When rules governing postal deposits are changed through a gazette notification about which neither the government official nor the consumer is aware, how would it affect the investor?
Case Study: Arulmigu Sri Sankaranareyanan, a charitable trust, placed a deposit of Rs 50,000 with the Kovilpatti Post Office in Tamil Nadu on 21.9.1996. The deposit was accepted by the postal department even though it was in contravention with the Post Office Savings Bank General Rules which debarred institutional investments in Post Office Time Deposit Accounts. The mistake was detected by the postal authorities in mid-August,1997.
The postal department then sent a letter to the trust on 24.12.1997, asking it to close the deposit account.
As a special case, the postal authorities offered to pay a interest of 3% per annum. The trust did not respond and instead approached the District Forum by filing a complaint against the Union of India through the Superintendent of Post Offices. The case was contested, stating that the interest was not payable since the deposit was in contravention with the rules.
After considering the rival contentions, the forum allowed the complaint and held the postal department liable to pay interest. This order was challenged but the appeal was dismissed. The postal authorities then finally approached the National Commission in revision.
The National Commission observed that the earlier institutions were allowed to invest in postal time deposits, which was later disallowed under a notification issued on 8.3.1995. It relied on the Supreme Court’s judgment in Arulmighu Dhandayudhapaniswamy v/s The Director General of Post Offices, Department of Posts & Ors. in Civil Appeal No. 4995 of 2006 decided on 13.7.2011, where it had been held that ignorance of law on part of the investor is no excuse, and it is presumed that the citizen is aware of every notification published in the government gazette.
So under normal circumstances, no interest whatsoever—not even the 3% interest offered—would be payable on the deposit since the investment was in contravention of the rules.
The national commission also observed that once it was noticed that the investment was contrary to law, it was the duty of the postal department to forthwith refund the principal amount without interest instead of waiting for the investor to close the account.
Failure to do so would be a considered a deficiency in service, for which the investor would be entitled to claim compensation.
Accordingly, by its order of 11.6.2018 delivered by Justice V K Jain, the National Commission held the postal authorities liable to refund the deposit along with the offered rate of 3% interest from the date of investment till the date when the mistake was detected, and thereafter at 12% per annum from 31.8.1997 onwards.
Conclusion: An investor has to exercise caution when investing in government schemes as even though the dealing officials may be ignorant and callous, it is the consumer who has to suffer the loss.
(The author is a consumer activist and has won the Govt of India’s National Youth Award for Consumer Protection. His email is email@example.com