Yogesh Jain & Anr. v. Central Bank of India

1. The present petition assails common order dated 14.10.2025 (“impugned order”) passed by the learned Debt Recovery Appellate Tribunal (“DRAT”) in Misc. Appeal No. 415/2018 and Misc. Appeal No. 499/2018, whereby order dated 26.06.2018 arising out of OA 254/2010 before the learned Debt Recovery Tribunal–III, Delhi (“DRT”) was challenged. By way of the impugned order, the appeal of the petitioner was allowed, and the appeal of the respondent-bank was dismissed with the direction that the respondent bank is liable to refund to the petitioner a sum of Rs.30,832.27/with interest at the rate of 6% per annum simple from 11.03.2014 till the date of realization.

2. The brief facts giving rise to the present petition are that petitioner no.1, along with his son, approached the respondent-bank for grant of an educational loan of Rs.15,00,000/- under the Education Loan Scheme, for pursuing a four-year undergraduate course at Indiana University, Bloomington, USA. By sanction letter dated 13.09.2002, the respondent-bank sanctioned the said educational loan, secured by the personal guarantees of Ms. Preeti Jain and Ms. Savitri Jain, along with a re-charge on the property already mortgaged with the respondent-bank in the account of M/s Rishabh Electricals Pvt. Ltd., belonging to Ms. Savitri Jain. Pursuant thereto, an Agreement for Educational Loan dated 24.09.2002 was executed between the parties. Under the terms of the sanction, the loan was to be repaid in 84 monthly instalments commencing twelve months after completion of the course or six months after the student secured employment, whichever was earlier. During the moratorium period, only simple interest was to be charged and, thereafter, compound interest was payable, with penal interest of 2% being payable only on overdue amounts. As per the respondent-bank, the loan amount of Rs.15,00,000/- was to be disbursed in four instalments of Rs.3,75,000/- each, as and when demanded by the university.

3. Out of the sanctioned loan amount of Rs.15,00,000/-, the respondent-bank disbursed only three instalments of Rs.3,75,000/- each on 01.10.2002, 25.07.2003 and 23.04.2004, aggregating to Rs.11,25,000/-. The fourth and final instalment of Rs.3,75,000/- was withheld by the respondent-bank for want of adequate security, despite repeated requests made by petitioner no.1 for release of the same for payment of the tuition fee required for completion of his son's course. The petitioners also did not repay the loan amount disbursed by the respondent-bank, claiming that fourth and final instalment was not received and the repayment had to start after they had received the full education loan amount during the course. According to the petitioners, the respondent-bank unjustifiably insisted upon furnishing additional collateral security, although the sanction letter did not stipulate any such condition and the security was already accepted by the respondent-bank. Thereafter, alleging default in repayment, the respondent-bank instituted O.A. No.254/2010 before the DRT seeking recovery of Rs.24,93,511/together with further interest. During the pendency of the recovery proceedings, in order to protect their property from attachment and coercive recovery proceedings, the petitioners furnished Fixed Deposit Receipts (“FDR”) aggregating to Rs.35.11 lakhs before the DRT as security. Thereafter, upon the O.A. being allowed by final order dated 21.02.2014, the respondent-bank encashed and appropriated the said FDR amount on 10.03.2014 towards the alleged outstanding dues. The petitioners preferred Appeal No.353/2014 before the DRAT, Delhi which came to be dismissed on 03.02.2015.Aggrieved thereby, the petitioners approached this Court by filing W.P. (C) No.4454/2015. By judgment dated 31.03.2016, this Court set aside the orders passed by the DRT and the DRAT, and remanded the matter to the DRT with directions to ensure that the respondent-bank produced complete and legible statements of account, grant an opportunity to the petitioners to examine and object to the debit entries relating to interest and overdue interest, quantify the amount actually due and also give due adjustment of the amount appropriated by the respondent-bank from the FDR amounting to Rs.35.11 lakhs, with consequential refund, if any, found payable. Pursuant to the remand, the respondent-bank filed affidavits stating that the statements of account prior to the year 2006 could not be produced as the accounts had originally been maintained on a stand-alone computer system at the Daryaganj Branch, which was subsequently migrated to the Core Banking System in the year 2006, rendering the earlier data unavailable despite efforts to retrieve the same.

4. By order dated 26.06.2018, the DRT held that the respondent-bank had disbursed only three instalments and unjustifiably withheld the fourth and final instalment of the educational loan, which has adversely affected the education of the student. Having regard to the peculiar facts and circumstances of the case, the DRT exercised its discretion while balancing equity between the parties and directed that the liability be recomputed by applying simple interest throughout. However, it has been pointed out during the course of arguments that there is an apparent computation error by the DRT. After adjusting the amount appropriated by the respondent-bank from the FDRs, the DRT directed refund of the balance amount found payable to the petitioners. Aggrieved thereby and calculations therein, both the petitioners and the respondent-bank preferred appeals before the DRAT.

