Lost Lakhs: PPF Deposits That Backfired

In Judgment WA No. 1636 of 2025 (dated 14 August 2025), the Kerala High Court addressed a case where guardian opens PPF accounts on behalf of minor children and continued to deposit money even after they turned 18. The court ruled that the post office was justified in forfeiting ₹6.87 lakh in excess interest accrued due to these additional contributions.

People Involved in this Case

Appellants

• Union of India Ministry of Communications
• Senior Post Master, Ernakulam Head Post Office
• Post Master General, Ernakulam North

Respondents

• Mrs. Fareeda Sukha Rafiq (elder daughter)
• Dr. Shabnam Jameela Rafiq (younger daughter)
• Mrs. Ameena Rafiq (mother)

What was the issue?

Mrs. Ameena (mother) opened three PPF accounts in 1999:

• One in her name.
• Two in the name of her minor child (Fareeda Sukha Rafiq and Shabnam Jameela Rafiq)

She kept depositing money in all three accounts every year even after the Children became adults.

• Fareeda turned 18 on 24.12.2005.
• Shabnam turned 18 on 26.09.2007.

But the accounts were not converted to independent accounts - deposits continued as before.

Problem discovered in 2017

In 2017, during an internal audit, the Post Office found that the mother had deposited more than the allowed annual limit (limit under Rule 3 of the PPF Scheme).

As per PPF rules, the total yearly deposit limit (then ₹1,00,000) is combined for the parent and all minor accounts operated by that parent.

Since she deposited more than the limit (in total across all 3 accounts), the extra interest earned was wrongly credited.

Postal Department's Action

• Post Office took back (appropriated) Rs 6,87,021 - which was the extra interest wrongly given on those excess deposits.

Mother's Side Argument (Respondents)

• The deposits were made lawfully, under the PPF Scheme.
• The Post Office allowed deposits for many years - so if there was a mistake, it was the Post Office's fault.
• The daughters were majors since 2005 and 2007, but no one told them to convert the accounts.
• The action in 2017, after almost 10 years, is too late and unfair.
• Therefore, Post Office should return Rs 6,87,021 with interest.

Postal Department's Argument (Appellants):

• Rule 3 of the PPF Scheme clearly limits the total deposits for a person and his/her minor children.
• Since the mother deposited over that limit, extra interest was illegal.
• Interest was only taken back for the period when the daughters were minors (before they turned 18).
• After they became majors, their accounts earned interest normally - no deduction made after that.
• The mother should have informed the Post Office when the children became majors.
• No one can benefit from violating the rules - "no estoppel against statute."
• If allowed this would set a bad example - other could misuse the scheme to get extra interest from public money.

What the Single Judge (Earlier Court) Decided (2024)

The Single Judge in 2024 ruled in favour of the mother and daughters.

Said:

• The Post Office took action too late (2017).
• The daughters had already become majors years earlier.
• So, the limit clubbing rule (for minors) did not apply.
• Ordered Post Office to return ₹6,87,021 + interest

What This Appeal Court (Division Bench) Decided (2025)

The Division Bench (two judges) disagreed with the Single Judge and allowed the appeal by Union of India.

They gave the following reasoning:

Step-by-Step Reasoning

Rule 3 of PPF Scheme says:

A person can deposit up to a certain limit (e.g. ₹1,00,000 earlier) including:

• Their own PPF account, and
• Accounts opened for their minor children.

So, the total limit is combined not separate.

In this case:

Mother deposited more than the allowed limit in the combined 3 accounts.

That means the extra deposits were in violation of Rule 3.

Interest withdrawn (₹6.87 lakh) was only:

For the period till the children became majors:

• For Fareeda → till 24.12.2005
• For Shabnam → till 26.09.2007

After they became majors, all deposits and interest were allowed normally.

Hence, the Post Office correctly recovered ₹6,87,021, which was extra interest wrongly given earlier.

The Single Judge ignored this important detail and wrongly ordered refund.

The Court said:

• Paying interest beyond the legal limit is "unjust enrichment".
• This money belongs to the public exchequer.
• The government cannot be forced to pay interest against rules.

Final Decision (Result)

• Appeal Allowed.
• Earlier Single Judge's order (2024) set aside.
• Post Office action upheld.
• Rs 6,87,021 need not be refunded - it can be recovered if not already done.
• No costs (each party bears its own legal costs).