Delhi District Court
Bank Of India vs Jitender Sah on 30 June, 2025
IN THE COURT OF SH. SUMIT DALAL
DISTRICT JUDGE - 04
SOUTH WEST DISTRICT
DWARKA COURTS : NEW DELHI
RCA CIVIL DJ ADJ: 135/2023
CNR NO: DLSW01-011542-2023
BANK OF INDIA
HEAD OFFICE
STAR HOUSE, G-BLOCK,
BANDRA KURLA COMPLEX,
BANDRA (EAST), MUMBAI,
MAHARASHTRA
BRANCH OFFICE:
G-1/155, MAIN NAJAFGARH ROAD,
UTTAM NAGAR, DELHI
....APPELLANT
VERSUS
1. SH. JITENDER SAH
S/O SH. MISHREE LAL SAH
R/O: G-1/16, GROUND FLOOR,
DAL MILL ROAD, UTTAM NAGAR,
NEW DELHI - 110059.
2. SH. SHREE RAM SAHNI
S/O SH. AJODHI SAHNI
R/O: A-2/13, HASTSAL ROAD,
D.K.MOHAN GARDEN,
UTTAM NAGAR, DELHI - 110059.
3. SH. BHOLE SINGH
S/O SH. HARIGYAN SINGH
R/O: 101, G-3, GALI NO. 12,
SAI ENCLAVE, MOHAN GARDEN,
UTTAM NAGAR, DELHI - 110059.
RCA CIVIL DJ ADJ 135/2023 Page 1 of 45
4. SH. ANIL KUMAR
S/O SH. KADAM LAL PANDIT
R/O: F-38A, MOHAN GARDEN,
UTTAM NAGAR, DELHI - 110059.
5. M/S GEOSANSAR ADVISORS PVT. LTD.
HAVING ITS HEAD OFFICE AT
8-2-293/82/J-111/564/A/17,
2ND FLOOR, SERENITY WORKSPACE,
ROPD. NO. 92, JUBILEE HILLS,
HYDERABAD - 500034.
ALSO AT
J.C, 24C, KHIRKHI EXTENSION,
NEW DELHI - 110017,
6. MOHD. ASLAM
S/O SH. PYARE MIYAN
R/O: 254, NAI BASTI
PASCHIM WARD - 12 PART,
JASPUR POST, JASPUR TEHSIL,
DISTRICT UDDAM SINGH NAGAR,
UTTRAKHAND.
7. SH. ARVIND KUMAR BAIRWA
S/O SH. DEEN DAYAL BAIRWA
R/O: B-260, BAKKARWALA,
J.COLONY, DELHI.
....RESPONDENT(S)
DATE OF INSTITUTION : 14.12.2023
DATE OF FINAL ARGUMENTS : 11.02.2025
DATE OF JUDGMENT : 30.06.2025
Counsel for Appellant : Sh. Varun Sharma
Counsel for Respondent no. 1 to 4 : Sh. Devendra Dagar
Counsel for Respondent no. 5 : Ms. Ritu Sharma
Counsel for Respondent no. 6 : Sh. Nishant Gupta
RCA CIVIL DJ ADJ 135/2023 Page 2 of 45
Counsel for Respondent no. 7 : Sh. S.K.Chauhan
APPEAL UNDER SECTION 96 READ
WITH ORDER XLI RULE 1 OF THE
CODE OF CIVIL PROCEDURE, 1908
AGAINST THE JUDGMENT AND
DECREE DATED 25.09.2023, PASSED
BY THE COURT OF SH. ASHISH
KUMAR MEENA, LD. CIVIL JUDGE -
01 (SOUTH WEST), DWARKA
DISTRICT COURTS, DELHI IN CIVIL
SUIT NO. 625/2017 TITLED AS
JITENDRA SAH & OTHERS VS BANK
OF INDIA & ORS.
JUDGMENT
1. The present appeal, filed under Section 96 of the Code of Civil Procedure, 1908, takes exception to the judgment and decree dated 25.09.2023 passed by the Ld. Civil Judge-01 (South- West), Dwarka Courts, Delhi in Civil Suit No. 625/2017. The Appellant, Bank of India (original Defendant No. 1), being aggrieved by the said judgment, challenges the finding whereby the suit for recovery of money filed by the original plaintiffs (Respondents No. 1 to 4 herein) was decreed. The Ld. Trial Court, by way of the impugned judgment, fastened joint and several liability upon the Appellant Bank and its Business Correspondent, M/s Geosansar Advisors Pvt. Ltd. (Respondent No. 5), for the payment of ₹2,39,000/- in total to the plaintiffs, along with costs and pendente lite and future interest @ 13% per annum. This court, having heard the arguments of the Ld. Counsel for the parties and RCA CIVIL DJ ADJ 135/2023 Page 3 of 45 having meticulously perused the trial court record, now proceeds to dispose of the appeal.
PLAINTIFF'S CASE BEFORE THE LD. TRIAL COURT
2. The summary of the Plaintiff's case as per his plaint before the ld. Trial Court is as follows:
a. The Parties and the Impugned Banking Arrangement: The suit was instituted by four plaintiffs (now Respondents No. 1 to 4), described as humble citizens earning their livelihood through modest means. Their primary grievance was against the Appellant, Bank of India (original Defendant No. 1), and its appointed Business Correspondent, M/s Geosansar Advisors Pvt. Ltd. (Respondent No. 5/original Defendant No. 2). It was pleaded that in 2014, Respondent No. 5, acting as an authorized agent of the Appellant Bank, established a banking kiosk at WZ-155, Najafgarh Road, Uttam Nagar. This kiosk was strategically located directly in front of the Bank's own Uttam Nagar branch, which acted as its link branch. The plaintiffs' central contention was that the Bank, through its Branch Manager, actively encouraged and directed its customers, especially those like the plaintiffs who needed to remit funds to outstation accounts, to forego the main branch and instead use the services of this kiosk. This conduct, it was alleged, created an undeniable representation that the kiosk was an official and secure extension of the Bank itself.RCA CIVIL DJ ADJ 135/2023 Page 4 of 45
b. The Specific Disputed Transactions: The plaintiffs averred that, relying on this representation and having conducted some successful initial transactions, they deposited significant sums of money in 2016 at the kiosk for remittance. Receipts for these deposits were issued on the Bank's own pay-in slips, stamped by Respondent No. 5. However, these specific amounts were never credited to the intended beneficiaries. The granular details of these failed transactions are:
1. Respondent No. 1 (Jitender Sah): Sought to remit a total of ₹1,25,000/- to his mother, Smt. Nirmala Devi (A/c No. 443310110000466). The deposits, evidenced by separate slips, were:
- ₹40,000/- on 01.03.2016
- ₹35,000/- on 08.03.2016
- ₹10,000/- on 17.03.2016
- ₹40,000/- on 30.03.2016
2. Respondent No. 3 (Bhole Singh): Sought to remit ₹49,000/- on 01.06.2016 to his maternal grandfather, Shri Ganga Ram (A/c No. 728010100026331).
3. Respondent No. 2 (Shree Ram Sahni): Sought to remit ₹25,000/- on 13.05.2016 to his own joint savings account (A/c No. 497410110007457).
