Rs 36.4 lakh fraud in Post Office through NSC and term deposit: India Post employees convicted; Madhya Pradesh HC grants relief to depositors

A recent case in the Madhya Pradesh High Court shows how some employees of the India Post Office Bina branch tricked several deposit holders by giving them fake national savings certificates (NSC) and term deposit advice slips. The total fraud amount was about Rs 36.4 lakh and the Madhya Pradesh Police arrested the India post employees responsible for this fraud. These employees were prosecuted, convicted and are now in Jail. However, the postal department refused to refund the money lost by deposit holders. They claimed that the deposit holders did not do due diligence by verifying if the employees were authorized to work at the Bina post office.

The postal department confirmed these were their employees but said they were not authorised to work at Bina post office. However, for unknown reasons, these employees were sitting at the Bina post office and targeting deposit holders who came to open NSC and term deposits at the Bina post office.

On October 15, 2026, the fraud victims won the case in the Madhya Pradesh High Court. The court ordered the department of posts to refund all the money lost by them with interest.


Also read: ICICI Bank branch manager duped depositors of crores for years to meet targets

Why did the deposit holders win the case?

Nivedita Bhardwaj, Partner, King Stubb and Kasiva, said to ET Wealth Online: The deposit holders succeeded because the Madhya Pradesh High Court found that they had acted in good faith and had been dealing with persons who were employees of the Post Office. In these cases, the employees had facilitated the opening of accounts and issued passbooks, which were later found to be fake. The employees were subsequently prosecuted and convicted.

The Postal Department had rejected the claims on the ground that the employees involved were not posted at that particular branch at the relevant time and that the customers should have approached the authorised employee at the counter.

The Madhya Pradesh High Court, however, observed that an ordinary customer could not reasonably be expected to know the internal posting or transfer details of a Post Office employee, particularly when the person was present at the Post Office. The Court also noted that the Department's circular dated 27 May 2021 specifically provides for dealing with cases where an account was not actually opened or a fake passbook was issued.

Therefore, the Madhya Pradesh Court directed the Department to consider the depositors' claims under the procedure prescribed in the circular. The Madhya Pradesh High Court also directed that the applicable interest on the fixed deposits be paid in accordance with law.

Also read: ICICI Bank branch manager forged signatures, siphoned off 'Rs 11.95 crore' by transfer and cash, alleges the customer; case in EOW's net

According to Bhardwaj, depositors should always ensure that all deposits are made through the proper Post Office channels and that they receive and preserve official documents such as the passbook, deposit receipt, account details and other acknowledgements.

Bhardwaj says that it is also advisable to periodically verify that the account and deposits are properly reflected in the Post Office's records. If there is any discrepancy, such as a transaction not appearing in the records or any mismatch in the passbook, the depositor should immediately raise a written complaint with the concerned Post Office and keep proof of the complaint.

Bhardwaj says: "In cases involving a fake passbook or an account that was never actually opened, depositors should also make use of the claim mechanism prescribed by the Department of Posts. The present judgment makes it clear that such situations are specifically contemplated under the Department's May 27, 2021 circular."

How did this fraud happen at the post office?

As per the court submissions, deposit holders went to Bina post office with a request to open a Term Deposit Account as well as a National Savings Certificate. However, before they could reach the counter some post office employees met them and helped them fill the forms and collected the money also. These post office employees misrepresented themselves and issued fake account statements and passbooks to the affected deposit holders.

Later on, it was found that there was a scam and the passbooks were forged and fabricated and no accounts were opened. However, the department of post refused to refund the amounts lost by the affected deposit holders. The Department of Post Office refused refund on the ground that in order to open the account, the affected victims had approached the employee of the post office who was already transferred and was not posted at the Bina post office branch. The postal department said that the affected victims should know better and instead of approaching the employees who did this fraud with them, they should have approached authorised office employees at the post office counter.

The grievance of affected deposit holders in this cases is that since they have been duped at the behest of the post office employees, the postal department has vicarious liability to indemnify the affected deposit holders who had suffered pecuniary losses on account of the fraud played at the behest of the employees of the post office.

Advocate Ravindra Singh Ahriwar helped the affected victims of this post office scam file a court case in Madhya Pradesh High Court to get a refund of their money lost.

Advocate Ravindra Singh Ahriwar argued that it is undisputed facts that issuance of forged passbook as well as the opening of the account was at the behest of the persons who were employees of the Department of Post Office and therefore affected victims had no means or knowledge to disbelieve the said employee and thus they did not check where the employee was authorised to be in Bina post office.

The postal department’s lawyer said that the post office cannot be made liable to pay the money lost due to this fraud as the victims had not opened the NSC and term deposits through authorised employees at the counter and instead approached their employees who were not posted at the concerned branch at the relevant time.

Madhya Pradesh High Court discussion

Justice Maninder S. Bhatti of Madhya Pradesh High Court said that a review of records revealed that at the post office, the victims were approached by persons who were undisputedly employees of the Department of Post Office. The victims were unaware whether the employee was posted at that particular branch or not. Nor were they supposed to know about that fact.

The Madhya Pradesh High Court said: “Therefore, once the petitioners (victims) acted bona fide and innocently and opened their accounts with the concerned Post Office at the behest of the said persons who were later found to be culprits, the petitioners (victims) were entitled for the amount as claimed by them after the fraud was committed.”

The court observed that a Circular dated May 27, 2021 issued by the Department of Post Office takes care of the eventuality in the cases where the accounts themselves are not opened, and fake passbooks are issued.

So, the Madhya Pradesh High Court ordered the post office to accept claims of the victims. The court told the victims to fill a specified form within 30 working days and submit it before the competent authority. Once the form is filled and submitted, the competent authority would process the claim within 90 days. The high court also said that the victims would also be entitled to get an applicable interest amount on the fixed deposit in accordance with law.