State Bank of Indore Branch Bhind vs Parashuram Vidyalaya Samiti and Others

This appeal is by Bank against the directions of Single Bench to pay interest to Respondent No. 1 Society passed in Misc. Petition No. 616/91.

Respondent No. 1 for the purpose of running an educational institution has deposited Rs. 25,000/- in fixed deposit with Appellant bank and the said fixed deposit receipt was kept with the University as security. While amount was remained in custody of the University Misc. Petition No. 481/1995 was filed by one of the employees of Respondent No. 1 Society. Division Bench of this Court directed University to pay the amount due to the said employee from the fixed deposit of the Respondent Society kept with the University. In pursuance of the orders passed by the Division Bench an amount of Rs. 6,790/ was paid to Khemeshwar Sahay and the remaining amount remained with the University.

Respondent No. 1 filed a Writ Petition and the only argument raised was that the amount in fixed deposit remained with the bank from 1970 till they were encashed in pursuance of the order passed by the this Court. The deposit receipt is dated 8th September 1970 in the sum of Rs. 25,000/ - and it was encasehd in pursuance of the order passed by this Court on 25th January 1989.

It is admitted that the said fixed deposit receipt was issued in 8th September 1970 for a period of five years which matured on 8th Sept. 1975. It is also admitted by Respondent No. 1 that no steps for renewal of said fixed deposit were taken before the Bank and in the year 1989 an amount of Rs. 6,790/- was paid out of the said amount to Khemeshwar Sahay, who was arrayed as Respondent No. 2 in this appeal and his name has been deleted on account of his death.

Only question involved in the case is whether the Society is entitled for interest from the Bank when it is admitted by the Society that after encashing the amount remaining amount was kept with the University.

Counsel for the Appellant submitted that after the maturity of the fixed deposit and on failure of Respondent No. 1 to get the said receipt renewed the amount was kept in the current account of Respondent No. 1. He submitted that when the amount is kept in the current account it will not carry any interest and Bank can not be directed to pay interest on the said amount.

Counsel for Respondent No. 1 submitted that the amount as security with the University was with the Bank and as long as the amount is not encashed, Bank is liable to pay interest. He referred to some regulations of the year 1987, which are not applicable for the transactions of the year 1975.

Under Section 5 of the Interest Act, interest is payable on the amount for the period agreed by the party. The party, who has deposited the amount is not entitled for further interest after expiry of period.

Since there was no agreement to pay interest, no directions could be given to Bank to pay interest on the said amount. The contract was for the payment of interest for the period the amount was kept in the fixed deposit. On failure of Respondent No. 1 to get fixed deposit renewed or by novation of contract Appellant Bank cannot be directed to pay interest on the said amount. No relief is claimed against the University in the Writ Petition. Respondent No. 1 has filed another Letters Patent Appeal challenging the impugned order praying therein that the earlier judgment passed by the Division Bench was on account of suppression of material facts and Khemeshwar Sahay played a fraud upon the Court. An application was also moved that the appeal be treated to be one under Article 226 of the Constitution of India as a public interest litigation. All the contentions of the Respondent No. 1 were rejected and appeal was dismissed. Therefore, contention of Respondent No. 1, that earlier order passed by the Division Bench is not proper and withdrawal of amount and payment to Khemeshwar Sahay without knowledge of Respondent No. 1 is bad in law, has no force, as Respondent No. 1 was party in the Writ Petition before the Division Bench and the order passed against the Respondent No. 1 is binding upon him. At any rate, since the fixed deposit was not renewed and no steps were taken by Respondent No. 1 to get the fixed deposit renewed, the Respondent No. 1 is not entitled for any interest on the said amount after expiry of period of contract, precisely after 8th September 1975.

In the result, appeal succeeds and is allowed. Order passed by the Single Bench is set aside and the Writ Petition filed by the Respondent No. 1 is dismissed without any order as to costs.