SENIOR SUPERINTENDENT OF POST OFFICES KOLHAPUR OFFICES, KOLHAPUR DIVISION vs ICHALKARANJI MUNICIPAL COUNCIL & ORS.

Delay condoned.

This First Appeal, under Section 19 of the Consumer Protection Act, 1986 (for short "the Act"), by the Senior Superintendent of Post Offices, Kolhapur Division, Kolhapur, Maharashtra, Opposite Party No.3 in the Complaint under the Act, is directed against the order dated 04.08.2015, passed by the Maharashtra State Consumer Disputes Redressal Commission at Mumbai (for short "the State Commission") in Complaint Case No. CC/06/114. By the impugned order, while holding that there was deficiency in service on the part of Opposite Parties No. 1 to 4, including the Appellant herein, and, thus, the Complainant was entitled to recover the assured interest as on and upto 31.12.2005 on the Time Deposits made by it with the Appellant, the State Commission has partly allowed the Complaint and directed the aforesaid Opposite Parties to jointly and severally refund to the Complainant a sum of 60,71,877/- together with interest @ 7.5% p.a. from the date of the Complaint, i.e. 31.08.2006, within four months form the date of the said order, failing which rate of interest shall be 12% p.a., besides costs, quantified at 25,000/-.

Succinctly put, the material necessary for appreciating the controversy involved, as culled out from the Complaint, are: 3.1 The Complainant is a Municipal Council, constituted or deemed to be constituted under the provisions of the Maharashtra Municipal Councils Nagar Panchayats and Industrial Townships Act, 1965 (for short "the 1965 Act"). The Government of India through Ministry of Finance, Department of Economic Affairs, in exercise of powers conferred by Section 15 of the Government Savings Banks Act, 1873, amended the Post Office Savings Account Rules, 1981 (for short "the 1981 Rules") and, accordingly, the Amending Rules, namely, Post Office Savings Account (Second Amendment) Rules, 2005 (for short "the Amending Rules") came into force w.e.f. 27.07.2005, on publication of the Notification in the Official Gazette. By the said Amending Rules, following amendments were introduced:

" 2. In the Post Office Savings Account Rules, 1981,

1.in rule 5, after sub-rule (7), the following sub-rule shall be inserted, namely:

(8) Notwithstanding anything contained in this rule -

(a) No deposits shall be accepted in an account other than an individual account.

(b) The outstanding balances in an account other than an individual account shall be refunded to the depositor on a date not later than 31 st December, 2005.

(ii) in rule 6, after sub-rule (9), the following sub-rule shall be inserted, namely:

(10) Notwithstanding anything contained in this rule -

(a) deposits in an account other than any individual account shall not earn interest after 31 st December, 2005

(b) the interest on an account other than an individual account closed on or before 31 st December, 2005 through withdrawal or refund shall also be allowed for the month in which the account is closed on pro rate basis."

3.2 The effect of the amendment was that no Time Deposit could be made or accepted on behalf of any institution or body, except an individual.

