Karnataka High Court
The Secretary To The Government Of India vs Sri P M Shankarappa on 3 December, 2018
Equivalent citations: AIRONLINE 2018 KAR 2215, 2019 (1) AKR 357, (2019) 2 KCCR 1816
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 3RD DAY OF DECEMBER 2018
BEFORE
THE HON'BLE MR. JUSTICE SREENIVAS HARISH KUMAR
REGULAR FIRST APPEAL No.1151 OF 2003
BETWEEN
1. The Secretary to the
Government of India,
Ministry of Finance,
Department of Economic Affairs,
'Dak Bhavan' New Delhi.
2. The Post Master General
South Karnataka Region,
Bangalore-560001.
3. The Superintendent of Post
Offices, Chikkamagalur Division,
Chikkamagalur.
...Appellants
(By Sri.B.Pramod, CGC)
AND
Sri. P.M.Shankarappa,
S/o. Marulappa, Major
Agriculturist,
Mallikarjuna Nilaya,
Yagati, Kadur Taluk.
...Respondent
(By Sri. K.G.Kamath, Advocate, for M/s Kamath and
Kamath, Advocates)
2
This RFA is filed under Section 96 of CPC., against the
judgment and decree dated 16.07.2003 passed in
O.S.No.90/01 on the file of the Civil Judge (Sr. Dn), Kadur,
decreeing the suit for recovery of money.
This RFA coming on for hearing this day, the court
delivered the following:
JUDGMENT
The appellants are the defendants in the suit O.S.90/2001 on the file of Senior Civil Judge, Kadur. The said court by its judgment dated 16.7.2003 directed the defendants to pay Rs.2,41,500/- with costs to the plaintiff. Hence this appeal.
2. In a nutshell the pleadings are as follows : -
Attracted by high rate of interest introduced by the appellants in a scheme called MIS, the plaintiff made certain investments on different dates in the post office at a place called Yagati, Kadur Taluk. Details of the investment are as follows : -3
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Date Account No. Amount
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15.11.1994 38024 Rs.1,02,000/-
05.01.1995 38025 Rs.1,02,000/-
20.02.1995 38026 Rs.1,02,000/-
18.3.1998 38040 Rs.1,02,000/-
--------------------------------------------------------------------------- The interest being accrued every month on the above deposits was being credited to the S.B.Account of the plaintiff at the post office. The plaintiff wanted to close the above deposit accounts and when he approached the Post Master, the latter insisted on an application to be given for withdrawing the deposits. The respondent gave an application to the Post Master on 20.4.2000. By letter dated 25.4.2000 the plaintiff was informed that the matter had been referred to higher authority and after receiving information from the higher authority, payments would be made. Some time later the Post Master at Yagati closed the deposit accounts and made payment to the plaintiff after deducting the entire monthly interest paid to him. The plaintiff, noticing the deduction, issued a legal notice calling 4 upon the defendants to pay back the interest amount deducted by them. Since the defendants failed to make him the payment as demanded by him, he instituted a suit for recovering the amount deducted by the defendants along with interest and other charges, the details of which are tabulated as below :-
A/c No. Amount Amount Amount
Deposited returned to deducted by
the plaintiff the defendant
38024 102000 41,225 60,775-00
38025 102000 42,333 59,670-00
38026 102000 43,435 58,565-00
38040 102000 84,320 17,680-00
Total 1,96,690-00
Further interest from August 1999 to 44,200-00
06.06.2000 for 10 months @ Rs.1105/- p.m.
for 4 accounts
Notice charges claimed 500-00
Contingent expenditure & typing charges 110-00
Grand total amount 2,41,500-00
3. In the written statement of the third defendant, it is admitted that the plaintiff made the deposits as mentioned in the plaint and that the post office also credited the interest periodically to the S.B. Account of the plaintiff. But 5 what is specifically pleaded is that in the monthly income scheme (MIS) introduced by the Government of India, the maximum that an individual could invest was Rs.2,04,000/-. Even if an individual deposited in more than one account, the maximum limit should not exceed Rs.2,04,000/- and any investment made beyond this limit was against the rules and regulations concerning that scheme; the depositor was not entitled to bonus or interest. On 13.09.1994 the plaintiff invested an amount of Rs.2,04,000/- and he further invested money in the said scheme on subsequent dates as mentioned in the plaint. He knew that he could not have invested more than Rs.2,04,000/- and yet he invested the money without disclosing the investment made on 13.09.1994. For this reason a decision had to be taken to close down the investments made on 15.11.2004, 05.1.1995, 20.02.1995 and 18.03.1998. While returning the deposit money, the defendants had to deduct the interest paid on those deposits. There was nothing illegal.
