# Nem Kumar Jain & Anr v. U.O.I. & Ors

- **Citation:** (2025) 11 ILRA 860
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2025-11-17
- **Case number:** Writ - C No.21627 of 2023
- **Bench:** Ajit Kumar, Mrs. Swarupama Chaturvedi
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/nem-kumar-jain-anr-v-u-o-i-ors-52767
- **Pages:** 14

## Headnote

A.S.G.I., Jainendra Kumar Mishra

Issue for consideration
The main issue was whether a respondent bank
is legally justified in unilaterally reducing the
rate of interest on Fixed Deposit Receipts after
they have been issued and the contract has
been formed.

Headnotes
A.
Civil
matter-Constitution
of
India,1950-Article 226-Indian Contract
Act,1872-Banking
Regulation
Act
1949-Petitioners created several FDRs
between 2011 and 2014 with interest
rate of 10.75% ad 10.25%-After the
merger of Oriental Bank of Commerce
with Punjab National Bank in 2020, the
bank reduced these rates-The bank
argued
that
the
reduction
was
a
"correction" because the retired staff
member
was
not
the
"Principal
Account holder"-The court established
fundamental principle of promissory
estoppel and the doctrine of legitimate
expectation
apply
to
banking
contracts-Once a bank promises a
specific rate of interest via an FDR and
the depositor acts upon it without
misrepresentation, the bank is bound
by that rate-Internal bank circulars or
RBI guidelines concerning "additional"
discretionary benefits cannot be used
as a legal basis to retrospectively
reduce
a
previously
agreed
upon
contractual interest rate.
Held
The court allowed the writ petitions and
direction issued that bank must pay interest at
the originally contracted rates as mentioned on
the FDRs until their maturity. Banks cannot
make depositors suffer for the bank's own
internal errors or oversight in offering a specific
interest rate-Any deduction made in the interim
must be refunded with interest.(Para 12 to 38)
(E-6)

Case law Cited
Navjyoti Coop. Group Housing Society v. Union
of India, (1992) 4 SCC 477 Smt. Sarojni Jain
and Another Vs Union of India and 2 Others,
Writ C No. 17211 of 2021 , Smt. Shalini Agarwal
and Another Vs. Union of India and 2 Others
Writ C No. 33494 of 2022.

List of Acts
Constitution of India,1950, Indian Contract
Act,1872, Banking Regulation Act 1949

List of Keywords
FDR
(Fixed
Deposit
Receipt),
Unilateral
reduction,
Promissory
Estoppel,
Legitimate
expectation,

Contractual
obligation,
Retrospective application, RBI Master Directions.

Case Arising From
CIVIL JURISDICTION:Writ - CNo.21627 of 2023
From the judgment and order dated 17.11.2025
of the High Court of Judicature at Allahabad

Nem Kumar Jain &Anr Vs. U.O.I.& Ors.

Appearances for Parties
Adv. for the Petitioner:
Manish Kumar Rai

Advs. for the Respondents:
A.S.G.I., Jainendra Kumar Mishra

## Text

_Characters 0–39,806 of 45,532. This is a partial read: ask again with offset=39806 for what follows._

860 INDIAN LAW REPORTS ALLAHABAD SERIES
(2025) 11 ILRA 860
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 17.11.2025

BEFORE

THE HON'BLE AJIT KUMAR, J.
THE HON'BLE MRS. SWARUPAMA
CHATURVEDI, J.

Writ - C No.21627 of 2023

Nem Kumar Jain & Anr. ...Petitioners
Versus
U.O.I. & Ors. ...Respondents

Counsel for the Petitioner:
Manish Kumar Rai

Counsel for the Respondents:
A.S.G.I., Jainendra Kumar Mishra

Issue for consideration
The main issue was whether a respondent bank
is legally justified in unilaterally reducing the
rate of interest on Fixed Deposit Receipts after
they have been issued and the contract has
been formed.

Headnotes
A.
Civil
matter-Constitution
of
India,1950-Article 226-Indian Contract
Act,1872-Banking
Regulation
Act
1949-Petitioners created several FDRs
between 2011 and 2014 with interest
rate of 10.75% ad 10.25%-After the
merger of Oriental Bank of Commerce
with Punjab National Bank in 2020, the
bank reduced these rates-The bank
argued
that
the
reduction
was
a
"correction" because the retired staff
member
was
not
the
"Principal
Account holder"-The court established
fundamental principle of promissory
estoppel and the doctrine of legitimate
expectation
apply
to
banking
contracts-Once a bank promises a
specific rate of interest via an FDR and
the depositor acts upon it without
misrepresentation, the bank is bound
by that rate-Internal bank circulars or
RBI guidelines concerning "additional"
discretionary benefits cannot be used
as a legal basis to retrospectively
reduce
a
previously
agreed
upon
contractual interest rate.
Held
The court allowed the writ petitions and
direction issued that bank must pay interest at
the originally contracted rates as mentioned on
the FDRs until their maturity. Banks cannot
make depositors suffer for the bank's own
internal errors or oversight in offering a specific
interest rate-Any deduction made in the interim
must be refunded with interest.(Para 12 to 38)
(E-6)

Case law Cited
Navjyoti Coop. Group Housing Society v. Union
of India, (1992) 4 SCC 477 Smt. Sarojni Jain
and Another Vs Union of India and 2 Others,
Writ C No. 17211 of 2021 , Smt. Shalini Agarwal
and Another Vs. Union of India and 2 Others
Writ C No. 33494 of 2022.

