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Unit Trust Of India v. Ravinder Kumar Shukla And Others
Factual and Procedural Background
The appellant, a statutory corporation established under Section 3 of the Unit Trust of India Act, 1963, routinely issued “account-payee, non-transferable and not negotiable” cheques to unit-holders for maturity or repurchase proceeds. Approximately 1,600 such cheques, amounting to about Rs 3.35 crores, were intercepted before delivery; fraudulent bank or post-office accounts were opened in the payees’ names, the funds withdrawn, and only nominal balances left. Aggrieved unit-holders lodged complaints before various District Consumer Forums, all of which held the appellant liable and ordered payment. The National Consumer Disputes Redressal Commission dismissed the appellant’s appeals/revision petitions, leading to the present batch of Supreme Court appeals.
Legal Issues Presented
- Whether, in the absence of any agreement or request by unit-holders to send cheques by post, the post office acted as the agent of the appellant (drawer) or of the unit-holders (payees), thereby determining who must bear the loss caused by the interception of cheques.
- Whether the Consumer Fora possessed jurisdiction, given the appellant’s contention that no “deficiency in service” or negligence was attributable to it.
Arguments of the Parties
Appellant’s Arguments
- No deficiency in service existed; the appellant was not negligent in sending the cheques.
- The Consumer Fora lacked jurisdiction to adjudicate the dispute.
- Loss should lie with the unit-holders because posting the cheques constituted payment, making the post office the payees’ agent.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| CIT v. Ogale Glass Works Ltd. (1955) 1 SCR 185; AIR 1954 SC 429 | Where the payee requests/consents to receipt by post, the post office becomes the payee’s agent; posting equals payment at the place of posting. | Used to show that agency of the post office inures to the payee only when such a request or agreement exists. |
| H.P. Gupta v. Hiralal (1970) 1 SCC 437 | Failure to post dividend warrants constitutes the offence; obligation to pay is performed at the place of posting, implying agency derived from request/consent. | Reinforced the need for an express or implied request before agency can shift to the payee. |
Court's Reasoning and Analysis
The Court distilled the governing legal principle from Ogale Glass Works and H.P. Gupta: posting a cheque constitutes payment only where an express or implied contract or request by the payee authorises postal delivery; absent such authorisation, the post office remains the drawer’s agent and the risk of loss lies with the drawer.
To test whether this principle aided the appellant, the Bench repeatedly asked counsel, Mr Bhat, for evidence—documentary or otherwise—showing any unit-holder’s agreement, request, or consistent practice authorising postal dispatch. After two adjournments for record inspection, counsel candidly conceded that no such proof existed in any of the 1,600 matters.
Consequently, the Court held that:
- No agency of the post office could be imputed to the unit-holders; it remained the appellant’s agent.
- Loss from interception therefore rested with the appellant.
- Findings of negligence and deficiency of service recorded by the Consumer Fora were factual and warranted no interference under Article 136.
- The jurisdictional objection failed because the Fora had properly exercised consumer jurisdiction on established negligence.
Holding and Implications
Appeals DISMISSED; no order as to costs.
Immediate effect: the appellant must honour the Consumer Fora awards and compensate all affected unit-holders. Broader implication: the judgment reaffirms that, without payee authorisation, postal delivery does not shift risk of loss from drawer to payee, but it sets no new legal precedent beyond applying established principles.
S.N Variava, J.— All these appeals can be disposed of by this common order as the issue involved is the same.
2. Briefly stated, the facts are as follows:
The appellant is a statutory corporation established under Section 3 of the UTI Act, 1963. As part of its activities the appellant floats various schemes. Under the various schemes from time to time, the appellant issues cheques towards maturity amount of the units purchased and/or towards repurchase value. It appears that the appellant normally draws account payee, non-transferable and not negotiable cheques and send them to the payee by registered post.
