A bank is not liable for the fraudulent acts of its secretary if the secretary is not acting within the scope of his authority or in the course of his employment.

Venkatadri, J.

1. This civil revision Petition belongs to the unfortunate class of cases in which the courts have to decide which of the two innocent parties has to suffer for the fraud of a third party.

2. The petitioner is a Co-operative Bank doing banking business. The respondent is a lady who had dealings with the bank from the year 1952. She made two fixed deposits with the bank one for a sum of Rs. 2300 on 24-1-1955 and another for a sum of Rs. 550 on 5-4-1952 for three years, the interest payable being 5 per cent per annum. The fixed deposit receipts bearing Nos. 1293 and 1192 respectively were issued to her by the secretary. As she did not receive interest once in six months as per the rules of the bank, she issued a notice calling upon the bank to pay the interest accrued due on the said two deposits.

The petitioner (bank) promptly denied its lability and replied to her letter stating that only a sum of Rs. 1000 had been deposited under fixed deposit receipt No. 1223. The respondent filed the suit SC No. 926 of 1956 for a decree directing the bank to pay Rs. 237-8-0 for the interest accrued due on the fixed deposits. The petitioner, who was the defendant in the suit, contended that the fixed deposit receipt No. 1293 for a sum of Rs. 2300 and No. 1192 for a sum of Rs. 550 were not issued by the bank, that there was no entry in the account books of the bank either for the alleged deposits of Rs. 2300 or Rs. 550, that the fixed deposit receipts were never signed by the directors except the secretary and that the fixed deposit receipts now held by the respondent are bogus ones and not binding on the bank.

3. The learned District Munsif who tried the suit found that the fixed deposit receipts were not genuine and the secretary of the bank committed a forgery by affixing the signatures of the three directors. Nevertheless he came to the conclusion that as the secretary was authorised to receive the money according to the bye-laws of the bank, the bank was liable to pay the amounts due on the fixed deposit receipts held by the respondent and he accordingly decreed the suit. The bank has filed this revision petition and as an important question is involved in this case, namely, how far a bank is answerable to third parties for the fraudulent acts of its servants or officers, the civil revision petition has come up before a Bench for consideration.

4. Before considering the question of law involved in this case it is necessary to set out the relevant bye-laws framed by the bank. They are:

Bye-law 14: Deposits may at the discretion of the Board of Directors be received at any time from members or non-members.

Bye-law 15 : Deposits from members shall be given preference to deposits from non-members.

Bye-law 21 : The Board of Directors shall appoint a paid secretary who shall have no seat jn the Board. The Board shall fix the nature and extent of the security to be furnished by the secretary.

Bye-law 25: Receipts shall be issued for all moneys paid to the society. For moneys paid by members, the receipt shall be signed, by the president or the Secretary whoever is selected by the Board of directors to discharge his function. In the case of borrowings from non-members Or from other societies the receipt or bond shall be-executed by at least four members of the Board of Directors of whom the President shall be one.

Mr. Ramamurthi, the learned counsel for the petitioner, contends that the Bank is not liable for the unauthorised and fraudulent act of a secretary committed for his own benefit unless there has been negligence on the part of the bank. His further contentions may be stated 'bus: There is no warrant or justification either in the act or rules or bye-laws, that the secretary was authorised to receive money from the customers. Apart from the forged fixed deposit receipts tlic bank accounts did not contain any entry regarding the alleged deposits.

The fixed deposit receipts were not signed by the Director's but on the Other han