Kerala High Court Rejects State Nirmithi Kendra's Plea To Prematurely Withdraw ₹3 Crore Bank Deposits

The Kerala High Court has rejected Kerala State Nirmithi Kendra's plea to withdraw ₹3 crore from fixed deposits with Bank of India before maturity. The Bench held that early withdrawal was allowed only in exceptional circumstances under the bank's non-callable deposit scheme.

Justices Anil K. Narendran and Muralee Krishna S set aside a July 16, 2026 order directing the bank to release the deposits with normal fixed deposit interest.

The bench also held that the contractual dispute involved disputed questions of fact requiring appreciation of evidence.

The dispute arose after Nirmithi Kendra, which had deposited an aggregate ₹17 crore with the bank, sought premature closure of two deposits worth ₹1,00,00,100 and ₹2 crore. The institution cited financial difficulties and the need to pay employee salaries and statutory dues, including EPF contributions.

The bank refused the request, relying on its Non-Callable Deposit Scheme. The scheme permits premature withdrawal only in specified exceptional circumstances.

The Division Bench examined the scheme's provisions and observed that premature withdrawal was permitted in cases involving bankruptcy, winding up under directions of a court or regulator, legal issues, and the death of a depositor.

“A reading of the aforesaid conditions in Ext.R3(a) Scheme coupled with the SOP would show that PSUs are not eligible for non-callable deposits,” the Bench held.

However, the Court disagreed with the Single Judge's finding that Nirmithi Kendra was a public sector undertaking (PSU) and was therefore ineligible to make such deposits. Referring to government documents and a list of autonomous bodies published by the Comptroller and Auditor General of India, the Bench held that Nirmithi Kendra was an autonomous body under the Kerala government.

“Therefore, the finding of the learned Single Judge about the status of the 1st respondent-writ petitioner as a PSU is incorrect,” the Bench observed.

The Court nevertheless held that Nirmithi Kendra's eligibility to make the deposits did not entitle it to withdraw them prematurely outside the circumstances permitted under the scheme.

It also rejected the argument that the penalty clause printed on the fixed deposit receipts independently permitted premature closure. The Bench held that the clause applied only when early withdrawal was permitted under the scheme.

The court also held that the bank's standard operating procedure could not override the deposit scheme. It noted that the parties disputed whether the scheme's terms had been properly explained to Nirmithi Kendra, a question requiring evidence. The Bench therefore dismissed the institution's writ petition and set aside the Single Judge's order.

For Appellants: Advocate Jawahar Jose

For Respondents: Senior Advocate K.K. Chandran Pillai, Advocate G. Ranju Mohan,