Narayan Bharathan v. State Bank of India and Anr
Where a term deposit was made for a fixed period with no renewal instruction, the bank's own circular provides that it is automatically renewed on maturity for the same period at the prevailing rate, so the bank cannot deny interest for the interim period; a writ is maintainable where the issue can be decided on admitted facts.
By CA Nikhil Gupta · Reviewed against the retained judgment 2026-10-10
Asiatic Export Enterprises, a partnership whose accounts were frozen by a dispute among partners, had a ₹7.22 crore fixed deposit with State Bank of India that matured in July 2012. SBI paid interest only from May 2013, saying the money lay in a current account in between. The High Court held SBI's circular required automatic renewal and ordered the gap interest paid.
What happened
The firm made a fixed deposit of ₹7.22 crore with SBI's Kollam commercial branch on 19 July 2011 for twelve months. A dispute over the share of the petitioner's late father in the firm stopped operation of the accounts, and the petitioner and his mother filed W.P.(C) No. 15008/2015, disposed of by judgment of 9 July 2015, the writ appeals being decided on 13 August 2015. The petitioner claimed interest from the maturity date of 18 July 2012 to 10 December 2015. The bank admitted liability for 13 May 2013 to 10 December 2015, ₹41,99,765, which it paid under the interim order of 21 November 2018, so the remaining dispute was for 18 July 2012 to 12 May 2013. The bank said that after the one-year period the money was moved to the firm's current account where it earned no interest, and was moved on 13 May 2013, on an oral request, into a fixed deposit under the Army Group Insurance Fund with retrospective effect from 18 July 2012, a scheme open only to defence personnel. The petitioner relied on the bank's circular (Ext. P18) that a term deposit without instruction is automatically renewed for the same period at the interest rate prevailing on maturity, and on M/s Hyderabad Commercials v. Indian Bank, AIR 1991 SC 247, and ABL International Ltd. v. Export Credit Guarantee Corporation, on maintainability.
Questions before the court
- Is the firm entitled to interest for 18 July 2012 to 12 May 2013, and could it be relegated to a civil suit?
Why the court ruled this way
There was no dispute about the deposit or its closure on 10 December 2015, and the bank had paid interest from 13 May 2013, so the remaining question was only the earlier period on an admitted deposit (paragraph 9). The bank's contention was that interest ran only to the maturity date of 18 July 2012, but its own circular, Ext. P18, provides for automatic renewal for the same period at the prevailing rate absent instructions (paragraph 9). The bank did not contend that the amount was moved into the Army Group Insurance Fund at the instance of the firm, so no evidence was needed and there was no reason to relegate the petitioner to a civil court (paragraph 10). There is no absolute bar to a writ, entertainability depends on various factors, and this petition was filed in 2018 with part of the amount already paid under the interim order (paragraph 10).
Controlling point
The bank was bound by its circular to treat the deposit as renewed, and interest for the gap period was payable.
Order and next steps
The writ petition was allowed, directing the respondents to calculate interest at 8.5% on ₹8,00,19,849 for the period from 18 July 2012 to 12 May 2013 and to credit it to the firm's current account within two months of receiving a certified copy of the judgment.
Practical implications
A depositor whose fixed deposit matured without instruction can rely on the bank's own auto-renewal circular, and should keep the deposit receipt and circular to claim interest for any gap after maturity.
Limits of this ruling
- The ruling turns on the bank's circular and on the absence of any dispute that the transfer to the other scheme was not at the depositor's instance; it does not set a general rule on writs for deposit disputes.
Law and judgment source
- Constitution of India, Article 226
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Source checked: 2026-10-10 · Judgment paragraphs: paragraphs 1–12 · Later case history: not verified. Verify appeals, stays and subsequent orders before reliance.
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