Appellant was the opposite party before the State Commission.

Complainant/respondent and his son entered into a partnership to start a business in the name and style of “S N V Krishnaswamy Handloom Sarees”.  They opened a Current Account with the appellant bank.  In 1994 some misunderstanding developed between the partners, i.e. father and the son as a result of which the business practically came to a grinding halt.  At that time, a sum of Rs.11,97,003.10 was lying to the credit of the partnership of the respondent.  In the year 1997 respondent/complainant wrote a letter to the appellant bank to transfer the amount in Fixed Deposit since the amount was lying without fetching any interest.  Appellant did not take any action.  Respondent/complainant filed a suit for a mandatory injunction seeking a direction to the appellant to transfer the amount from Current Account to Fixed Deposit.  Pursuant to the decree passed by the civil court, appellant bank transferred the sum of              Rs.11,97,003.10 and invested in Fixed Deposit for a period of                 36 months @ 10.5% p.a. from 15.09.1999 to 13.03.2002.  Again another suit was filed seeking direction to the appellant bank to re-deposit the fixed deposit amount which matured on 13.03.2002. The suit was decreed and the amount was re-deposited for a period of             3 years from 13.03.2002. 

        Complainant/respondent filed the complaint before the State Commission seeking interest of the period from 1994 to 1999.         

        State Commission allowed the complaint and directed the appellant bank to pay a compensation of Rs.5,38,650/- towards loss of interest from May 1994 to May 1999.  Appellant was further directed to re-invest the proceeds of the Fixed Deposit dated 13.03.2002 which matured for payment on 13.3.2005 in a Fixed Deposit for a further period of 3 years along with the sum of Rs.5,38,650/-.  Rs.3000/- were awarded as compensation.

        Being aggrieved, opposite party bank has filed the present appeal.

Counsel for the appellant states that the amount as per directions of State Commission is being kept in Fixed Deposit Account.  Further contends that the State Commission has erred in directing the appellant to pay compensation of Rs.5,38,650/- towards loss of interest from May 1994 to May 1999.  As against this, counsel for the respondent submits that the appellant is entitled to interest @ fixed deposit rates as the bank failed to deposit the amount lying with it in the fixed deposit in spite of the requests made by the respondent in the year 1997.  Requests were followed by a legal notice.

The amount was lying in a recurring account.  Since there was a dispute between the partners, the account could not be operated by either of the partners.  Bank, at the instance of one of the partners, could not have kept the amount in the fixed deposit.  As the amount was kept lying in the recurring account,  we are of the view that the bank could  not  be  asked  to  pay  the  interest  @  fixed deposit rates from May 1994 to May 1999.  But since the amount was lying in deposit with the appellant bank for all this period, the bank should at least pay interest @ saving bank rates on the deposited amount for the period from May 1994 to May 1999 instead of the interest @ fixed deposit rates.

Accordingly, we partly accept this appeal, set aside the order of the State Commission directing the bank to pay interest @ fixed deposit rates and instead direct the bank to pay interest @ saving bank rates. 

Order of the State Commission to that extent is modified.  Rest of the order of the State Commission is upheld.

Appeal stands disposed of in above terms.