List of Acts
Constitution of India,1950, Indian Contract
Act,1872, Banking Regulation Act 1949

List of Keywords
FDR
(Fixed
Deposit
Receipt),
Unilateral
reduction,
Promissory
Estoppel,
Legitimate
expectation,

Contractual
obligation,
Retrospective application, RBI Master Directions.

Case Arising From
CIVIL JURISDICTION:Writ - CNo.21627 of 2023
From the judgment and order dated 17.11.2025
of the High Court of Judicature at Allahabad

Nem Kumar Jain &Anr Vs. U.O.I.& Ors.

Appearances for Parties
Adv. for the Petitioner:
Manish Kumar Rai

Advs. for the Respondents:
A.S.G.I., Jainendra Kumar Mishra

(Delivered by Hon'ble Mrs. Swarupama
Chaturvedi, J.)
11 All. Nem Kumar Jain & Anr. Vs. U.O.I. & Ors.
861

1. Heard Sri Manish Kumar Jain,
learned counsel for the petitioners, Sri
Jainendra Kumar Mishra, learned counsel
for respondent nos. 2 and 3 and learned
Standing Counsel for the State respondent.

2. By means of both these writ
petitions, filed under Article 226 of the
Constitution, the petitioners have sought
substantially similar reliefs. The principal
prayer is for a writ of mandamus directing
the respondents to compute and pay interest
on the respective Fixed Deposit Receipts at
the contracted rate till their dates of
maturity and to restrain the respondents
from reducing the agreed rates of interest
and further to direct Respondent Nos. 2 and
3 to consider and decide the representations
submitted by the petitioners. These prayers
flow from the common grievance regarding
the unilateral reduction of the agreed
interest rate after issuance of the FDRs.

3. Since both petitions raise identical
legal issue, they were heard together and
are being decided by this common
judgment. Although the factual particulars
of each petition, such as the date of the
Fixed Deposit Receipt (FDR), the amount
deposited and the name of the depositor
differ, the core question involved is the
same that whether the respondent bank is
justified in reducing the rate of interest
after issuance of the FDR. For clarity, the
individual facts of each case are discussed
separately, but the determination of the
common issue shall govern both petitions.

4. The background facts in the Writ-C
No. 21627 of 2023 is that many Fixed
Deposit Receipts (FDRs) were created by
petitioner no. 1 with his mother, Smt.
Yashoda Jain (petitioner no. 2), and his
father, late P.K. Jain, who was a retired
staff member of the Oriental Bank of
Commerce, Bulandshahr Branch, and who
passed away in the year 2016. The said
FDRs were issued by the Oriental Bank of
Commerce,
Bulandshahr
Branch,
on
01.12.2011,
01.12.2011,
01.12.2011,
16.12.2011,
28.03.2012,
28.03.2012,
28.03.2012, and 16.12.2011, for amounts of
Rs.
5,00,000/-,
Rs.
3,00,000/-,
Rs.
3,00,000/-, Rs. 2,00,000/-, Rs. 1,00,000/-,
Rs. 50,000/-, Rs. 50,000/-, and Rs. 45,000/-
, respectively. These FDRs were created on
the interest rate of 10.75% per annum, with
a maturity period of ten years, and the total
maturity amount payable thereunder was
Rs. 44,63,051/-. The petitioners had also
created another FDR on 18.02.2014 for an
amount of Rs. 1,00,000/-, carrying an
interest rate of 10.25% per annum and
maturing on 18.02.2024, with a maturity
value of Rs. 2,75,134/-.

5. The brief facts in the Writ-C No.
21657 of 2023 is that FDRs were made by
the petitioner no.1 and his joint account
holder mother namely, Smt. Yashoda Jain
(petitioner no. 2) and father namely, P.K.
Jain, a retired staff member of Branch of
Oriental Bank of Commerce, Bulandshahar
and he died in the year 2016. The aforesaid
FDRs were created before the Branch of
Oriental Bank of Commerce, Bulandshahar
on 01.12.2011, 01.12.2011, 16.12.2011,
16.12.2011 and 28.03.2012 amounting Rs.
5,00,000/-, Rs. 5,00,000/-, Rs. 1,00,000/-,
Rs. 1,00,000/- and 2,00,000/- respectively
interest @ 10.75 % which will be matured
after 10 years and total maturity amount
will have to be paid Rs. 40,44,189/-.

