Panchayat Vicariously Liable For Acts Of Upper Division Clerk Done In Course Of Employment: Kerala High Court

Holding the panchayat vicariously liable for the security deposit collected by the UDC, Justice N. Nagaresh observed thus:

“In view of the law on Vicarious Liability as discussed above, if any UDC employed by the respondent-Panchayat accepts money and issue the receipts in the course of his employment, the respondents are liable to refund that amount, if the amount accepted is refundable. The fact that a vigilance case is pending and action has been taken against the fraudulent activities of the UDC cannot be an excuse to deny the amounts duly deposited by the petitioner on the basis of the receipts issued on behalf of the Panchayat. The Panchayat is vicariously liable.”

The petitioner, a small-scale businessman had rented a shop room owned by the Panchayat for which he paid one lakh ten thousand eight hundred as security deposit. After vacating the premises, the petitioner was not refunded with the security deposit. The petitioner produced receipts showing payment of security deposits. For claiming the refund of the security deposit, the petitioner filed the writ petition.

The counsel for the respondents admitted that the petitioner was given the license to use the shop room. However, counsel for the respondents contended that the receipts were forged, and the security deposit was collected by the UDC. A vigilance case was filed against the UDC for committing financial irregularities, the counsel for the respondents submitted. It was averred that the Panchayat cannot refund the amount because the security deposit was not credited to the account of the Panchayat.

The Court observed that for vicarious liability, certain relation must exist between the two parties and the wrongful act committed by one party in the relation has to be connected to their relationship. It noted that commonly accepted examples of vicarious liability are liability of principal for the acts of agent, liability of the master for the acts of the servant, liability of partners in each other’s torts. Panchayat being a local self-government, is a statutory body and is liable for the acts of its employees committed during the course of employment, the Court stated.

The Court relied upon various decisions of the Apex Court to state that the employer shall be made liable for the acts of the employee if such acts are within the scope of the employment. The Court held that the act of collecting the security deposit by the UDC is not an independent act and comes within the scope of his employment. The Court observed thus:

“In the case on hand, it cannot be said that the Upper Division Clerk was not acting in the course of his employment. Acceptance of Security Deposit from the petitioner by the Upper Division Clerk cannot be treated as an independent act.”

The Court held that the Panchayat cannot say that the amounts were not credited to the accounts of the Panchayat as the same was collected by the UDC who was authorized to perform monetary payments on and behalf of the panchayat. Noting that the Panchayat is vicariously liable for the amount collected by the UDC, the Court stated thus:

“From the pleadings in the writ petition, it is clear that the Upper Division Clerk, employed by the Panchayat who collected the Security Deposit from the petitioner, was authorised to collect Security Deposits and other monetary payments on behalf of the Panchayat. But, the said Upper Division Clerk who had to act honestly, had fraudulently desisted from crediting the Security Deposit in the accounts of the Panchayat. Therefore, the principles of Vicarious Liability would indeed apply.”

On the above observation, the Court ordered the Panchayat to refund the security deposit to the petitioner.

Case title: Poongottil Prasad v Melattur Grama Panchayat

Citation: 2023 LiveLaw (Ker) 383

Case Number: W.P. (C) No. 24302/2022

Counsel for the petitioner: Advocate Albin A Joseph

Counsel for the respondents: Advocates Manu K Raj, K Vinaya