Case Note & Summary
The petitioner, P Balaji Babu, participated in an auction conducted by the State Bank of India (respondent No.1) for the sale of immovable property owned by one Sri Jignesh N Patel, who had obtained a loan from the bank. The petitioner deposited Rs.24.10 lakhs as part of the auction process. However, the auction did not proceed to completion, and the bank forfeited the entire deposit. The petitioner challenged this forfeiture by filing a complaint with the Banking Ombudsman, which was dismissed, and an appeal to the Appellate Authority was also dismissed. Aggrieved, the petitioner filed a writ petition under Article 226 of the Constitution of India seeking a direction to the bank to refund the amount with interest at 18% per annum. The court examined the facts and found that there was no contractual term in the auction notice or any agreement authorizing the bank to forfeit the deposit. The bank's action was therefore arbitrary and unjust. The court held that the writ petition was maintainable despite the availability of alternative remedies, as the bank's action was without authority of law. The court directed the bank to refund the amount of Rs.24.10 lakhs with interest at 6% per annum from the date of deposit until the date of payment, within four weeks. The petition was allowed in part.
Headnote
A) Banking Law - Forfeiture of Deposit - Unilateral Forfeiture Without Contractual Authority - The bank forfeited the deposit of the petitioner who had participated in an auction sale of property, without any contractual term authorizing such forfeiture - The court held that the forfeiture was unjust and directed refund with interest at 6% per annum from the date of deposit till payment (Paras 1-10).
Issue of Consideration
Whether the forfeiture of Rs.24.10 lakhs deposited by the petitioner with the bank was lawful and whether the petitioner is entitled to refund with interest.
Final Decision
The writ petition is allowed in part. The respondent No.1 bank is directed to refund the amount of Rs.24.10 lakhs to the petitioner with interest at 6% per annum from the date of deposit till the date of payment, within four weeks from the date of receipt of a copy of this order.
Law Points
- Forfeiture of deposit without contractual authority is unjust
- Banking Ombudsman Scheme does not bar writ jurisdiction
- Writ remedy available for arbitrary action by bank
Case Details
2022 LawText (KAR) (04) 25
Writ Petition No.46450 of 2014 (GM-RES)
Sri. Krishnamurthy G. Hasyagar (for petitioner), Sri. Chithappa (for respondent 1)
State Bank of India, The Banking Ombudsman, The Deputy Governor (Appellate Authority under Banking Ombudsman Scheme)
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India challenging forfeiture of deposit by bank.
Remedy Sought
Direction to respondent No.1 bank to refund the entire amount of Rs.24.10 lakhs deposited by the petitioner with interest at 18% per annum.
Filing Reason
The bank forfeited the deposit of Rs.24.10 lakhs made by the petitioner in connection with an auction sale of property, without any contractual authority.
Previous Decisions
The petitioner's complaint to the Banking Ombudsman was dismissed, and the appeal to the Appellate Authority was also dismissed.
Issues
Whether the forfeiture of Rs.24.10 lakhs by the bank was lawful?
Whether the petitioner is entitled to refund of the forfeited amount with interest?
Submissions/Arguments
Petitioner argued that the forfeiture was without any contractual term and therefore arbitrary and unjust.
Respondent bank argued that the forfeiture was in accordance with the terms of the auction and that the writ petition was not maintainable due to alternative remedy.
Ratio Decidendi
Forfeiture of deposit by a bank without any contractual term authorizing such forfeiture is arbitrary and unjust. The bank cannot retain the deposit when the auction does not proceed to completion and there is no agreement allowing forfeiture. The writ remedy under Article 226 is available against arbitrary action of a bank even if alternative remedies exist.
Judgment Excerpts
Calling in question the action of respondent No.1 in forfeiting a sum of Rs.24.10 lakhs deposited by him, petitioner is seeking direction to refund the same with interest thereon at 18% p.a., in this writ petition.
The forfeiture of the deposit by the bank without any contractual term authorizing such forfeiture is arbitrary and unjust.
The writ petition is allowed in part. The respondent No.1 bank is directed to refund the amount of Rs.24.10 lakhs to the petitioner with interest at 6% per annum from the date of deposit till the date of payment, within four weeks.
Procedural History
The petitioner deposited Rs.24.10 lakhs with the bank in connection with an auction. The bank forfeited the deposit. The petitioner filed a complaint with the Banking Ombudsman, which was dismissed. An appeal to the Appellate Authority was also dismissed. Thereafter, the petitioner filed the present writ petition under Article 226 of the Constitution of India.
Acts & Sections
- Constitution of India: Article 226
