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A Comprative Study Of Agent, Servant And Independent Contractor

Vicarious Liability

The Vicarious Liability is such an instance where a person would be held responsible for the offense or wrongful actions of another person.[1] The Liability of such nature is imposed on someone for the wrongful activities of another person. This creates a situation where a person establishes the liability on someone through his or her offense, tort or wrongdoing.

The liability arises when a person is responsible for the actions of another person since the person was negligent with his or her responsibility and exercise of control. The Vicarious Liabilty comprises responsibility of someone for the harmful act of another person even when he or she is not directly related with the offense.[2]

The Vicarious Liability also known as 'Imputed Liability' emerges when one has authoritative relationship with another which makes him or her legally responsible for the harm caused by another party.

Comprehending Vicarious Liability With The Help Of Case Laws

The Vicarious Liability has been applied in different situations with reference to the case laws holding someone liable for the wrongful actions of another person.

State Of Rajasthan V. Smt. Shaekhu And Ors. On 22nd July, 2004[3]

Facts
The Defendant no. 1 is Lokumal, a temporary employee of the State of Rajasthan employed as a motor driver (on probation) of a Government Jeep Car under the Collector of Udaipur and Defendant no. 2 is the State of Rajasthan. The concerned car had been sent for repairs. On dated February 11, 1952, while driving back from the car workshop after the repairs were done knocked down a pedestrian named Jagdishal.

The victim suffered badly and three days later, he died in the hospital. The plaintiff happens to the widow of Jagdishal and his daughter aged 3 years filed a suit for damages under tort against Lokumal and the State of Rajasthan claimimg Rs. 25, 000 as compensation from both defendants. The Defendant No. 1 was ex parte and therefore, the suit was contested by Defendant No. 2.

Issue:
  • Whether the State be held liable for the offense committed by the motor driver?

Judgement
The negligence of the driver would involve the owner of the motor vehicle in an accident even when the owner is not directly negligent creating liability to pay the compensation to the claimants. Such liability is called 'vicarious liability' and this principle of vicarious liability is applicable in motor accident cases thus, suit for damages for negligence of the driver of the State is maintainable. The Court upheld the decision of the High Court mentioning the State to be liable for the tort committed by the driver within the scope of employment creating liability of the state to compensate the claimants.

Aneeta Hada V. Godfather Travels & Tours Pvt. Ltd. On 27th April, 2012[4]

Facts
The Appellant named Aneeta Handa was an authorized signatory of International Travels Limited issued a cheque in favour of the respondent, M/s. Godfather Travels & Tours Private Limited on dated 17th January, 2011. The cheque got dishonoured to which the respondent initiated a criminal proceeding by filing a complaint under section 138 of the Negotiable Instruments Act, 1881. The Appellant is the director of the company without bringing the company under spot light as an accused.

Issue:
  • Whether Aneeta Handa be liable for the dishonour of cheque?

Judgement
The Court held against the accused Aneeta Handa since extension of criminal liability for dishonour of a cheque to the officers of the company. The principal accused being the company itself, the liability would fastened vicariously on the people connected with the company. The interpretation of section 141 of the N.I. Actmentions the extension of the criminal liability for offenses like dishonour of cheques under section 138 of the N.I. Act to the people related to the company.

Sunil Bharti Mittal V. Central Bureau Of Investigation On 9th January, 2015[5]

Facts
The case was filed against the unfamiliar private companies, people belonging to those private companies and officials of the Department of Telecommunications, Ministry of Telecommunications. In 2008, the then Minister of Telecommunication gave permission to issue Unified Access Services Licenses. Later, illegal activities took place under the umbrella of Unified Access Services Limited causing massive losses in the National Treasury and such incidents were reported to CBI. The High Court of Delhi in the 2g spectrum scam case, held the directors of companies liable for obtaining licenses by illegal means causing immense loss in the National Treasury. Sunil Bharti one of the directors of the company aggrieved with the decision of the court was granted with civil appeal based on Special Leave Petition under Art. 136 of Indian Constitution was heard in Supreme Court.

Issue:
  • Whether the members of the company be held liable for the illegal activities done in the name of the company?

