State Bank Of India vs Agricultural Produce Market ...
2014 Latest Caselaw 2714 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

+                          RSA 124/2014
%                                                          27th May, 2014

STATE BANK OF INDIA                                ......Appellant
                  Through:              Mr. Anil Kumar Sangal, Adv.


                           VERSUS

AGRICULTURAL PRODUCE MARKET COMMITTEE
                                    ...... Respondent

Through: Ms. Avnish Ahlawat, Ms. Latika Chaudhary and Mr. Nitesh Kumar Singh, Advocates.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not? Yes.

VALMIKI J. MEHTA, J (ORAL)

1. This second appeal is filed under Section 100 CPC, 1908

impugning the concurrent judgments of the courts below; of the trial court

dated 24.5.2013 and the first appellate court dated 3.2.2014; decreeing the

suit of the respondent-plaintiff for recovery of Rs.2,90,491.94 alongwith

interest at 10% per annum.

2. The case of the respondent-plaintiff as per the plaint was that

the appellant-defendant vide its undated letter Ex.PW1/4 stated that w.e.f

1.11.1997, the rate of interest for fixed deposits for a period from one year to

two years was 10% per annum, and in terms of this representation, the

respondent-plaintiff by its letter dated 8.12.1997, Ex.PW1/5 deposited a sum

of Rs.5 crores with the appellant-defendant for putting in an FDR at 10% per

annum. Respondent-plaintiff contends that the appellant-defendant wrongly

and illegally issued the FDR Ex.PW1/D1 for Rs.5 crores on 8.12.1997

giving interest only at 9.5% instead of 10% as asked for in the appellant-

defendant's letter Ex.PW1/4. Respondent-plaintiff says that it realized the

lower rate of interest of 9.5% when its accounts were being scrutinized in

October 1998 and whereafter the appellant-defendant was written a letter

dated 26.10.1998 by the respondent/plaintiff to give interest at 10% and not

at 9.5%.

3. Appellant-defendant in its written statement took up a stand that

no doubt when the letter Ex.PW1/4 was issued in November 1997 the rates

of interest w.e.f 1.11.1997 for deposits between one and two years was 10%

per annum, however, the rates of interest for a period from one year to two

years w.e.f 1.12.1997, became 9.5% per annum and this was in terms of the

circular dated 28.11.1997, Ex.DW1/1, issued by the concerned department

of the appellant/defendant bank. It was pleaded that the rates of interest

changed regularly and rate of interest which can be granted by the

appellant/defendant bank is only that rate of interest which prevails on the

date of deposit, and since on the date of deposit of the amount of Rs.5 crores

by the respondent-plaintiff with the appellant-defendant on 8.12.1997 the

rate of interest was 9.5% per annum, deposit was made at this rate of 9.5%

per annum and that rate was specifically written in the FDR Ex.PW1/D1. It

is the case of the appellant-defendant that grant of interest is a matter of

contract and the contractual document being the FDR Ex.PW1/D1 stated the

rate of interest as 9.5% per annum as per the prevalent rates of interest given

to all other customers, and consequently, the appellant-defendant is not

liable to pay 10% per annum interest as claimed by the respondent-plaintiff.

4. The only issue which was urged before the courts below was as

to whether the appellant-defendant is bound to pay interest at 10% per

annum as stated in Ex. PW1/4 or that the appellant/defendant is liable to pay

only 9.5% per annum interest which is the figure which is stated in the FDR

receipt Ex. PW1/D1.

5. Both the courts have held that since in the offer document

Ex.PW1/4, the rate of interest was written by the appellant/defendant as 10%

per annum, the appellant-defendant was bound to give this rate of interest

at10% per annum and not the rate of interest at 9.5% per annum because the

respondent-plaintiff acted on the representation of the appellant-defendant

contained in Ex.PW1/4 of the rate of interest being 10% per annum for a

period of deposit from one year to two years.

6. For the disposal of this second appeal, the following substantial

question of law is framed:-

"Whether the courts below have committed a gross illegality and perversity in decreeing the suit by giving the respondent-plaintiff interest at 10% per annum although in the contractual document being an FDR Ex.PW1/D1 dated 8.12.1997 the interest was specifically mentioned at 9.5% per annum, and which rate was specified/stated in spite of the fact that in the letter dated 8.12.1997, Ex.PW1/5, the respondent-plaintiff had wanted the FDR interest at 10% per annum?"