4. The trial court framed seven issues based on the pleadings, examined one witness PW-1 from plaintiff's side 6 and two witnesses DW-1 and DW-2 from the defendant's side. The plaintiff produced 14 documents as per Ex.P.1 to P.14 and the defendants produced 6 documents as per Ex.DW-1 to DW-6. On appreciating the evidence the trial court came to conclusion to decree the suit and held that the plaintiff was entitled to a sum of Rs.2,41,500/- with costs. Its findings are as below:
4.1. The evidence of DW-1 very well establishes that the plaintiff is a resident of a small village called Yagati and that DW-1 was working in the sub-post office in that village for quite a long time and that he knew the plaintiff very well.
He knew very much that the plaintiff had already opened an account under MIS, yet he allowed the plaintiff to invest amounts in other accounts. Except the last account, other deposits were made by the plaintiff through the small savings agents. There is no material to show that the plaintiff was aware of the terms and conditions of the scheme. Actually these transactions amounted to contract. The defendants having accepted the deposits made by the plaintiff are liable to pay the interest to the plaintiff 7 according to MIS. Section 70 of the Contract Act can be applied. The defendants cannot be allowed to say that deposits made by the plaintiff were in violation of the terms and conditions of MIS.
5. Assailing the findings of the trial court, the learned counsel for the appellants argued that Ex.D-5 is a notification published in the Gazette of India on 25.04.1993. According to this notification, the Central Government framed rules with regard to MIS. The rule is very clear that a depositor may operate more than one account under the scheme, but the investment made by an individual in all the accounts should not exceed Rs.2,04,000/- in single account and Rs.4,08,000/- in joint account. The plaintiff operated single account. On 13.09.1994 under Account nos.38023, the plaintiff invested Rs.2,04,000/- and therefore the other deposits made by him on subsequent dates were in violation of the rules. Those investments cannot be treated as deposits under MIS. Having noticed this violation of rules, the defendants deducted the interest that had been credited to plaintiff's SB account in relation to the subsequent 8 deposits made by the plaintiff from 15.11.1994 onwards while closing the accounts. The action thus taken by the defendants was in accordance with rules. The plaintiff submitted applications while making deposits. The application contains the terms and conditions of the scheme. It cannot be said that the plaintiff was not aware of those terms and conditions. Though there existed a contract between the plaintiff and the defendants, since it was in violation of the rules governing the transaction, the defendants cannot be held liable to repay the interest amount deducted by them. He argued that the findings given by the trial court are contrary to law and therefore this appeal needs to be allowed and the judgment of the trial court set aside.
6. It was the argument of the learned counsel for the respondent that the plaintiff is a permanent resident of Yagati village. He is an agriculturist and illiterate. It has come in the evidence that the plaintiff invested money under MIS through an agent and therefore it cannot be said that the plaintiff knew the terms and conditions. When DW-1 9 knew very much that the plaintiff had already deposited Rs.2,04,000/- on 13.09.1994, he should have informed the plaintiff that he could not invest money in the same scheme further. The plaintiff believed hat he could invest any amount of money under MIS. Moreover the money was with the defendants for quite a long time. The plaintiff made deposits expecting high yield. Defendants having made use of the plaintiff's money cannot say that the plaintiff could not have invested money under MIS, and that the deductions that they made were legal. There was contract between the plaintiff and the defendants. The trial court has appreciated the evidence in right perspective. The well reasoned judgment cannot be interfered with and therefore appeal has to be dismissed.
7. From the above argument, the point that arises for discussion is as follows:
Is the finding of the trial court that the plaintiff is entitled to interest on the four deposits exceeding the limit of Rs.2,04,000/- 10 made by him under MIS correct although such deposits were in violation of the terms and conditions of the said scheme?
8. It is undisputed fact that the plaintiff invested an amount of Rs.2,04,000/- on 13.09.1994. The next four investments made by him on 15.11.1994, 05.01.1995, 02.02.1995 and 18.03.1998 were certainly against the scheme formulated by the Central Government. Exs.D-5 and D-6 are the two documents produced by the defendants in proof of their contention that the maximum amount that an individual could invest under MIS was Rs.2,04,000/-. The plaintiff himself has adduced evidence as PW-1. In his examination-in-chief affidavit he has reiterated the plaint averments. In the cross examination, an effort is made to discredit him. All the suggestions given to him that he was aware that he should not invest more than Rs.2,04,000/- and that it was brought to his notice that the investment was exceeding Rs.2,04,000/- have not been admitted by him. To rebut the evidence of the plaintiff, two witnesses DW-1 and DW-2 have adduced evidence. DW-1 was the post 11 master at Yagati Sub-Post office where the plaintiff made deposits and in his examination-in-chief he has stated that he had explained all the rules and regulations concerning the said scheme to the plaintiff. It is his another statement in examination in chief that the plaintiff made investment under MIS through the agents viz., Mohan Kumar and J.A. Srinivasa Murthy. In the cross - examination it is his clear admission that the amount available in the SB account of the plaintiff was transferred to the MIS account of the plaintiff. He has also admitted another suggestion that the postal inspectors used to visit the post office frequently and inspect the pass books and there used to be auditing every year. DW-2 was the Superintendent of Post Office, Chickmagalur. In his examination-in-chief, he has stated that on conducting verification of the registers, the violation of rules regarding the investment made by the plaintiff came to his notice and as per the scheme, the amount over and above the limit was refunded to the plaintiff. He has also stated that the interest already paid to the plaintiff under the irregular deposit was recovered from him while returning the 12 amount to the plaintiff. Certain suggestions are given to the witness in the cross examination, they are not so useful to be mentioned here.
