Explaining that the principle of promissory estoppel is absolutely attracted in the realm of contract, the Allahabad High Court strongly asserted that, having promised a particular rate of interest upon which the investor agreed to invest money by creating FDRs, the bank cannot later, upon maturity, deny the agreed/promised rate of interest.
The Court pointed out that the reduction of the contracted interest rates on the petitioner’s FDRs was neither authorised by law nor supported by any regulatory or circular provisions, and negated the reliance on RBI circulars, calling it misplaced, as those directions relate only to the grant of additional interest and do not empower the bank to alter previously agreed contractual terms.
Accordingly, the Court directed the banks to compute and pay the interest on the petitioner’s FDRs at the originally contracted rates of interest as mentioned on each FDR, from the respective dates of maturity of the FDRs.
The Division Bench comprising Justice Swarupama Chaturvedi and Justice Ajit Kumar observed that the bank has not alleged any fraud, misrepresentation, or irregularity on the part of the petitioners (investors) while opening the FDRs. The higher rate of interest was offered at the time of issuance, and the subsequent reduction was the result of a unilateral decision by the bank officials. Thus, the petitioners cannot be made to suffer for any error or oversight by the bank in offering a higher rate of interest.
The Bench noted that the issuance of the FDRs with a clearly stated and higher rate of interest constituted an express term of the contract by the respondent bank, based on which the petitioners had acted and allowed their deposits to remain with the bank for the full tenure.
The Bench found that the petitioners were issued Fixed Deposit Receipts (FDRs) with contracted rates of interest of 10.75% and 10.25% as applicable. After years, the respondent bank, suo-moto, reduced the interest rates on these FDRs, while quoting bank and RBI circulars regarding additional interest payable to bank staff, retired staff, and senior citizens.
From a careful perusal of these circulars and regulatory provisions, the Bench found that they are entirely enabling in nature, governing only the discretionary grant of additional interest to eligible categories of depositors and prescribing the eligibility conditions for such benefits. Nowhere do these provisions authorise retrospective reduction or revision of the rate of interest already contracted in FDRs already issued.
Briefly, the petitioner, along with his mother and his late father, who was a retired employee of the Oriental Bank of Commerce and passed away in 2016, had booked eight FDs with the bank. These fixed deposit receipts (FDRs) were set up at an interest rate of 10.75% per annum, with a ten-year maturity period, resulting in a total maturity amount of Rs 44 lakh. Additionally, the Jain family had opened another FDR for Rs 1 lakh, which carried an interest rate of 10.25% per annum, with a maturity value of Rs 2.75 lakh.
Oriental Bank of Commerce merged with the Punjab National Bank in 2020, and the PNB unilaterally reduced the contracted rate of interest on various FDRs from 10.75% to 9.25%, and from 10.25% to 8.25%, without issuing any notice or providing any opportunity to the Jain family for a chance to be heard. Even though it was argued that this kind of unilateral reduction in interest rates is not allowed by law, the PNB justified this reduction by citing some circulars and RBI master directives.
Appearances:
Advocate Manish Kumar Jain, for the Petitioner
A.S.G.I., Jainendra Kumar Mishra, for the Respondent
