What happened
The money sat in the bank because of a corporate feud. In July 2008, the Delhi High Court ordered Rs 8.5 crore from the accounts of Tiffins Barrytes, Asbestos and Paints Limited secured in a dispute with Hero Exports; Rs 5.89 crore of it was held at what was then ABN AMRO Bank - later Royal Bank of Scotland, now NatWest Markets PLC - and placed in fixed deposits at the maximum available rate. The bank complied for nearly a decade, paying 7.75%, 8.25% and 7.75%. Then, on January 30, 2018, without any notice or explanation, it slashed the rate to 3.5%.
When the matter reached a single judge in 2019, the court took strong exception and ordered the entire sum deposited with the Registrar General, with interest from January 30, 2018 calculated at the average of the preceding three years' rates - about 7.9%. NatWest appealed to the Division Bench, citing RBI circular clauses 3.3 and 3.4 giving banks freedom to set term-deposit rates, and arguing that a matured, unrenewed deposit earns only the savings rate.
Justices Avneesh Jhingan and Shail Jain dismissed the appeal. The circular's rate freedom carries a non-discrimination caveat for deposits of the same date and maturity, and NatWest produced no evidence that all similarly placed deposits had actually been cut to 3.5% - its affidavit mentioned 30 phased branch closures but said nothing about the rates at the two branches that remained.
What it cost
Ordered to pay interest at about 7.9% - the three-year average - from January 30, 2018 on Rs 5.89 crore, after a decade of litigation through two court levels.
Why it happened
A deposit held under a court order is not an ordinary term deposit: the bank holds it for the court, and changing its terms unilaterally invites the court back in.
The RBI circular's rate-setting freedom carried a non-discrimination caveat, and the bank offered no proof the 3.5% rate applied across all similar deposits.
The bank never told the parties whose money it held that the deposit had matured or needed renewal, so the cut looked less like policy and more like a silent haircut.
Closing 30 branches was an explanation for the bank's convenience, not evidence about the rates actually on offer at the two that were left.
The lesson
A deposit held under a court order is the court's creature: change its terms unilaterally and the litigation you are parked inside comes for you.
Aftermath
The Division Bench dismissed the appeal, leaving the single-judge order standing: interest on the Rs 5.89 crore from January 30, 2018 at roughly 7.9%, the three-year average, instead of the 3.5% the bank had unilaterally set. This ruling is the marker for any bank in India holding court-ordered deposits.
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