The Kerala High Court (Ernakulam Bench) has held that where a bank’s own circular provides for automatic renewal of a term deposit on maturity in the absence of contrary instructions, the bank cannot deny interest for the interregnum period merely because it unilaterally shifted the money to a current account or wrongly placed it in an ineligible deposit scheme with retrospective effect. In such a case, when the material facts are admitted and no complex factual inquiry is required, a writ petition under Article 226 is maintainable even though the claim relates to payment of money arising from a banking transaction.
The Court also held that for the relevant period, the applicable interest rate on deposits for more than one year was 8.5% under the bank’s circular dated Feb 27, 2013. Therefore, the petitioner was entitled to interest at 8.5% per annum on the admitted amount of Rs. 8 crores for the interregnum period. Accordingly, High Court directed State Bank of India to calculate interest at the rate of 8.5% per annum on Rs. 8 crores and to credit that amount to the current account of Asiatic Export Enterprises within two months from the date of receipt of a certified copy of the judgment.
A Single Judge Bench of Justice M.A. Abdul Hakhim examined the law on maintainability of writ petitions in contractual and banking matters and noted that there is no absolute bar on entertaining a writ petition merely because money is claimed or because a contract is involved. The Court observed that writ jurisdiction can still be exercised where the facts are admitted, complicated evidence is unnecessary, and the dispute can be resolved on the basis of documents already on record.
On the merits, the Court found no dispute regarding the original deposit on July 19, 2011 or the closure of the fixed deposit account on Dec 10, 2015. It noted that the bank had already admitted and paid interest for the later period from May 13, 2013 to Dec 10, 2015, leaving only the earlier period in issue. The Court accepted the petitioner’s reliance on the bank’s own circular providing that, in the absence of specific instructions from the customer, a term deposit on maturity would be automatically renewed for the same period at the rate prevailing on the date of maturity.
The Court also found that the bank had no case that the transfer of the deposit amount to the current account had been made at the request of the petitioner or any other interested person. Similarly, the bank had no case that the petitioner or the firm had sought the deposit in the Army Group Insurance Fund with retrospective effect from July 18, 2012. The Court held that even if such a request had been made, the bank should not have created a retrospective deposit in an ineligible scheme. The Court therefore concluded that the deposit in the Army Group Insurance Fund with retrospective effect was a fault attributable to the bank alone, and the petitioner could not be blamed for that irregularity.
Briefly, the case concerned a dispute between a partner of Asiatic Export Enterprises and State Bank of India over unpaid interest on a fixed deposit originally placed by the firm for Rs. 7.22 crore on July 19, 2011 for a period of 12 months. After the deposit matured on July 18, 2012, disputes within the firm relating to the share of the petitioner’s late father led to difficulties in operating the firm’s accounts. Earlier litigation resulted in directions to the bank to release the fixed deposit proceeds, and pursuant to those directions the bank paid Rs. 9.39 crores after deducting TDS to the firm on Dec 10, 2015. The present writ petition was then filed disputing the maturity value and seeking further interest.
The real controversy in the writ petition was interest for the period between July 18, 2012 and Dec 10, 2015. During the proceedings, the bank admitted liability to pay interest for the period from May 13, 2013 to Dec 10, 2015 and stated that this admitted amount came to Rs. 41.99 lakhs. On an interim order of the High Court, that amount was directed to be paid to the firm’s account. As a result, the surviving dispute was narrowed down to whether the petitioner was entitled to interest for the earlier period from July 18, 2012 to May 12, 2013.
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The petitioner’s case was that there had been no specific instruction against renewal, and therefore under the bank’s own circular, the term deposit ought to have been automatically renewed for the same period at the rate of interest prevailing on the date of maturity. The petitioner argued that once the original fixed deposit matured on July 18, 2012, the bank was bound to continue renewing it from year to year until closure. The petitioner also argued that the writ petition was maintainable because the dispute could be resolved on admitted facts and documents.
The bank, on the other hand, contended that after the initial one-year period, the amount had been moved to the firm’s current account, and no interest could be claimed for the period it remained there. The bank further said that the amount was later transferred on May 13, 2013 into a fixed deposit under the Army Group Insurance Fund with retrospective effect from July 18, 2012 on the petitioner’s oral request to obtain a higher rate of interest, though the firm was not eligible for that scheme. The bank also argued that since the claim was essentially for money arising out of a contract, the proper remedy was a civil suit rather than a writ petition.
