1 MNM IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO. 2776 OF 2009 IN SUIT NO. 472 OF 2005 Inox Air Products Ltd. ...Plaintiffs Vs. Central Bank of India & Ors. ...Defendants Mr.Shyam Mehta i/b. Malvi Ranchoddas & Co. Advocate for Plaintiff Mr. K.K.Jadhav, Advocate for Defendant No.1 Mr. Anil Agarwal, Advocate for Defendant Nos.2 to 9 CORAM : SMT. ROSHAN DALVI, J. DATED : 15TH MARCH, 2010 P.C. : 1. The Suit is based upon the Escrow Agreement executed by and between the parties which is admitted by all the parties. All the parties agree to abide by its terms and conditions. 3 FDRs have been executed for an aggregate amount of Rs.1 Crore payable with interest @ 6.5% thereon. The agreement is yet in force. It is admittedly valid and subsisting between the parties. The FDRs are executed for a period of one year each. During the subsistence of the Escrow Agreement the 3 FDRs shall have to be renewed 2 from time to time each year. The next renewal is in January 2011. Thereafter it shall be renewed each year in the month of January. 2. The Defendant No.1 Bank agrees to pay interest @ 6.5% pa on the FDRs upon the renewal of the FDRs as per the order of this Court in this Suit. However, the Defendant No.1 does not agree to pay interest for the prior years in 2001 when the FDRs were first executed. 3. Under Clauses 2 and 3 of the Escrow Agreement the Defendant No.1 Bank as an Escrow Agent was inter alia obliged to renew the FDRs on their maturity for such period as may be necessary. The FDRs were not renewed except on 29th March 2003 and 11th January 2010. At the time of the first renewal the interest was credited. Thereafter, the Defendant No.1 Bank did not credit the interest as the FDRs were not renewed upon maturity. The Defendant No.1 Bank contends that this is because of certain litigations and orders obtained in those litigations. There is nothing in terms and conditions of the Escrow Agreement, by which the parties are bound and the execution of which is admitted by Defendant No1 Bank, which allows Defendant No.1 Bank not to grant interest on the deposits as also not to renew the FDRs on their maturity. 4. The Advocate on behalf of Defendant No.1 Bank relied upon clauses 7 and 8 of the Escrow Agreement Exhibit-C to the plaint. 5. In Clause 7 the Defendant No.1, as an Escrow Agent, would not liable for any loss caused to any of the parties except by its own negligence and fault. 3 The Advocate on behalf of Defendant No.1 Bank states that since the FDRs were not renewed they were kept in Demand Deposit Account for which interest is not payable. Clause 2.3 of the agreement shows that it was the obligation of none other than the Defendant No.1 Bank to renew the FDRs on maturity. It failed to give instructions as per the obligations under the contract for renewal of the FDRs. The Bank itself transferred the proceeds to the Demand Deposit Account. The FDRs matured from year to year. The excess amount remained with the Defendant No.1 Bank. Hence the FDRs had to be renewed. Interest upon such renewal follows as a matter of corollary. 6. Under clause 8 in the event of any disagreement between the transferor and transferee resulting in any adverse claim or demands, Defendant no.1 Bank as an Escrow Agent was required to deposit in Court the Escrow property, which was then Rs.1 Crore and which is now depleted to Rs. 81.67 lakhs. On so depositing the Escrow property the Defendant No.1 as the Escrow Agent was to be relieved of its obligations under the agreement. The Defendant No.1 Bank has not deposited the Escrow Property in the Court though the suit has been pending since 2005. The Defendant No.1 Bank is, therefore, bound by its obligation under the agreement. The obligations of Defendant No.1 Bank under Clause 2.3 therefore, remains. It was for the Defendant No.1 Bank to give instructions for renewal of the FDRs. These instructions were not given. The obligations were, therefore, breached. The FDRs were not renewed upon maturity. The Defendant No.1 Bank did not obtain any directions of any Court or offer to deposit the Escrow amount. The FDRs have now been renewed in January 2010. The 4 Defendant No.1 Bank agrees to pay interest at the agreed rate of 6.5% thereafter. There is no reason and no cause shown for not making payment of the interest at the same rate which is the agreed rate of interest as mentioned in the FDRs issued by the Bank for the entire earlier period also during which the FDRs were to be renewed from year to year. 7. Since the Defendant No.1 agrees to renew the FDRs annually hereafter, which is now to the extent of Rs.81,67,254/- the prayer is not opposed and is granted accordingly. 8. In view of the obligations of Defendant No.1 Bank under the agreement hereinabove stated Defendant No.1 Bank shall pay interest @ 6.5% p.a on the FDRs until the Escrow Agreement is effectuated. The amount of interest payable on the FDRs shall be paid by the Defendant No.1 Bank to the heirs of Defendant No.4, being Defendants 4A to 4F in the Suit. 9. Prayer (c) and (d) are not pressed. 10.The Notice of Motion is disposed off accordingly. (SMT. ROSHAN DALVI, J.)