7. Before I pronounce upon the issue in the present matter, there is

one aspect which needs to be noted and which is that the rate of interest

which was given for deposits over one year and upto two years by the

appellant/defendant bank for all its customers in view of the circular

Ex.DW1/1 had indeed become 9.5% per annum but this interest of 9.5 % per

annum remained only for a short period for about one month or so and

thereafter by the middle of January 1998 the rate had again become 10% per

annum for deposits between one year to two years. Appellant-defendant

therefore in view of the peculiar facts of this case had thus requested the RBI

vide appellant/defendant's letter dated 18.12.1998 to grant it permission to

pay interest at 10% per annum to the respondent-plaintiff, however, RBI

vide its letter dated 25.1.1999 Ex.DW1/4, did not agree and observed that

RBI was unable to accede to the request of the appellant-defendant to pay

interest to respondent-plaintiff a rate other than the actual rate which was

prevalent on the date of acceptance of the FDR. I am stating this because

appellant-defendant tried its best to give the higher rate of interest at 10%

per annum by pursuing the matter with RBI but it was not successful. Of

course the, appellant -defendant did this for having a continuity of

contractual relations with the respondent/plaintiff which used to park large

amount of funds with the appellant-defendant, however, the

appellant/defendant was not successful. With this preface let me turn to the

issue at hand.

8. One thing which is clear is that the letter Ex.PW1/4 when it

states that the rate of interest for deposits from one year to two years will

carry interest at 10% per annum w.e.f 1.11.1997, the same did not state that

rate of interest will continue irrespective of whenever the deposit is made by

a customer/distributor. It is well known that the rates of interest by banks do

vary and in the present case though the respondent-plaintiff is correct in

contending on the basis of the RBI circular dated 21.10.1997 (admitted

document) whereby a free hand was given by RBI to the banks to fix

whatever rates of interest it wanted to fix on term deposit of over 30 days,

however, the issue is not the free hand given by RBI, but issue is what was

the contractual relationship between the parties as regards the rates of

interest. On the one hand, the respondent-plaintiff wanted interest at 10%

and which is more than clear from its covering letter Ex.PW1/5 dated

8.12.1997, but, the fixed deposit receipt which was issued, Ex. PW1/D1

dated 8.12.1997, was at 9.5% per annum. It is therefore not that appellant-

defendant had in any manner concealed anything at the time of taking fixed

deposit. Fixed deposit is a contract. Contract will be governed by

contractual terms. Contractual terms are contained in the FDR receipt

Ex.PW1/D1. Once contractual terms are contained in the FDR, in this case

so far as law and law of contract is concerned, appellant-defendant cannot be

fastened with liability of interest at 10% per annum. Really in this case the

issue boils down to the respondent-plaintiff not noticing till October 1998

the rate of interest in the FDR being 9.5% and so stated in the FDR receipt

Ex.PW1/D1 dated 8.12.1997. The respondent-plaintiff no doubt may have

acted honestly and bonafidely thinking that it was getting 10% interest in

view of its letter dated 8.12.1997 Ex.PW1/4, but, the respondent-plaintiff

committed a lapse in not checking the rate in the FDR dated 8.12.1997 much

later till October, 1998. In fact it is because of this delayed noticing of the

respondent-plaintiff that the problem arose because if the respondent-

plaintiff would have noticed the rate of interest of 9.5% per anum earlier, it

can and would surely have withdrawn the fixed deposit from the appellant-

defendant bank and placed it at other banks which admittedly were giving

interest at 10% per annum. There is therefore no doubt a loss to the

respondent-plaintiff, but it cannot be held under the contractual law that the

contract was for rate of interest at 10% per annum instead of the rate of

interest at 9.5% per annum which is so specifically stated in the FDR receipt

Ex.PW1/D1.

9. In view of the above, the substantial question of law needs to be

and is answered in favour of the appellant-defendant and against the

respondent-plaintiff. It is therefore held that in terms of the contract being

the FDR receipt Ex.PW1/D1, the respondent -plaintiff was only entitled to

interest at 9.5% per annum and not at 10% per annum as claimed by the

respondent-plaintiff. The entire controversy has arisen only because of the

respondent-plaintiff not noticing the rate of interest being only 9.5% per

annum as stated in the FDR till October 1998. May be the respondent-

plaintiff was lulled into the sense of false belief in view of the specific

statements in its letter dated 8.12.1997 Ex.PW1/4 seeking deposit at 10% per

annum, however, once we have to decide the case only as per law, and law

being as per the contractual relationship between the parties, the explicit

terms contained in the FDR Ex.PW1/D1 will have to hold sway and equity

cannot entitle the respondent/plaintiff to the higher rate of interest of 10%

per annum.

10. In view of the above, the appeal is allowed. The impugned

judgments of the courts below are set aside. The suit of the respondent-

plaintiff for recovery will stand dismissed. Parties are left to bear their costs.

MAY 27, 2014                                    VALMIKI J. MEHTA, J.
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