State bank of India v Shyama Devi, 1978 AIR 1263

Before the Supreme Court of India

Decided on: 5th May 1978.

Bench: RS Sarkaria, PS Kailasam, NL Untwalia.

Author: RS Sarkaria.

Counsel for petitioners: YS Chitale, JS Arora, Ashok Grover, GKB Chowdri.

Counsel for respondents: SP Bhargava and MV Goswami.

Brief facts and Procedural History: The respondents, in this case, opened a savings account in the plaintiff bank (formerly known as ‘Imperial bank of India’) having introduced by one of their friends and employee of the bank, Kapil Deo Shukla.

  • There was an arrangement between KD Shukla and respondent that former will deposit money in the bank given by the respondent. KD Shukla duly deposited amount of Rs. 1932 but embezzled other amounts.
  • On suspicion about the deposits, respondent’s husband wrote a letter to the bank confirming the deposits are made in the account.
  • The bank replied that they accept deposits made of a part, but reject any kind of information about Rs. 12205/ in her account.
  • The respondent sued the bank in the trial court contending that they are responsible for acts committed by one of their employees, the trial court agreed to the amounts except for Rs.5000/.
  • The plaintiff appealed to the high court and the high court ordered the bank to compensate for the whole amount with 6% simple interest. The plaintiffs aggrieved by this decision went to the Supreme Court.

Issues before the court:

  1. Whether KD Shukla misappropriated the money in course of employment of the bank?
  2. If yes, then to what extent is the bank responsible for the acts of the employee?

Arguments on behalf of the plaintiff: The plaintiff primarily contended that the misappropriation done by the employee (KD Shukla) was not in his course of employment in the bank, as he was not assigned duties on the savings counter of the bank. They relied on the case of Leesh River Tea Co. Ltd & Ors. v. British India Steam Navigation Co. Ltd.

Arguments on behalf of the respondent: The respondents argued that the employee used to get passbook signed fraudulently, and the bank reacted to his actions with negligence. They relied on the principle of vicarious liability and said that as KD Shukla was the employee of the bank, the bank was also responsible for his misdemeanour.

Held: The court allowed the appeal of the plaintiff bank and exempted them from the amounts of Rs 11000/.


(This brief was prepared and submitted to by Aarsh Chokshi, Student at Gujarat National Law University- Gandhinagar). 


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