Pradeep Kumar and another Vs Post Master General and others (Supreme Court)

Court: Supreme Court of India
Head Notes:

Pradeep Kumar and another Vs Post Master General and others
Forum-Supreme court of India
Date-7th February 2022

Sub-Whether post office is liable for payment of KVPs to the original holder when the same is encashed by the agent of the Post office by fraud. The law relating to holder, holder in due course , payment in due course, banker threadbare explained.

The Court was dealing with a matter which arose out of dismissal of complaint by National Consumer Forum(NCDRC) when the appellants had purchased KVPs worth Rs 32.60 lacs during the year 1995 and 1996 with various maturity dates and wanted the KVPs to be transferred to a particular post office and were directed by the Post office to take services of an agent, whereupon the appellants handed over the KVPs duly signed at the back to the agent for doing the needful. However, it was discovered that the said agent had cheated the appellant and many others by encashing the KVPs in cash in connivance with the sub-post master who acted against the SOP. The NCDRC however dismissed the complaint in favour of post office interalia on account of the fact that there was no rule at the time of encashment that the KVPs cannot be encashed in cash and has to be paid by cheque. The court after discussing the term holder, holder in due course and payment in due course as per the provisions of Negotiable Instruments Act, 1881 held that as the agent did not obtain the instrument in normal course but by fraud, the post office being banker under the NI Act should have acted in good faith. Moreover, as the Post office did not follow the rules, the principles of contributory negligence were applied and besides the agent, the post office was also liable and thus the appeal was decided in favour of the KVP holder by directing post office to pay the maturity value with 7% interest till date as well as Rs 110000 towards compensation and cost to be paid within 8 weeks.

This is a landmark judgement and will be helpful in similar cases where IVP, KVPs etc are lost or maturity payment are not received.

Ramesh Patodia

Section(s): Section 8, 10 and 82 of the Negotiable Instruments Act, 1881
Counsel(s): Counsels
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Uploaded By CA Ramesh Patodia
Date of upload: February 9, 2022

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