Postal authorities cannot retrospectively deduct credited PPF interest after accepting deposits without notice.

The petitioner maintained a Public Provident Fund (PPF) Account No. 1300898601, opened in 1992 at Patna G.P.O. under the Public Provident Fund Act, 1968 and the Public Provident Fund Scheme, 1968. The petitioner regularly deposited amounts, and the Postal Department credited interest annually.

Although the account had matured, the respondents continued accepting deposits and crediting interest until 30 August 2017. At closure, the account balance was shown as Rs.60,38,612/-, but the respondents paid only Rs.38,16,748/- and withheld Rs.22,21,864/- under the head “UCR”.

The petitioner challenged the deduction as unauthorised and sought refund with interest.

The respondents relied on the Government of India Circular dated 12 March 2013, contending that pre-13 May 2005 PPF (HUF) accounts were not entitled to earn interest beyond 31 March 2011 if not closed or extended in accordance with the rules.

They asserted that the amount paid represented the balance as on 31 March 2011 plus subsequent deposits, excluding interest credited thereafter.

Whether the respondents were legally entitled to deduct Rs.22,21,864/- from the petitioner’s PPF account at the time of closure on the ground that interest credited after 31 March 2011 was inadmissible under the Government Circular dated 12 March 2013?

Whether the respondents could unilaterally reverse or withhold interest previously credited to the account without prior notice, disclosure of reasons, or a reasoned order?

Whether the petitioner could be made to suffer for the Postal Department’s failure to prevent continued operation of the account and continued crediting of interest after maturity?

The Court applied the Public Provident Fund Act, 1968 and the Public Provident Fund Scheme, 1968 governing PPF accounts.

It considered the Government of India Circular dated 12 March 2013, under which certain pre-13 May 2005 PPF (HUF) accounts that remained unclosed after maturity were not entitled to earn interest beyond 31 March 2011.

The Court further applied the principles of administrative fairness, natural justice, and non-arbitrariness, holding that an authority cannot, without notice or a reasoned order, withdraw amounts that it had itself accepted and credited over a prolonged period.

It also applied the principle that a depositor should not suffer for administrative lapses or negligence attributable to the authorities.

The Court accepted that the respondents relied on the 12 March 2013 Circular to deny interest after 31 March 2011. However, it found that the respondents had continued to accept deposits, operate the account, and credit interest up to 30 August 2017, as reflected in the passbook.

Having represented through their conduct that the account remained operative and interest-bearing, the respondents could not, at the stage of closure, unilaterally deduct the interest previously credited without informing the petitioner that the account had ceased to earn interest or providing an opportunity to contest the proposed deduction.

Any irregularity in continuing the account was attributable at least in part to the Postal Department, and the petitioner could not be prejudiced by that administrative failure.

The deduction was therefore held arbitrary, unreasonable, and legally unsustainable.

The respondents were directed to release the deducted amount along with admissible interest, if any, in accordance with law, within three months from the date of receipt or production of a copy of the judgment.

Any pending interlocutory applications were disposed of.