary of State in Council shall and may sue and be sued as well in India as in England by the name of the Secretary of state in Council as a body corporate, and all persons and bodies politic shall and may have and take the same suits, remedies and proceedings legal and equitable against the Secretary of State in Council of India, as they could have done against the said Company. The possession and government of the British territori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of England). One class of acts of State includes acts, such as making treaties, commandeering private property for purposes of war or quelling disturbances by force. In a matter of an act of state, a Court cannot enquire into it, as the matter is not justiciable in a Court of law; and, since the State itself is not answer-able for such act in its Courts, it cannot be made answerable for the acts of its officers or subordinates. If a civil wrong has been committed and damage has been suffered as a result of governmental or commercial activities, a plaintiff will be entitled to sue for relief by way of damages, but the question will be against whom will the suit lie -- against the person who commits the wrong or against his employer vicariously? There is a right to sue the State if the act causing the wrong or damage was done in carrying on an ordinary business which might be carried on by private individuals and not in the exercise of governmental power, i.e., a power which could not be lawfully exercised save by the sovereign authority or persons to whom the sovereign authority might delegate those powers. Acts of the former class are mercantile operations of the kind in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of special authorisation by the State, and in the absence of such proof, the act is considered to have been done in exercise of the power or the discretion vested in the officer by the relevant Rule or law and not in. pursuance of any implied authority derived from the Government. In the present case, the treasury staff have been found guilty of negligence in their failure to compare the signatures of the Chairman on the cheques with his specimen signature kept with the Accountant. A statutory duty had been cast upon them to honour, in proper circumstances, the cheques issued by the Chairman, and this duty carried with it the implied obligation to take care and, as the evidence stands, the obligation to compare the signatures. The treasury staff was, therefore, negligent in the performance of this duty which was cast upon them, and, therefore, guilty of disobedience of the rules, and not of disobedience of the will of the employer. 25. In -- 'Tobin v. The Queen' (1864) 143 ER 1148 (E) a petitioner claimed damages sustained by him from the loss of his vessel. The vessel had been seized as being engaged in the slave-trade by Captain Douglas who was the Commander ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm a service ordered by himself and over which he has absolute control at all times. It is needless to cite the cases showing where the liability attaches: but we refer to some classes of decisions in which the limits of the liability are defined, in order to shew that the analogy supposed by the suppliant does not exist. When the duty to be performed is imposed by law, and not by the will of the party emptying the agent, the employer is not liable for the wrong done by the agent in such employment. On this principle it has been declared that superior public officers, such as the Post-Master General, the lords commissioners of the Treasury, the commissioners of Customs and Excise, the auditors of the Exchequer, and the like, are not responsible for the negligence or misconduct of inferior officers in their several departments, though the superior officers appointed them and had the power of dismissing them: see --'Whitfield v. Lord De Despencer' (1878) 2 Cowp 754 (F) . Then it was further observed at page 1164 : Upon this view of the cases, we think that the supposed analogy between the relation of the Queen to a captain in Her Majesty's navy, and the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting Press by the plaintiff. It was then alleged that the Official Receiver, on 1-4-1927, agreed to pay that rent and kept possession of the house until 19-2-1928. Hence a certain sum was due to the plaintiff for the use and occupation of these premises, as the Official Receiver had failed to pay the same. The only issue which had been framed in the suit was regarding the amount for which the defendant was liable. The claim made in the Small Cause Court was decreed. Thereafter, the Government Pleader made an application to the Small Cause Court Judge stating that in that suit a most crucial issue had not been framed, namely, whether the Official Receiver was an agent or servant of the Secretary of State and whether the Secretary of State was liable for the acts of the Official Receiver. A review was, therefore, prayed for and it was allowed. The suit was again tried by the learned Judge of the Small Cause Court and then dismissed. The case, ultimately, came to the High Court at Allahabad, and their Lordships stated that they found it incumbent upon themselves to see whether there was any liability on the Secretary of State for the alleged acts of the Official Receiver. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector to the recorded proprietor in spite of an order of the Collector passed before the revenue sale to make the payment to the purchaser of the taluk in execution of a mortgage decree. There was thus an error made on the part of the clerical staff who apparently did not bring the proper facts to the notice of the Deputy Collector, and the Deputy Collector committed an error in ordering payment of the surplus sale proceeds to the recorded proprietor. Hence the question for decision was whether the Secretary of State for India in Council was liable to make good the loss to the plaintiff, or, in other words, whether the Government revenues were liable for the alleged losses. It was pointed out that the surplus sale proceeds were held in the interest of the late recorded proprietor. It was not held by the Collector for the profit of the Government. By the order to make payment to the wrong person, the Government did not derive any benefit. The act was done by the Deputy Collector entirely in the exercise of his statutory duties; and, if he committed an error in his duty, the Secretary of State for India in Council could not be held liable for that act. 32. The appellant also re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and not commercial, and acts done in the exercise of these powers or in the purported fulfilment of those, duties are not within the Rule of vicarious liability. There is some justification for this rule. The liability of the State reacts on its subjects, and any damages awarded against the State must be paid out of the public revenues. Hence the public at large will be made liable to pay for the wrong done to one of them by an officer employed by the State. 34. It was argued that, in the present case, the act of negligence was committed while performing duties cast upon the treasury staff under a statute, namely, the Bihar and Orissa Local Self-Government Act. The act complained of was neither authorised nor subsequently ratified by the Government, nor did the Government profit any thing thereby. 