Judgement
The Special Judge issued summon comprising insufficient evidences to impose vicarious liability hence, granting the appellant not liable for obtaining licenses by illegal means. The judgement dealt with the determination of illegal activities committed in the name of companies imputed among members of the company via the principle of 'Alter - ego'. The vicarious liability did not emerge among members of the company since insufficient material of evidence, the Supreme Court held favourable to the appellant Sunil Bharti Mittal.

Dillip Hiramani V. Bank Of Baroda On 9th May, 2022[6]

Facts
The respondent is Bank of Baroda which issued loans to a company named M/s. Global Packaging wherein the appellant is a partner. Another partner of the firm drew three cheques in his name extended to the firm which later got dishonoured. In response, the bank filed a case under section 138 of the N.I. Act against the partner who drew three cheques and the appellant. As the matter reached the Supreme Court, the court noted that the appellant was not involved in drawing of cheques.

Issue:
  • Whether the Appellant be held liable for the dishonour of the cheques?

Judgement
The court held that in absence of any evidences proving involvement of the appellant towards issuance of the cheques and thus, the appellant is not to be convicted just because he is the partner in the firm. The 'Vicarious Liability' under section 141 (1) of the N.I. Act can be applied when the concerned person is in overall control of the day - to - day business of the company or firm wherein this case no evidence to prove that the appellant was in - charge and responsible for affairs of the business.

The liability of the Appellant arising out of section 20 of the Partnership Act, 1932 is civil in nature and thus, cannot be fastened under section 141 of N.I. Act as 'Vicarious Liability'. The section 141 (2) of the N.I. Act mentions consent or neglect to the offense on the part of director, manager, secretary or other officer of the company which in this case was absent.

Agent

The Agent is different from either a servant or an independent contractor and the Agent is supposed to discharge his / her duty based on contract or by some request, conducts business or some act or series of acts on behalf of another who is definitely the Principal. The Agent is someone having relationship with another person i.e., Principal to carry out business or task on behalf of the Principal. Taking the scenario of a car driven by the agent of a Principal, the vicarious liability will arise when the owner of the motor vehicle i.e., Principal authorizes his agent to drive the vehicle for the purpose of (owner's) own and the agent while driving injures someone.

The determination of vicarious liability takes place by emphasizing on the request or authorization of the Principal to the agent to do some act to fulfil the purpose of the Principal. The mere permission of the Principal to the agent is not enough. The Principal must either authorize, request or delegate the agent to do task to fulfil the purpose of the Principal along with having the control over his agent's work to constitute 'Vicarious Liability'. There must be such work done by the agent which comprise fulfilment of the purpose of the Principal otherwise any act done by the agent will not bring vicarious liability upon the Principal.

In the case of Ormord v. Crosville Motor Services Ltd. established the point of purpose fulfilment of the Principal by the work done by the agent.[7] The facts of the case mention the defendant about to compete in the car rally who asked his friend to drive his (defendant's own car) car from Birkenhead to Monte Carlo in order to meet the defendant after the rally. Their plan was to get the car carrying the suitcase of the defendant and finishing the rally both were to set off for holiday.

The friend of defendant during his journey from Birkenhead to Monte Carlo collided with an omnibus which suffered damages. The Court held that the defendant will be held liable since his friend drove his car in order to fulfil the purpose of the defendant. The friend of the defendant will be considered as the agent and defendant as the principal since the defendant delegated the task to drive the car to fulfil his purpose.

There are situations where the agent was not working within the scope of the authority of the principal to which the agent's breach of duty will not be constituting vicarious liability upon the master. The matter can be understood by the following case of State Bank of India v. Shyama Devi whose facts states that the petitioner gave certain amount of money to his friend in order to deposit the money in Plaintiff's account since the friend was an employee of the bank.[8]

The plaintiff's friend took the advantage of the situation and misappropriated the amount of money to which the court held that the State Bank of India cannot be held liable for the wrongful act by their employee since at the time of misdeed the employee was neither acting as the agent or as the employee of the bank, instead as a friend of the plaintiff.