4. Respondent No. 4 (Anil Kumar): Sought to remit ₹40,000/- on 06.06.2016, deposited by his brother on RCA CIVIL DJ ADJ 135/2023 Page 5 of 45 his behalf, to his father, Shri Kadam Lal Pandit (A/c No. 447310110001919).
c. Post-Discovery Actions and Complaints: The plaint further detailed the plaintiffs' diligent but futile efforts to seek redressal upon discovering the non-credit of funds. They first approached the manager of the kiosk and then lodged formal written complaints with the Appellant Bank's Uttam Nagar branch. Jitender Sah, further escalated the matter by filing complaints with the Banking Lokpal on 04.10.2016 and sending letters to the Chairman of the Appellant Bank. It was also pleaded that during this period, they received replies from Respondent No. 5 giving them false assurances that their money would be credited shortly, but these assurances were never fulfilled.
d. Basis of Liability and Final Recourse: The legal foundation of the plaintiffs' case was the principle of vicarious liability. They contended that Respondent No. 5 was not an independent entity but a "channel partner" and authorized agent, appointed by the Appellant Bank to conduct banking business on its behalf. Therefore, the Bank, as the principal, was fully and solely responsible for all acts, omissions, and fraudulent conduct of its agent. Having exhausted all other remedies, the plaintiffs jointly issued a legal demand notice dated 17.04.2017 through their counsel. While the Appellant Bank chose not to reply, Respondent No. 5 sent a reply dated 17.05.2017 refusing to make the payment. This refusal RCA CIVIL DJ ADJ 135/2023 Page 6 of 45 formed the final cause of action, compelling the plaintiffs to institute the suit.
e. Reliefs Sought: On the basis of these pleadings and averments, the plaintiffs prayed for a decree of mandatory injunction directing the defendants to credit the respective amounts to the beneficiary accounts, or in the alternative, a decree for the recovery of the total sum of ₹2,39,000/- along with pendente lite and future interest @ 18% per annum and the costs of the suit, to be paid jointly and severally by the Appellant Bank and Respondent No. 5.
DEFENDANT'S DEFENCE BEFORE THE LD. TRIAL COURT
3. The summary of Appellant/Defendant No.1's Written Statement before the ld. trial court is as follows:
a. Preliminary Submissions on the Nature of the Agreement:
The Appellant Bank (original Defendant No. 1) began its defense by providing context for its relationship with Respondent No. 5. It was submitted that in order to achieve greater financial inclusion as mandated by the Reserve Bank of India, banks were permitted to use intermediaries like Respondent No. 5 under a "Business Correspondent Model." The entire relationship, it was contended, was strictly governed by the terms of the Business Correspondent Agreement dated 24.08.2011, executed between them.RCA CIVIL DJ ADJ 135/2023 Page 7 of 45
b. Express Denial of Principal-Agent Relationship: The primary legal defense of the Bank was a vehement denial of any principal-agent relationship. It was specifically pleaded that Respondent No. 5 was not a "franchisee" or "authorized agent" in the legal sense. To substantiate this, the Appellant placed heavy reliance on Clause 13(1) of the agreement, which stated: "...the Business Correspondent shall perform its obligations under this agreement as an independent party. Neither this agreement nor the Business Correspondent's performance of obligations under this agreement shall create an Association, Partnership, Joint- Venture or relationship of Principal and Agent, Master and Servant or Employer and Employee between the Bank and Business Correspondent or its employees/sub agents." Based on this clause, the Bank asserted it could not be held vicariously liable for the acts of an independent party. c. Shifting of Liability and Indemnity: The Appellant further pleaded that the agreement was structured to place the entire onus and liability for operations on Respondent No. 5. It was contended that Respondent No. 5 had agreed to be solely responsible for all losses, liabilities, claims, and actions arising out of any claim or suit brought against the Bank due to the acts, omissions, or commissions of its own officers or agents. The existence of an indemnity clause in favour of the Bank was pleaded as proof of this arrangement.RCA CIVIL DJ ADJ 135/2023 Page 8 of 45
d. Specific Factual Defenses: Regarding the specific transactions, the Appellant raised multiple defenses. Firstly, it denied any knowledge of the alleged deposits, stating that no entry for any such transaction was ever made in the official books or servers of the Bank. Secondly, it raised the crucial defense of a transactional limit, pleading that the kiosk was only authorized for the "receipt and delivery of small value remittances" and that this authority was capped at a maximum of ₹20,000/- per day for any single account. It was pleaded that since most of the receipts produced by the plaintiffs were for amounts far exceeding this limit, the transactions themselves were unauthorized, and the receipts "seem to be forged."
e. Denial of Involvement and Post-Complaint Actions: The Appellant Bank categorically denied the plaintiffs' allegation that its Uttam Nagar Branch Manager had directed customers to the kiosk. It was also submitted that upon receiving complaints from the plaintiffs, its actions were limited to promptly forwarding these complaints to Respondent No. 5 for necessary verification and resolution, which it claimed was the contractually agreed procedure. It clarified that the police complaint against the errant kiosk staff was lodged by Respondent No. 5, not by the Bank, further seeking to establish its distance from the internal affairs and criminal conduct of its Business Correspondent's employees.RCA CIVIL DJ ADJ 135/2023 Page 9 of 45
f. Final Plea: Conclusively, the Appellant's stand was that no cause of action had arisen against it, and it was not liable for the acts and conduct of the officials or agents of Respondent No. 5 in any manner. It thus prayed for the dismissal of the suit against it with exemplary costs, on the grounds that it was frivolous and misplaced.
4. The summary of Respondent No. 5/Defendant No. 2's Written Statement before the Ld. Trial Court is as follows:
a. Business Model and Relationship with Co-Defendants:
Respondent No. 5 (original Defendant No. 2, M/s Geosansar Advisors Pvt. Ltd.) began its defense by describing itself as a reputed financial institution engaged as a Business Correspondent (BC) for various nationalized banks. It was pleaded that while its own agreement with the Appellant Bank defined it as an independent party, it operated its kiosks through different models, including giving out franchises. The core of its defense was to immediately shift culpability to its own franchisee for the Uttam Nagar kiosk, Mr. Aslam (Respondent No. 6/original Defendant No. 3), and his employee, Mr. Arvind Kumar Bairwa (Respondent No. 7/original Defendant No. 4).
b. The Sub-Agency Agreement and its Express Limitations: It was specifically averred that Respondent No. 5 had granted the franchise to Mr. Aslam after due formalities and under a separate "Master-Franchisee Agreement." A crucial and RCA CIVIL DJ ADJ 135/2023 Page 10 of 45 express condition of this agreement, it was contended, was a strict cap on transactions, limiting the franchisee to accepting deposits of no more than ₹20,000/- per customer, per day. It was further pleaded that the operational model was secure, requiring the franchisee (Mr. Aslam) to log into the system using a unique code, biometric fingerprint, and password, thus placing the operational responsibility and control squarely on the franchisee.
