Case Law Details
ICICI BANK Vs Manjeet Kaur (Delhi State Consumer Disputes Redressal Commission)
Whether the bank may exercise and invoke the banker’s Rights of Lien as per Section 171 of the Indian Contract Act, 1872 to settle the dues from the deceased person in case the deceased person has taken a loan?
The answer is negative as per the judgment of ICICI BANK Versus Manjeet Kaur decided dated 16.03.2022 by the Delhi State Commission. As per the RBI circular dated 09.06.2005 and 01.07.2011, the bank cannot make the adjustment in the bank account of the deceased person without the prior permission of the nominee or the legal heirs and the claim should have been settled within 15 days, after the intimation of the death of the account holder. As far as the right to the lien is concerned under Section 171 of the Indian Contract Act 1872, the bank shall file a civil suit for the recovery of the respective unpaid loan amount.
Section 171 of the Indian Contract Act is reproduced hereinbelow: –
171 General lien of bankers, factors, wharfingers, attorneys and policy brokers- Bankers, factors, wharfringers, attorney of a High Court and policy brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them, but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.
The selective part of the RBI circular dated 09.06.2005 is reproduced hereinbelow Verbatim:-
‘Settlement of claims in respect of deceased depositors’
- Accounts with survivors/nominee clause
2.1 As you are aware, in the case of deposit accounts where the depositor had utilized the nomination facility and make a valid nomination or where the account was opened with the survivorship clause (either or survivor ‘ or ‘anyone or survivor’, or ‘former or survivor “ or latter or survivor’) the payment of the balance in the deposit account to the survivor(s) / nominee of a deceased deposit account holder represents a valid discharge of the bank’s liability provided:
1. The bank has exercised due care and caution in establishing the identity of the survivor(s) / nominee and the fact of death of the account holder, through appropriate documentary evidence;
2. There is no order from the competent court restraining the bank from making the payment from the account of the deceased; and
3. It has been made clear to the survivor(s) / nominee that he would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor , i.e. such payment to him shall not affect the right or claim which any person may have against the survivor(s) / nominee to whom the payment is made.
2.2 It may be noted that since payment made to the survivor(s) / nominee, subject to the foregoing conditions, would constitute a full discharge of the bank’s liability, insistence on production of legal representation is superfluous and unwarranted and only serve to cause entirely avoidable inconvenience to the survivor(s) / nominee and would, therefore invite serious supervisory disapproval. In such case therefore, while making payment to the survivor(s) / nominee of the deceased depositor , the banks are advised to desist from insisting on production of succession certificate, letter of administration or probate etc., or obtain any bond of indeminity or surety from the survivor(s) / nominee irrespective of the amount standing to the credit of the deceased account holder.
Comments
From the above para, it can be deduced that in case a deceased person who has made a survivor’s nominee. The survivor’s nominee can claim the amount from the bank. The bank cannot insist the survivor’s nominee to produce of succession certificate, letter of administration or probate, etc.
- Accounts without the survivior/nominee clause:
2.3. In case where the deceased depositor had not made any nomination or for the accounts other than those styled as ‘either or survivor’ ( such as single or jointly operated accounts), banks are advised to adopt a simplified procedure for repayment to legal heir(s) of the depositor keeping in view the imperative need to avoid inconvenience and undue hardship to the common person. In this context , banks may, keeping in view their risk management system , fix a minimum threshold limit, for the balance in the account of the deceased depositors, up to which claims in respect of the deceased depositors, up to which claims in respect of the deceased depositors could be settled without insisting on production of any documentation other than a letter of indemnity.
RBI circular
20.6 Time limit for settlement of claims
Banks should settle the claim in respect of deceased depositors and release payment to survivor(s) /nominee (s) within a period not exceeding 15 days from the date of receipt of the claim subject to the production of proof of death of the depositor and suitable identification of the claim(s), to the bank’s satisfaction. Banks should report to the Customer Service Committee of the Board, at appropriate intervals, on an ongoing basis, the details of the number of claims received pertaining to deceased depositors/ locker-hirers/ depositors of safe custody article accounts and those pending beyond the stipulated period, giving reasons thereof.”
It is clear that it is the duty of a banker to settle the claim in respect of the deceased depositors and release the payment in favour of nominee/legal heir within 15 days from the date of intimation.
Conclusion
Banks cannot invoke the provision of Section 171 of the Indian Contract Act to recover the pending dues from a deceased customer. The banks can only recover the same from a civil court by filing a civil suit. Also, as per the circular dated 09.06.2005 and 01.07.2011 issued by the RBI, the banks must settle the claim within 15 days from the date of intimation, and also the nominee survivors don’t have to produce the succession certificate or letter of administration, etc.
The author of this article can be reached at [email protected] for any discussion or clarification. Please free to drop me a mail.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI STATE CONSUMER DISPUTES
1. The facts of the case necessary as per the District Forum record are:
“The late husband of the complainant namely Sh. Charanjeet Singh was maintaining different accounts with the OP bank. He had expired on 9.7.2008 in Pakistan. The complainant had written letters on 27/9/2008 and 1/12/2008 to the OP informing it about the death of her husband. It is alleged by the complainant that after the death of her husband, the OP had no power to operate his accounts. It is alleged by her that the Operation of the accounts of the deceased after 1.12.2008 was unauthorized and against the law. It is also alleged by the complainant that the amounts standing at credit of the deceased account holders was liable to be paid to his legal heirs. It is alleged that on 5.7.2011 a sum of Rs 314592.70 being the sale proceeds of some shares belonging to the deceased was credited to his account which was liable to be released to his LRs. It is alleged that instead of releasing the amount to the LRs of the deceased, the OP has illegally credited an amount of Rs 253311/- on 24.9.2011 to the loan account of the deceased to liquidate his bank dues. It is alleged that this act of the OP bank was illegal in as much as it had no right to appropriate the amount to the deceased loan account. The complainant, therefore. wrote a letter dated 31.10.2011 asking the OP to release the amount lying to the credit of the deceased to her after reverting the illegal appropriation made as aforesaid. The OP bank has failed to oblige which had led the complainant to approach this forum by means of the present complaint.”
