Cesc Ltd. Vs Chief Post Master General .

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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.

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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

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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

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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’,

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‘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

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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

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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

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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

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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

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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

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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.

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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.

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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

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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.”

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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

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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

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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

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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/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

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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

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

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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

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

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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

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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.

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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

CESC LTD. Vs CHIEF POST MASTER GENERAL .

CESC LTD. Vs CHIEF POST MASTER GENERAL .