Cuttack, April 13: Orissa High Court, in a landmark judgment, has ruled that the Bhubaneswar Urban Cooperative Bank cannot withhold a depositor's "hard earned money".

The high court said "the bank, in no state of imagination, can withhold the money" deposited in the shape of long-term deposit, "otherwise the entire faith in the banking system will be jeopardised".

Somnath Patra, a senior citizen, had sought the high court's intervention in 2012 after the bank did not allow him to withdraw his fixed deposit of Rs 3,72,234, citing restrictions imposed by the Reserve Bank of India (RBI).

While disposing the petition, the single judge bench of Justice Sujit Narayan Prasad said: "If the money will not be disbursed at the time when it is needed, the whole purpose of keeping the money in safe custody will frustrate".

"The authorities, while not disbursing the money, has not considered this aspect of the matter and acted contrary to the interest of the bank as a whole. However, reasoning has been given that due to the financial crunch which the bank is facing, the RBI issued a guideline. But whatever may be the reason the bank cannot withhold the money of the depositor and the bank cannot act as a private money lender," Justice Prasad said in his order, a copy of the full text of which is in possession of The Telegraph.

In his order dated April 4, 2016, Justice Prasad directed the Bhubaneswar Urban Cooperative Bank "to ensure disbursement of the amount within four weeks" of filing of application by the petitioner "as the money deposited by him in the shape of fixed deposit has already matured".

The court endorsed the contention of the petitioner's counsel that he deposited the money with the bank in anticipation that it could be withdrawn at the time of need. However, by not releasing the money, the bank had failed to discharge their bilateral contract.

In a counter affidavit filed on behalf of the RBI, it was stated that precautionary measures had been adopted due to the financial condition of the Bhubaneswar Urban Cooperative Bank to prevent it from failing to have statutory deposit as required under RBI guideline. The affidavit, however, stated that the restriction imposed regarding withdrawal of money had been lifted and the current restriction to withdraw the amount had been enhanced to Rs 3,000 per depositor. It also permitted the withdrawal of Rs 1 lakh on medical grounds and Rs 50,000 in cases of extreme hardship for meeting urgent necessities such as marriage, education and so on.

The verdict assumes significance as the RBI had cancelled the bank's licence on February 17, 2014 after it ceased to be solvent and all efforts to revive it failed. With the cancellation of the licence, the bank's business transactions had come to a halt and the security of the depositors' money had become uncertain.

According to official records, around 13,797 depositors are yet to receive nearly Rs 30 crore they deposited with the bank. The bank was yet to collect nearly Rs 17.82 crore of loan amount from around 1,760 customers.