c. Discovery of Fraud and Proactive Measures Taken: Respondent No. 5 pleaded that it became aware of the fraud only after customers, including the plaintiffs, began complaining to the Appellant Bank about the non-remittance of funds. It asserted that it took immediate and proactive steps upon learning of the issue. An internal investigation was allegedly launched, which revealed that the sub-agent, Mr. Aslam, had committed a systematic fraud by accepting cash from customers but not processing these transactions through the official bank portal, thereby misappropriating the funds. To substantiate its claim of being a responsible entity and also a victim of the fraud, Respondent No. 5 detailed that it had lodged a formal police complaint with the A.C.P. South and the S.H.O. of Bindapur Police Station. This complaint, it was pleaded, resulted in a Ld. Magistrate passing an order on 16.05.2017 for the registration of an FIR against Mr. Aslam and Mr. Bairwa.RCA CIVIL DJ ADJ 135/2023 Page 11 of 45
d. Direct Challenge to the Plaintiffs' Evidence: In addition to blaming its sub-agents, Respondent No. 5 mounted a direct attack on the plaintiffs' case. It was pleaded that upon verification, the deposit receipts tendered in evidence by the plaintiffs were found to be "fake and manipulated by the plaintiff." It was also argued that the ₹20,000/- limit was common knowledge due to government advertisements and that the plaintiffs, by participating in transactions exceeding this limit, were party to an irregular process. It was contended that any act by the sub-agent to accept a larger amount was an ultra vires act, beyond the scope of delegated authority, for which Respondent No. 5 could not be held responsible.
e. Denial of Liability and Final Plea: The ultimate legal stand of Respondent No. 5 was that it could not be held vicariously liable for the independent, criminal, and unauthorized acts of its franchisee, against whom it had already initiated criminal proceedings. It specifically denied giving any false assurances to the plaintiffs about the crediting of funds. Referencing its reply to the legal notice, it reiterated its stand that the plaintiffs had "concocted the story to extort the money." Consequently, Respondent No. 5 prayed for the complete dismissal of the suit against it.
ISSUES FRAMED BY THE LD. TRIAL COURT RCA CIVIL DJ ADJ 135/2023 Page 12 of 45
5. On completion of pleadings, Ld. Trial Court had framed following issues on 06.02.2020:
a. ISSUE NO.1: Whether the defendant no.1 has no liability towards the plaintiffs in view of the agreement entered into between defendant no.1 and defendant no.2? .......... OPD-1 b. ISSUE NO.2: Whether the defendant no.2 has no liability towards the plaintiffs in view of the agreement entered into between defendant no.2 on one hand and defendant no.3 and 4 and the other? .........OPD2 c. ISSUE NO.3: Whether the plaintiffs are entitled to a decree of mandatory injunction, as prayed for? ........OPP.
d. ISSUE NO.4: Whether the plaintiffs are entitled, in the alternate, to a decree of recovery, as prayed for? ........OPP. e. ISSUE NO.5: Reliefs.
EVIDENCE BEFORE THE LD. TRIAL COURT
6. The Respondent No. 1 to 4/plaintiffs have examined four witnesses on their behalf i.e, PW-1 Jitender Shah, PW-2 Bhole Singh, PW-3 Shri Ram Sahani, and PW-4 Anil Kumar.
7. PW-1 Sh. Jitender Shah, is plaintiff no. 1 before the ld. Trial Court, has tendered his evidence by way of affidavit which was exhibited as Ex. PW1/A, reiterating his averments made by him in the plaint. The evidence affidavit is not being reiterated here for the sake of brevity. Following documents have been relied upon by the plaintiff in his evidence affidavit.
RCA CIVIL DJ ADJ 135/2023 Page 13 of 45 S. Documents Exhibit
No.
1. Copy of aadhar card Ex. PW1/1
(OSR)
2. Copy of passbook Smt. Nirmala Ex. PW1/2
Devi (OSR)
3. Payslip dated 01.03.2016 Ex. PW1/3
amounting to Rs. 40,000/-
4. Payslip dated 08.03.2016 Ex. PW1/4
amounting to Rs. 35,000/-
5. Payslip dated 17.03.2016 Ex.PW1/5
amounting to Rs. 10,000/-
6. Payslip dated 30.03.2016 Ex.PW1/6
amounting to Rs. 40,000/-
7. Complaint dated 03.08.2016 Ex.PW1/7
8. Complaint dated 04.10.2016 Ex.PW1/8
9. Registry slip dated 21.02.2017 Ex. PW1/9
10. Letter cum complaint dated Ex.PW1/10 21.02.2017
11. Registry slip dated 21.02.2017 Ex.PW1/11
12. Complaint to the Chairman, Ex.PW1/12 Bank of India dated 21.02.2017
13. Reply from defendant no. 2 Ex.PW1/13 dated 10.05.2016
14. Legal demand notice dated Ex.PW1/14 17.04.2017
15. Six registry slips Ex.PW1/15
16. Two internet generated Mark A acknowledgments Ex.PW1/16 is de-exhibited
17. Reply from defendant no. 2 Ex.PW1/17 dated 17.05.2017 This witness was cross examined by ld. Counsel for D-1 on 05.03.2020. Cross examination of this witness on behalf of RCA CIVIL DJ ADJ 135/2023 Page 14 of 45 ld. Counsel for D-2 was done on 09.03.2022 and the witness was discharged.
8. PW-2 Sh. Bhole Singh S/o Sh. Harigyan, is plaintiff no. 2 before the ld. Trial Court, has tendered his evidence by way of affidavit which was exhibited as Ex. PW2/A, reiterating his averments made by him in the plaint. The evidence affidavit is not being reiterated here for the sake of brevity. Following documents have been relied upon by him in his evidence affidavit.
S. Documents Exhibit
No.
1. Copy of aadhar card Ex. PW2/1
(OSR)
2. Copy of the passbook Ex. PW2/2
(OSR)
3. Deposit slip dated 01.06.2016 Ex. PW2/3
amounting to Rs. 49,000/-
4. Copy of complaint dated Ex.PW2/4
01.08.2016
5. Print out of e-mail dated Ex.PW2/5
07.10.2016
6. Copy of complaint dated Ex.PW2/6
24.03.2017
7. Reply of defendant no. 2 dated Ex.PW2/7
11.08.2016
This witness was cross examined by ld. Counsel for D-1 on 05.03.2020. Cross examination of this witness on behalf of ld. Counsel for D-2 was done on 20.04.2022 and the witness was discharged.
RCA CIVIL DJ ADJ 135/2023 Page 15 of 459. PW-3 Sh. Shri Ram Sahani S/o Sh. Ajodhi Sahani, is plaintiff no. 3 before the ld. Trial Court, has tendered his evidence by way of affidavit which was exhibited as Ex. PW3/A, reiterating his averments made by him in the plaint. The evidence affidavit is not being reiterated here for the sake of brevity. Following documents have been relied upon by him in his evidence affidavit.
S. Documents Exhibit
No.
1. Copy of aadhar card Ex. PW3/1
(OSR)
2. Copy of the passbook Mark A
Ex. PW3/2 is de-
exhibited
3. Deposit slip dated 13.05.2016 Ex. PW3/3 amounting to Rs. 25,000/-
4. Copy of complaint dated Ex.PW3/4 02.07.2016
5. Reply from defendant no. 2 Ex. PW3/5 dated 11.08.2016 This witness was cross examined by ld. Counsel for D-1 on 05.03.2020 and on behalf of other defendants Cross examination Nil Opportunity was given.
10. PW-4 is Sh. Anil Kumar, plaintiff no. 4 before the ld. Trial Court, has tendered his evidence by way of affidavit which was exhibited as Ex. PW4/A, reiterating his averments made by him in the plaint. The evidence affidavit is not being reiterated here for the sake of brevity. Following documents have been relied upon by him in his evidence affidavit.
