AI Structured Summary
Not yet generated for this judgment
Judgment
I.K. Kotwal, J.—By virtue of this petition, the petitioner seeks issuance of a writ of mandamus directing the respondents to encash five
National Defence Certificates bearing Nos. 12 ND G/O 098097, 12 ND G/O 097098, 12 ND E/l 183275, 12 ND F/O 941975, and 12 ND
F/O 041974 issued by respondent No. 1 in favour of the petitioner.
The petitioner is a Public Limited Company. The five aforesaid National Defence Certificates for a total value of Rs. 12,500/- were purchased
by Messrs. Kashmir Fruit and Chemical Industries through its Managing Director Shri G. C. Devan on 18th June 1968. The petitioner has placed
these certificates on the file. As the name of the original purchaser, namely M/s. Kashmir Fruit and Chemical Industries, Jammu, was changed into
Dewans Modern Breweries Limited, Jammu a corresponding change was also made in the name of the purchaser. It is also the admitted case of
the parties that the certificates though normally to be encashed on 18-6-1980 could be encashed 12 months after the date of their issuance
according to the option given to the purchaser in that behalf. These five certificates were pledged by the petitioner in favour of respondent No. 2 in
connection with some commercial dealings and entry to this effect was also made by respondent No. 1 on the certificates. To this extent there is no
dispute between the petitioner and respondent No. 1. Respondent No. 2 however has not chosen to file any objections somuch so that he has not
even cared to put in his appearance in the court from 13th Oct. 1976 onwards. Normally an order setting respondent No. 2 ex parte should have
been passed by the court but some how or other the same has escaped the attention of the Court. Respondent No. 2 is therefore hereby set ex
parte. The petitioner then goes on to state that a release of the aforesaid certificates was ordered by respondent No. 2 on 22-7-74 and an
information to that effect was also addressed by him to respondent No. 1, The petitioner further goes on to state that after securing release order
from respondent No. 2, he approached respondent No. 1 for encashment of the certificates but the certificates were not encashed rather
respondent No. 1 referred the matter to the Postmaster (Gazetted) to obtain fresh release order from respondent No. 2, which was of course
refused by respondent No. 2. According to the petitioner he also served a notice on 14-11-1974 calling upon respondent No. 1 to encash the
certificates but respondent No. 1 again referred the petitioner to respondent No. 2 for obtaining a release certificate. The petitioner has therefore,
prayed for issuance of a writ of mandamus on the grounds that respondent No. 1 was duty bound to encash the certificates and that by refusing to
encash the certificates he has violated the petitioner's fundamental rights to property guaranteed to him under the Constitution of India.
Respondent No. 1 in his return has raised no genuine quarrel with the petitioner so far as the facts leading up to the filing of the writ petition are
concerned. He has resisted the writ petition only on the ground that the order of release issued by respondent No. 2 is no order in the eye of law
as the same does not conform to Rule 562 of the Post and Telegraph Manual Vol. 6, and Rule 254/19 of the Post Offices Certificates Rules of
1960. This is so because according to respondent No. 1 the release order should have contained a statement to the effect that respondent No. 2
had an authority from the President of India or Governor of Punjab to accept the five aforesaid National Defence Certificates as security from the
petitioner.
I have heard the Learned Counsel for the parties at length and also perused the record of the file.
The Learned Counsel for the petitioner has argued before me that no release certificate under the aforesaid rules was necessary as the security
had been taken and accepted by respondent No. 2 in exercise of his statutory powers under the Punjab Excise Act, and not under his executive
powers as envisaged by Art. 299 of the Constitution of India. On the other hand the Learned Counsel for respondent No. 1 has urged that a
certificate under the aforesaid rules was a must under any circumstances and unless such a certificate was there, the right of encashment vested in
respondent No. 2 and not in the petitioner.
