CESC LTD. vs. CHIEF POST MASTER GENERAL .

1 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2606 OF 2006

  SUDHANSU   JYOTI     MUKHOPADHAYA,     J.    JUDGMENT 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. Page 1 2 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 JUDGMENT 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 Page 2 3 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 JUDGMENT 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 Page 3 4 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 JUDGMENT 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’, Page 4 5 ‘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 st informed the Company that as per revised postal tariff w.e.f 1 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. st 1 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 JUDGMENT 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 th letter was informed that the letter dated 29 May, 1997 was treated as cancelled by the Postal Authority with further Page 5 6 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. st th 1,83,89,410/- for the period from 1 June, 1997 to 29 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 JUDGMENT st claim was made on the ground of postage rate from 1 June, th 1997 was Rs.2/- per Book Post and from 30 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 Page 6 7 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. JUDGMENT 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 Page 7 8 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 JUDGMENT 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 Page 8 9 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 JUDGMENT 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 Page 9 10 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 JUDGMENT 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 Page 10 11 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 st effect from 1.6.1997 and again from 1 August 1998. On JUDGMENT 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. Page 11 12 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. JUDGMENT 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. Page 12 13 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 st prescribed rate which was due since 1 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 JUDGMENT 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 Page 13 14 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. JUDGMENT (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.” Page 14 15 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. JUDGMENT 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 Page 15 16 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.” JUDGMENT 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  .­   If  due  in  respect  of  postal  articles Page 16 17 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 JUDGMENT 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 Page 17 18 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 JUDGMENT The Deputy Manager(Com) C.E.S.C. House, Chowrighee Square   Calcutta   700     001     No. Tech/Z­27/9/90      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 Page 18 19 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/Cal­12”           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  JUDGMENT 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 Page 19 20 Calcutta 700 001 No. Tech/Z­27/9/90    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, Cal­12” 33.   Thus  it  is  apparent  that  due  to  a  wrong  JUDGMENT 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  Page 20 21 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  JUDGMENT 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  Page 21 22 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.  JUDGMENT 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.  Page 22 23 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 JUDGMENT Page 23