Penalty moderation and Section 11AB interest require statutory preconditions; interest failed without Section 11A proceedings.

Penalty under Rule 57U(6) was moderated because the credit had been reversed before the show cause notice and the overdrawal was limited; on that factual basis, the penalty was reduced as excessive. Interest under Section 11AB could not be sustained because its levy depended on proceedings having been initiated under Section 11A, and that statutory precondition was absent; the interest demand was therefore set aside. The remaining portion of the impugned order was upheld.

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Issues: (i) Whether the penalty imposed under Rule 57U(6) required reduction on the facts of the case. (ii) Whether interest under Section 11AB was leviable when the proceedings had not been initiated under Section 11A.

Issue (i): Whether the penalty imposed under Rule 57U(6) required reduction on the facts of the case.

Analysis: The credit had been reversed before the show cause notice was issued, and the overdrawal amount was stated to be limited. In these circumstances, the penalty was considered excessive and a lenient view was found appropriate on the quantum of penalty.

Conclusion: The penalty was reduced to Rs. 1,00,000/- from Rs. 3,35,023/-.

Issue (ii): Whether interest under Section 11AB was leviable when the proceedings had not been initiated under Section 11A.

Analysis: Interest under Section 11AB was held to be dependent on proceedings initiated under Section 11A, and since that foundational requirement was absent, the levy could not be sustained.

Conclusion: Interest under Section 11AB was set aside.

Final Conclusion: The order was modified by reducing the penalty and by annulling the interest demand, while the remainder of the impugned order was upheld.

Ratio Decidendi: Where the statutory precondition for levy of interest is absent, interest cannot be sustained, and penalty may be moderated on a lenient assessment of the facts.

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