In view of the controversy raised by the parties, two questions fall to be determined by the court in this case. The questions are:
(i) was a certificate of release necessary in terms of Rule 562 of Posts & Telegraphs Manual, Vol. 6, and Rule 254/19 of the Post Offices
Certificates Rules of 1960; and
(ii) if such a certificate was necessary can respondent No. 1 still refuse encashment of the certificates. Rule 562 of the Posts and Telegraphs
Manual, Vol. 6 and Rule 254/19 of the Post Offices Certificates Rules, 1960 so far as the same are relevant for the disposal of this writ petition,
are reproduced below:
(1) The holder of certificate may at any time on his making an application in Form N. C. 41 pledge the certificate to (i) the President of India
or Governor of a State; (ii) to the Reserve Bank of India or a Scheduled Bank or a Co-operative Society including a Co-operative Bank; (iii) a
Corporation or Government Company; and (iv) a local authority. The application Form N. C. 41 will be signed by both the pledger and the
pledgee and in case the pledgee is a Government Officer, it will be accompanied by a certificate by the officer accepting the savings certificate as
security on behalf of the President of India or Governor of a State that he is duly authorised under Art. 229 (299?) of the Constitution vide
Notification No. ......dated ......by the Govt. of India, in Ministry of ....../State Government of .........to execute such instrument or deeds on behalf
of the President of India/Governor of the State. The Postmaster will verify the application with reference to the application for purchase and if
found to be in order make the following endorsement on the certificates. ""Transferred as security to ............"" A remark to the effect that it is a
transfer as security will also be made in the remarks column of the application for purchase.
(2) A certificate purchased on behalf of a minor can be transferred as security only if the purchaser of the certificate certifies that the minor is alive
and the transfer is for the benefit of the minor.
X X X X
X X X X
(3) The pledgee will be deemed to be the holder of the certificates until such time he releases the certificates from pledger in writing. On receipt of
the release authority from the pledgee, the certificate will be re-transferred to the pledger. The Postmaster of office of registration will make the
following endorsement on the certificate.
Re-transferred to ......... (Name of the holder)
In cases where a certificate has been pledged without obtaining a certificate from a gazetted officer as per sub-rule (1) the pledgee while releasing
the pledge will have to give the said certificate.
Rule 254/19 of Post Offices Certificates Rules, 1960:--
254/19. Pledging of certificate--(1) On an application being made in the form laid down by the Director-General Posts and Telegraphs by the
transferor and the transferee, the Postmaster of the office of registration may after the expiry of one year from the date of issue of a certificate,
permit the transfer of any certificate as security to:--
(a) the President of India or Governor of a State in his official capacity;
(b) the Reserve Bank of India or a Scheduled bank or a Co-operative society including a Co-operative bank;
(c) a Corporation or a Government Company; and
(d) a local authority:
Provided that the transfer of a certificate purchased on behalf of a minor shall not be permitted under this sub-rule unless the purchaser of the
certificate certifies that the minor is alive and the transfer is for the benefit of the minor.
(2) When any certificate is transferred as security under sub-rule (1), the Postmaster of the office of registration shall make the following
endorsement on the certificate, namely:
Transferred as security to .........
(3) ""Except as otherwise provided in these rules, the transferee of a certificate under this rule shall, until it is retransferred under sub-rule (4), be
deemed to be holder of the certificate.
(4) A certificate transferred under sub-rule (2) may, on the written authority of the pledgee be retransferred with the previous sanction in writing of
the authorised Postmaster and when any such retransfer is made, the Postmaster of the office of registration shall make the following endorsement
on the certificate, namely:
Re-transferred to ............
Note 1--The gazetted officer of the Govt. accepting the certificate as security under sub-rule (1) or releasing the pledge under sub-rule (4) on
behalf of the President or a State Governor shall certify that he is duly authorised under Art. 299 of the Constitution vide Notification No. .........
dated ......... by the Govt. of India in the Ministry of ........./State Government ............ to execute such instruments or deeds on behalf of the
President of India/Governor of ......... State. Note 2--An officer of the Reserve Bank of India or, a Scheduled Bank or a Co-operative Society
including Co-operative Bank, a Corpn. or a Govt. Co. or a local authority as the case may be, accepting the certificates as security under sub-rule
(1) or release the pledge under sub-rule (4) on behalf of the respective institution, shall certify under his dated signature and seal of office that he is
duly authorised under the articles of the said institution to execute such instrument or deeds on its behalf.
(5) Where as a result of several endorsements made under sub-rules (2) and (4) on a certificate no space is left for making further endorsements of
a like character on that certificate, a fresh certificate may be issued by the Postmaster of the office of registration in lieu of such certificate. (6) A
fresh certificate issued under sub-rule (5) shall be treated as equivalent to the certificate in lieu of which it has been issued for all the purposes of
these rules.