S. Documents Exhibit
RCA CIVIL DJ ADJ 135/2023 Page 16 of 45
No.
1. Copy of aadhar card Ex. PW4/1
(OSR)
2. Copy of the passbook Ex. PW4/2
(OSR)
3. Deposit slip dated 06.06.2016 Ex. PW4/3 amounting to Rs. 40,000/-
4. Copy of complaint dated Ex.PW4/4 24.03.2017
5. Reply from defendant no. 2 Ex. PW4/5 dated 10.08.2016 This witness was cross examined by ld. Counsel for D-2 on 04.03.2021, ld. Counsel for D-1 on 09.03.2022.
11. On the statement of ld. Counsel for plaintiffs, the plaintiff's evidence was closed.
12. Defendant no. 1 has not lead any evidence in the present case and vide separate statement of Sh. Y.K.Dubey, ld. Counsel for D-1, the defendant no. 1's evidence was closed.
13. Defendant no. 2 before ld. Trial Court, had examined one witness namely Sh. Akhil Muhammad, who has tendered his evidence in affidavit Ex. DW2/A and has also relied upon the following documents in support of his evidence.
S. Documents Exhibit
No.
1. Copy of authorization letter Ex. DW2/1
(OSR)
2. Copy of the agreement Mark X
Ex. DW2/2 is
RCA CIVIL DJ ADJ 135/2023 Page 17 of 45
de-exhibited
3. Copy of agreement Mark X-1
Ex.DW2/3 is de-
exhibited
4. Copy of reply Mark X-2
Ex. DW2/4 is
de-exhibited
5. Copy of FIR Mark X-3
Ex. DW2/5 is
de-exhibited
This witness was cross examined by ld. Counsel for plaintiff(s) on 19.10.2022 and discharged.
JUDGMENT OF THE LD. TRIAL COURT
14. The Ld. Trial Court, after a comprehensive review of the pleadings, the evidence led by the parties, and the final arguments, decreed the suit in favour of the plaintiffs (Respondents No. 1 to 4 herein). The detailed findings, reasoning, and conclusions of the Ld. Trial Court, as encapsulated in the impugned judgment dated 25.09.2023, are summarized as follows:
a. Finding on Issue No. 1 (Liability of the Appellant Bank):
The Ld. Trial Court decided this issue squarely against the Appellant Bank, holding it liable for the plaintiffs' loss. The finding was based on a confluence of factors. The Court began by noting that the onus to prove this issue was on the Bank, which it failed to discharge as it chose not to lead any evidence in its defense. A strong adverse inference was drawn from this failure, particularly the non-examination of RCA CIVIL DJ ADJ 135/2023 Page 18 of 45 its Branch Manager to rebut the plaintiffs' consistent testimony. Legally, the Court held that while Clause 13 of the Business Correspondent Agreement (Mark X1) attempted to label the relationship as that of an "independent party," the substance of the relationship indicated otherwise. The Court invoked the principle of "implied agency" under Section 187 of the Indian Contract Act, 1872. It reasoned that the circumstances--namely, the kiosk operating right in front of the Bank's branch, using the Bank's name and branding on its receipts, and performing core banking business as described in Clause 2 of the agreement--created an undeniable impression in the minds of the public that the kiosk was an agent of the Bank. The Court further made a sharp legal observation regarding the indemnity clause, reasoning that the very existence of a clause indemnifying the Bank against the fraudulent acts of its Business Correspondent presupposed the Bank's potential liability to third parties, thereby strengthening the conclusion of an agency relationship. The Court concluded that the Bank could not "shy away" from the acts done on its behalf. b. Finding on Issue No. 2 (Liability of the Business Correspondent): This issue was decided against Respondent No. 5 (the BC). The Ld. Trial Court analyzed the Master- Franchisee Agreement (Mark X) between Respondent No. 5 and Mr. Aslam (Respondent No. 6) and concluded that it created a "sub-agency." The Court relied on Section 191 of RCA CIVIL DJ ADJ 135/2023 Page 19 of 45 the Contract Act to define Mr. Aslam as a sub-agent appointed by and acting under the control of the original agent, Respondent No. 5. Applying the legal principle enshrined in Section 192 of the Act, the Court held that the agent (Respondent No. 5) is responsible to the principal for the acts of the sub-agent. It concluded that Respondent No. 5 could not escape its liability by merely blaming the sub- agent it had itself appointed to conduct the business of the agency. The Court further buttressed this finding by highlighting the admission of DW-2 (witness for Respondent No. 5) in his cross-examination that Mr. Aslam was their "agreement agent" conducting transactions "on behalf of Bank of India."
c. Findings on Issues No. 3 & 4 (Merits of Plaintiffs' Claims and Entitlement to Relief): The Ld. Trial Court found that the plaintiffs had successfully proved their respective claims on a preponderance of probabilities. It undertook a witness- by-witness analysis:
- It found the testimonies of PW-1, PW-2, and PW-3 to be credible, consistent, and unshaken in cross- examination. It noted that they had successfully proved the deposit slips (Ex. PW1/3 to PW1/6, Ex. PW2/3, Ex. PW3/3), which bore the official stamp of Respondent No. 5 and contained correct beneficiary account details that matched the exhibited passbooks.RCA CIVIL DJ ADJ 135/2023 Page 20 of 45
- Regarding PW-4, the Court similarly found that his testimony "remained unhinged, intact and proved" and that he had deposed on the same lines as his affidavit.
- The Court categorically rejected the defendants' allegation that the receipts were "forged and fabricated," terming it a "bald claim" for which the defendants had failed to lead any affirmative evidence.
- A significant part of the judgment was dedicated to dismantling the defense of the ₹20,000 transaction limit. The Court rejected this defense comprehensively, reasoning that: (i) the specific monetary limit was absent from the main agreement (Mark X1), which only contained the vague term "small value"; (ii) the defendants failed to prove that the plaintiffs were ever made aware of such a private limitation on authority, with plaintiffs consistently denying any knowledge or public notice thereof; and
(iii) most decisively, the defense was factually contradicted and demolished by the evidence of PW-2, who proved through a separate deposit slip (Ex.
PW2/D1) and passbook entry (Ex. PW2/D2) that the very same kiosk had accepted and successfully processed a deposit of ₹49,000/- for him.
d. Final Relief and Decree: Based on the foregoing findings, the Ld. Trial Court held that the plaintiffs were entitled to the recovery of their money. It held the Appellant Bank and RCA CIVIL DJ ADJ 135/2023 Page 21 of 45 Respondent No. 5 jointly and severally liable. In determining the rate of interest, the Court opined that the plaintiffs should be compensated for the wrongful deprivation of their funds and benchmarked the rate against the commercial lending rates of the Appellant Bank itself, deeming 13% per annum to be a "current rate of interest" that was just and reasonable. Accordingly, the suit was decreed in favour of each plaintiff for their respective claimed amounts, along with pendente lite and future interest @ 13% per annum, and costs.
