Karnataka High Court Raps Postal Officials For Opening HUF PPF Account After Withdrawal Of Scheme, Orders Payment Of Interest

The Karnataka High Court recently came to the rescue of a 48 years old Bengaluru resident who was denied interest on PPF deposits, stating that his HUF PPF account was opened irregularly after the scheme was amended.

Stating that it was for the authorities to detect such irregular accounts and inform the investors immediately, a single judge bench of Justice M Nagaprasanna cautioned the Postmaster and the Senior Superintendent of Post Offices that failure to do so will lead to the Officers who manage such accounts being held responsible for dereliction of duty.

“It is necessary for the respondents to issue these instructions to all the Post Offices who handle such accounts, so that the common man does not bear the brunt of unnecessary litigation,” the bench added.

The court made the observation while allowing a petition filed by K.Shankarlal calling in question direction issued by the Postmaster (Malleshwaram post office), holding that he would not be entitled to any interest on the deposit made by him in the PPF Scheme.

HUF PPF Scheme account stood closed in the year 2005. Shankarlal had in 2009 opened an account in the name of HUF in the PPF Scheme and the maturity date of the said account is in March 2025. After about 12 years of opening of the account, the Postmaster communicated to the petitioner that he has opened a PPF account under the Scheme in the capacity of HUF after cut-off date of May 31, 2005. Hence, it was treated as an account that was irregularly opened and had to be closed without interest.

The petitioner contended that he had made deposits for the last 12 years during which period he was not made known that the account was irregular.

The Deputy Solicitor General of India opposed the plea saying that the petitioner made the investment knowing fully well that the Scheme did not exist.

Findings

The bench noted that after opening of the account, the petitioner went on depositing amounts into the account at intermittent intervals. He was also issued a passbook for opening of the account.

“If the dates and link in the chain of events are noticed what would unmistakably emerge is that the petitioner is no way responsible for the fault of the respondents/authorities. At the outset it was an agent who facilitated opening of the account; the account was opened. For 12 long years, the petitioner had deposited money into the account under the Scheme as HUF. After receiving the amounts for 12 years into the said account with eyes wide open, knowing full well that the Scheme has been amended and opening of the account itself was irregular, no fault can be laid at the doors of the petitioner,” the Court held.

It expressed “The 1st (Postmaster) and 2nd respondents could not have permitted opening of the account and further could not have permitted deposits into the account for 12 long years. Having kept quiet, all along cannot pass the buck upon the petitioner and make the account irregular and deny interest for the investment.”

Further it said “The action of the respondents in denying interest and directing closure of the account holding it to be irregular does not behoove its status being a State under Article 12 of the Constitution of India, as the impugned action is far from fairness.”

Accordingly it allowed the petition and directed “The petitioner would be entitled to interest under the Scheme, only up to the date on which the communication comes to the petitioner On and from 23-09-2021 the account of the petitioner till its maturity shall carry interest at the scheduled Banks lending rate and not the rate of interest under the Scheme.”

Case Title: K. Shankarlal v. Post Master, India Post & Ors.

Case No: WRIT PETITION NO. 2042 OF 2023

Citation: 2023 LiveLaw (Kar) 146

Date of Order: 31-03-2023

Appearance: Advocate Chandrashekar Patil for petitioner.

DSGI H.Shanthi Bhushan for respondents.