REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2606 OF 2006
CESC LTD. …. APPELLANT
Versus
CHIEF POST MASTER GENERAL & ORS. .… RESPONDENTS
WITH
CIVIL APPEAL NO. 2607 OF 2006
CESC LTD. …. APPELLANT
Versus
CHIEF POST MASTER GENERAL & ORS. .… RESPONDENTS
J U D G M E N T
SUDHANSU JYOTI MUKHOPADHAYA, J.
These appeals have been preferred by the appellant- CESC Limited
(hereinafter referred to as the “Company”) against the common order and
judgment dated 20.1.2004 whereby the Division Bench of the Calcutta High
Court allowed the appeal preferred by the first respondent- the Chief Post
Master General, West Bengal Circle and others (hereinafter referred to as
the “Postal Authority”) and dismissed the appeal preferred by the Company.
2. The order impugned before the Division Bench was passed in the Writ
Petition No. 2282 of 1999 preferred by the Company against a demand notice
dated 10.9.1999 issued by Postal Authority asking the Company to deposit a
sum of Rs.1,83,89,410/-. The learned Single Judge by order dated 7.11.2000
had allowed the writ petition and held that the demand notice dated
10.9.1999 is contrary to Section 11(2) of the Indian Post Office Act, 1898
(hereinafter referred to as “the Act”) and remitted the matter with a
direction to the Postal Authority to consider the representation of the
Company after giving it a hearing and with a further direction that, till
the matter is decided, the entire deposit of Rs.50 lacs as was made by the
Company in terms of the interim direction be kept with the Postal
Authority. In case, it was decided that the amount was not payable by the
Company, the Postal Authority would refund the same, but in the event it is
found that the amount was due and payable by the Company, the Postal
Authority shall adjust the same against the dues.
3. Against the said order, an appeal was preferred by the Company as the
learned Single Judge allowed the Postal Authority to retain the amount of
Rs. 50 lakhs deposited by the Company in terms of the interim order while
another was preferred by the Postal Authority against the said order of the
learned Single Judge since the notice of demand was quashed and the learned
Single Judge held that the Postal Authority had no power to demand such
amount.
4. The case of the appellant is that it is a ‘company’ incorporated
under the provisions of the Companies Act and is conducting the business
of supplying electricity. The Company has about 26 lakh of registered
consumers which is increasing continuously. The consumption bills are sent
by the Company to its consumers, every month through the Post Office. For
the purpose of sending monthly consumption bills by post, a specific area
has been allotted to the Post Office in the South-west Regional Office of
the Company at Taratola for carrying out the necessary operations, commonly
known as the “Taratola Sorting Office” of the Postal Department. This
practice is being followed by the company for a considerable period of
time. The Officials of the Postal Department are posted at the said
Taratola Sorting Office and a sub-office has been set up in a space
provided by the appellant company exclusively for the purpose of receiving
‘franked’ monthly electricity consumption bills as is made by the officials
posted there. The appellant company had installed the requisite ‘franking
machines’ for this purpose which are operated by the appellant company’s
staff.
5. The dispute relates to the period between 1.6.1997 to 29.10.1998,
during which, the monthly consumption bills, upon being folded, were marked
with the requisite postal stamp of Rs.1/- per bill using franking machines.
The monthly consumption bills thus franked, were made over to the counter
of the Postal Department located in the said premises. Upon being
satisfied with the franking marks and the value thereof, the Postal
Officials accepted and took the postal articles, namely, the monthly
consumption bills for being dispatched to the addressee consumers. Till
then there were no disputes that the appellant had ever breached the
franking conditions as enshrined under the license. The monthly consumption
bills are printed on a sheet of paper which are then merely folded for
convenience. The consumption bills are not sealed at either end and when
posted, are not enclosed in any envelop or wrapper. The consumption bills
are also not stitched or stapled anywhere. Under the prescribed postal
tariff as prevailing with effect from June 1, 1997, a charge of Rs.1/- per
letter was prescribed for ‘letter cards’ under ‘Serial No. 3’ and for
‘Book’, ‘Pattern’ and ‘Sample Packets’ under ‘Serial No. 5’ thereof. The
monthly consumption bills of the appellant company weighs much less than 50
grams.