6. Learned counsel for the petitioners
submits that the aforementioned FDRs
were jointly made by petitioner no. 1,
petitioner no. 2 (the mother of petitioner
no. 1), and the late father of petitioner no.
1. It is further submitted that the Oriental
862 INDIAN LAW REPORTS ALLAHABAD SERIES
Bank of Commerce was merged with the
Punjab National Bank in the year 2020,
and, the respondent no. 2, without issuing
any show cause notice or affording any
opportunity of hearing to the petitioners,
reduced the contracted rate of interest on
various FDRs from 10.75% to 9.25%, and
from 10.25% to 8.25%. It is contended that
such unilateral reduction in interest rates is
impermissible in law. Learned counsel of
the
petitioners
further
submits
that
petitioners approached respondent nos.2
and 3, requesting payment of interest at the
originally agreed rate of 10.75% on all the
FDRs but despite such representations, the
respondents failed to release the interest at
the contracted rate, which is arbitrary and
illegal.

7. Learned counsel for the petitioners
further
submits
that
when
petitioner
contacted officials of the bank regarding the
details of the FDRs interest rate, the letter
was provided to the petitioner stating that the
FDRs interest rate has been deducted
according
to
Circular
No.
HO/CS&P/22/2014-15/248 dated July 3,
2014 and clarified that benefits of additional
interest of banks? staff members or retired
member was available only in case the staff
member or retired staff members had an
account singly or jointly with family member
where the staff member/retired staff member
was the Principal Account Holder but the
FDRs in these petitions were made before the
date of circular and hence it was cited as
reason to reduce the rate of interest. It is
argued that the circular cannot be applicable
retrospectively and the respondent has not
provided any information to the petitioner till
the year 2020 and there is no provision to
make this circular retrospective.

8. It is further submitted by the learned
counsel representing petitioners that the
reduction of the interest rate amounts to a
violation of settled principles of contract law,
as the issuance of the FDR with a specified
rate of interest constitutes a binding
contractual obligation between the parties.
Learned counsel contends that the petitioners
got legitimate expectation of receiving the
matured amount at the rate expressly
stipulated in the FDRs, and such contractual
assurance cannot be unilaterally altered by
the Bank after the FDRs had been issued.

9. It is also submitted that the sister of
the petitioner no.1 and petitioner no.2 in
these petitions have faced same issue
regarding their FDRs and they challenged
the decision of the bank in Writ C No.
17211 of 2021 and Writ C No. 33494 of
2022, which were allowed by this Court
vide its order dated 24.02.2023 with
directions for the payment as per promised
rate in FDRs.

10. Learned counsel for the petitioners
also relies upon the circular of the Reserve
Bank
of
India,
RBI/DBR/2015-16/19,
Master
Direction
DBR.Dir.No.84/13.03.00/2015-16 namely,
?Master Direction - Reserve Bank of India
(Interest Rate on Deposits) Directions,
2016?, which is applicable on every
Scheduled Commercial Bank, including
Regional Rural Banks (RRBs). Provision
under Chapter II, 4 (c) provides that the
interest rates payable on deposits shall be
strictly as per the schedule of interest rates
disclosed in advance. Clause (d) further
states that rates shall not be subject to
negotiation between the depositors and the
bank. Learned counsel relies upon various
provisions of the circular to buttress his
arguments that the bank cannot make
deviation
from
the
rate
of
interest
mentioned in the FDRs at the time of their
issuance.
11 All. Nem Kumar Jain & Anr. Vs. U.O.I. & Ors.
863

11. Per contra, learned counsel for
respondent Nos.2 and 3 has vehemently
opposed the prayer made in the petition and
submitted that the father of petitioner No.1,
admittedly an employee of the respondent
Bank, had retired in the year 2002 and
passed away in the year 2016. However,
the FDRs in question were issued by the
Bank in the year 2011-12, during which
period petitioner No.1 was not dependent
upon his father, hence, the amount invested
in the said FDRs had no concern with the
service benefits of the petitioner's father. It
is further submitted that no declaration, as
required under the applicable norms, was
ever furnished by the petitioner. Learned
counsel for the respondents submitted that
the petitioners procured the FDRs without
adhering to the due process mandated
under the Circulars issued by the RBI from
time to time. Learned counsel further
submits that although Writ-C No. 17211 of
2021 filed by the mother of petitioner No. 1
was allowed by a coordinate Bench of this
Court on compassionate grounds without
considering the said RBI Circulars, and the
respondent-Bank has duly complied with
the order dated 24.02.2023 passed therein,
but the present writ petition seeks a
direction for payment of additional interest,
to which the petitioners are not entitled
under the RBI Circulars.

12. Learned counsel for respondent
nos. 2 and 3 has placed reliance on the
Master Circular dated 01.07.2009, issued
by the Reserve Bank of India in which
clause 6.2B(ii) it is clearly mentioned as
under:-

"In the case of employees taken
over
pursuant
to
the
scheme
of
amalgamation, the additional interest shall
be allowed only if the interest at the
contractual
rate
together
with
the
additional interest does not exceed the rate
which could have been allowed if such
employees were originally employed by the
bank."

