State liability for forged cheque payments turns on statutory duty, not commercial undertaking, in treasury negligence cases.

State liability for payments made on forged cheques depends on the nature of the function performed by treasury officials. Where the officials act under statutory duties, rather than in the course of a commercial or private business undertaking, ordinary vicarious liability for torts does not apply. The treasury staff were negligent in failing to compare signatures with specimen signatures, but the treasury arrangements for District Board cheques did not convert the State's role into banking or a commercial enterprise. On that basis, the State was treated as immune from liability on the facts discussed.

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Issues: Whether the State was liable for the loss caused by treasury officials paying out amounts on forged cheques in discharge of statutory duties, and whether the treasury could be treated as a commercial undertaking so as to attract vicarious liability.

Analysis: The treasury officials were found negligent in failing to compare the signatures on the forged cheques with the specimen signatures kept in the treasury. The governing rules required the treasury to receive and honour District Board cheques, but the relevant duties were imposed by statute and not by any commercial or private business relationship. Liability of the State for torts committed by its servants depends upon the nature of the function performed: where the act is done in the exercise of governmental or statutory power, and not in the conduct of an ordinary business which a private individual could equally undertake, the ordinary rule of vicarious liability does not apply. The District Board fund and the treasury arrangements under the local self-government law did not convert the State's function into banking or a commercial enterprise.

Conclusion: The State was not liable for the negligence of the treasury staff, and the treasury was not a commercial undertaking for this purpose.

Final Conclusion: The appeal failed and the dismissal of the suit was affirmed because the impugned payments arose from negligence in the performance of statutory duties, for which the State was immune on the facts of this case.

Ratio Decidendi: The State is not vicariously liable for tortious acts of its officers when the acts are committed in the discharge of statutory duties rather than in the course of a commercial or private business undertaking.

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