6. By letter dated 29.5.1997, the Director of Postal Service informed
the Company that as per revised postal tariff w.e.f 1st June, 1997, charges
for ‘Book’, ‘Pattern’ and ‘Sample packets’ for first 50 gms. or fraction
thereof is Rs.1/-. For every additional 50 gms. or fraction thereof in
excess of 50 gms. is Rs.2/-. Monthly consumption bill, if it is posted as
‘Book’, ‘Pattern’ and ‘Sample packets’ the revised postal tariff w.e.f.
1st June, 1997, as mentioned above will be applicable.
7. Accordingly, from June 1997 to October 29, 1998, the appellant sent a
total of 1,63,60,121 Bills, based on the aforesaid communication dated
29.5.1997, treating the posts as ‘book post’, affixing Rs.1/-, per postal
articles. The posts were cleared by the postal department without any
objection and were also delivered to the respective addressee consumers.
8. All of a sudden on 29.10.1998, the appellant, by another letter was
informed that the letter dated 29th May, 1997 was treated as cancelled by
the Postal Authority with further intimation that the ‘Monthly Consumption
Bill’ does not come under the category of ‘book post’/ ‘book packets’ and
that such type of ‘bills’ could be posted by affixing postage stamps as
applicable to the ‘letter mail’ with immediate effect. The appellant
objected to the cancellation and requested the postal authorities for a
review of the decision and to restore the status quo. However, in
compliance with the aforementioned letter the Company started posting the
consumption bills affixing Rs.3/- stamps under protest and without
prejudice.
9. Suddenly the Vigilance Officer, Department of Post by letter dated
18.6.1999 made additional claim for Rs. 1,83,89,410/- for the period from
1st June, 1997 to 29th October, 1998 during which a total of 1,69,60,121
bills were despatched by the company affixing franking stamp of Rs.1/- per
bill. Such claim was made on the ground of postage rate from 1st June,
1997 was Rs.2/- per Book Post and from 30th August, 1998 the rate was
Rs.3/- per Book Post.
10. The Company replied on 30.10.98, that under Section 11, the
liability is not of the Company to pay but that of the addressee consumers
as the posts have already been delivered by the Postal Authority without
any objection and hence no such objection can be raised at this stage. It
was informed that neither was there any objection taken by the Postal
Authority at the time of entrustment of the posts nor at the time of
delivery, when they were actually delivered to the addressee. This demand
was raised long after the posts had been delivered to the respective
addressees and hence it requested to review the decision.
11. Pursuant to the said letter the Postal Authority informed the company
by letter dated 26.7.1999 that the case was reviewed by the appropriate
authority and reiterated the demand for Rs.1,83,89,410/- thereby rejected
the prayer for review as is evident from the said letter. The relevant
portion of which is quoted hereunder:
“The case was reviewed by the appropriate authority. Though the
approval of the Department was given confirming the rates for
sending electricity bills by Book Post as Rs.1/-, the same was
given by mistake. The question remains that the electricity
bills were posted at Book post rate i.e. @ Rs.1/- bill during
the period from June 1997 to 29.8.1998 and @ Rs.3/- during the
period from 30.8.1998 to 29.10.1998.
It is once again requested kindly to deposit the deficit
amount of postage of Rs. 1,83,89,410/- in respect of posting of
electric bills during the period from June 1997 to 29.10.98 at
any Post Office and intimate the particulars of deposit to this
office.
If the deficient amount of postage of Rs. 1,83,89,410/- is
not deposited, the same will be treated as due to the Govt. of
India from C.E.S.C. Limited.”
