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A customer gives some amount or cheque to the bank employee to be deposited in the customer's account…

The facts are based on State Bank of India v. Shyama Devi, AIR 1978 SC 1263. Where a customer hands over money or a cheque to a bank employee in his private capacity as a…

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A customer gives some amount or cheque to the bank employee to be deposited in the customer's account (in the capacity of friend) but he misappropriates the amount. For determination of liability of bank consider the following statements :
A. The bank is liable as the act is done in the course of employment.
B. Bank is not liable as the act is not done in the course of employment.
C. The employee is liable as his act is outside the course of employment.
D. The employee is liable as the act is done for his personal gain.
Which of the statements given above is/are correct ?

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Answer and explanation

Correct answer C

The facts are based on State Bank of India v. Shyama Devi, AIR 1978 SC 1263. Where a customer hands over money or a cheque to a bank employee in his private capacity as a friend to deposit into her account, the employee acts as the customer's personal agent and not within the scope of his employment with the bank. Consequently, the bank is not vicariously liable (Statement B is true and Statement A is false), while the employee is personally liable for misappropriating the funds for his own gain (Statements C and D are true), making 'B, C & D' correct.

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