* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ LPA No.1794/2006
Date of Decision : 30th July, 2008
ALL INDIA MANAGEMENT ASSOCIATION .....Appellant
Through Mr. Rajiv Sharma, Adv.
versus
UNION OF INDIA & ORS. .....Respondents
Through Mr. Rakesh Tiku with
Mr. Prakash Gautam, Advs.
CORAM:
HON'BLE MR. JUSTICE MUKUL MUDGAL
HON'BLE MR. JUSTICE MANMOHAN
1. Whether the Reporters of local papers
may be allowed to see the judgment? Yes
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be Yes
reported in the Digest?
JUDGMENT
30-07-2008
: MUKUL MUDGAL,J.(Oral)
LPA No.1794/2006 Page 1 of 11
1. The appellant was the original writ petitioner before the learned Single
Judge. The appellant is the All India Management Association, which
according to the appellant is exempted under Section 80(G) of the Income
Tax Act, as a charitable Trust.
2. The following facts are not in dispute:
(a) The appellant had made postal deposits with the respondents at
stipulated rates of interests varying from 7.5% to 9% per annum and the
deposit periods varied from 8th February 2002 to 26th December, 2003.
2(b) A dispute arose on account of a subsequent postal audit. During the
audit it was found that the accounts opened by the appellant were in
contravention of the existing rules and instructions and it was revealed that
the petitioner could not have made such deposits, accordingly, a letter dated
21st June 2004 was sent by the respondent to the petitioner averring as
follows:
“To,
All India Management Association
14, Institutional Area,LPA No.1794/2006 Page 2 of 11
Lodi Road, N.D.-3.No.APN SB No./Audit/04
dtd.21.6.04
Sub: Irregular opening of I.D. Accounts
with the bank of Rs.9.49 crores.PO.
As per Post Office Small Saving Scheme,
other institutional accounts to be opened by a
trust, Regimental & welfare fund only w.e.f.
1.4.95.You are, therefore, requested to
intimate whether “All India Management
Association” is one under Institutional or
other Institutional Accounts category.Sr. Postmaster
Lodi Road, HPC
New Delhi-110003.”The appellant responded to the said letter in the following terms:
“To
Sr. Post Master
Lodhi Road, HPO
New Delhi 110003.Ref: Your letter No.APM SBHO/Audit/04
dated 21/06/04.Dear Sir,
Please refer to your above mentioned
LPA No.1794/2006 Page 3 of 11
letter in connection with the opening of TD
accounts for the sum of Rs.9.49 crores. In this
connection we hereby inform you that AIMA is
an autonomous body and all its activities are
educational and towards the development of the
management profession. In addition, we are
exempted u/s 10(23 C)(vi) and 80G of the
income tax act, 1961. We have to follow sec.
11(5) of the income tax act to invest our
surplus funds and are assessed as Charitable
Trust by the Income tax department. Copy of
all these relevant documents were submitted to
you while opening our first TD account on
08/02/2002. Thereafter, you have allowed us
to open our further TD accounts till our last
deposit 26/12/2003.However, we once again are enclosing
herewith the copies of aforesaid papers and
request your to release all our interest amount
due on various TD accounts. In case you have
any reservation on this account, the same
should be intimated to us urgently so that we
can suitably invest our funds elsewhere.”3. Eventually, on 18th October 2004, the appellant was directed by the
respondent to close its account in the following terms:
“Sir,
Kindly refer to your office letter
no.AIMA/crs/INV/04-05 dated 28-06-04
regarding opening TD accounts for the sum of
Rs.9.39 crores.LPA No.1794/2006 Page 4 of 11
In this connection, it is intimated that our
Audit objected that all your office TD
accounts were opened in contravention of the
Rules. As per existing rules, only trust,
Regimental Fund and Welfare Fund can open
a Time Deposit Account under other
institutional accounts category. Your
institution does not came under the above
category.As per D.G. instructions you are
requested to close your irregular TD accounts
within a week, if you are not agree to close
these accounts, this office will close all the TD
account opened in contravention of Rules after
deducting the interest paid till date earlier.”
4. It is not in dispute that all the deposits of the appellant were returned on
26th October 2004 by the respondents. The said amounts were returned to the
appellant after deducting the sum of Rs.61,85,726.85 which was the offered
rate of interest already paid to the appellant.
5. This led to the filing of the writ petition in this Court where the
petitioner’s main grievance was that he ought not have to suffered on account
of respondents’ mistake as the appellant had not made any mis-declaration
while making deposits. The learned Single Judge while agreeing with the
LPA No.1794/2006 Page 5 of 11
petitioner and setting aside the deduction of 61,85,726.85 by the respondent,
granted interest to the petitioner only @ 5% per annum. This denial of the
interest at the offered rate on deposits by the respondents has led to the
present appeal by the appellant.
6. The main grievance of the appellant as ventilated by Mr. Rajiv Sharma,
the learned counsel appearing for the appellant is that when the learned Single
Judge had found that there was no mis-declaration made by the appellant and
the appellant was in no way responsible for what was later termed as an error
which was discovered during the audit, the writ petitioner/appellant should
not have been penalized because grant of interest limited to 5% per annum
would deny him the amount of interest which he could have secured from the
deposits with the respondent or elsewhere.