12. As the Postal Authority continued to make the demand, the Company
preferred the Writ Petition No. 2282 of 1999 mainly on the ground that the
demand notice dated 10.9.1999 asking the appellant to deposit
Rs.1,83,89,410/-, is contrary to Section 11(2) of the Indian Postal Act,
1898. The learned Single Judge by order dated 7.11.2000 allowed the writ
petition affirming that the demand notice is contrary to Section 11(2) of
the Indian Postal Act, 1898. The learned Single Judge found that the pre-
requisite of fastening liability on the sender of the post under Section 11
is not permissible. Therefore, the Company cannot be saddled with the
responsibility to pay. Furthermore, it was also found that the person
issuing the demand notice did not have the authority to issue such a
notice. However, the learned Single Judge of the Writ Court did not order
the refund of Rs. 50 lacs, which was deposited by the Company pursuant to
the interim order, and held that the said refund would be subject to the
decision of the respondent authorities.
13. The Division Bench by the impugned judgment held that the Postal
Authority through the Post Master General, West Bengal Circle was
completely empowered by Clause 11.5 (xv) and 34 of the Post Office Guide
read with Section 12 of the Act to recover the outstanding sum remaining,
due by the licensee Company to the Postal Authority. At the same time the
Post Master General was also competent enough to direct the denial of
acceptance of postal articles from the Company, unless and until the
outstanding is paid and the finding of the learned Single Judge to the
contrary on that score is wrong and was thereby set aside. The demand
notice was upheld, but the direction of the learned Single Judge, directing
the authorities to decide the representation of the Company by giving
personal hearing was upheld. The Division Bench upheld the order passed by
learned Single Judge, while directing the continuance of deposit of the
above sum of Rs.50 lacs as and by way of an interim measure. Therefore,
the Division Bench refused to interfere with that part of the order of the
learned Single Judge.
14. The learned counsel appearing on behalf of the Company submitted that
the Company was guided by the Postal Department for franking and their
office staff were present at the site of the Company where franking were
made. The manner of posting the bills was as per the instructions issued
by the Postal Authorities. In this regard, there is no difference between
a ‘normal post’ and ‘franked’ one and the breach of the franking license
conditions was not even alleged.
15. It was also contended that liability under Section 11 is only upon
the addressee while the liability of the sender is contingent on the pre-
requisites which had not happened. The demand was raised without
adjudicating or ascertaining the dues. This apart, the authority issuing
the demand was not competent to issue the same. It was further submitted
that the letter dated 18.6.1999 issued by the Vigilance Officer shows that
not only were the authorities making a demand from the wrong person, the
right person under Section 11 being the addressee, but were also asking the
Company to pay for the “mistake” which was committed by them. Till that
date, the Postal Authority had not produced the so called notification
dated 27.8.1997. Therefore, the appellant was seriously prejudiced by non-
production of that document.
16. It was further contended that the postal charges for despatch of the
electricity bill is recovered by the sender along with the electricity
tariff, which could only be done while preparing the bill. Since the
Company had no means of recovering any amount and subsequently it cannot
pass-on this liability on the addressees, the claim of the postal authority
was denied. It was also contended that there is no provision whatsoever
for levying arrears on postal charges and without complying with the terms
and mandate of Section 12 of the Act, the Vigilance Officer issued a
demand notice for Rs. 1,83,89,410/- with a threat that unless the aforesaid
amount is deposited within 30 days, a direction would be given that all
postal services conveying articles, except the government services
despatched by the Company, be withheld. Therefore, the demand was ex-
facie illegal.
17. The learned counsel appearing on behalf of the Postal Authority
contended that the postal tariff was revised with effect from 1.6.1997 and
again from 1st August 1998. On 29.10.1998, the mistake committed by the
department was detected and, therefore, the Postal Authority immediately
cancelled their letter dated 29.5.1997 whereby the authorities informed the
Company that for the monthly consumption bills, if posted as ‘book post’
and ‘sample packets’ the revised tariff of Rs.1/- will be applicable.