13. Learned counsel for respondent
nos. 2 and 3 has further submitted that in
the instant case, the petitioner no.1 who
deposited the money was not the staff of
the Bank, therefore, the additional rate of
interest is not payable to the petitioner no.1.
It is further submitted that if any FDRs
issued/obtained by the petitioners beyond
the provisions of the circulars issued by the
RBI in pursuance of an additional rate of
interest, then the respondent Bank has the
right to correct the same as per circulars
issued from time to time.

14. In rejoinder, learned counsel for
the petitioners denies the applicability of
the circular in the facts of this case because
the rate of interest was clearly mentioned
by the bank on fixed deposit receipt and it
was further submitted by the counsel of the
petitioner that at no occasion any noncompliance in issuance of FDRs was
communicated
by
the
bank
to
the
petitioners. He further states that the issue
involved in the matter is identical to Writ-C
No.17211 of 2021, which was allowed on
24.02.2023 by coordinate Bench of this
Court after consideration of all submissions
made by the respondents during hearing of
these writ petitions as the same argument
was made by the respondent bank in the
hearing that case also. Operative portion of
the judgement and order dated 24.02.2023
passed by division bench in Writ-C
No.17211 of 2021, on which the counsel of
the petitioners is relying, is reproduced as
under:-

"The writ petition is, accordingly,
allowed. The respondent bank is directed to
864 INDIAN LAW REPORTS ALLAHABAD SERIES
compute and pay the interest rate at
10.75% on the FDRs until due date of
maturity of the FDRs. The deducted amount
towards interest shall be paid within a
week from the date of receipt copy of this
order. Failing which, petitioners shall be
entitled to interest on the due amount at the
rate of interest admissible on FDR."

15. After going through records and
submissions made by the learned counsel
of respective parties, the undisputed fact
appears that there are various FDRs
mentioning rate of interest, issued in favour
of
petitioners
and
on
no
occasion,
petitioners were informed about any
illegality in creating those FDRs. Another
fact, which is not in dispute that the father
of petitioner no.1 was employee of the
bank, who later got retired from his
services after completion of his tenure. The
relief in favour of the sister of petitioner
no.1 who was similarly situated and had
same issue with respondent bank in FDRs
in her name, is also not disputed and the
same also gets clear after going through the
order passed by this High Court in Writ C.
No. 17211 of 2021 and the connected
matter. Petitioner no.2 in these petitions
also got relief regarding some of her FDRs
in same common order and this fact is also
not disputed by the respondents here.

16. For proper adjudication of the
controversy involved in these petitions, we
proceed to consider the circulars and the
judgement placed on record by the
petitioners and the respondents.

17. Learned counsel for the petitioners
has placed reliance upon Master DirectionReserve Bank of India (Interest Rate on
Deposits) Directions, 2016. For the ready
reference,
relevant
provisions
of
the
?Master Direction-Reserve Bank of India
(Interest Rate on Deposits) Directions,
2016? is reproduced below:

"CHAPTER - II

GENERAL GUIDELINES

4.
Interest
Rate
framework
Scheduled commercial banks shall pay
interest on deposits of money (other than
current account deposits) accepted by them
or renewed by them in their Domestic,
Ordinary
Non-Resident
(NRO),
NonResident (External) Accounts (NRE) and
Foreign Currency (Non-resident) Accounts
(Banks)
Scheme
{FCNR(B)}
deposit
account on the terms and conditions
specified in these directions:

....

 (c) Interest rates payable on
deposits shall be strictly as per the schedule
of interest rates disclosed in advance. The
banks shall maintain the bulk deposit interest
rate card in their Core banking system to
facilitate supervisory review.

(d) The rates shall not be subject
to negotiation between the depositors and
the bank.

....

 (g) Deposits maturing on nonbusiness working day

 (i) If a term deposit is maturing
for payment on a non-business working
day, Scheduled Commercial Banks shall
pay interest at the originally contracted
rate on the original principal deposit
amount for the non-business working day,
intervening between the date of the
maturity of the specified term of the deposit
and the date of payment of the proceeds of
the deposit on the succeeding working day.
11 All. Nem Kumar Jain & Anr. Vs. U.O.I. & Ors.
865

 (ii) In case of reinvestment
deposits and recurring deposits, Scheduled
Commercial Banks shall pay interest for
the intervening non-business working day
on the maturity value.

(h) Consequence of transfer of
branch of one bank to another bank
Deposits accounts transferred from one
bank branch to another bank branch on
account of takeover of bank branches in
rural and semi-urban centres shall adhere
to the following conditions:

 (i)
deposit
accounts
shall
deemed to be transferred to the new bank
and will continue to be governed by the
terms of contract agreed to between the
customer and the bank branch that is
being taken over.