5. By the impugned common order dated 14.10.2025, the DRAT held that the Tribunal is empowered to reduce pendente lite and future interest depending upon the facts and circumstances of each case and to award such rate of interest as would meet the ends of justice. The DRAT further affirmed that only simple interest was chargeable during the moratorium period. However, while also affirming the finding of the DRT that the respondent-bank had withheld the fourth and final instalment of the educational loan and that the same has caused hardship to the student, the DRAT exercised the aforesaid discretion and set aside the computation made by the DRT by directing that, after expiry of the moratorium period, the liability be computed in terms of the contractual stipulations, including compound as well as penal interest, while restricting the pendente lite interest from the date of filing of the O.A. till appropriation of the FDR to 6% per annum simple. Aggrieved by the interference with the exercise of discretion by the DRT and the consequent recalculation of liability, the petitioners have preferred the present writ petition.

6. Learned counsel for the petitioners submits that the respondent-bank itself committed breach of the sanctioned loan arrangement by withholding the fourth and final instalment of the educational loan of Rs.15,00,000/-, despite requests made by the petitioners and despite the loan having been sanctioned under the educational loan scheme for enabling completion of the student's course abroad. It is submitted that the respondent-bank unjustifiably insisted upon furnishing additional collateral security, although the sanction letter itself accepted the existing security by way of re-charge of the property already mortgaged with the respondent-bank along with personal guarantees, and no condition requiring any further security formed part of the sanction terms. It is further submitted that despite directions issued by the DRT and this Court in the earlier round of litigation, the respondent-bank failed to produce complete and legible statements of account for the period prior to

2006. It is lastly submitted that, although the DRAT has allowed the appeal preferred by the petitioners, it has, in effect, failed to grant them any meaningful or effective relief.

7. Per contra, learned counsel for the respondent-bank submits that the statements of account prior to 2006 could not be produced due to migration from the stand-alone banking system to the Core Banking System and despite efforts, the data could not be retrieved. It is further submitted that such non-availability caused no prejudice to the petitioners as repayment of education loan was to commence after the moratorium period and only simple interest was chargeable during same, and contractual compound interest as well as penal interest became applicable thereafter. Reliance is also placed upon petitioner no.1's letter dated 22.12.2005 acknowledging receipt of the three disbursements.

8. This Court has considered the submissions advanced by the learned counsel for the parties and perused the material placed on record.

9. It is not in dispute that the respondent-bank sanctioned an educational loan of Rs.15,00,000/- for enabling the son of petitioner no.1 to pursue education abroad but disbursed only Rs.11,25,000/- by releasing only three instalments and withheld the fourth and final instalment of Rs.3,75,000/-. The petitioner also did not start its repayment when it fell due. The matter thereafter travelled before the DRT, the DRAT and this Court, culminating in the remand by judgment dated 31.03.2016 of this Court. Upon remand, the respondent-bank expressed its inability to produce the statements of account for the period prior to 2006 and the DRT and DRAT proceeded to determine the liability after recalculating the interest. The controversy in the present petition, therefore, is confined to the correctness of the exercise of discretion by the DRT and the DRAT in computing the liability and interest payable in the peculiar facts of the present case.

10. It is also not in dispute that the respondent-bank had accepted the collateral security at the time of sanction and had released three instalments on that basis. Having sanctioned the loan for the entire course, the respondent-bank ought to have released the fourth and final instalment during the subsistence of the course, particularly when the loan was sanctioned to enable completion of the student's education. While the respondent-bank was always at liberty to recover its dues in accordance with law upon default, withholding the final instalment defeated the very object of the educational loan and caused hardship to the student. It is in the backdrop of these peculiar facts that the exercise of discretion by the DRT and its interference by the DRAT is required to be examined.

11. Before dealing with the principal issue, the grievance of the petitioners regarding non-production of the complete statements of account requires consideration. Though this Court, while remanding the matter in W.P. (C) No.4454/2015, had directed the respondent-bank to produce complete and legible statements of account, the respondent-bank has explained in its affidavits dated 12.07.2017 and 19.06.2018 that the statements for the period from 2002 to 2006 could not be produced due to migration from the stand-alone banking system to the Core Banking System and despite efforts, the earlier data could not be retrieved. It has further stated that during the said period, the loan was under the moratorium and only simple interest was chargeable. In the absence of any material to show that the explanation is untenable, this Court is inclined to accept the explanation regarding the non-availability of the records, though such inability cannot be regarded as an ideal state of affairs expected from a nationalised bank.

12. On perusal of the order dated 26.06.2018 passed by the DRT, we find that the DRT, while determining the liability of the petitioners, has taken into consideration the peculiar facts and circumstances of the case, including the fact that the loan in question was an educational loan sanctioned for enabling the son of petitioner no.1 to pursue his undergraduate course abroad, and that the respondent-bank, despite sanctioning the loan for the entire course, has withheld the fourth and final instalment of Rs.3,75,000/-. The DRT has also held that such withholding of the final instalment has adversely affected the education of the student. It is in the aforesaid circumstances, that the DRT exercised its discretion and directed that the liability be computed by applying simple interest throughout. The DRT thus sought to balance the equities between the parties by requiring the petitioners to repay the amount actually disbursed with simple interest while denying the respondent-bank the benefit of compound and penal interest. This Court is of the view that the aforesaid exercise of discretion by the DRT cannot be said to be arbitrary, unreasonable or perverse.

13. In Wander Ltd. v. Antox India (P) Ltd., 1990 Supp SCC 727, the Supreme Court held: -