3. The appellant started receiving a large number of complaints from unit-holders alleging non-receipt of the cheques. In all, 1600 unit-holders had not received cheques of the value of approximately Rs 3 crores 35 lakhs. All these cheques were intercepted, new accounts opened in banks/post offices in the names of payees of the cheques and thereafter the monies were withdrawn, leaving a minimum balance in the accounts. In respect of this colossal fraud, FIRs have been lodged, investigations and prosecution are in progress.
4. As the unit-holders had not received the money, they filed complaints in various District Forums. The District Forums have held that the appellant is bound to pay the amounts to the unit-holders. Most of the appeals and/or revision petitions have been dismissed. Against the dismissal of the appeals/revisions by the National Consumer Disputes Redressal Commission, these appeals have been filed.
5. The Consumer Forums have held that there was negligence on the part of the appellant. It has been held that the post offices were agents of the appellant and, therefore, the loss, if any, has to be borne by the appellant. It has been held that as the appellant had not paid the unit-holders, the unit-holders are entitled to receive the money from the appellant.
6. The question before this Court is whether the loss is to be borne by the unit-holder payee and/or by the appellant. The answer to this question would depend on whether the post office was acting as an agent of the unit-holder and/or the appellant.
7. In the case of CIT v. Ogale Glass Works Ltd. (1955) 1 SCR 185, AIR 1954 SC 429 the question was whether the respondent therein, which was a non-resident company, could be said to have received payment in India for the purposes of the Income Tax Act. On the request of the assessee, the amounts of the bills were sent to them by means of cheques which were drawn in Delhi. It was held that as the assessee had requested that the amounts be sent by post, the post office became the agent of the assessee. It was held that as the post office was in Delhi the assessee had received the amounts in Delhi.
8. In the case of H.P Gupta v. Hiralal (1970) 1 SCC 437 the appellant was a Director of a company. The respondent had filed a complaint under Section 207 of the Companies Act on the ground that the dividends declared by the company had not been paid within the prescribed time. This complaint was filed at Meerut where the complainant resided. The question was whether the Magistrate at Meerut had jurisdiction to try the complaint. This Court held that Section 207 of the Companies Act casts an obligation on the company to pay the dividend, which is declared, to the shareholders within 42 days from its declaration. It was held that the offence under Section 207 is the failure to pay dividend. It was held that the failure to pay will arise when the warrant is not posted. It was held that the offence was failure to post and not the non-receipt of the warrant by the shareholders. It was held that the obligation to pay, therefore, arises at the place where it is to be performed i.e at the post office where the cheque is to be posted and not at the address at which the cheque is to be delivered. It was, therefore, held that the Magistrate at Meerut did not have jurisdiction as the post office was in Delhi. It was held that it is only the Magistrate at Delhi who would have jurisdiction. It must be mentioned that in coming to this decision this Court implied an agreement/request from the dividend-holder to send the dividends by post.
9. Thus the law is that in the absence of any contract or request from the payee, mere posting would not amount to payment. In cases where there is no contract or request, either express or implied, the post office would continue to act as the agent of the drawer. In that case the loss is of the drawer.
10. We, therefore, asked Mr Bhat whether in any of the matters there was any proof of any contract that the amounts could be sent by post or any proof that any request had been made by any of the payees that the amount be sent by post. Mr Bhat was also asked whether there was any proof of any practice from which it can be implied that the payee had requested/consented to have the cheques sent by post. Time was taken from this Court on two occasions in order to ascertain whether in any of the matters any such proof had been filed. After making inquiries and taking inspections of the papers from the lower forums, Mr Bhat very fairly stated that there was no proof in any of these matters.
11. Mr Bhat next argued that these are not the matters in which the Consumer Forum had jurisdiction to adjudicate. He submitted that there was no deficiency of service as there was no negligence on the part of the appellant. All the forums have on facts held that there was an obligation to send the amounts and that there was negligence. These are questions of facts. We see no reason to interfere with questions of facts.
12. Under the circumstances, the appeals stand dismissed. There will be no order as to costs.
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