Since reference has been made in these rules to Art. 299 of the Constitution of India it would be useful to reproduce the relevant part of the
article as well. Art. 299 (1) of the Constitution of India reads thus:
299 (1) All contracts made in the exercise of the executive power of the Union or of a State shall be expressed to be made by the President, or by
the Governor ......... of the State, as the case may be, and all such contracts and all assurances of property made in the exercise of that power shall
be executed on behalf of the President or the Governor ......... by such persons and in such manner as he may direct or authorise.
A perusal of Art. 299 (1) of the Constitution of India would show that the article would apply only to those, contracts which are made by the
Union of India or by any State Government in exercise of its executive powers. It is only in such contracts; that a necessity to authorise a
Government servant for entering into a contract on behalf of the President of, India or the Governor of a State may arise. No such authority may
be required where a Govt. servant is required to do something in exercise of the powers vested in him by virtue of a statute. Clearly, therefore, a
distinction shall have to be drawn whether or not a particular act of a Govt. employee belongs to the realm of his executive powers, before
applying the provisions of Art. 299 (1) of the Constitution of India to a case. Mr. Bhagotra, the Learned Counsel for the petitioner has invited my
attention to Sec. 34 (2) of the Punjab Excise Act, 1914 to show that respondent No. 2 had power to demand security from the petitioner in
exercise of the statutory powers vested in him under the said section. Sub-section (2) of Sec. 34 of the Punjab Excise Act, 1914 reads as under:
Security-- Any authority granting a license under this Act may require the licensee to give such security for the observance of the terms of his
licence, or to make such deposit in lieu of security, as such authority may think fit.
A perusal of this section reveals that respondent No. 2 a licensing authority under the Act had a right to demand and accept security from the
petitioner. There was, therefore, neither any occasion nor any legal justification for the parties to take recourse to Art. 299 of the Constitution of
India. The provisions of Art. 299 of the Constitution of India would be attracted only to a case where a contract was being entered into by the
Union of India or the State in exercise of its executive powers. If something was being done by a Government officer in exercise of the statutory
powers vested in him under statute, application of Art. 299 of the Constitution of India would be out of question. A similar view was taken in
Shree Krishna Gyanoday Sugar Ltd. and Another Vs. The State of Bihar and Another, wherein the court held as under:--
......It cannot be disputed that any contract, which has to be in accordance with Art. 299 of the Constitution, is nullified and becomes void if the
contract is not executed in conformity with the provisions of Art. 299 and there is no question of estoppel or ratification in such cases. But, it is
difficult to accept the contention raised on behalf of the State that when the State Government in exercise of the powers under Sec. 22 of the Act,
grants the exclusive privilege to any person on certain conditions under sub-section (1) of Sec. 22 and a licence is received by that person under
sub-section (2) of that section it amounts to a contract made in exercise of the executive power of the State Govt. within the meaning of Art. 299
of the Constitution. In my opinion, the State Government, in such circumstances grants the exclusive privilege to a particular person for
manufacturing or supplying or selling articles covered by the Act in exercise of its statutory function u/s 22 of the Act......
I am therefore clearly of the view that Rule 562 of the Post and Telegraph Manual, Vol. 6 and Rule 254/19 of the Post Office Certificates Rules of
1960 reproduced heretofore had no application to the present case and a certificate of release as contemplated by the aforesaid rules was not
necessary. These rules can apply to only those cases where contracts made or assurances given by the Union of India or State through its
employees are made or given in exercise of its executive powers.
Assuming that a certificate under the aforesaid rules was necessary, absence of recording the certificate would necessarily involve breach of Art.
299 of the Constitution of India either on the ground that respondent No. 2 had no authority to accept the security or that he accepted the security
not in the manner indicated by the relevant rules even if any such authority was there. In any case the result would be that the acceptance of the
security and the transfer of certificates by respondent No. 1 in favour of respondent No. 2 as a consequence of the acceptance of the security by
the latter would be rendered ab initio void. Even then respondent No. 1 could not have refused to encash the certificates and the petitioner had a
right u/s 65 or 70 of the Contract Act, as the case may be, to get the certificates encashed. In any event, therefore, respondent No. 1 was bound
to encash the certificates and his refusal to do so, has clearly violated the petitioner's fundamental right to property.
I would, therefore, allow the writ petition, and direct respondent No. 1 to encash the aforesaid National Defence Certificates in favour of the
petitioner. In the peculiar circumstances of the case, the parties are left to bear their own costs.