The Principal will only be held liable for the wrongful act done by the agent when the principal authorises the work in order to fulfil the purpose of the Principal. In the case of C. Ranganathan v. Government of Tamil Nadu, writ petition was filed against the authorities of government hospital for medical negligence.[9]

The deceased father in his affidavit stated that his daughter was left unattended by the hospital staff suffering from condition of bleeding through mouth, nostrils and ears and was controverted by a counter affidavit. Eventually, the court held that the Government Hospital will be held liable for the negligent act by the hospital staff and with the fact that the Government Hospital treats patients for free doesn't mean that it would disentitle parties to get compensation for loss caused by the negligence act of the authorities.

Servant

The servant is in relation with the master on basis of 'respondent superior' where the servant's presence under the umbrella of authority of the master and the superior i.e., master will be held responsible for the act of the servant. The servant happens to make the master liable for his acts with reference to the maxim 'qui facit per alium facit per se' which means he who employs someone to do something is deemed to do himself.[10]

The servant acts can make the master liable only at due course of employment. The concept of master - servant relationship based on superiority over another to make the person accomplish some tasks and by doing that master in position of superiority exercise control over the servant. A person recognized as the servant of the master binds the servant with the master on basis of 'Contract of Service' wherein the servant is controlled by the master ordering him "what is to be done" and "how it shall be done". The person will only be claimed as the servant of a master when the master has the control over servant by ordering him "what is to be done" and "the manner in which his work is to be done".

The test to determine the servant is no longer regarded as the criterion since due to the extension of vicarious liability in modern times. The issue arises not with the instruction "what is to be done" but with the "manner in which the work is supposed to be done". In the case of Hillyer v. Governors of Hospital, the hospital was not to be vicarious liable for the negligence of their professional workforce since no control of the hospital over the manner in which the work carried out by such taskforce.[11] This kind of legal restriction on the part of the hospital was removed.

With reference to cases like Gold v. Essex C. Council, Collins v. H.C. Council[12] and Cassidy v. Ministry of Health[13], the hospital will be held vicarious liable for the negligence of the nurses, whole time services radiographers, resident house surgeon, and whole time medical officer or surgeon. In the case of Mooren v. Swinton & Pendlebury Council in which it mentions about general emphasis given upon the control but can't be considered as determining test to point out one to be servant since it is next to impossible to have control over people of professional nature with skill set like for e.g., pilot, surgeon, etc.[14]

Hence, with mention of the case Dharangadhara Chemical Works v. State of Saurashtra[15], the Supreme Court stated that the right with the master to have control over the execution of the work is different in several businesses and such test of control over the servant cannot be of universal in nature, thus, control of the servant by the master to go for the execution of the work is incapable to be confined to a precise definition.

Independent Contractor

A servant is a person subject under a 'contract of service' which instils the right with the master to determine the task of the servant i.e., "what is to be done" and "how is to be done", except where the work is either technical or professional in nature which does not hinder the power with the master to set "what is to be done" but makes him incompetent to elaborate the manner in which the task is to be done i.e., pilot's job or surgeon's surgery. The independent contractor is different from an agent or a servant since the independent contractor comes under the ambit of 'contract for service' i.e., "what is to be done".

The master performs the act of task giving but not bound to mention the way the work is supposed to be done that gives the independent contractor a free hand to carry out the task in the manner he wishes to accomplish. The work gets carried out on the sole discretion of the independent contractor. The master will not be vicarious liable for the offense committed by the independent contractor.

The reference of the case can be taken of B. Govindaraj v. M.L.A. Govindaraja Mudaliar, the defendant sent his bus for repair to a workshop owner.[16] The employee of workshop while driving the bus injured the plaintiff to which the Madras High Court held that the owner will not be held liable vicariously, since the employee was that of the workshop which held the position of independent contractor neither agent nor servant.

Exceptions Of The Employer Not Liable For The Tortious Acts Of The Independent Contractor

  1. Employer authorizes to perform an illegal task.
  2. Employer Vicariously Liable in cases of strict liability.
  3. Employer Vicariously Liable for damages caused on or near the highway by the Independent Contractor.
  4. Employer Vicariously Liable for the act causing the damage to the plaintiff in the form of nuisance by withdrawing support from the neighbour's land.
  5. Employer Vicariously Liable for the breach of common law duty having damage consequences to the servant done by the independent contractor.

