Supreme Court wants law to safeguard multi-crore court deposits

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The Supreme Court said the pressure of inflation and economic uncertainties also add to the anxieties about rates of interest on the deposits. | Photo Credit: The Hindu

A law is necessary to protect crores deposited by litigants across courts and tribunals in the country during pending appeals, the Supreme Court said in a recent judgment.

A Bench of Justices P.S. Narasimha and Alok Aradhe observed that litigants’ money should be saved from ad-hoc management while calling for nationwide legislative reform to standardise how courts and tribunals handle money deposited during pending litigation.

The apex court pointed out the problem of the absence of uniform rules governing court-ordered deposits. For example, a court would direct a litigant to deposit money in order to get a stay while his or her appeal is heard out.

So far, individual courts and tribunals have passed orders on deposits and their investment during the pendency of appeals on a case-to-case basis. This, the court said, has left huge sums of money entangled in financial instruments across different banks, earning inconsistent interest rates and triggering post-judgment litigation over the interest-accounting of their deposits.

The Bench said the pressure of inflation and economic uncertainties also add to the anxieties about rates of interest on the deposits.

“In order to preserve the economic integrity of any deposit and to provide interest, there must be clarity and uniformity in the method and manner in which the deposit itself is handled. Lack of standardisation in the process by which sums deposited into the court are to be handled undermines this essential underlying principle of the time value of money as well as the accrual of interest in a certain and clear manner,” the recent verdict observed.

Further, the top court pointed out that the asymmetry in treating deposits made by litigants is leading to further pendency across courts.

“Lack of common standards and consistent principles are resulting in repeated determinations of routine questions concerning investment, renewal, quantum, accounting and interest on deposits, thereby increasing the burden on courts/tribunals,” the Bench, also comprising Justice Alok Aradhe, observed.

The court suggested the U.S. model of having a common platform where deposits made in courts and tribunals were pooled into one unified scheme and put into the most beneficial financial instrument for the litigating parties.

“This common platform will not only create certainty in the interest rates and increase the ease of accessibility for litigants but will also ease the burden on courts/tribunals regarding how this money deposited is to be invested and dealt with,” Justice Narasimha observed.

The apex court recommended a statutory framework modeled after international precedents, specifically pointing to the United States’ Court Registry Investment System (CRIS).

Justice Narasimha explained that federal courts across the U.S. were linked to the CRIS platform. The money deposited through the CRIS is automatically pooled into a single unified portal, which is used to purchase Government Account Series Securities. The centralised mechanism offers automatic interest accrual, transparency and liquidity.

“We are of the opinion that it is necessary to evolve and formulate suitable legislation on the subject. We request the Law Commission of India to examine the issues which we have highlighted and, in the process, also consider the laws which other countries have enacted. It may be necessary for the Law Commission to consult the Reserve Bank of India, Ministry of Finance and also the nodal Ministry of Law and Justice,” the apex court directed.

The Bench directed the judgment copy to be forwarded to the Law Commission chairperson; Governor, Reserve Bank of India; and the Secretaries to the Ministries of Finance and Law and Justice.

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