(ii) the same rate of interest shall
be
payable
till
maturity
on
such
transferred deposits, as was payable at the
time of takeover of the branch."

(Emphasis added)

18. Upon bare reading of the above
provisions it becomes clear that all
Scheduled
Commercial
Banks
are
mandated to pay interest on term deposits
strictly in accordance with the schedule of
interest rates disclosed in advance. The
directions
made
in
above
circular,
expressly provide that such rates are nonnegotiable and not amenable to individual
variation. It further stipulates that where a
term deposit matures on a non-business
working day, the bank is obliged to pay
interest at the originally contracted rate for
the intervening period until the succeeding
working day. There is also clear direction
that in the event of transfer of deposit
accounts due to branch takeovers, the
deposits shall continue to be governed by
the original terms of contract, and the rate
of interest agreed at the time of acceptance
of the deposit shall remain binding and
payable until maturity. These provisions
cumulatively establish the principle that
once the rate of interest is mentioned at the
time of issuance of the FDR, the same
cannot be unilaterally altered to the
detriment of the depositor.

19.
Learned
counsel
of
the
respondents has relied upon rule 6.2 of
the Reserve Bank of India circular dated
01.07.2009,
RBI/2009-10/80,
UBD.No.BPD.MC.No.
11/13.01.000/2009-10, namely, Master
Circular,
Interest
Rates
on
Rupee
Deposits-UCBs, which makes provision
for the additional interest payable to
bank?s
staff
and
their
exclusive
associations. Relevant part of rule 6.2 is
reproduced below for the ready reference:

"6.2 To Bank's Staff and their
Exclusive Associations

A bank may, at its discretion
allow additional interest at a rate not
exceeding one per cent per annum over and
above the rate of interest stipulated in the
Annex 1 & 2 and the additional interest
payable/paid as per paragraph 6.1:

(A) In respect of a savings or a
term deposit account opened in the name of

 (i) a member or retired member
of the bank's staff, either singly or jointly
with any other member or members of
his/her family; or

(ii) the spouse of a deceased member
or a deceased retired member of the bank's
staff; and
866 INDIAN LAW REPORTS ALLAHABAD SERIES

 (iii) an association or a fund,
members of which are the members of the
bank's staff, Provided that - the bank shall
obtain a declaration from the depositor
concerned, that the monies deposited or
which may, from time to time, be deposited
into such account, shall be monies
belonging to the depositor as stated in
Clauses (i) to (iii) above.

Provided further that -

(a) in the case of employees taken
on deputation from another bank, the bank
from which they are deputed may allow
additional interest in respect of the savings
or term deposit account opened with it,
during the same period of deputation;

 (b) in the case of persons taken
on deputation for a fixed duration, or on a
contract of a fixed duration, the benefit
shall cease to accrue on the expiry of the
term of deputation or contract, as the case
may be;

(B) Payment of additional interest
shall be subject to the following conditions,
namely :

(i) The additional interest shall
be payable only so long as the person
continues to be eligible for the same and in
case of his ceasing to be so eligible, till the
maturity of the deposit, in the case of a
term deposit account.

 (ii) In the case of employees
taken over pursuant to the scheme of
amalgamation, the additional interest shall
be allowed only if the interest at the
contractual
rate
together
with
the
additional interest does not exceed the rate
which could have been allowed if such
employees were originally employed by the
bank. (C) Bank employees' federations in
which bank employees are not direct
members shall not be eligible for additional
interest."

20. We have carefully gone through
the above provision, considered directions
given thereunder which is to permit banks
to grant up to one per cent additional
interest on savings and term deposits
belonging to members or retired members
of the bank?s staff, their eligible family
members, and staff-exclusive associations
or funds, subject to the depositor providing
a declaration that the deposited funds
belong to such eligible persons at bank?s
discretion. This provision merely authorises
banks to grant an additional interest of up
to one per cent to eligible categories of
staff and their family members at their
discretion. The provision is enabling in
nature and does not contain any clause
permitting the bank to subsequently revise
or
reduce
the
interest
rate
already
contracted in respect of an existing FDR. In
our view, nothing in this clause empowers
the bank to reduce a rate of interest which
is already mentioned at the time of issuance
of the FDR in the past. The direction
regulates only the grant of additional
interest in eligible cases, but it does not
authorise
retrospective
alteration
or
reduction of the agreed rate of interest after
the FDR has been issued.

21. Learned counsel for the respondent
further relies upon the circular No.
HO/CS&P/22/2014-15/248
dated
03.07.2014,
issued
by
the
General
Manager, Oriental Bank of Commerce.
Operative part of the circular is reproduced
below for the ready reference:

"Clarification for payment of
additional rate of interest on term deposits
11 All. Nem Kumar Jain & Anr. Vs. U.O.I. & Ors.
867
paid to staff, retired staff who is senior
citizen in case of joint accounts with
dependent senior citizen.