DIFFERENCE BETWEEN AGENT, SERVANT AND INDEPENDENT CONTRACTOR
Basis For Comparison Agent Servant Independent Contractor
Meaning A person other than a servant and independent contractor either by way of contract, request, authorization or delegation conducts some business or perform some acts on behalf of the principal to fulfil his purpose. A servant is the person under the control of the master and the test of determination of relationship of the servant with the master is based on 'contract of service' i.e., "what is the work to be done" and "how must be the work done" and the second test will be absent with regard to work of a professional with skills like for e.g., pilot's job or surgeon's surgery. A person neither an agent nor a servant and comes into picture by the medium of 'contract for service' i.e., "what is the work to be done". The independent contractor possess the freedom to do the work by the way he wants at his own discretion.
Works For Principal Master Master/Principal/Employer
Compensation Commission Salary/Wages Payment
Direct Control And Supervision The Agent comes under direct supervision and control of the Principal. The Servant comes under direct supervision and control of the Master The Independent Contractor does not come under the direct supervision and control of neither Master, Principal nor Employer.
Acts The Principal is liable for the tort committed by the agent under his authority. The Master is liable for the tort committed by the servant in the course of employment. Neither the master, principal or employer is liable for the tort committed by the independent contractor
Generally, the employer, master or principal is not liable for the tortious acts committed by the independent contractor has certain exceptions mentioned as follows:
  1. The master/employer/servant has authorized to do wrongful act.
  2. In cases of Strict Liability, Employer/Master/Principal will be liable for the tortious act of the independent contractor.
  3. The Master/Servant/Principal will be held liable for the work that caused damages on or near the highway by the independent contractor.
  4. The Master/Servant/Principal will be held liable for the damage caused to the plaintiff which takes the form of nuisance by withdrawal of support from neighbour's land done by the independent contractor.
  5. The Master will be held liable for the breach of duty of common law duty to which the servant suffered damage committed by the independent contractor on his behalf
Work The work received by the agent that holds the principal liable can come to him either by contract, request, authorization or delegation to fulfil the purpose of the Principal. The work done by the servant is based on 'Contract of Service' which mention the work given to servant with two sets of instruction i.e., "What is the work to be done?" and "How the work must be done?". The second will not be applicable in case of professionals with skills e.g., pilot's job  The work done by the independent contractor is based on 'Contract for service' which determines only "What work is to be done?". The Independent contractor acquires the freedom to do the given task in the manner he prefers.
End-Notes:
  1. Ratanlal & Dhirajlal, The Law of Torts (Lexis Nexis 2022)
  2. S.P. Singh, Law of Torts (Universal Lexis Nexis 2022)
  3. State of Rajasthan v. Smt. Shekhu And Ors., I (2005) ACC 156
  4. Aneeta Hada v. Godfather Travels & Tours Pvt. Ltd., (2005) 4 SCC 530
  5. Sunil Bharti Mittal v. Central Bureau of Investigation, (2011) 1 SCC 74
  6. Dilip Hariramani v. Bank of Baroda, 2022 Latest Caselaw 399 SC
  7. Ormord v. Crossville Motor Services Ltd., (1953) 2 All ER 753
  8. State Bank of India v. Shyama Devi (1978) 3 SCC 399
  9. C. Ranganathan v. Government of Tamil Nadu AIR 2005 Mad 171
  10. Baxi A. Singh v. Union of India 1973 75 PLR 1.
  11. Hillyer v. Governors of Hospital, (1909) 2 KB 829.
  12. Gold v. Essex C. Council, 1942 KB 293.
  13. Cassidy v. Ministry of Health, (1951) 2 KB 343.
  14. Mooren v. Swinton & Pendlebury Council (1965) 2 All ER 351.
  15. Dharangadhara Chemical Works Ltd. v. State of Saurashtra AIR 1957 SC 264.
  16. B, Govindaraja v. M.L.A. Govindaraja Mudaliar, AIR 1966 Mad 332.

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