35. Certain sections of the Bihar and Orissa Local Self-Government Act, 1885, as amended by subsequent Acts, may again be noticed. It is now well settled that the preamble of a statute is a good means of finding out its meaning, and as it were it is a key to the understanding of the statute. The preamble states the general object and intention of the legislature in passing the ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al authority if, in its opinion, the resolution or order is in excess of the powers conferred by law. Section 122 provides that the Commissioner or the Magistrate of a district or such other person as the Local Government may authorise shall have power of inspection; under Section 123 the Local Government may appoint an officer to be Inspector of Local Works etc.; under Section 124 the Magistrate of the district, in certain circumstances, may suspend the execution of any order or resolution of a local authority or the doing of any act which is about to be done, or is being (sic, done?), by such local authority; under Section 125, if a District Board makes default in the performance of any duty imposed upon it under the Act, the Local Government may order the performance of that duty within a fixed period; under Section 131 the Local Government may, in certain circumstances, declare a District Board, Local Board or Union Committee to be incompetent and dissolve or supersede it; and Section 132 provides for the consequences on supersession. It is unnecessary to quote further. Certain properties are made over to a District Board and fund is placed at their disposal but control i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of State (A)', referred to above, their Lordships proceeded to observe as follows: A distinction must be made between acts done by the Crown in pursuance of ventures which a private individual might undertake equally well, and acts done in exercise of Governmental powers which could not be lawfully exercised. save by the sovereign authority or persons to whom the sovereign authority might delegate those powers. Acts of the former class are mercantile operations or operations of like kind in, which the East India Company actually engaged itself before and even after it had acquired sovereignty. The reason why an action lies against the Crown with reference to acts of this type is, on the one hand, a historical reason because actions could, in fact, be brought against the East India Company at the relevant time and, on the other hand, a statutory reason, because a specific provision, saving the right of action in such cases, has been made in all the successive Government of India Acts. Acts of the second class fail under two categories. One class are acts of State, properly so called, such as making a treaty, commandeering private property for war purposes, or quellin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding the patni sale and dealing with the sale proceeds could not be said to have been an act which a private individual could also do. The act of the Collector was an act done by an officer of the Government in the exercise of powers conferred on him by a statute, and the statute in that case was the Patni Regulation, and it was done in the course of his official duties, and it was held that the Secretary of State was not liable to make good the loss caused. 39. This case was relied upon in the case of-- 'Maharaj Bose v. Governor-General in Council AIR 1952 Cal 242 (P) where again it was repeated that there is a clear distinction between acts done by the Crown in pursuance of ventures which a private individual might undertake equally well and acts done in exercise of governmental powers Which could not be lawfully exercised save by the sovereign authority or persons to whom the sovereign authority might delegate such powers. 40. Mr. Rajkishore Prasad also referred to the case of -- 'Vijaya Ragava v. Secretary of State' 7 Mad 466 (Q). In that case, the Government had removed a Municipal Commissioner for misconduct and the act which was treated as tort was held to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, and I do not think that the argument is supported by these references. 43. On the other hand, the relative situation of a banker, and customer was well indicated by the Lord Chancellor in the case of -- 'Foley v. Hill', (1843) 2 HLC 28 (S) ). He said : Money, where paid into a bank, ceases altogether to be the money of the principal (see -- 'Parker v. Merchant' (1843) 1 P 356 (T), it is then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into the banker's, is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker's money; he is known to deal with it as his own, he makes what profit of it he can, which profit he retains to himself, paying back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places. The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he treasury does is to receive money for the District Board and honours its cheques (which word is said to be a 'misnomer in the above Madras case) in the sense that the treasury respects orders issued to it by the District Board for payment. 46. On a consideration of the authorities cited at the Bar and having regard to the particular Circumstances disclosed in this case, I am clearly of the opinion that the State cannot be said to be engaged in the conduct of a business or commercial undertaking as suggested by the learned Advocate for the appellant as though the State is conducting a sort of business of banking in opening treasuries. It is impossible to hold that the State is engaged in an undertaking which is oi' a character of private business and it is liable for damages as the act of negligence was committed by its servants in the course of employment and in the discharge of duties which are incidental to the conduct of a private business. 47. The arguments advanced in support of this appeal must, therefore, fail. I am, accordingly, of the opinion that the suit was rightly dismissed. I would dismiss the appeal with costs. Narayan Roy, J. 48. I agree, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssage in the judgment of his Lordship Mukherjea, J. has got some importance and it cannot be said that the view which Mukherjea J. took of the decision of Sir Barnes Peacock was in any way dissented from in the judgments of the other learned Judges. But, certainly, this case is not a decision in point for our present purpose. On the other hand, Fazl Ali, J. in -- State of Tripura v. Province of East Bengal' AIR 1951 SC 23 (Y), after quoting Section 65 of the Government of India Act, 1858, Section 32 of the Government of India Act 1915, and Section 176(1) of the Government of India Act, 1935, observed as follows: Such being the law, the question has been posed in a number of cases from very early days as to whether, and, if so, in what cases, the Secretary of State would be liable for a wrong or a tort committed by the servants of the Crown, and it has now been definitely held that he may be liable in certain cases. So far as the present discussion is concerned, the following three points which emerge from a careful perusal of a large number of cases bearing on the subject, seem to be material: (1) The principles of the law of torts have been consistently applied in al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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