2009 (6) TMI 1008 - HC - Indian Laws

Employer not liable for employee's fraud; appeal dismissed.

N. Sridhar Versus Maruthi Jayaraman And M/s. M.R.F. Ltd.

N. Sridhar Versus Maruthi Jayaraman And M/s. M.R.F. Ltd. - TMI Issues Involved:1. Liability of the employer (second respondent/second defendant) for the tortious acts of the employee (first respondent/first defendant) under the principle of vicarious liability.2. Negligence of the employer in preventing the theft of share certificates.3. Determination of whether the wrongful acts were committed during the course of employment.Issue-Wise Detailed Analysis:1. Liability of the Employer for the Tortious Acts of the Employee:The primary issue is whether the second respondent/second defendant (employer) can be held vicariously liable for the tortious acts committed by the first respondent/first defendant (employee). The appellant/plaintiff argued that the employer is vicariously liable for the fraudulent acts of the employee, committed during the course of employment. The trial court, however, concluded that the liability for the fraud committed by the first respondent/first defendant rests solely with him and not with the second respondent/second defendant. The court emphasized that for vicarious liability to be established, the wrongful act must be authorized by the employer or be a wrongful and unauthorized mode of doing something authorized by the employer.2. Negligence of the Employer in Preventing the Theft of Share Certificates:The appellant/plaintiff contended that the second respondent/second defendant was negligent in allowing the employee to meddle with the share certificates lodged for transfer. The appellant/plaintiff argued that the second respondent/second defendant failed in its duty to take diligent care to prevent the theft of shares, thereby making them liable for the loss sustained. The court, however, found that the second respondent/second defendant had taken appropriate actions upon discovering the fraud, including terminating the employee's services, lodging a police complaint, and reporting the matter to SEBI and stock exchange authorities. The court determined that the employer's actions did not constitute negligence sufficient to establish liability.3. Determination of Whether the Wrongful Acts Were Committed During the Course of Employment:The court examined whether the fraudulent acts of the first respondent/first defendant were committed during the course of his employment with the second respondent/second defendant. The evidence showed that the first respondent/first defendant was employed in the Speciality Coatings Division, not the secretarial division, and that he had independently committed the fraud by impersonating another individual and selling the stolen shares. The court concluded that the wrongful acts were independent, personal, and unauthorized, and therefore, not committed in the course of employment. Consequently, the employer could not be held vicariously liable for these acts.Conclusion:The court affirmed the trial court's judgment, concluding that the second respondent/second defendant (employer) could not be held liable for the fraudulent acts of the first respondent/first defendant (employee) under the principle of vicarious liability. The appeal was dismissed, and the judgment and decree passed by the trial court were upheld. The court directed that each party bear its own costs in the appeal.