7. The learned counsel for the respondent, Mr. Rakesh Tiku assisted by
Mr. Prakash Gautam, Advocate, has contended that the grant of 5% interest
per annum adequately meets the ends justice as today the term Saving Bank
Account offers rate of interest @ 3.5% per annum. This has been countered
LPA No.1794/2006 Page 6 of 11
by the learned counsel for the appellant by contending that the interest rates
indicated by the respondent are in respect of Saving bank accounts and not
fixed term deposit where the interest is much higher.
8. We are of the view that the mistake was made at the end of the
respondent in accepting the deposit of the appellant and the appellant would
have been entitled to reimbursement of the interest in case no audit objection
had been raised.
While we agree with the grant of interest by the learned Single Judge to
the appellant @ 5% per annum on the premise that there was no mis-
declaration by the original writ petitioner, i.e., the appellant, we are satisfied
that in the present case, the denial of the stipulated rate of interest available
on Postal deposits in the present case causes grave injustice to the appellant
as the fault was not at the appellant’s end, since the deposits were only
wrongly accepted by the respondent and discovered only upon the audit
objection.
9. Even the Single Judge adopted the following rationale for awarding 5%
LPA No.1794/2006 Page 7 of 11
interest “The fact remains that the Respondents have enjoyed the fruits of the
Deposits made to them by the Petitioner for a considerable period of time.
The Respondents are, therefore, liable to pay interest on the amounts.” It is
evident that the petitioner/appellant would have been entitled to the interest
elsewhere at higher rates. The appellant, in our view, is entitled to plead that
it should be granted interest as per the stipulated rate. We cannot lose sight of
the fact that the appellant would have been given the interest at the stipulated
rate in case no audit objection had been raised. Furthermore, the amount
deposited by the appellant was available to the respondents till its return on
26th October 2004. The learned Single Judge has held that a bonafide mistake
on the part of the respondent leads to the result that there is no consensus ad
idem between the contracting parties.
10. According to Black’s Law Dictionary (6th Edition) consensus ad idem
means a meeting of minds. The Hon’ble Supreme Court in the case of ITC
Limited vs. George Joseph Fernandes and Anr. (1989) 2 SCC 1 while
emphasizing on the concept of consensus ad idem, observed as follows: –
LPA No.1794/2006 Page 8 of 11
“…….Neither party can rely upon his own mistake to say
that it was a nullity from the beginning, no matter that it
was a mistake which to his mind was fundamental, and no
matter that the other party knew that he was under a
mistake. A fortiori, if the other party did not know the
mistake, but shared it. There is no doubt that the
application of the doctrine of mutual mistake depends upon
the true construction of the contract made between the
parties. A mutual misunderstanding will not nullify a
contract but only if the terms of the contract construed in
the light of the nature of the contract and of the
circumstances believed to exist at the time it was done
show that it was never intended to apply to the situation
which in reality existed at that time, will the contract be
held void. Mistake as to the quality of the article
contracted for may not always avoid the contract. As Lord
Atkin said in Bell v. Lever Bros. Ltd. mistake as to the
quality of the thing contracted for raises more difficult
questions. In such a case a mistake will not affect assent
unless it is the mistake of both parties, and is as to the
existence of some quality which makes the thing without
the quality essentially different from the thing as it was
believed to be. A distinction has, therefore, to be made
between a mistake as to substance or essence on the one
hand, and a mistake as to quality or attributes on the other.
A mistake of the former type, will avoid the contract
whereas a mistake of the latter type will not. Such a
distinction was made in Kennedy v. Panama Royal Mail
Co. Ltd. It may be said that if there be misapprehension as
to the substance of the thing there is no contract; but if it
be a difference in some quality or accident, even though
the misapprehension may have been the actuating motive
to the purchaser, yet the contract remains binding. Thus a
mistake as to an essential and integral element in the
subject matter of the contract will avoid the contract. A
mistake will not affect assent unless it is the mistake ofLPA No.1794/2006 Page 9 of 11
both parties, and is as to the existence of some quality
which makes the thing without the quality essentially
different from the thing as it was believed to be. A
distinction, therefore, should be drawn between a mistake
as to the substance of the thing contracted for, which will
avoid the contract and mistake as to its quality which will
be without effect. …..”
In our view, in the present case, when the Appellant made the deposits,
the meeting of mind between the parties was on the contracted rates of
interest. Mistake, if any, had occurred only from one side, i.e., the
respondent, and therefore, the principle a lack of consensus ad idem has no
application to the present case. Accordingly, we allow the appeal and direct
that instead of interest @ 5% per annum as ordered by the learned Single
Judge the appellant shall be entitled to the interest at rates initially stipulated
for on the deposits of the respondent. The said amount shall be paid to the
appellant by the respondent not later than 25th September, 2008. The interest
would be payable from the date of deposits at the stipulated rate in respect of
each deposit up to 26th October, 2004. However, the amount of interest
already paid shall be liable to be adjustable by the respondents.
LPA No.1794/2006 Page 10 of 11
11. With the above observations and directions, the appeal is allowed in the
terms indicated above.
MUKUL MUDGAL, J.
MANMOHAN, J.
July 30, 2008
dr
LPA No.1794/2006 Page 11 of 11