A bank is required to pay compound interest with half-yearly rests at a rate fixed by the Trustees in accordance with the relevant regulations, and cannot unilaterally alter the scheme of keeping provident fund money payable to employees in deposit with it on interest.

JUDGMENT :

Mishra, J.—The employer, the State Bank of Bikaner and Jaipur, represented by the Managing Director, has preferred this appeal against the judgment in a writ petition under Art. 226 of the Constitution of India in which a mandamus has been issued commanding the appellant and other respondents in the writ petition to forbear from agreeing and/or approving and/or ratifying the refund of the sum of Rs. 50,46,116.27/- from the 'State Bank of Bikaner and Jaipur Employees' Provident Fund Account' to the second respondent in the writ petition, i.e., the appellant.

2. Facts shortly stated are :-

The first petitioner in the writ petition/first respondent in this appeal, is an association of the employees of the second respondent/appellant and the second petitioner is the President. The second respondent/appellant is a body corporate constituted u/s 3 and 4 of the State Bank of India (Subsidiary Banks) Act 38 of 1959, for short the 'Act'. The second respondent/appellant employed about 6,000 employees in its various branches all over India which were about 385 in number, as on December 31, 1975. Section 51 of the Act empowered the second respondent/appellant to establish and maintain, inter alia, a provident fund for the benefit of its employees and officers. The second respondent/appellant accordingly took recourse to Section 63 of the Act and with the approval of the Reserve Bank of India, framed regulations known as State Bank of Bikaner and Jaipur Employees' Provident Fund Regulations, 1969, which regulations were brought into force with effect from October 1, 1969. It seems, previous to the present regulations there were certain regulations separately for the Bank of Bikaner Limited and the Bank of Jaipur Limited, but obviously for the reasons of the amalgamation of the two banks under the Act, the new regulations were brought in and a Fund known as State Bank of Bikaner and Jaipur Employees' Provident Fund was created. Under the said regulations the Fund stood vested in Trustees who under its scheme included the Directors of the second respondent/appellant together with not more than six members of the Fund nominated by the Board of Directors of the second respondent/appellant.

3. According to the writ petitioner Association, everything worked peacefully in accordance with Regulation 12 and the account of each member was credited to his benefit to the satisfaction of all concerned until it transpired that the second respondent/appellant intended to alter, if not totally abandon, the scheme of keeping the provident fund money payable to the employees in deposit with it on such interest as was payable according to the prevailing bank's rate on the pretext that the interest in accordance with the regulations payable on the deposit of the provident fund ought to have ranged between 5% and 6% during the period from October 1, 1969 to March 31, 1976. This prompted the Association to move this Court by way of writ petition.

4. The second respondent/appellant maintained in its return to the petition of the Association that the rate of interest payable on money of the fund deposited with it ought to have ranged between 5% and 6% during the period from October 1, 1969 to March 31, 1976 as per sub-regulation (2) of Regulation 12, yet the appellant had been paying interest on such deposits at staff rates which ranged between 6% and 11% which according to the appellant was not the permissible rate either in the regulation or under the contract governing the investments. According to it, by virtue of crediting the fund with interest at the rates ranging from 6% to 11% the amount of over Rs. 50,00,000/- now in dispute, on account of a mistake, had got credited in favour of the employees but in effect the employees were not entitled to it. In an affidavit filed in the course of the hearing of the writ petition; however, the Trustees withdrew the investments on July 16, 1976 and debited to the current account with the Public Park Bikaner Bra