GROUNDS OF APPEAL
15. The Appellant, being aggrieved by the impugned judgment and decree dated 25.09.2023, has assailed the same on, inter alia, the following primary legal and factual grounds:
a. On the Finding of Agency: That the Ld. Trial Court committed a fundamental error in law by holding that an "implied agency" existed between the Appellant and Respondent No. 5. It is contended that the Court wrongly applied Section 187 of the Indian Contract Act, 1872, while completely ignoring the express and unambiguous terms of Clause 13 of the Business Correspondent Agreement (Mark X1), which categorically stated that Respondent No. 5 would act as an "independent party" and not as an agent of the Bank.
b. On the Interpretation of the Indemnity Clause: That the finding of the Ld. Trial Court with respect to the indemnity RCA CIVIL DJ ADJ 135/2023 Page 22 of 45 clause (Clause 14) is perverse and contrary to established legal principles. The Appellant argues that the said clause was intended to protect and indemnify the Bank from any liability arising out of the acts of Respondent No. 5, not to fasten liability upon the Bank. The court's interpretation, it is urged, turns the very concept of indemnity on its head. c. On the Transaction Limit: That the Ld. Trial Court failed to appreciate the specific defense that the disputed transactions were unauthorized as they exceeded the permitted operational limit of ₹20,000 per day for the kiosk. It is submitted that the Bank cannot be held liable for acts committed by the Business Correspondent beyond its contractually defined authority.
d. On the Award of Interest: That the award of pendente lite and future interest @ 13% per annum is arbitrary, excessive, and punitive. It is contended that since the deposits were intended for low-interest savings accounts, the awarded interest bears no rational nexus to the nature of the transaction and ought to be set aside.
e. On Overall Appreciation of Facts and Law: That the impugned judgment is based on surmises and conjectures and suffers from a non-application of mind to the facts and the law. It is submitted that the Ld. Trial Court failed to appreciate that Respondent No. 5 had itself admitted liability in other similar cases by refunding customers without any RCA CIVIL DJ ADJ 135/2023 Page 23 of 45 involvement from the Appellant Bank, which established that the liability was theirs alone.
16. Based on these and other grounds as detailed in the memorandum of appeal, the Appellant has prayed for the setting aside of the impugned judgment and decree and for the dismissal of the suit as against it.
REPLY ON BEHALF OF THE RESPONDENTS
17. Upon notice, only Respondent No. 5 and Respondent No. 7 filed their respective replies to the appeal. The original plaintiffs (Respondents No. 1 to 4) and Respondent No. 6 did not appear or file a reply.
18. The summary of the reply filed by Respondent No. 5 (M/s Geosansar Advisors Pvt. Ltd., the Business Correspondent) is as follows:
a. It is stated at the outset that the company has demerged with M/s Atyati Technologies Pvt. Ltd., which has adopted all liabilities and has filed the reply. Respondent No. 5 has taken a multi-faceted and strategic stand in its reply. While it concurs with the Appellant Bank that the impugned judgment dated 25.09.2023 is "bad in law" and ought to be set aside, it does so primarily to argue for its own non- liability.
b. The principal and novel contention raised by Respondent No. 5 is that after it executed a Master-Franchisee RCA CIVIL DJ ADJ 135/2023 Page 24 of 45 Agreement with its sub-agents (Respondents No. 6 & 7), the said sub-agents began operating under the direct supervision and control of the Appellant Bank. It is argued that this new operational reality, particularly after 2016, effectively severed the chain of command and liability. Respondent No. 5 contends that it was no longer in control of the kiosk's operations, thereby making the Appellant Bank solely responsible for the conduct of the kiosk staff.
c. Consequently, Respondent No. 5 has pleaded that it cannot be held liable for the fraudulent acts committed by its sub- agents, against whom it had already initiated criminal proceedings by lodging an FIR. It submits that the true liability, if any, rests either solely with the sub-agents who committed the fraud or with the Appellant Bank under whose direct supervision they were allegedly operating. d. Respondent No. 5 has also contested the Appellant's reliance on the indemnity clause, arguing that the same is not applicable under the circumstances where the sub-agents were not acting under its control at the relevant time. e. Finally, Respondent No. 5 has stated its intention to file a separate appeal against the impugned judgment to challenge the findings against it and has prayed for the dismissal of the present appeal filed by the Bank.
19. The summary of the reply filed by Respondent No. 7 (Shri Arvind Kumar Bairwa) is as follows:
RCA CIVIL DJ ADJ 135/2023 Page 25 of 45a. Respondent No. 7, in his separate reply, has primarily sought the dismissal of the appeal as against him. His central submission is that he was merely a salaried employee, an "Executive", of Respondent No. 5, and therefore, holds no personal liability for the alleged fraudulent transactions conducted by the kiosk, which was managed by his senior, Mr. Aslam (Respondent No. 6).
b. He contends that he has been wrongly and unnecessarily impleaded in the present appeal by the Appellant Bank solely for the purpose of harassment, as the Ld. Trial Court's judgment fastened no liability upon him, and no relief has been sought from him.
c. A significant submission made in his reply is with respect to the parallel criminal proceedings. It is pleaded that in FIR No. 372/2017, which was registered against him and Respondent No. 6, the investigating agency filed an "Untrace Report". He states that this report was duly accepted by the concerned Ld. Magistrate's Court on 26.06.2023, and the file was consigned to the Record Room. He has put forth this fact to argue his innocence and lack of direct involvement in the matter.
d. In essence, Respondent No. 7 argues that as he was neither a direct beneficiary of the alleged fraud nor a contracting party in any of the agreements, he should be discharged from the present proceedings. He accordingly prays for the dismissal of the appeal with heavy costs, specifically qua him.RCA CIVIL DJ ADJ 135/2023 Page 26 of 45
POINTS FOR DETERMINATION
20. Based on a review of the grounds raised in the Memorandum of Appeal by the Appellant, and the counter- arguments and submissions made in the respective replies by Respondent No. 5 (M/s Geosansar Advisors) and Respondent No. 7 (Shri Arvind Kumar Bairwa), the following Points for Determination are framed for the adjudication of this appeal:
a. Point of Determination No. 1 - Whether the Ld. Trial Court erred in its interpretation of the Business Correspondent Agreement (Mark X1) and the legal relationship between the Appellant (Bank) and Respondent No. 5 (Business Correspondent)?
b. Point of Determination No. 2 - Whether the Ld. Trial Court's finding of fastening joint and several liability upon the Appellant (Bank) is sustainable in law, in light of the defense that the disputed transactions were for amounts exceeding the alleged operational limit of ₹20,000 per day? c. Point of Determination No. 3 - Whether the finding of liability against Respondent No. 5 is correct, in view of its contention in reply that its sub-agents (Respondents No. 6 &
7) were acting under the direct supervision and control of the Appellant Bank, thereby severing its own role in the chain of liability?
d. Point of Determination No. 4 - Whether the Ld. Trial Court was justified in awarding pendente lite and future interest @ RCA CIVIL DJ ADJ 135/2023 Page 27 of 45 13% per annum, or if the rate is excessive as contended by the Appellant?
ANALYSIS AND FINDINGS POINT FOR DETERMINATION NO. 1 - WHETHER THE LD. TRIAL COURT ERRED IN ITS INTERPRETATION OF THE BUSINESS CORRESPONDENT AGREEMENT (MARK X1) AND THE LEGAL RELATIONSHIP BETWEEN THE APPELLANT (BANK) AND RESPONDENT NO. 5 (BUSINESS CORRESPONDENT)?
