Case Brief- SBI v. Shyama Devi 


Shyama Devi (The respondent) was a savings account holder with SBI (the appellant). The Respondent was introduced and encouraged to open an account with the Appellant Bank by her friend Kapil Deo Shukla, who was an employee of the bank at the time. Subsequently, the Respondent began depositing money into her account. Some of the deposits into her accounts were given to Kapil Deo Shukla, under the belief that he shall deposit them. The deposits were of amounts Rs. 1,932, Rs. 105, Rs. 4,000, Rs. 8,000, and Rs. 100, over a period of 1 year as represented in the Respondent’s passbook. Upon suspicion by the Respondent’s husband, the bank was requested to clarify the deposits into the account. The bank claimed only a deposit of Rs. 1932 had been ratified and accepted, while the other deposits were denied. Consequently, the respondent filed a suit in the trial court claiming the remaining Rs. 12,205. The trial court in its judgement denied the deposition of Rs. 4000 and Rs. 105, while finding other amounts to have been deposited and therefore, upholding respondent’s right to claim the same from the bank. The respondent decided to appeal the decision in the High court of Allahabad, wherein Shyama Devi further contended for the sums of Rs. 4000 and Rs. 105.  


Whether K.D.Shukla when accepting money from the respondent, was acting as an agent of the bank? And whether his actions were in the usual course of business?

Arguments presented

Appellant’s arguments

The bank contested that K.D Shukla was an employee who didn’t work on the savings bank counter which is responsible for the transactions in question as they pertain to a savings account. Hence his employment does not extend to the deposition of money in question as such deposition occurred outside his course of employment. Furthermore, the bank claimed that the money had never been ratified and approved as there exists a procedure for such deposition of money. Thus arguing that the failure to deposit money according to the said procedure by the authorized personnel relieves the bank from any liability arising out of such a deposition.

Respondent’s arguments

The Respondent’s advocate argued, that K.D. Shukla was handed over the money due to his position as a Bank employee, furthermore, such incidents had occurred previously with Mr. Shukla manipulating accounts of three others, who were compensated for the same. The Respondent highlighted the discriminatory treatment by the bank in not giving the respondent compensation, unlike previous examples. Moreover, evidence suggested that K.D Shukla was often called upon for help at other counters. Therefore, the transaction was in his course of employment which entailed helping out at other counters. The claim of collusion between the respondent’s husband and Shukla was also quashed as no one will collude to cause financial loss to themselves and their family.

Discussion of legal principles and application

The court explored the existence of vicarious liability within an agency relationship. Vicarious liability is the principle of passing over an employee’s liability to the employer in an employer-employee/agent relationship, provided, the liability arose during the course of employment. The court in its exploration referred to Leesh River Tea Co. Ltd. & Ors. V. British India Steam (1966), wherein the agents stole equipment from the ship, leading to the spoiling of goods. As held in the precedent, the employer is not liable merely because they provided an opportunity to the agent to commit a crime. The precedent was aptly utilized in the current case, as the Bank was not at fault or liable as they merely provided K.D. Shukla an opportunity to commit the crime.  Subsequently referring to Lloyd v. Grace, Smith & co. (1912),  and United Africa Company Ltd. V. Baka Owoade (1954), both aforementioned precedents explore the liability of the firm when an employee misuses their responsibility and in such cases, the court observed that vicarious liability is applicable only when the employee commits a fraud within the course of employment. However, K.S Shukla’s embezzlement of funds was an act that was done outside the designated responsibilities vested in him, furthermore, the court concurred with the bank’s argument of K.D. Shukla’s actions being in his capacity and being acts that were beyond his course of employment. The court also emphasized the non-adherence to the official banking procedure when denying the respondent’s argument about the versatile course of his employment. The official banking procedure when depositing money consists of many steps of verification and ratification to be done by bank employees at different levels in the organization. This is crucial to ensure funds in the bank are correct and duly accounted for. This procedure was not followed when the said deposition of the disputed amount occurred, therefore, the court held that the bank is not liable to pay damages to the respondent, as while K.D. Shukla was an agent of the bank, his authority under the contract of agency didn’t extend to the transactions which occurred between Shukla and Shyama Devi, hence, the principal cannot be made vicariously liable for acts of the agent that occur beyond his course of employment. It was said that if a bank employee receives some cash and cheques from his friend, in his capacity without taking any proper receipts for depositing the same with the bank, the bank cannot be made liable and the servant acted outside the course of employment.


Following on from the judgement, the nature of agency between the bank and K.D. Shukla can be analyzed further, which may lead to the definitive establishment of the bank’s liabilities and responsibilities. Section 188 of the ICA, enumerates the responsibility of the agent to act in a manner “usually done in the course of conducting such business”, K.D Shukla’s violation of the banking procedures which lay out the usual course of deposition violated his responsibility as an agent when carrying out the disputed act. Following the court’s analysis, Shukla’s actions in his capacity surpassed the authority vested upon him. Therefore, the bank has the right to repudiate the transaction under Section 215. The banking procedures are extremely crucial in understanding the nature of the agency, the procedures require repeated ratification and verification of the agent’s transactions such as deposition and withdrawal from the principal (the bank), as highlighted in section 196, ratification of an agent’s acts is critical in an agency agreement, and therefore the lack of such ratification despite the requirement for the same may exempt the principal from claiming the transaction to be correct and thus shall be exempted from liability which arises out of those transactions. Finally, aligning with section 238 of the ICA, K.D Shukla was acting above and beyond the authority provided to him as an agent of the bank. Thus, the court was just and fair in holding for the bank as an act done beyond an agent’s guidelines shall amount to no detrimental effect being accrued to the principal.

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