The Complainant, which, as per the 1965 Act, was empowered to invest surplus funds in public securities in the name of the Council, on requests from Opposite Parties No. 5 and 6, viz. Assistant Director, Small Saving Department & the Collector, District Kolhapur and the Sub-Divisional Officer, Ichalkarnaji Division, District Kolhapur respectively, deposited the amount accumulated in Staff Salary Reserve Fund with Opposite Party No.4, viz. Head Post Office at Ichalkarnaji, District Kolhapur, under its Time Deposit Scheme for a period of five years, commencing 13.08.2002. The interest payable was @ 8.5%/7.5% p.a. According to the Complainant, at the time of accepting the deposits, it was never informed that such accounts could not be opened by the Council. On the amounts deposited, totaling 2,32,07,000/-, the Complainant received interim interest, amounting to 23,48,410/-, between the period from 13.08.2002 and 10.11.2004. However, vide its letter dated 06.12.2005, Opposite Party No.4, i.e. Post Master, Head Post Office, Ichalkarnaji, informed the Complainant that in light of the Audit objection, the Time Deposits made in an official capacity in contravention of the Rules, were required to be closed immediately without payment of interest and by recovering the interest already paid. Consequently, the Post Office refunded the amount deposited in the Time Deposits after deducting the interest paid thereon. Vide its letter dated 03.01.2006, the Complainant informed Opposite Party No.4 that it was accepting the amount under protest. It was alleged that as per the Time Deposits Rules and committed interest on the said deposits, Opposite Party No.4 was required to make payment of deposited amounts along with interest accrued thereon as on 31.12.2005, till closure of the accounts, and, therefore, deduction of the interest paid was illegal and without jurisdiction. In response to the same, the Appellant, vide its letter dated 15.06.2006, informed the Complainant that as the Savings Accounts, in which Time Deposits had been made, were opened in contravention of the Rules, it was not entitled to any interest on the deposits and, therefore, the interest paid earlier had been correctly deducted.

Alleging the said action to be illegal, arbitrary and without jurisdiction and, inter alia, asserting that for any irregularity on the part of Opposite Party No.4 in opening such Savings Accounts, a statutory body could not be penalized by not paying the interest accrued on such deposits, the Complainant filed the afore-noted Complaint before the State Commission. In the Complaint, while pleading that the Opposite Parties were guilty of deficiency in service and unfair trade practice, the Complainant prayed for a direction to the Opposite Parties to jointly and severally pay a sum of 60,71,877/-, being the loss suffered and interest accrued on the Time Deposits, together with future interest on the said sum w.e.f. 01.01.2006 at an appropriate rate, besides 5,00,000/- as compensation on account of deficiency in service and 25,000/- as litigation expenses.

Opposite Parties No.1 to 4 contested the Complaint by filing a joint Written Version, through Opposite Party No.3, the Appellant herein. While denying that there was any deficiency in service and unfair trade practice on their part, it was pleaded that the Department of Posts, New Delhi had issued instructions vide GSR No. 118E dated 08.03.1995, barring opening of Time Deposit Account by the institutions w.e.f. 01.04.1995. However, investments by Trust in these instruments and investments in Post Office Time Deposit under Charitable Endowment Account by Regimental Funds & Welfare Funds were to continue. Since the Complainant had opened the Time Deposit Salary Reserve Fund Account irregularly and in contravention of the Rules and Regulations, it was not entitled to any kind of interest on the deposits. While denying that the Complainant had deposited/invested the amount at the behest of Opposite Parties No. 5 and 6, it was stated that before making investments, the Complainant was required to be careful to ensure that the public funds were lawfully invested/secured; mere issue of passbooks did not entitle the Complainant of the benefits of the scheme or an account, if it was irregular and in contravention of the Rules; there being no personal interest of any officer/servant of the Postal Department, the question of misguiding/misinforming the Complainant as an investor did not arise; on closure of the accounts in question, the lawful amount due and payable, after deducting the interest wrongfully paid earlier, was refunded to the Complainant, which had been received/accepted by it without any protest; and as the Amending Rules, which came into force w.e.f. 27.07.2005, were not applicable to the Time Deposit Salary Reserve Fund Accounts, which were opened on or after 01.04.1995, the claim of the Complainant was illegal and unlawful. It was asserted that there was no deficiency in service on the part of the Opposite Parties and no default or negligence could be attributed to any of the officers/servants of the Opposite Parties.

On appraisal of the material placed by the parties before it and relying on the order of this Commission in Post Master and Ors. V. Krishi Upaj Mandi Samiti, IV (2005) CPJ 95 (NC) , the State Commission, while holding that Opposite Parties No.1 to 4 had made the Complainant to believe that the Scheme was to continue, without bringing to its notice the change of the Rules from 1995 itself, held that there was deficiency in service on their part, partly allowed the Complaint and issued the afore-stated directions to Opposite Parties No. 1 to 4. Hence, the present Appeal.