21. This is the central issue upon which the entire edifice of the Appellant Bank's case stands. The Ld. Counsel for the Appellant has vehemently argued that the Ld. Trial Court committed a grave error by holding the Appellant Bank vicariously liable, contending that the court completely ignored the express terms of the Business Correspondent Agreement (Mark X1). The primary contentions of the Appellant are twofold: first, that Clause 13 of the agreement explicitly defines Respondent No. 5 as an "independent party" and negates any principal-agent relationship; and second, that the indemnity clause (Clause 14) was misinterpreted, as it was intended to protect the Bank from liability, not establish it.
22. The Ld. Trial Court, in its detailed findings on Issue No. 1, rejected these contentions. It held that despite the contractual label, the circumstances of the case created an "implied agency" under Section 187 of the Indian Contract Act, 1872. The RCA CIVIL DJ ADJ 135/2023 Page 28 of 45 court further interpreted the indemnity clause as an implicit acknowledgment of the Bank's potential liability towards third parties.
23. Upon careful perusal of the trial court record, the evidence adduced, and the legal framework governing agency, this court will now analyze the correctness of the Ld. Trial Court's findings on this point.
Legal Framework and Application to Facts
24. It is a settled principle of law that to determine the existence of a principal-agent relationship, the court must look beyond the mere nomenclature used by the parties in an agreement and must consider the substance of the relationship, the nature of the transaction, and the surrounding circumstances. Section 186 of the Indian Contract Act, 1872, clarifies that agency can be created either expressly or impliedly. Section 187 further provides that an agency is "implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case."
The "Independent Party" Clause vs. Implied Agency:
25. The Appellant places heavy reliance on Clause 13 of the agreement (Mark X1), which seeks to contractually exclude a principal-agent relationship. While parties are free to define their relationship, such a clause is not conclusive proof and cannot be used as a shield to absolve a party of its liability if the substance of RCA CIVIL DJ ADJ 135/2023 Page 29 of 45 the relationship and the course of conduct overwhelmingly point towards an agency. The Ld. Trial Court rightly chose to examine the circumstances, which were:
a. Location and Branding: The kiosk of Respondent No. 5 was situated directly in front of the Appellant Bank's branch. The receipts issued from this kiosk (Ex. PW1/3 to PW1/6, etc.) bore the name of the Appellant Bank and the stamp "CASH RECEIVED KIOSK BANKING GEOSANSAR ADVISORS PVT. LTD. BC BANK OF INDIA." To a common person, this branding creates an undeniable impression that the kiosk is an extension of the Bank itself, operating under its authority.
b. Nature of Business: The kiosk was performing core banking functions--accepting deposits for remittance--which are intrinsically part of the "ordinary course of the bank's banking business," a phrase used in Clause 2 of the agreement itself.
c. Direct "Holding Out" by the Bank: Most critically, the plaintiffs consistently testified that they were directed to use the kiosk by the Appellant's own Branch Manager. The testimony of PW-2, Bhole Singh, was particularly specific on this point. The Appellant Bank made a crucial strategic decision to not lead any evidence, thereby failing to produce its Branch Manager or any other official to rebut this specific and damaging allegation. The unrebutted testimony of the plaintiffs on this point lends immense credibility to the RCA CIVIL DJ ADJ 135/2023 Page 30 of 45 creation of an agency by "holding out," where the principal, by its words or conduct, induces third parties to believe that a certain person is its agent.
26. In light of these powerful circumstances, the Ld. Trial Court's finding that an implied agency existed is not only justified but is the only logical conclusion. The Appellant Bank, by its conduct and the physical setup, created an environment where any reasonable customer would believe they were dealing with the Bank, and it cannot now resile from the consequences of that representation by relying on a self-serving clause in its private agreement with Respondent No. 5.
Interpretation of the Indemnity Clause:
27. The Appellant's argument that the Trial Court misinterpreted the indemnity clause (Clause 14) is misplaced. An indemnity clause, by its very nature, is a contractual arrangement between two parties (here, the Bank and the BC) to allocate the burden of loss between themselves. It anticipates that the indemnitee (the Bank) might suffer a loss or be held liable to a third party due to the actions of the indemnifier (the BC). The clause then provides the Bank with a contractual right to recover that loss from the BC. The existence of such a clause does not extinguish the principal's primary liability to the innocent third party who has suffered the loss. In fact, it reinforces the existence of an agency relationship, as there would be no need for the Bank to be indemnified against the fraudulent acts of a truly independent RCA CIVIL DJ ADJ 135/2023 Page 31 of 45 third party. The Ld. Trial Court's reasoning on this point was legally astute and correct.
Conclusion on Point for Determination No. 128. In view of the above analysis, this court finds no error in the Ld. Trial Court's interpretation of the legal relationship between the Appellant and Respondent No. 5. The trial court rightly looked at the substance over form, correctly applied the principles of implied agency based on the overwhelming circumstances and unrebutted evidence, and properly interpreted the legal effect of the indemnity clause. The finding that a principal-agent relationship existed for the purpose of liability towards third-party customers is well-founded in law and on the facts of this case.
29. This Point for Determination is accordingly decided against the Appellant Bank and in favour of the Respondents.
POINT FOR DETERMINATION NO. 2: WHETHER THE LD. TRIAL COURT'S FINDING OF FASTENING JOINT AND SEVERAL LIABILITY UPON THE APPELLANT (BANK) IS SUSTAINABLE IN LAW, IN LIGHT OF THE DEFENSE THAT THE DISPUTED TRANSACTIONS WERE FOR AMOUNTS EXCEEDING THE ALLEGED OPERATIONAL LIMIT OF ₹20,000 PER DAY?
30. The Ld. Counsel for the Appellant Bank has contended that even if an agency relationship is presumed to exist, RCA CIVIL DJ ADJ 135/2023 Page 32 of 45 the agent (Respondent No. 5) acted beyond the scope of its authority by accepting deposits greater than the stipulated limit of ₹20,000/- per day. It is argued that a principal cannot be held liable for an act of its agent that is clearly outside the agent's actual authority. The Appellant submits that since all but one of the disputed transactions exceeded this limit, they were unauthorized acts for which the Bank bears no responsibility.
31. The Ld. Trial Court, in paragraphs 63 and 64 of the impugned judgment, thoroughly examined and rejected this defense. The trial court found that the defendants failed to prove that such a limit was binding on the plaintiffs and, more importantly, that their conduct showed that this limit was not, in fact, adhered to.
32. This court has examined the evidence and legal principles concerning the authority of an agent. The liability of a principal for the acts of its agent is not always confined to the agent's actual authority; it often extends to the agent's apparent or ostensible authority. Apparent authority is the authority that a reasonable third party would understand the agent to possess, based on the representations and conduct of the principal. Any private or secret limitation on an agent's authority does not affect a third party who deals with the agent without knowledge of such a limitation.
