The Delhi High Court has ruled against NatWest Markets PLC, directing the bank to restore interest rates on a Rs 5.89-crore court-ordered fixed deposit. The bank had previously slashed the rate from 7.75% to 3.5% in 2018 without proper notice. The court held that financial institutions cannot apply standard default policies to funds held under judicial protection, setting a key precedent for how banks manage litigation-related assets.
The Delhi High Court recently delivered a significant judgment regarding the handling of fixed deposits held under judicial orders. In a dispute involving NatWest Markets PLC, the court rejected the bank's decision to unilaterally reduce the interest rate on a Rs 5.89-crore deposit from 7.75% to 3.5%. This ruling, delivered by a Division Bench of Justices Avneesh Jhingan and Shail Jain on September 23, 2026, forces the institution to recalculate the interest based on the average of the rates applicable during the three years prior to the reduction.
The case originated from a 2008 court order that mandated the creation of the fixed deposit to secure funds during an arbitration between Hero Exports and Tiffins Barrytes, Asbestos and Paints Limited. In 2018, the bank lowered the interest rate, arguing that the deposit had matured and had effectively defaulted to a lower savings account rate in line with Reserve Bank of India (RBI) guidelines for unclaimed funds.
However, the court found this defense insufficient. The Bench emphasized that when a bank holds funds under a specific judicial mandate, it acts as a fiduciary and cannot rely on general retail banking protocols without first seeking permission from the court. The ruling highlighted that the bank failed to provide adequate notification to the account holder or the court-appointed arbitrators before executing the rate cut. Furthermore, the court noted that the bank could not prove it had applied similar rate reductions to other equivalent deposits, rendering the decision to lower the rate arbitrary.
For the financial sector, this judgment introduces stricter accountability standards for banks holding money tied to active litigation. It clarifies that banks do not have absolute autonomy to alter terms for court-ordered deposits. Financial institutions are now expected to treat such deposits with a higher degree of diligence, ensuring clear communication with legal parties and seeking judicial guidance before making any changes that could impact the value of the security.
This decision serves as a warning for banks to review their internal processes for managing deposits that are subject to court orders. Failure to comply with these enhanced communication and transparency requirements could lead to significant financial liabilities, as demonstrated by the court’s order for NatWest Markets to pay the higher interest rate. Investors and legal observers may monitor whether this precedent leads to tighter compliance audits within the banking sector to prevent similar disputes in the future.