The Kerala High Court has directed the State Bank of India (SBI) to pay interest on a firm’s fixed deposit for the period between its maturity on July 18, 2012, and May 12, 2013. The court held that SBI’s own circular required the fixed deposit to be automatically renewed if the customer had not given any instructions to the contrary.
Court Refers to SBI’s Own Circular
Justice M.A. Abdul Hakhim observed that SBI’s circular clearly stated that when a term deposit matures, it should be automatically renewed for the same period at the interest rate applicable on the date of maturity. The court noted that SBI could not produce any other circular showing a different rule.
Background of the Case
The case involved a fixed deposit of ₹7.22 crore placed by Asiatic Export Enterprises with SBI on July 19, 2011, for a period of one year. The deposit matured on July 18, 2012.
However, disputes among the partners of the firm prevented the firm’s bank accounts from being operated. Following earlier directions from the High Court, SBI finally released the maturity amount to the firm on December 10, 2015.
Dispute Over Interest Payment
One of the firm’s partners, Narayan Bharathan, later sought payment of the remaining interest. During the case, SBI accepted that it had to pay interest for the period from May 13, 2013, to December 10, 2015, and paid that amount as directed by the court.
The only remaining dispute was whether SBI should also pay interest for the period from July 18, 2012, to May 12, 2013.
Arguments by Both Sides
Bharathan argued that since no instructions had been given after the fixed deposit matured, SBI was required under its own circular to automatically renew the deposit for another term at the prevailing interest rate.
SBI argued that after the deposit matured, the amount had been transferred to the firm’s current account. The bank also claimed that the dispute arose from a contractual relationship and therefore should be decided by a civil court instead of the High Court through a writ petition.
High Court Rejects SBI’s Arguments
The High Court rejected SBI’s objection and stated that contractual disputes are not automatically barred from being considered through a writ petition. The court said that each case must be examined based on its own facts.
The court also found that SBI had not shown any evidence that the fixed deposit amount had been transferred to the current account on the request of Bharathan or any other authorised person connected with the firm.
Bank Responsible for Its Own Actions
The court also examined SBI’s claim that the money had later been placed under the Army Group Insurance Fund with retrospective effect. It held that even if such a request had been made, the bank should not have made the deposit with retrospective effect.
The court observed that the petitioner could not be blamed for the bank’s actions and that the mistake was entirely attributable to SBI.
Court’s Final Order
Allowing the petition, the Kerala High Court directed SBI to calculate and pay interest at the rate of 8.5% per annum on ₹8 crore for the period from July 18, 2012, to May 12, 2013. The bank has been directed to credit the amount to the firm’s current account within two months.