We have heard Mr. P.K. Jain, learned Counsel appearing for the Appellant, and Mr. Umapathy, learned Counsel appearing for the Complainant at some length.

Relying strongly on the decision of the Hon''ble Supreme Court in Arulmighu Dhandayudhapaniswamy Thirukoil, Palani, Tamil Nadu, through its Joint Commissioner v. Director General of Post Offices, Department of Posts & Ors, AIR 2011 Supreme Court 2604, Mr. Jain submits that the said decision squarely covers the issue raised in the Appeal, in favour of the Appellant and, therefore, the impugned order deserves to be set aside. It is also urged that on a plain reading of Sections 2(1)(b) and 2(1)(m) of the Act, the Complainant could neither be treated as a "Complainant" nor a "person", entitled to file a Complaint under the Act and, therefore, the Complaint was per se not maintainable.

Per contra, Mr. Umapathy, while supporting the impugned order, has submitted that in Arulmighu''s case (supra) the fine distinction between Rule 16, dealing with Accounts opened "incorrectly" and Rule 17, dealing with Accounts opened in "contravention of Rules", of the 1981 Rules has not been noticed and even assuming that the Time Deposits were made in the accounts opened "incorrectly", the Complainant was entitled to interest at the rate applicable from time to time to a Savings Account of the type for which the depositor is eligible, in terms of Sub-Rule (2) of Rule 16. It is also asserted that having utilized the funds deposited by the Complainant and earned interest thereon by investing the same, the Appellant cannot turn around and contend that they are not liable to pay any interest on the Term Deposits in question.

In our opinion, in light of the authoritative pronouncement by the Hon''ble Supreme Court in Arulmighu''s case (supra) , which is on all fours to the facts at hand, the impugned order cannot be sustained. Dealing with a similar situation and being cognizant of the fact that the Complainant had lost a substantial amount by way of interest on the amount deposited, the Supreme Court has held that since prayer of interest under the scheme to institutions was prohibited, failure to pay interest to the Complainant in that case could not be construed as a case of deficiency in service in terms of Section 2(1)(g) of the Act, observing thus:

"9. It is true that when the appellant deposited a huge amount with the 3 rd Respondent from 05.05.1995 to 16.08.1995 under the Scheme for a period of five years, it was but proper on the part of the Post Master to have taken a note of the correct Scheme applicable to the deposit. It was also possible for the Post Master to have ascertained from the records, could have applied the correct Scheme and if the appellant, being an institution, was not eligible to avail the Scheme and advised them properly. Though Mr. S. Aravindh, learned counsel for the appellant requested this Court to direct the 3 rd Respondent to pay some reasonable amount for his lapse, inasmuch as such direction would go contrary to the Rules and payment of interest is prohibited for such Scheme in terms of Rule 17, we are not inclined to accept the same. We are conscious of the fact that a substantial amount had been kept with the 3 rd Respondent till 03.01.1996 when the said amount was refunded without interest. In the light of the letter dated 01.12.1995 and in view of Rule 17 of the Rules, failure to pay interest cannot be construed as a case of deficiency in service in terms of Section 2(1)(g) of the Consumer Protection Act, 1986. Both the State and the National Commission have concluded that the 3 rd Respondent was ignorant of any Notification and because of this ignorance the appellant did not get any interest for the substantial amount. We agree with the factual finding arrived at by the State and the National Commission and in view of the circumstances discussed above, the respondents cannot be fastened for deficiency in service in terms of law or contract and the present appeal is liable to be dismissed."

Following the ratio of the said decision, with respect, we hold that in view of the statutory prohibition, the Complainant was not entitled to any interest and, therefore, there was no deficiency in service on the part of the Appellant in deducting the amount of interest, periodically paid to the Complainant on the Time Deposits in questions.

Resultantly, the Appeal succeeds and is allowed accordingly and the impugned order is set aside, leaving the parties to bear their own costs.