Regular First Appeal against a Trial Court order dismissing a suit for recovery of a bank penalty. The High Court held that the bank acted within RBI Circular directives to deduct a 1% penalty for premature conversion of rupee to foreign currency deposits and dismissed the appeal.
Appeal dismissed; no fresh relief granted to the appellant.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
*** IN THE HIGH COURT OF DELHI AT NEW DELHI**
+ RFA No. 230/2005
% 20th August, 2018
ANJANA KHANEJA ..... Appellant
Through: Ms. Biji Rajesh, Advocate (Mobile No. 9717577733).
versus
STATE BANK OF PATIALA ..... Respondent Through: None.
CORAM: HON’BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
RFA No. 230/2005 Page 1 of 6
interest rate than as payable on completion of Fixed Deposit period,
as charges on account of premature conversion by the
appellant/plaintiff of a Fixed Deposit of Rs.6,57,00,000/- i.e. on a normal premature encashment of a fixed deposit rate of interest was brought down from 14% to 12% when the fixed deposit was prematurely encashed, and which Fixed Deposit was in rupees, and thereafter since the new fixed deposit is made in foreign currency, therefore besides deducting 2% for premature encashment, a 1% of the amount additionally has to be deducted for creating a foreign currency account in terms of relevant RBI Circular.
RFA No. 230/2005 Page 2 of 6
deposit with maturity value of US$ 19,53,966.47 at 5.25%. This Fixed Deposit called as Special Term Deposit was rolled over when it matured on 29.4.1999 for another period of twelve months with agreed interest at 4.75 % compounded with maturity value being US$ 20,47,881.92. When this term deposit was encashed after its period on 24.4.2000, the respondent/defendant-bank however deducted an amount of Rs.7,39,623/-, and it transpired that this amount which was deducted by the respondent/defendant-bank was on account of the fact that actually at the time of first premature encashment on 24.4.1998 the appellant/plaintiff besides getting a lesser interest at 12% instead of 14%, the respondent/defendant-bank was entitled to charge a penalty of 1% on account of RBI circulars and for this 1% of Fixed Deposit amount of Rs. 7,39,623/- no deduction was made at the relevant point of time. Appellant/plaintiff protested to this, as it was contended by the appellant/plaintiff that this was done without any notice, and this could not have been done on 24.4.2000 when the claim was as on 24.4.1998.
respondent/defendant-bank the sole issue which was raised was that
RFA No. 230/2005 Page 3 of 6
by mistake when for the first time that the fixed deposit of Rs.6,57,00,000/- was encashed on 24.4.1998, an amount of 1% of
penalty had to be deducted because conversion was from a rupee account to a foreign currency account in view of the Circular dated 13.3.1992 but was by mistake not deducted ,and consequently the respondent/defendant-bank was entitled to this 1% amount which translated to a sum of Rs.7,39,623/-.
following issues:-
“(1) Whether deduction of Rs.7,39,623/- made by defendant is illegal as alleged by the plaintiff? OPP
(2) If issue no. 1 is decided in favour of the plaintiff, whether she is entitled to recover this amount from the defendant? OPP
(3) Whether the plaintiff is entitled to recover any interest from the defendant if so at what rate, for what amount and for what period? OPP
(4) Relief.”
respondent/defendant-bank by holding that the respondent/defendantbank had committed a clerical mistake which was pointed out during
the audit proceedings and the RBI instructions were proved as Ex.DW1/2 which directed deduction of 1% additional penalty on
RFA No. 230/2005 Page 4 of 6
conversion of a rupee account to a foreign currency/US$ account. The relevant circular in this regard, and which was proved by the respondent/defendant-bank was Ex.DW1/2, and which is not reproduced in the impugned judgment, the same reads as under:-
“Circular No. P&SB/3 of 1992-93 Dated: 8th April, 1992
NRI SEGMENT – CONVERSION OF NRE DEPOSITS INTO FCNR DEPOSITS AND VICE-VERSA BEFORE MATURITY OF DEPOSITS
Please refer to our Circular No. P&SB/90 of 1989 dated the 30th June, 1989
RFA No. 230/2005 Page 5 of 6
because it shows that when a rupee NRE account of a fixed deposit is converted into FCNR deposits i.e. a Foreign Currency Non Resident Deposits then a penalty of 1% is chargeable whenever a Fixed Deposit is prematurely encashed.
AUGUST 20, 2018 AK
VALMIKI J. MEHTA, J
RFA No. 230/2005 Page 6 of 6
2 issues framed by the court
Whether the bank was entitled to deduct an additional 1% penalty for converting a rupee fixed deposit to a foreign currency account on subsequent premature encashment when it was not deducted previous
Whether the bank's deduction of the penalty amount was illegal or barred by limitation.
1 provisions across 1 enactments
Anjana Khaneja
State Bank of Patiala
Valmiki J. Mehta
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
