Log on to the Internet and type out the words: Kisan Vikas Patra. You will see any number of sites, including those hosted by the Small Savings Directorates of state governments, describing the Kisan Vikas Patra as the safest savings instrument. The state government websites also tell you that they have a network of agents to market small savings schemes such as these notified by the government of India from time to time. In short, the impression that the websites give is that the Kisan Vikas Patra is backed by both the state and the central government and there are absolutely no risks associated with these schemes.

However, when a problem did arise and an investor lost his hard earned money, neither the state government nor the central government was willing to pay back the investor, forcing him to wage a long legal battle. The apex consumer court’s verdict in this case should force governments to behave more responsibly vis-à-vis the investor.

The case has its origin in Arun Borse’s decision to invest his father’s savings in a Kisan Vikas Patra. He paid the agent, duly appointed by the Madhya Pradesh state government under the Small Savings Scheme, Rs 25,000 towards the purchase of the savings instrument and got a proper receipt for it too. However, he never got the certificate.

The postal authorities who issue the certificate told the District Consumer Disputes Redressal Forum that the agent had played fraud on a number of depositors. They had filed a police complaint and the matter was under investigation. Instead of asking the postal authorities to take responsibility for the agent’s action and pay up, the District Forum held that the case did not come under the purview of the consumer court.

The consumer court at the state level however disagreed and asked both the state government and the central government to refund Borse Rs 25,000, along with 18 per cent interest. Instead of honourably accepting this verdict, the central government challenged it before the apex consumer court. Dismissing it, the National Consumer Disputes Redressal Commission pointed out that the agent had received the money on behalf of the government of India, National Savings Organization. Even though the state government appoints the agent, it is done as per the directions of the government of India and the agent is the agent of the Union of India. It therefore held that both the state and the central government were jointly and severally liable (Union of India vs Arun Borse, RP number 200 of 2001).