BANK OF BIHAR LTD. vs MAHABIR LAL & ORS.

The Supreme Court held that under Sections 85 and 118 of the Negotiable Instruments Act, 1881, payment must be made to the firm or its authorized agent for liability to arise. The Court found that the money was not in the actual custody of the firm or its agent, thus the firm could not be held liable for the misappropriation by the Potdar, a servant of the Bank. The judgment of the Patna High Court was upheld, confirming that the Bank was not responsible for the criminal acts of its servant.