33. Applying this principle to the facts on record, this court makes the following observations:
RCA CIVIL DJ ADJ 135/2023 Page 33 of 45a. The Alleged Limit was Not Proven to be a Binding Term on Customers: The primary document governing the relationship, the Business Correspondent Agreement (Mark X1), does not contain any specific monetary figure. It vaguely refers to "small value deposit," a term which is not defined. The Appellant Bank sought to prove the ₹20,000 limit through a "branch circular" (Mark DX1) that was put to DW-2 in cross-examination. At best, this document proves the existence of an internal policy or instruction from the Bank to its agent. It does not, by itself, prove that this internal limit was ever communicated to the public or the plaintiffs.
b. Plaintiffs Had No Notice of the Limit, and the Appellant Led No Rebuttal Evidence: All four plaintiffs, during their respective cross-examinations, consistently and unequivocally testified that they were unaware of any such transaction limit. PW-1, Jitender Sah, specifically stated that no notice, board, or circular was displayed at the kiosk to inform customers of any such restriction. This oral testimony placed the onus squarely on the defendants to prove that this internal limit was, in fact, communicated to the public. At this juncture, the Appellant Bank's complete failure to lead any evidence before the Ld. Trial Court becomes critical. The Appellant never entered the witness box; it did not produce its Branch Manager or any other official to depose that such notices were displayed or that customers were ever RCA CIVIL DJ ADJ 135/2023 Page 34 of 45 informed of this limit. The direct testimony of the plaintiffs on this crucial fact thus remains wholly unrebutted. The Bank had every opportunity to refute this evidence but chose not to, and a necessary adverse inference must be drawn against it. A secret limitation on an agent's authority, which the principal has made no demonstrable effort to communicate to the public, cannot be used to defeat the claim of an innocent third party who has acted in good faith. c. The Defense is Factually Demolished by Evidence: The most compelling reason to reject this defense lies in the evidence adduced by PW-2, Bhole Singh. During his cross- examination, PW-2 testified that on the very same day as the disputed transaction, he made another deposit of ₹49,000/- which was successfully credited to his maternal uncle's account. He proved this successful transaction by producing the corresponding deposit slip (Ex. PW2/D1) and the passbook reflecting the credit entry (Ex. PW2/D2). This piece of evidence is the proverbial "smoking gun." It irrefutably establishes that the kiosk, operated by the agent of the Appellant Bank, did, in fact, accept and process transactions far in excess of the alleged ₹20,000 limit. This factual evidence completely dismantles the Appellant's theoretical argument that such transactions were unauthorized or impossible. It proves that the apparent authority of the agent, from the perspective of a customer, included the authority to accept such larger sums. The RCA CIVIL DJ ADJ 135/2023 Page 35 of 45 agent's own conduct, which was never shown to be restricted by the Bank's systems, defined the scope of its apparent authority.
Conclusion on Point for Determination No. 234. In light of the above, the defense raised by the Appellant Bank regarding the transaction limit of ₹20,000 is untenable, both in law and on facts. The limit was an internal instruction of which the plaintiffs had no notice, a fact the Appellant failed to rebut by not leading any evidence. Furthermore, the defense is factually contradicted by the evidence on record. The Ld. Trial Court was entirely correct in rejecting this defense.
35. This Point for Determination is accordingly decided against the Appellant Bank and in favour of the Respondents.
POINT FOR DETERMINATION NO. 3: WHETHER THE FINDING OF LIABILITY AGAINST RESPONDENT NO. 5 IS CORRECT, IN VIEW OF ITS CONTENTION IN REPLY THAT ITS SUB-AGENTS (RESPONDENTS NO. 6 & 7) WERE ACTING UNDER THE DIRECT SUPERVISION AND CONTROL OF THE APPELLANT BANK, THEREBY SEVERING ITS OWN ROLE IN THE CHAIN OF LIABILITY?
36. In its reply to the appeal, Respondent No. 5 (M/s Geosansar Advisors Pvt. Ltd., the Business Correspondent) has introduced a novel argument to challenge the finding of liability RCA CIVIL DJ ADJ 135/2023 Page 36 of 45 against it. While concurring with the Appellant Bank that the impugned judgment should be set aside, it does so on the ground that it bears no liability. The contention is that after it appointed Respondents No. 6 & 7 (Mr. Aslam and Mr. Bairwa) through a Master-Franchisee Agreement, the sub-agents came under the direct supervision and control of the Appellant Bank. It is argued that this new arrangement effectively severed the link between Respondent No. 5 and its sub-agents, making the Bank solely responsible for their actions.
37. The Ld. Trial Court, while adjudicating Issue No. 2, had found that Respondent No. 5, as the agent of the Bank, had appointed Respondents No. 6 and 7 as its sub-agents. Applying the principles of sub-agency under the Indian Contract Act, 1872, the trial court held Respondent No. 5 liable for the acts of the sub- agents it had appointed.
38. The law on sub-agency is enshrined in Sections 190 to 193 of the Indian Contract Act, 1872. Section 191 defines a "sub- agent" as "a person employed by, and acting under the control of, the original agent in the business of the agency." Section 192, which is pivotal here, delineates the responsibility flowing from such an appointment. It stipulates that the principal (in this case, the Bank) is bound by and responsible to third persons for the acts of the sub-agent. It further makes the agent (the BC, Respondent No. 5) "responsible to the principal for the acts of the sub-agent." The law does not contemplate a situation where an agent can RCA CIVIL DJ ADJ 135/2023 Page 37 of 45 appoint a sub-agent and then simply absolve itself of all responsibility for the sub-agent's conduct in the business of the agency.
39. This court makes the following observations regarding the new contention raised by Respondent No. 5:
a. An Argument Not Founded on Pleadings or Evidence: The contention that the sub-agents came under the "direct supervision" of the Bank, thereby severing Respondent No. 5's liability, is a new plea raised for the first time in its reply at the appellate stage. A perusal of the written statement filed by Defendant No. 2 (now Respondent No. 5) before the Ld. Trial Court shows that its primary defense was to blame the sub-agents for committing fraud, not to argue that the Bank had taken over their direct control. An appeal is a continuation of the suit, but parties cannot be permitted to set up an entirely new case at the appellate stage which is not supported by their original pleadings and the evidence on record.
b. Lack of Supporting Evidence: Respondent No. 5 has made this assertion without a shred of evidence to support it. It failed to produce any document, circular, or correspondence before the Ld. Trial Court to show that the Appellant Bank had assumed direct supervisory control over Respondents No. 6 and 7. The witness produced by Respondent No. 5, RCA CIVIL DJ ADJ 135/2023 Page 38 of 45 DW-2, did not depose to this effect. The argument remains a bald and unsubstantiated assertion.
c. Contradiction with Own Witness's Testimony: The new argument is, in fact, contradicted by the evidence of Respondent No. 5's own witness, DW-2 (Mr. Akil Muhammed). In his cross-examination, DW-2 admitted, "It is correct that the Mr. Aslam Khan and Sh. Arvind Kumar Bairwah was working at our Uttam Nagar Kiosk as agreement agent." He did not state that they were working under the Bank's direct control; he affirmed that they were Respondent No. 5's agents as per an agreement. This admission fortifies the trial court's finding of a sub-agency created by Respondent No. 5.
d. Correct Application of Law by the Trial Court: The Ld. Trial Court correctly analyzed the contractual chain: The Bank appointed Respondent No. 5 as its agent (Mark X1), and Respondent No. 5 in turn appointed Respondent No. 6 as its sub-agent or "Master Franchisee" (Mark X). This creates a classic sub-agency. As per Section 192 of the Contract Act, the agent (Respondent No. 5) is responsible to the principal for the acts of the sub-agent. It cannot abdicate this statutory responsibility by simply pointing a finger at the principal.Conclusion on Point for Determination No. 3
40. The novel contention raised by Respondent No. 5 is an unsupported afterthought, designed to escape the liability correctly RCA CIVIL DJ ADJ 135/2023 Page 39 of 45 fixed upon it by the Ld. Trial Court. The evidence on record clearly establishes a sub-agency, and the law holds the agent responsible for the sub-agent's acts. The Ld. Trial Court's finding on this issue is well-reasoned and in accordance with the established principles of the law of agency.