18. On 30.10.1998, the Company made a request to review the decision and
thereafter, the Postal Authority made their demand on 18.6.1999 and a
further demand was made on 18.8.1999 and finally on 10.9.1999, the threat
of panel action was also conveyed through the said letter. Attention was
also drawn to a letter dated 5.11.1998 wherein the Company themselves
agreed to bear the cost as may be required, on demand. On 18.6.1999, the
demand for deficit postage was asked for, by the Postal Authority. On
26.7.1999 a demand for deficit postage and a threat was made to recover the
same as Government duty followed by another demand dated 18.8.1999 and a
threat of penal action under the Act. It was contended that those letters
are not under challenge and in the writ petition, only the letter of demand
dated 10.9.1999 has been challenged and is the subject matter of the writ
petition.
19. The learned counsel for the Postal Authority referred to Rule 17 of
the Indian Post Office Rules, 1933 which defines “Book Packets”. While
Rule 19 stipulates the articles which cannot be posted as “book packets”.
According to him, the monthly consumption bills satisfied Rule 17 and are
not covered under Rule 19.
20. Further according to the counsel for the Postal Authority, ‘the Post
Office Guide’ is an administrative instruction issued to fill up gaps if
any, in the Indian Post Office Rules and therefore it has a binding force.
The Company having accepted the classification, and by affixing the
postal stamps of Rs.3/- per bill by franking since 29.10.1998, cannot
object to pay the prescribed rate which was due since 1st June,1997.
21. We have heard the learned counsel for the parties and have carefully
perused the Indian Post Office Act, 1898 and the Post Office Guide as
relied by them.
22. The present dispute pertains to the period between 1.6.1997 and
29.10.1998, and as the Company has been affixing the postal franking
stamps as per the demanded rate since 30.10.1998, there is no dispute
regarding the subsequent period.
23. The only question arising for consideration is whether the
respondents have the authority and power under the Indian Post Office Act,
1898 or the Post Office Guide or any other Rule/guidelines to demand the
alleged deficit amount of postage from the “sender” of the postal articles,
after receiving the same from the “sender” without any objection to the
deficit amount and after delivering the postage articles to the addressee
without claiming any deficit amount from the “addressee”.
24. Clause 11(10) (xv) of the Post Office Guide, relates to recovery of
an amount in the event of a breach of the conditions of the license and
reads as under:-
“11.Franking Machine.- A postal franking machine is a stamping
machine intended to stamp impressions of dies of approved design on
private and official postal articles in payment of postage and
postal fees. A commission of 1-1/2 per cent is permitted on the
value of franks used.
2. x x x x x x x x x
x x x x x x x x x
(10) The licence is granted to the following conditions.
(xv) In the event of a breach of any condition of the licence,
the licence will be forthwith cancelled by the head of the Postal
Circle who will not be responsible for any loss which the licensee
incurs thereby. Any sum that may be due to the licensee on account
of postage advanced will, however, be refunded to him and any sum
that may be due to the Department on account of postage will be
recovered from him.”
25. Clause 34 of the said Guide stipulates cancellation of a license in
the event of a breach of any prescribed condition, as quoted hereunder:-
“34. In the event of breach of any of the prescribed conditions the
license will be forthwith cancelled by the licensing authority who
will not be responsible for any loss which the licensee may incur
thereby. Any sum that be due to the licensee on account of postage
advance will, however, be refunded to him and any sum that may be
due to the Department on account of postage will be recovered from
him.”
26. In this case, it has not been alleged by the Postal Authority that
the Company has breached any of the conditions of license. In the absence
of any such allegation relating to a breach, the provisions of Clause
11(10) (xv) or Clause 34 of the Post Office Guide are not attracted.
