TMI Blog1990 (2) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the agents as also through the post offices all over the country. The plaintiffs were desirous of purchasing 7-Year National Savings Certificates (II Issue) in the name of the said trust of the value of Rs. 1,00,000. They passed a suitable resolution in this behalf on February 22, 1972. Accordingly, they purchased the certificates after applying for the same to the General Post Office, Bombay, on the prescribed application form. The certificates were of the face value of Rs. 5,000 each and in all they purchased 20 such certificates. The certificates matured for payment in 1979 on the expiry of the period of seven years from the date of their purchase. When they approached the Presidency Postmaster, G. P. O., Bombay, for encashment of those certificates, the supervisor in the office of the Presidency Postmaster made the following endorsement "Rejected ; Certificates are issued in contravention of S. C. Rules as the charitable trust whose donations are free from income-tax cannot purchase certificates. Hence, the same will have to be discharged on face value." The Presidency Postmaster thus gave to the plaintiffs only a sum of Rs. 1,00,000 and refused to pay the interest amountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following issues have been framed : Issues 1. Whether the plaintiffs are entitled to claim interest in respect of the 7-Year National Savings Certificates (II Issue) ? 2. Whether rule 13 of the said Rules is ultra vires as stated in paragraphs 6A to 6E of the plaint ? 3. Whether the plaintiffs are entitled to a reasonable compensation as stated in para 6G of the plaint ? 4. What relief ? The plaintiffs have tendered a compilation of all the relevant documents and they have been exhibited as exhibit "A" (collectively). There is an application made by the plaintiffs and signed by all the then trustees of the trust. The application expressly says that they were buying these certificates in the name of the plaintiffs' trust. They accordingly purchased these certificates of the denomination of Rs. 5,000 each, all in the name of the said trust. When the certificates matured, they forwarded the certificates together with the letter dated May 7, 1979, addressed to the Presidency Postmaster, G. P. O., Bombay, and requested him to issue a cheque for the principal amount of Rs. 1,00,000 together with interest thereon for seven years. The plaintiffs were told that the said certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t fund ; (b) joint 'A' type certificates may be issued jointly to two adults payable to both holders jointly or to the survivor. (c) joint 'B' type certificates may be issued jointly to two adults payable to either of the holders or to the survivor. 5. The limits up to which certificates may be purchased.--The maximum permissible holding of a certificate or certificates shall be. as shown below for each class of investor, namely : --------------------------------------------------------------------------------------------------------------------------------------------------- Limit Class of investor Rs. --------------------------------------------------------------------------------------------------------------------------------------------------- (i) an adult or a minor 75,000 (ii) two adults jointly 1,50,000 (iii) any trust which is registered as a society under any law for the time being in force (other than a charitable trust donations to which qualify for income-tax relief), any gratuity fund constituted as an irrevocable trust, a banking company, a company, a corporation, a firm registered under the Indian Partnership Act, 1932 (9 of 1932), an associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit with regard to payment of income-tax goes to the donor and not to the charitable trust as such. As far as a public charitable trust is concerned, under section 11 of the Income-tax Act, it gets exemption from payment of income-tax, because it is a charity under section 11 of the Income-tax Act. Therefore, there can be no rule which can deny them the right to save in any savings scheme just because they are exempted from payment of income-tax under the provisions of the Income-tax Act. Even otherwise, if one considers the said Rules properly, I find no justification for the interpretation which the defendants sought to advance on these rules. Mr. Jaisinghani relies on rule 5, sub-rule (iii), and submits that under that rule a trust which is registered as a society under any law for the time being in force can invest up to a limit of Rs. 50,000. In that rule "a charitable trust, donations to which qualify for income-tax relief" has been excluded. He, therefore, submits that, by virtue of this exclusion, such a charitable trust is not entitled to invest at all. In my view, if one construes the rule as a whole, that rule relating to investment up to Rs. 50,000 applies to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the defendants. It is expressly stated-herein that any association or an institution or a body registered under any law, even though exempt from the payment of income-tax, is entitled to invest up to a limit of Rs. 1,00,000. Therefore, exemption from payment of income-tax is not the criterion for the purpose of excluding any institution which is entitled to invest up to the limits as prescribed under these rules. That is of no consequence. What is relevant is that there should be an association or an institution or a body registered under the law and to such an association, institution or body, donations are exempt from the payment of income-tax. Such a body can certainly invest up to the limit of Rs. 1,00,000. The plaintiffs plainly fit in, in this description as given under rule 5, sub-rule (iv), of the said rules, Therefore, the defendants were plainly not justified in denying payment of interest. They did so under an erroneous interpretation of the rule, misconstruing rule 5, sub-rule (iii), wherein a charitable trust has been excluded. It does not mean that under all clauses of rule 5, a charitable trust stands excluded. Mr. Jaisinghani submitted that it is furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iffs and would have pointed out to them that they were not entitled to purchase such certificates. I find no substance in the submission. The plaintiffs had, while making the application for the purchase of the certificates, not only forwarded a resolution passed by the trust of the plaintiffs but that they had also furnished a copy of the certificate of registration showing that the plaintiffs-trust has been registered under the Bombay Public Trusts Act. In any event, it is not now open to the defendants to contend, having issued the certificates, that they would not pay any interest on the plea of misrepresentation or non-representation of the facts on the part of the plaintiffs. Mr. Bharucha has also submitted that it is possible for one to construe that the list of persons mentioned under rule 4, sub-rule (2), is not exhaustive. In that context, he submitted that the rule says that the certiflcates "may be" issued to the following class of persons. On that basis, Mr. Bharucha submitted that it does not mean that they are the only persons who are entitled to invest and nobody else. However, having regard to the interpretation of the rule as given by me above, it is not necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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