9. Therefore on reassessment of evidence, it turns out that under the MIS, the plaintiff, in his individual account could only invest money to a maximum of Rs.2,04,000/- and having deposited Rs.2,04,000/- on 13.09.1994, any investment made by him subsequently was in violation of the scheme. Except the last investment on 18.03.1998 the other investments made by the plaintiff were through the agents. Though DW-1 has stated that he explained the scheme and its terms and conditions to plaintiff, his evidence cannot be so easily believed. If really, the terms and conditions had been explained either by DW-1 or the agents, the plaintiff would not have made excess investments under the said scheme. Moreover this inference is possible to be drawn because DW-1 has clearly admitted in the cross examination that the amount that was received on 05.01.1995 for being deposited was through transfer from the SB Account of the plaintiff. Whether the plaintiff knew the terms and 13 conditions or not; or there was a lapse on the part of the post master or the postal agents may not assume so much of importance as the rules framed by the Central Government govern the transactions and there cannot be violation of the rules. Therefore all the investments that the plaintiff made under account nos. 38024, 38025 , 38026 and 38040 were in violation of the terms and conditions of the scheme. The plaintiff cannot take advantage of it even though he made deposits in ignorance of these rules. But the fact remains that the money that the plaintiff invested remained with defendants till all the four accounts were closed on 06.06.2000. Therefore a question arises whether they were justified in deducting the interest that they had already paid from the deposited amount when they closed the accounts?
10. The factual position as assessed above discloses that a contract came into existence between the plaintiff and the defendants. This contract was subject to a condition; although at the inception the defendants accepted the deposit made by the plaintiff, the former, after coming to know violation of a rule governing the deposit scheme, might 14 have deducted the interest paid by them to the plaintiff, and the action taken by them cannot be said to be illegal or an action taken against the rule issued by the Central Government. But at the same time, it is to be noted that the plaintiff invested money expecting high yield. For a certain number of years the plaintiff's money remained with the defendants. In a situation like this, Section 65 of the Indian Contract Act is applicable. The defendants having had the plaintiff's money with them are bound to compensate the plaintiff, though they are not under obligation to pay the agreed rate of interest. The trial court has applied section 70 of the Indian Contract Act, probably for the reason that the defendants derived benefit from the deposit made by plaintiff who did not do so gratuitously. This finding given by the trial court cannot be said to be incorrect, but directing the defendants to pay interest at the contractual rate cannot be upheld. Since subsequent deposits made by plaintiff was against the rules governing the scheme, all that the plaintiff is entitled to is compensation, may be in the nature of interest, for the benefit derived by the defendants from the 15 plaintiff's money. The doctrine of "Quantum Meruit" can be applied to compensate the plaintiff.
11. What is the interest payable? is the next question. Since the interest required to be paid is in the nature of compensation, it should not be too low or exorbitant. An enquiry may also be held; and the trial court may be directed to hold an enquiry; but having regard to age of the suit, in my opinion without ordering an enquiry, a reasonable rate of interest may be fixed having the yardstick as the rate of interest probably in vogue under the other schemes. This is just an approximation to avoid future litigation. In my opinion 8% p.a. appears to be reasonable.
12. The plaintiff's deposit account was closed on 6.6.2000 by the defendants and therefore the plaintiff is entitled to interest on the deposit amount at 8% p.a. till 6.6.2000 from the date of opening of each deposit account. Since the defendants deducted an amount of Rs.1,96,690/- at the time of closing the deposit account, the defendants have to repay this amount with interest at the rate of 8% p.a 16 till the date of suit and also for the period till date of decree. However, future interest cannot exceed 6% according to section 34 of Civil Procedure Code. Hence, the following order : -
(a) Appeal is allowed in part.
(b) The judgment of the trial court stands modified as below: -
(i) It is held that the plaintiff is entitled to compensation by way of interest at the rate of 8% p.a. on the deposits made bearing account nos.38024, 38025, 38026 and 38040.
(ii) The defendants are hereby directed to
repay an amount of Rs.1,97,300/- which
is inclusive of notice charges and
contingency expenditure. The defendants
are also directed to pay interest at the rate of 8% p.a. on an amount of Rs.1,96,690/-
from 6.6.2000 till the date of filing of the 17 suit and also from the date of institution of the suit till the date of decree.
(iii) The plaintiff is entitled to future interest at the rate of 6% p.a. on amount of Rs.1,96,690/-.
(iv) Plaintiff is entitled to cost of the suit and this appeal.
Sd/-
JUDGE ckl/sd