Back
IN THE HIGH COURT OF ORISSA AT CUTTACK
Arindam Sinha, J.
Allahabad Bank (Now Indian Bank), Chief Manager Nayapalli Branch, Bhubaneswar & Anr. – Appellants
Versus
Surya Sponge Iron Ltd. & Anr. – Respondents
RVWPET No. 34 of 2022
Decided On : 08-12-2022
Interest - Banking Rules - The court considered the interpretation of 'no lien' account and the liability of the bank to pay interest on the money deposited in such an account. The decision highlighted the obligation of the bank to pay interest on the amount held in a 'no lien' account, despite the assignment of the credit facility account to another party.
Fact of the Case:
The petitioner deposited a sum of money in a 'no lien' account with the bank, which was later assigned to an asset reconstruction company. The petitioner sought interest on the deposited amount, claiming that the bank was liable to pay interest despite the assignment of the credit facility account.
Finding of the Court:
The court analyzed the concept of 'no lien' account and the bank's obligation to pay interest on the deposited amount. It concluded that the bank was liable to pay interest on the money held in the 'no lien' account, even after the assignment of the credit facility account to another party.
Issues: Interpretation of 'no lien' account, liability of the bank to pay interest, effect of assignment of credit facility account
Ratio Decidendi: The key legal principle established was that the bank is obligated to pay interest on the amount held in a 'no lien' account, irrespective of the assignment of the credit facility account to another party.
Final Decision: The court held that the bank was liable to pay interest on the money deposited in the 'no lien' account, despite the assignment of the credit facility account to the asset reconstruction company.
JUDGMENT
Arindam Sinha, J. - Mr. Sarangi, learned senior advocate appears on behalf of writ petitioner. He hands up and relies on order dated 12th March, 2013 made in W.P.(C) no.2797 of 2013. Text of the order is reproduced below.
'Misc. Case No.2723 of 2013
Issue notice as above.
Accept one set of process fee;
As an interim measure it is directed that no coercive measure shall be taken against the petitioners pursuant to the notice under Annedure-14 till 5th April, 2013 subject to condition that the petitioner shall deposit a sum of Rs. 1,30,00000/- (Rupees One Crore Thirty Lakhs) in two equal installments by 15th April, 2013 before the opposite party-Bank . The 1st installment shall be paid by 29th March, 2013 and the 2nd installment by 15th April, 2013.
Urgent certified copy of this order be granted on proper application.
He submits, the money was deposited with review applicant (bank) on 13th April, 2013, on his clients instruction, to be kept in a 'no lien' account. Soon thereafter, the loan account was assigned on 27th September, 2013. The money deposited, therefore, was to be refunded to his client but the bank held on it.
2. He submits further, 'no lien' account means simply that the bank could not exercise lien over that account. However, the bank could not have kept the money without paying interest thereon. On query from Court he submits that his client was unaware that this money was to be refunded, which is why in then pending said writ petition, no application was made for refund. Nevertheless, the bank having held on to money to have been refunded since, it itself assigned the credit facility account to the asset reconstruction company, is liable to pay interest.
3. Mr. Dey, learned advocate appears on behalf of applicant bank and prays for adjournment to demonstrate that the banking rules provide for no interest accrual in 'no lien' account.
4. List on 20th December, 2022.
The bank is obligated to pay interest on the amount held in a 'no lien' account, regardless of the assignment of the credit facility account to another party.
The main legal point established in the judgment is the interpretation of banking norms and the Standard Operating Procedure (SOP) on internal office accounts in determining the liability of the bank....
The amount deposited by the petitioner during the pendency of the writ petition with a view of show his bonafide to enter into a settlement was required to be returned to the borrower in the event of....
The court ruled that a lender cannot appropriate a no-lien account deposit in loan settlement without prior court approval, emphasizing adherence to interim orders.
Petitioner’s non-compliance with interim order leads to dismissal of writ petition, while preserving rights for statutory remedies.
The court upheld the principle of unjust enrichment, ordering the Bank to refund the petitioner Rs.1 crore as he had no liability for the loan repayment, thus prohibiting the Bank from withholding th....
An indefinite lien on a bank account is unsustainable when local authorities have confirmed the funds were lawfully recovered and a magistrate has previously ordered the release of those funds to the....
Failure to comply with interim order leads to dismissal of writ petition while preserving statutory remedies.
The court allows a petitioner an opportunity to pay overdue amounts to prevent coercive action under the SARFAESI Act.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
