State Bank Of India v. Sarathi Textiles And Others

Factual and Procedural Background

The case originated from an application filed by a bank before the Debts Recovery Tribunal (DRT) under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“the Act”). The Tribunal awarded interest at 19½ % per annum. On appeal, the Debts Recovery Appellate Tribunal reduced this rate to 10 %. Dissatisfied, the Bank filed Special Leave Petition (SLP) No. 9298 of 2000 before the Supreme Court of India.

An earlier order dated 5-8-2002 apparently referred the matter to a Constitution Bench, although the present order records that the reference order “does not indicate as to why” such a referral was made. During the current hearing, counsel for the respondent expressed willingness to settle the dispute by paying simple interest at 12 % per annum. The Court, therefore, disposed of the SLP with directions for payment within eight weeks, after which the Bank is to return the title deed.

Legal Issues Presented

1. Whether the provisions of Order 34 Rules 2, 3, 4 and 11 of the Code of Civil Procedure, 1908 (CPC) governing the grant of interest apply to proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
2. Whether, in exercise of its powers under Article 136 of the Constitution, the Supreme Court should interfere with the Appellate Tribunal’s reduction of the interest rate from 19½ % to 10 %.

Arguments of the Parties

Petitioner Bank’s Arguments

• Invoked Order 34 Rules 2, 3, 4 and 11 CPC to contend that courts possess discretion to grant higher rates of interest and that this discretion should guide the DRT and appellate bodies.
• Relied on earlier Supreme Court authority, particularly Soli Pestonji Majoo v. Gangadhar Khomka (1969) 1 SCC 220, to support a broader reading of judicial discretion in awarding interest.

Respondent’s Arguments

The opinion does not contain a detailed account of the respondents' legal arguments.

Table of Precedents Cited

Court's Reasoning and Analysis

1. Section 22 of the 1993 Act expressly excludes the general application of the Code of Civil Procedure, except for limited provisions. Therefore, Order 34 CPC cannot govern interest awards in DRT proceedings.

2. Section 19(20) of the Act specifically confers discretion on the DRT and Appellate Tribunal to “award interest… as it thinks fit to meet the ends of justice.” This special statutory regime overrides the CPC framework cited by the Bank.

3. Given this statutory context, the Supreme Court held that “the question of considering the provisions of Order 34 Rules 2, 3, 4 and 11 CPC… does not arise.”

4. Because the appellate authority had already exercised its statutory discretion by reducing interest to 10 %, the Court found “no justification for interference” under its extraordinary jurisdiction in Article 136.

5. Separately, the respondent’s willingness to pay 12 % simple interest provided an equitable basis to settle the dispute. The Court accepted this proposal, keeping larger legal questions open but unnecessary to adjudicate in the present matter.

Holding and Implications

HOLDING: The Special Leave Petition is DISMISSED and treated as disposed of on settlement terms; the respondent must pay simple interest at 12 % per annum within eight weeks, after which the title deed shall be returned to the respondent.

IMPLICATIONS: The decision reinforces that proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 are governed by that Act’s special provisions, not by the broader CPC framework on interest. While the Court left the larger legal questions “open,” it signaled that tribunals retain wide discretion under Section 19(20) in fixing interest rates. The ruling affects only the parties to this case and establishes no new binding precedent.