• Banking -  Guarantor - Liability of -  The legislature has succinctly stated that the liability of the guarantor is co-extensive with that of the principal debtor unless it is otherwise provided by the contract - The only exception to the nature of the liability of the guarantor is provided in the Section itself, which is only if it stated explicitly to be otherwise in the Contract - It is the prerogative of the Creditor alone whether he would move against the principal debtor first or the surety, to realize the loan amount - The guarantor cannot escape from her liability as a guarantor for the debt taken by the principal debtor - Loan agreement,- There is no clause which shows that the liability of the guarantor is not co-extensive with the principal debtor -  Indian Contract Act, 1872, Section 128. (2016)3 P.L.R.SC 542
  • Banking - F.D.R. - Respondent had tendered his affidavit, copy of the FDR and the death certificate of his wife to show his entitlement - Deposit which was made more than 20 years back - Plea that the amount must have been paid cannot be inferred by the only fact that the documents were not available to show that the FDR amount was still outstanding - The Permanent Lok Adalat, therefore, passed the award for the amount set forth in the FDR with interest - Upheld - Legal Services Authority Act, 1987 (36 of 1987).  (175) P.L.R.
  • Banking - One Time Settlement (OTS) Scheme - As per the OTS proposal restriction put on sale of the mortgaged property for a period of three years, and in case, the properties are sold within the said lock in period of three years, the same should be done with the permission of the bank and that the first respondent should share 50% of the increase in fair market value of the property, fixed at the time of sanction of the settlement  First respondent managed to enter into an agreement with the second respondent for sale of half of the mortgaged property and pursuant to that agreement, the whole amount of OTS , as per the offer made by the bank, was paid in terms of the OTS - Bank declined to settle the accounts and release the mortgage on the ground that the third party interest having been created, the bank was entitled to 50% of the fair market value - Possession of the mortgaged property has not been delivered to the first respondent and the three year lock in period has expired  - The creation of third party interest or arrangement by way of agreement for sale within the three year period is different from sale -  Admittedly, sale has not been made within the period of three years of settlement  Bank cannot rest any claim under law for the share of the increase in fair market value by way of recompense - There is nothing to be recompensed since the bank has not suffered or lost anything  Bank to release the property. (2016)3 P.L.R.SC 879
  • Banking - Fixed deposits - Quantum of interest - Death of depositor - Perusal of the relevant instructions of RBI, it is clear that the matter in fact had been left by the RBI to the discretion of the individual Banks - Instruction had not been duly notified to the depositors at the time of acceptance of such deposits in terms of the RBI instructions - The relevant instructions appearing in the Book of Instructions, Volume I of the petitioner-Bank were to form part of the instructions of FDRs issued to the depositor at the time of acceptance of deposits by the petitioner-Bank - The petitioner Bank thus had clearly failed to follow the RBI instructions on the subject and rather had followed those instructions in breach - Plea of the Bank against the impugned order is that as per RBI instructions, interest more than the interest payable on savings Bank account after the death of the depositor, is not payable - Plea negatived.  (178) P.L.R
  • Banking Laws (Amendment) Act, 1983 (1 of 1984) - Interest - Provides that a transaction between a bank and its debtor shall not be re-opened by any court on the ground that the rate of interest charged by the bank was excessive - Court of first instance has categorically observed that interest payable is simple interest @ 12% per annum - This finding has not been challenged by the defendants before the lower appellate Court on any ground whatsoever - Once there is no finding with regard to compound interest, then there being no challenge to the same before the lower appellate Court the rate of interest will be as per the decree which has been ordered to be worked out by the lower appellate  Court. (175) P.L.R.


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