 Background: Attention is invited
to operational Manual Chapter 9, Sub Para
3.10.2 of Para 3.10 (Staff Accounts) in
which it has been advised that for payment
of additional rate of interest to staff the
name of the staff/ retired staff/ spouse (in
case of his/her demise) shall be first, in
case of joint term deposit accounts.

 Clarification from RBI: IBA has
been receiving queries from member banks,
whether the benefits of additional interest
on senior citizen deposit and additional
interest to staff or retired staff can be paid
for deposits in joint account where the
spouse (senior citizen) is the first holder
and staff is the second holder. IBA had
taken
up
the
issue
with
RBI
for
clarification.

RBI
vide
its
letter
DBOD.Dir.No.19428/13.01.01/2013-14
clarified that benefits of additional interest
to bank's staff members or retired staff
member is available only in case the staff
member or retired staff members has an
account singly or jointly with family
member where the staff member/ retired
staff member is the Principal Account
Holder.

All the branches are once again
advised to take note of the above
instructions for meticulous compliance.
Any violation in this regard shall be viewed
seriously and erring official shall expose
himself/herself to disciplinary action."

22. From the perusal of the circular, it
appears that it is a clarification regarding
additional interest for staff, retired staff,
and senior citizens in joint accounts and
conditions for granting additional interest
on deposits. It is a fact that the instructions
in the circular make it explicit that such
benefits are admissible only where the staff
member or retired staff member is the
principal account holder, and stipulate the
strict compliance by all the banks,
however,
nowhere
does
the
circular
authorize or contemplate the reduction of
the contracted interest rate on an existing
FDR.
Therefore,
while
the
circular
regulates
the
discretionary
grant
of
additional interest to certain categories of
depositors, it does not in any manner
empower the bank to unilaterally revise or
reduce the interest rate already agreed and
clearly mentioned in an issued FDR.

23.
Learned
counsel
for
the
respondents also relies upon circular issued
by
Reserve
Bank
of
India
dated
02.07.2012, namely, Master Circular on
Interest Rates on Rupee Deposits held in
Domestic, Ordinary Non-Resident (NRO)
and
Non-Resident
(External)
(NRE)
Accounts. Provisions relied upon by the
learned counsel are reproduced below for
the convenience:

"2.5 Discretion to pay additional
interest not exceeding one percent on
deposits of bank?s staff and their exclusive
associations

A bank may, at its discretion,
allow additional interest at a rate not
exceeding one per cent per annum over and
above the rate of interest stipulated in
Annex 1 & 2 to this circular subject to
following conditions:

2.5.1 In respect of a savings or a
term deposit account opened in the name
of: a. a member or
868 INDIAN LAW REPORTS ALLAHABAD SERIES

a retired member of the bank?s
staff, either singly or jointly with any
member or members of his/her family; or

b. the spouse of a deceased
member or a deceased retired member of
the bank's staff; and

c. an Association or a fund,
members of which are members of the
banks staff;

A
bank
should
obtain
a
declaration from the depositor concerned,
that the monies deposited or which may,
from time to time, be deposited into such
account belong to the depositor as stated in
clauses (a) to (c) above.

2.5.2 For the purposes of subparagraph 2.5.1:

 (i) "a member of the bank?s
staff? means a person employed on a
regular basis, whether full-time or parttime, and includes a person recruited on
probation or employed on a contract of a
specified duration or on deputation and an
employee taken over in pursuance of any
scheme of amalgamation, but does not
include a person employed on casual basis

....

.

(ii) "A retired member of the
bank's staff? means an employee retiring
whether on superannuation or otherwise as
provided in the bank?s Service/Staff
Regulations, but does not include an
employee
retired
compulsorily
or
in
consequence of disciplinary action;

(iii)
"Family"
means
and
includes the spouse of the member/retired
member of the bank's staff and the
children, parents, brothers and sisters of
the member/retired member of the bank's
staff,
who
are
dependent
on
such
member/retired member, but does not
include legally separated spouse;

2.5.3
Payment
of
additional
interest
is
subject
to
the
following
conditions, namely:

The additional interest is payable
only so long as the person continues to be
eligible for the same and in case of his
ceasing to be so eligible, till the maturity of
a term deposit account;

In the case of employees taken
over
pursuant
to
the
scheme
of
amalgamation, the additional interest is
allowed only if the interest at the
contractual
rate
together
with
the
additional interest does not exceed the rate,
which could have been allowed if such
employees were originally employed by the
bank.

....

2.5.5
In
case
of
Domestic
deposits, it will be in order for banks to
give their resident Indian retired staff, who
are senior citizens, the benefit of higher
interest rates as admissible to senior
citizens over and above the additional
interest of not exceeding one per cent
payable to them by virtue of their being
retired members of the banks' staff."