41. This Point for Determination is accordingly decided against Respondent No. 5, and the finding of the Ld. Trial Court holding it liable is affirmed.
POINT FOR DETERMINATION NO. 4: WHETHER THE LD. TRIAL COURT WAS JUSTIFIED IN AWARDING PENDENTE LITE AND FUTURE INTEREST @ 13% PER ANNUM, OR IF THE RATE IS EXCESSIVE AS CONTENDED BY THE APPELLANT?
42. The final ground of challenge raised by the Appellant Bank pertains to the rate of interest awarded by the Ld. Trial Court. The Appellant has contended that awarding pendente lite (from the date of filing of the suit to the date of the decree) and future interest (from the date of the decree to the date of realization) @ 13% per annum is excessive and punitive. The argument is that the transactions were meant to be deposits in savings bank accounts, which accrue a much lower rate of interest (typically 3-4% p.a.), and therefore, the awarded rate is not compensatory in nature.
43. The Ld. Trial Court, in paragraph 64 of the impugned judgment, justified the award of interest @ 13% p.a. by reasoning that the plaintiffs must be compensated by granting the current rate RCA CIVIL DJ ADJ 135/2023 Page 40 of 45 of interest charged for personal/term loans by the defendant bank itself, which it estimated to be around 12% to 14% p.a.
44. The power of a court to award interest is governed by Section 34 of the Code of Civil Procedure, 1908. A perusal of Section 34 reveals two distinct stages for the award of interest post the institution of a suit:
a. Pendente lite interest: For the period from the date of the suit to the date of the decree, the court has the discretion to award interest at what it "deems reasonable". b. Future interest: For the period from the date of the decree to the date of realization, the interest rate shall not exceed six per cent per annum. However, a crucial proviso states that if the liability has arisen out of a "commercial transaction," the rate of future interest may exceed 6% but shall not exceed the rate at which moneys are lent or advanced by nationalised banks in relation to commercial transactions.
45. The first question to be addressed is whether the liability arose out of a "commercial transaction." The transactions in question involved customers availing a money remittance service offered by a nationalised bank through its authorised Business Correspondent, which is a commercial entity. The service was provided as part of the defendants' commercial banking and financial service operations, for which they earned revenue (as noted in Clause 3.1 of Mark X1, which provides for commission). Therefore, from the perspective of the defendants providing the RCA CIVIL DJ ADJ 135/2023 Page 41 of 45 service, the transactions were unequivocally commercial in nature. The Ld. Trial Court was thus empowered to grant future interest at a rate exceeding 6% per annum.
Reasonableness of Pendente lite Interest:
46. The Appellant's argument comparing the situation to a savings bank deposit is misconceived. This is not a case where money was peacefully resting in an account and earning interest. This is a case of wrongful deprivation, where the plaintiffs' funds, which were earmarked for specific family needs, were misappropriated due to the failure of the Bank's agency model. The plaintiffs were deprived of the entire principal amount and its use for several years. In such circumstances, awarding interest merely at the savings bank rate would be wholly inadequate and would fail to compensate the plaintiffs for the loss of opportunity and the hardship endured. The Ld. Trial Court's approach of benchmarking the rate against the Appellant Bank's own lending rates is a sound, non-arbitrary, and judicially recognized method. It correctly reflects the commercial value of money and the rate at which the Bank itself profits from lending. The exercise of discretion in awarding 13% pendente lite interest is, therefore, found to be reasonable and justified.
Justification for Future Interest:
47. As established above, the transaction being commercial, the trial court was empowered under the proviso to Section 34 CPC to award future interest at a rate at which RCA CIVIL DJ ADJ 135/2023 Page 42 of 45 nationalised banks lend for commercial transactions. The rate of 13% p.a. is well within the bracket of interest rates charged by nationalised banks for various types of loans and advances. The justification provided by the Ld. Trial Court for the pendente lite interest holds equally true for the future interest period. There is no reason to hold that the rate awarded is excessive or in contravention of the statutory provision.
Conclusion on Point for Determination No. 448. In view of the foregoing discussion, this court finds that the Ld. Trial Court correctly assessed the nature of the transaction and was well within its judicial discretion and statutory power to award pendente lite and future interest @ 13% per annum. The reasoning provided for the chosen rate is sound and the Appellant's challenge on this ground is without merit.
49. This Point for Determination is accordingly decided against the Appellant Bank and in favour of the Respondents.
CONCLUSION
50. In view of the findings on the points for determination, this court finds that the Ld. Trial Court has passed a well-reasoned judgment based on a correct and judicious appreciation of the facts, evidence, and the relevant principles of law. The finding that a relationship of principal and agent was established between the Appellant Bank and Respondent No. 5 is soundly based on the doctrine of implied agency, which was correctly invoked in the RCA CIVIL DJ ADJ 135/2023 Page 43 of 45 circumstances of this case. The Appellant's attempt to take shelter behind the "independent party" and "indemnity" clauses of its agreement, especially after failing to lead any evidence to rebut the plaintiffs' claims, was rightly rejected.
51. Furthermore, the Ld. Trial Court correctly dismantled the defense regarding the transactional limit of ₹20,000, not only on legal grounds of ostensible authority but also by relying on conclusive factual evidence on record. The findings on the liability of the agent (Respondent No. 5) for the acts of its sub-agent, and the award of interest, are also found to be in accordance with the law.
52. The appeal is found to be devoid of merit.
FINAL ORDER
53. The present appeal is accordingly dismissed.
54. The impugned judgment and decree dated 25.09.2023 passed by the Ld. Civil Judge-01 (South-West), Dwarka Courts, Delhi, in Civil Suit No. 625/2017, is hereby upheld and affirmed in its entirety.
55. The Appellant and Respondent No. 5 are jointly and severally liable to pay the decreetal amount to the original plaintiffs (Respondents No. 1 to 4) as ordered by the Ld. Trial Court.
56. The Appellant shall also bear the costs of this appeal.
57. The decree sheet be prepared accordingly.
RCA CIVIL DJ ADJ 135/2023 Page 44 of 4558. A copy of this judgment along with the Trial Court Record be sent back to the Ld. Trial Court for information and necessary compliance.
59. The file of this appeal be consigned to the Record Room after due compliance.
ANNOUNCED IN THE OPEN COURT DATED: 30.06.2025 (Digitally signed and uploaded on 07.07.2025) Digitally signed by SUMIT SUMIT DALAL DALAL Date:
2025.07.07 17:10:45 +0530 (SUMIT DALAL) DISTRICT JUDGE - 04 SOUTH WEST DISTRICT DWARKA COURTS : NEW DELHI RCA CIVIL DJ ADJ 135/2023 Page 45 of 45