27. The applicability of Clause 34 is conditions precedent such as (a)
breach of any of the conditions of license to use the franking machine (b)
cancellation of the license to use the franking machine (c) a sum due to
the department on account of postage. Such conditions have not been
fulfilled in this case nor any averment has been made and no such stand has
been taken by the Postal Authority. Therefore, Clause 11(10)(xv) or Clause
34 is not applicable in the present case. The Division Bench of the High
Court erred in holding that the provisions of Clause 11(10) (xv) and Clause
34 are attracted in the present case.
28. Section 11 of the Act, 1898 stipulates “liability for payment of
postage” and reads as under:-
“11. Liability for payment of postage.-(1) The addressee of a postal
article on which postage or any other sum chargeable under this Act is
due shall be bound to pay the postage or sum so chargeable on his
accepting delivery of the postal article, unless he forthwith returns
it unopened:
Provided that, if any such postal article appears to the
satisfaction of the Post Master General to have been maliciously sent
for the purpose of annoying the addressee, he may remit the postage.
2) If any postal article on which postage or any other sum
chargeable under this act is due, is refused or returned as
aforesaid, or if the addressee is dead or cannot be found, then
the sender shall be bound to pay the postage or sum due thereon
under this Act.”
29. Section 12 of the said Act, 1898 empowers the Postal Authority to
recover the postage and other sums due, in respect of postal articles which
reads as under:-
“12. Recovery of postage and other sums due in respect of postal
articles.- If any person refuses to pay any postage or other sum due
from him under this Act in respect of any postal article, the sum so
due may, on application made by an officer of the Post Officer
authorised in this behalf by the written order of the Post Master
General, be recovered for the use of the Post Office from the person
so refusing, as if it were a fine imposed under this Act, by any
Magistrate having jurisdiction where that person may for the time
being be resident, and the Post Master General may further direct that
any other postal article, not being on (Government) Service, addressed
to that person shall be withheld from him until the sum so due is
paid or recovered as aforesaid.”
30. Thus from Section 11 it is clear that the ‘addressee’ will be liable
to pay the deficit postal charges, if any, once the addressee accepts the
postal article or opens it. On the other hand, the ‘sender’ will be
liable to be charged for the deficit postage, if it is detected at the time
of postage or if the addressee refuse or return the postage or if the
addressee is dead or cannot be found. If such amount is found due from the
sender, the Postal Authority is empowered to recover the sum dues from the
sender under Section 12 of the Act.
31. It is not the case of the Postal Authority that any of the postage
has been refused or returned by any of the addressee or any addressee is
dead or could not be found. In absence of any such allegation no charge
can be made from the sender-company under Section 11 and the Company cannot
be made liable to pay the postage or sum due thereon for franking Rs.1/-
per bill for postage and for that there was no occasion for the authority
to exercise power under Section 12 to recover such due from the sender-
company.
32. Admittedly, the Director of Postal Services by his letter dated
29.5.1997 informed the Company that as per the revision of postal tariff
w.e.f. 1.6.1997, the electricity bills can be posted by paying Rs.1/-
w.e.f. 1.6.1997, whether the post sent either as ‘Book’ or ‘Pattern’ or
‘Sample Packet’. The said letter reads as follows:-
“DEPARTMENT OF POST, INDIA
OFFICE OF THE CHIEF POST MASTER GENERAL, W.B. CIRCLE, YOGAYOG BHAWAN,
CALCUTTA – 700 012
To
The Deputy Manager(Com)
C.E.S.C. House,
Chowrighee Square
Calcutta 700 001
No. Tech/Z-27/9/90
Dated the 29.5.1997
SUB: Revision of Tariffs in respect of certain Inland Postal
Services with effect from 01.6.1997.
REF: Your letter No. Nil dated 28.9.1997
Sir,
As per revised Postal Tariff w.e.f. 01.6.1997 charges for Book,
pattern and sample packets for first 50 Gms or fraction thereof is
Re.1/-. For every additional 50 Gms or fraction thereof in excess of
50 Gms. is Rs.2/. Monthly consumption bill, if it is posted as Book,
pattern and sample packets the revised Postal Tariffs w.e.f.