24. We have perused the above
provisions, however, in the present case,
the bank has not alleged any irregularity in
the issuance of the FDRs, nor any question
has been raised regarding the rates
mentioned therein, and at no stage were the
FDRs cancelled or modified for noncompliance of any provisions for years.
11 All. Nem Kumar Jain & Anr. Vs. U.O.I. & Ors.
869
None of the provisions in the circular relied
upon by the respondents provide any
authority
to
unilaterally
reduce
the
contracted rate of interest on FDRs, which
are already issued and have a rate clearly
mentioned therein, and therefore, above
provisions
cannot
be
considered
as
authorization to the bank for the reduction
made by the bank.

25. Learned counsel for the petitioners
relied upon the common order dated
24.02.2023, passed by this High Court in
Smt. Sarojni Jain and Another Vs Union
of India and 2 Others, Writ C No. 17211
of 2021 and Smt. Shalini Agarwal and
Another Vs. Union of India and 2 Others
Writ C No. 33494 of 2022, however
learned
counsel
for
the
respondents
contends that the writ petition filed by the
widow of the ex-employee, who is
petitioner no. 2 in these petitions, was
allowed on compassionate basis without
considering
RBI
circulars,
but
the
respondent bank complied with the order
dated 24.02.2023 honoring verdict of this
Court.

26. To decide the controversy, we
have perused the common order dated
24.02.2023 passed in the above mentioned
writ petitions, which is passed after calling
upon
the
General
Manager
of
the
respondent-bank, who was directed to file
his personal affidavit explaining as to how
the promised rate of interest on the date of
FDRs at 10.75% was reduced suo moto at
9.25%. In compliance of the direction, an
affidavit was filed and while disputing the
fact, the stand was taken that since the
retired staff/father of the first petitioner was
not the principal account holder, as such,
the benefit of additional rate of interest
cannot be given to the petitioners. Reliance
was placed on the clarification issued by
the Indian Bank Association, referring to a
Circular of the Reserve Bank of India (for
short?RBI?) dated 2 June 2014, which
reads thus:

"The benefit of additional rate of
interest to bank?s staff members or retired
staff member is available only in case of
the staff member or retired staff members
has an account singly or jointly with family
member where the staff member/retired
staff members is the principal Account
Holder. Accordingly after merger CBS
System of bank corrected the records and
reconciled the amount as per the RBI
guidelines."

27. It appears that similar submissions
were made to oppose those writ petitions
and after considering all submissions made
by the respondent bank the order was
passed by this Court in those writ petitions.
Relevant
paragraphs
to
demonstrate
submissions made by respondents in Writ
C No. 17211 of 2021 are reproduced
below: "

"12. Accordingly, it was stated
that correction of the rate of interest as per
the RBI Guidelines, was made in the FDRs
i.e. reducing it at 9.25% from the date of
deposit. Further, it was stated that the
retired staff/father of the first petitioner did
not make a declaration that the money
deposited or which may be deposited from
time to time into such account belongs to
him. Further, reliance has been placed on
RBI Circular dated 3 March 2016, updated
on 22 February 2018, wherein, it has been
provided that the interest rate offered shall
be reasonable, consistent, transparent and
available for supervisory review/scrutiny
as and when required. Accordingly, after
merger of the Oriental Bank of Commerce
with the Punjab National Bank the interest
870 INDIAN LAW REPORTS ALLAHABAD SERIES
rate on the FDRs in dispute, as well as, 15
other FDRs was corrected as per the RBI
Guidelines.

13. In other words, it is submitted
that the bank has not reduced the rate of
interest on the FDRs of the petitioners, but,
correction was made in compliance of the
Guidelines issued by the RBI and followed
by the Indian Bank Association.

14. In the aforenoted facts, the
short question that arises is as to whether
the bank was justified in reducing the rate
of interest promised on the FDRs on the
date of its deposit before the maturity of the
FDRs.?

28. After considering complete facts
and circumstances in those petitions, this
Court also observed in above mentioned
common order that it was not the case of the
respondent-bank
that
any
fraud
or
misrepresentation
was
played
by
the
petitioners with the bank while making the
FDRs. The respondent-bank has admitted that
the higher rate of interest was offered to the
petitioners, whereas, as per the Circular of the
RBI referred to by the respondents, correction
was made later on. In other words, it was a
mistake of the officers of the bank offering
higher interest on the FDRs. Same is the case
in petitions in hands, there is no allegation of
fraud played by any of the petitioner while
getting the FDRs issued and therefore the
respondents are not justified in unilateral
reduction of the rate of interest. Relevant
paragraph is reproduced to demonstrate that
the statement made by the learned counsel of
the respondent is not correct that this Court has
not considered R.B.I. circulars and passed the
order on compassion:

"17. Learned counsel for the
petitioners has placed reliance on the
Circular dated 3 March 2016, issued by the
RBI, i.e. Reserve Bank of India (Interest
Rate on Deposit) Directions, 2016. The
directions
are
applicable
to
every
Scheduled Commercial Bank, inter alia, on
term deposit.

