Bank restricted to simple interest after illegally withholding education loan installment and causing hardship to student; appellate tribunal cannot arbitrarily interfere with lower tribunal's discretion.

The petitioners obtained a sanctioned education loan of Rs. 15,00,000 for overseas studies, but the respondent bank withheld the final installment of Rs. 3,75,000, demanding additional security not specified in the original agreement.

Due to non-repayment, the bank initiated recovery proceedings, eventually appropriating Rs. 35.11 lakhs from the petitioners' fixed deposits following a Debt Recovery Tribunal (DRT) order.

Following a remand from the High Court, the DRT determined that the bank's withholding of funds was unjustified and adversely affected the student.

Balancing equities, the DRT ordered a recomputation of the debt using simple interest only.

However, the Debt Recovery Appellate Tribunal (DRAT) modified this on appeal, reinstating compound and penal interest for the post-moratorium period while acknowledging the bank's fault.

The petitioners challenged this modification via the present writ petition.

The court applied the principle of appellate interference in discretionary orders as established in Wander Ltd. v. Antox India (P) Ltd., which mandates that an appellate court should not substitute its own discretion unless the lower court acted arbitrarily, capriciously, or perversely.

This was supported by Mohd. Mehtab Khan v. Khushnuma Ibrahim Khan and Ramdev Food Products (P) Ltd. v. Arvindbhai Rambhai Patel, affirming that even if a different view is possible, the trial court’s reasonable exercise of discretion should be upheld.

The Court found that the DRT’s decision to apply simple interest was a valid exercise of discretion aimed at balancing equities, given the bank's breach in withholding the final loan installment.

It noted that the DRAT erroneously interfered with this discretion without finding the DRT’s logic to be arbitrary or perverse; in fact, the DRAT agreed with the DRT's factual finding that the bank caused hardship to the student.

Regarding the missing bank records, the Court accepted the bank’s technical explanation for the data loss during system migration but noted it was not an ideal state for a nationalized bank.

Finally, the Court identified a mathematical error in the DRT’s approach, noting that interest must be calculated based on the specific dates of the three separate disbursements rather than treating the total as a single lump sum from the first date.

The Court ordered the respondent bank to recompute the liability by applying simple interest to each of the three installments from their respective dates of disbursement until the date the FDR was appropriated.

The bank was directed to refund any excess amount to the petitioners with 7% simple interest within the stipulated timeline, or conversely, the petitioners must pay any remaining balance on the same terms.