01.6.1997, as mentioned above, will be applicable.
Thanking you,
Yours faithfully
Sd/-
(MRS. A. GHOSH)
Director of Postal Services
Calcutta Region/Cal-12”
In view of the letter dated 29.5.1997, the Company charged Rs. 1/-
per Bill for the period from 1.6.1997 till by letter dated 29.10.1998, the
Company was informed of cancellation of such letter as evident and quoted
hereunder:
“DEPARTMENT OF POST, INDIA
OFFICE OF THE CHIEF POST MASTER GENERAL, W.B. CIRCLE, YOGAYOG BHAWAN,
CALCUTTA – 700 012
From O/O the Chief P.M.G. To The Deputy Manager
West Bengal Circle (Commercial) ,
Yogayog Bhawan Victoria House
Calcutta 700 012 Chowrighee Square
Calcutta 700 001
No. Tech/Z-27/9/90 Dated at Calcutta-700012 the 29.10.1998
Subject
Sir,
I am directed to inform you that this office earlier letter of even
no. dtd. 29.5.97 is hereby treated as cancelled. Monthly consumption
bill is not under the category of Book Post/Book Packets as per this
office rule. This type of bill can be posted affixing the postage stamp
as applicable on the letter mail with immediate effect.
Yours faithfully
Sd/-
(S.C. Sahu)
A.D.P.S. (Technical)
For Chief Postmaster-General, Cal-12”
33. Thus it is apparent that due to a wrong intimation given by the Postal
Authority, the Company affixed the postal stamp of Rs.1/- per bill,
treating it as ‘book post’ and the staff of the Postal Department without
any objection cleared and delivered to the respective addressees.
34. Clause 30(iv) of Post Office Guide reminds the office of the Postal
Authority to check the bundles to ensure proper check of franking articles
and reads as under:-
“30. The following procedure must be insisted upon and should be
strictly endorsed in all the offices:
(iv) Office which accepts the posting should check the bundles to
see if various articles have been franked for correct postage and
also the total value of the articles tallies with the details given
in the dispatch slip and that entries in col.1 to 3 of the Franking
Machines register of posting have correctly been made. A separate
dispatch slip should be there for articles franked with different
machines. He will then put his initials, date and date stamp in the
Franking Machine Register of postings and return the same to the
licensee or his agent.”
35. Though under Clause 30(iv) the office which accepts the posting is
required to check the bundles franked for correct postage and also to tally
the total value of the articles, before dispatch of the article, there is
failure on the part of the office of the Postal Authority as noticed by the
Division Bench of the High Court and for that the sender company cannot be
made liable.
36. The Postal Authority mislead the sender company which caused charging
of lesser amount for the bills is evident from the letters written by the
Director, as quoted in the preceding paragraphs. The failure on the part
of the Postal Authority to ensure correct postage as per Clause 30(iv) is
also not in dispute. The mistake having been committed by the Postal
Authority and there being failure on the part of office of the Postal
Authority to check the postal articles and postage for recovering the
amount from the addressee, it is not open for the Postal Authority to pass
on such liability on the sender-company or to recover the same from the
Company. The demand notice being not proper was rightly held to be
illegal by the learned Single Judge. The question thus raised in this case
is answered in negative and against the respondents.
37. In the result, the appeals are allowed. The demand notice and the
order passed by the Division Bench of the High Court is set aside; the last
portion of the direction given by the learned Single Judge authorizing the
Postal Authority to decide the issue afresh and allowing them to retain
the amount of Rs. 50 lakhs till such decision is also set aside. The
respondents are directed to refund the amount of Rs.50 lakhs deposited by
the Company pursuant to the interim order passed by the High Court along
with 6% interest within three months from today. There will be no order as
to costs.
……………………………………………….J.
( R.M. LODHA )
……………………………………………….J.
( SUDHANSU JYOTI MUKHOPADHAYA)
NEW DELHI,
MAY 11, 2012