18. Direction 8 pertains to
interest rate on domestic term deposit i.e.
payment of additional interest on domestic
deposits. Sub-clause (a) provides that the
Scheduled Commercial Banks shall, at
their discretion, allow additional interest of
one per cent per annum, over and above
the rate of interest mentioned in the
schedule of interest rates on savings or
term deposits to bank's staff. Direction
8(a)(vi) further mandates the additional
interest may be paid on the deposits after
obtaining a declaration from the depositor
concerned, that the monies deposited or
which may be deposited from time to time
into such account belong to the depositor,
if the depositor is a retired bank staff and
deposits the money either singly or jointly
or any member or members of his/her
family. Sub-clause (b) of Direction 8
further confers a discretion upon the
Scheduled Commercial Banks to formulate
term deposit schemes specifically for
resident Indian senior citizens, offering
higher and fixed rates of interest as
compared to normal deposits of any size.

19. Accordingly, it transpires that the bank
promised a higher rate of interest of
10.75% on

the
FDR
to
the
petitioners. The FDR tenor was for 10
years. The stand of the bank that rate of
interest offered on the FDR to the
petitioners
made
alongwith
deceased
retired bank staff was at a higher rate and
not permissible under the Circular as the
retired bank staff was not the principal
account holder."
11 All. Nem Kumar Jain & Anr. Vs. U.O.I. & Ors.
871

29.
This
Court
has
thoroughly
considered
identical
facts
and
circumstances, which was involved in Smt.
Sarojni Jain (supra) and Smt. Shalini
(Supra), and respondent bank has made
similar contentions there. After hearing
learned counsel for respective parties, this
Court has passed following order:

"20. Be that as it may, for the
mistake/error, if any, committed by the
bank while offering the rate of interest at
the time of opening the FDR account
cannot all of sudden be reduced after nine
years of the deposit. The bank is liable to
pay the higher rate of interest as promised
and the same could not have been
recovered from the interest that accrued on
the FDR until the date of knowledge of the
mistake. It was not open to the bank to take
a stand without notice to the petitioners
that they would not pay the promised rate
of interest, henceforth, upon discovering
the mistake. If the officials of the bank are
responsible for the error it was always
open for the bank, as per their own
Circular, to proceed against the erring
employee and recover the loss caused to
the bank from the delinquent employee, in
accordance with Rules. Petitioners, one of
them being a retired staff of the bank, were
promised one percent higher interest rate
on the FDRs which was permissible as per
the Circulars of the RBI, which therefore
could not have been reduced mid way suo
moto irrespective of the fact that the retired
bank staff was not the principal account
holder. The petitioners cannot be made to
suffer for the mistake of the bank.

 21.
The
writ
petition
is,
accordingly, allowed. The respondent bank
is directed to compute and pay the interest
rate at 10.75% on the FDRs until due date
of maturity of the FDRs. The deducted
amount towards interest shall be paid
within a week from the date of receipt of
certified copy of this order. Failing which,
petitioners shall be entitled to interest on
the due amount at the rate of interest
admissible on FDR."

30. Having regard to the earlier
common order dated 24.02.2023 passed in
Writ C No. 17211 of 2021 and Writ C No.
33494 of 2022, which involved identical
contentions raised by the respondent bank,
it is clear that the unilateral reduction of the
contracted rate of interest on the FDRs by
the bank is impermissible. In the said order,
this Court had observed that any higher rate
of interest promised to the depositor,
including
retired
staff,
cannot
be
retrospectively reduced on the ground that
the staff member was not the principal
account holder, particularly where no
allegation of fraud, misrepresentation, or
irregularity in issuance of the FDRs was
made. The principle discussed therein is
squarely applicable to the facts of the
present petitions. The respondent bank?s
contention that the reduction was made in
conformity with RBI circulars or IBA
clarifications
is
misplaced,
as
those
provisions only empower the bank to grant
discretionary additional interest, however,
they do not authorize the bank to reduce the
rate of interest already mentioned in FDRs.
The petitioners, therefore, cannot be made
to suffer for oversight on the part of the
bank officials, in case if there are any
omission by any bank staff.

31. At this stage, it is necessary to
examine
the
broader
jurisprudential
principles
of
administrative
fairness
governing the relationship between a public
sector bank and its customers. When a
Fixed Deposit Receipt is issued with a
specific contracted rate of interest, the
872 INDIAN LAW REPORTS ALLAHABAD SERIES
depositor is entitled to proceed on the basis
that the terms expressly recorded therein
shall continue to govern the transaction
until maturity. The doctrine of legitimate
expectation, as evolved by the Supreme
Court in Navjyoti Coop. Group Housing
Society v. Union of India, (1992) 4 SCC
477 must be followed by the bank as it is
clearly mentioned that:

"16. ..the doctrine of 'legitimate
expectation' imposes in essence a duty on
public authority to act fairly by taking into
consideration all relevant factors relating
to such 'legitimate expectation...?.?

32. The doctrine of legitimate
expectation regarding contractual issue was
discussed in Union of India v. Hindustan
Development Corporation, (1993) 3 SCC
499, and it states as follows:

"27.