2. The District Forum after taking into consideration the material available on record passed the order dated 05.01.2015, whereby it held as under:
“The complainant has deposed that she had written letters dated 27.09.2008 and 1.12.2008 informing the OP bank that her husband had expired on 9.7.2008. she has further deposed that she had also supplied to the OP the death certificate issued by the concerned authority at Lahore. The complainant has also placed on record the courier receipts vide which these letters we sent to the bank. The OP bank on its part has not specifically denied the receipt of these letters. We are, therefore, convinced that the complainant had informed the OP bank about the death of her husband vide these letters. The further question for consideration is as to whether, the OP bank was within its rights to exercise its right of lien and debit the account of the deceased in order to liquidate the loan account held by him with the OP bank. Whereas, it is contended by the OP bank that it had acted U/s 171 Indian Contract Act and was within its rights to exercise the right of lien, the complainant has contended that the bank had no right to operate the account and further had no right of lien to debit the account of the deceased in order to liquidate his loan account. The OP bank has not placed on record any mater to show that it had the authority to operate the account even after had been informed about the death of the account holder and exercise the right of lien. The complainant on the other hand has placed on record instructions/ directions issued by the Reserve Bank of India dated 9.6.2009 for settlement of the claims in respect of the deceased depositors. The instructions make it amply clear that the balance in the credit of the deceased account holder has to be paid to his nominee and if there is none, then to his legal heirs. The learned counsel for the complainant has also drawn our attention to “Banking Law and practices” by Sh. P. N. Varshney wherein it has been recorded that on receipt of the notice of the death of the customer, the banker is obliged to stop the operation of his account because the authority of the customer terminates on his death. Under the head “Death of Drawer”, the following has been recorded:
On receipt of reliable Information about the death of the customer, the banker must stop payment of the cheque signed by him because the order of the customer to the banker ceases to operate on the occurrence of his death.
References has also been made to a book written by Mr. R. K. Gupta titled Banking Law and Practice where in under the head “death of customer” the following is recorded:
Death of customer: The account should be closed by the bank, as soon as he receives the notice about the death of the customer. The banker is justified in making the payment of the cheques presented after the customer’s death, but before he receives notice thereof. After the banker receives the notice of the death of the customer, the banker is not supposed to make payment of the cheques drawn before the death of the customer but presented after his death. On the death of the account holder, the property in his account passess to his legal heirs in this regard, the banker may pay the amount lying to his account to his nominee. If the customer has not made nomination, the bank may pay the amount in the account of the legal heirs after satisfying itself about the legal heirs of the deceased account holder on the basis of the succession certificate or otherwise. In the case of joint account, when one of the account -holder dies, the bank may pay the balance amount to the survivor.
Our attention has also been drawn to a judgment of Allahabad High Court reported as (1) BC 393 Bhagwan Singh V/S Sahab Singh & Ors. wherein the high court as observed as under:
10. Section 52 of the CPC provides a case where the decree is passed against the legal representative of a deceased person. The only difference in the sections 50 and 52 of CPC is that in one case decree is passed against a party in the second case it is against his legal heirs Mulla on the code of Civil Procedure (15th ed. Page 453 explains):
Whether a decree passed against a judgment -debtor is sought to be executed under ….Section (50 of the CPC) against his legal representatives or whether the decree itself has been passed under this section (52 of the CPC) against the legal representatives, the extent of their liability is the same. They are liable only for what has come into their hands as assets of the deceased and not duly accounted for.
A decree obtained against the legal representative of a deceased debtor can be executed against the estate of the latter in their hands. If the legal representatives satisfy the court that they have duly applied the property of the deceased that came into their hand then the decree holder is not entitled to proceed against their separate property.
11. The legal heirs merely represent the estate of the deceased debtor. Section 4 of the act discharges all debts of a debtor but not against his estate. It is immaterial if the suit for recovery of a debt was filed against the legal heirs and the original debtor. The fact is that the debt cannot be personally recovered from the legal heirs even if the suit was filed against them. The legal heirs do not personally owe a debt.
From the above it follows that on the death of an account holder the property passes on to his legal heirs and the banker has no right to operate the account as the authority to do so is lost by the death of the deceased. Since, the property of the deceased is inherited on the date of death of the deceased, the LR of the deceased become entitled to the same. The banker also loses his right of lien against the amount lying in the said account. The banker can file a suit for recovery against the LRs to recover its dues from the estate of the deceased which has come to the hands of the LRs. It is, therefore, clear that the act of the OP bank in appropriating a sum of Rs. 253311/- after the death of the deceased account holder was illegal and was an act of deficiency on its part we, therefore, direct the OP bank as under:
1. Pay the amount lying in the credit of the deceased on the date of his death along with accrued interest in accordance with the directions of the RBI as conveyed vide letter dated 9.6.2009.
2. Pay to the complainant a sum of Rs. 30,000/- as compensation for pain and agony suffered by him.
3. Pay to the complainant a sum of Rs. 5000/- on account of cost of litigation.
The above amount shall be paid by OP to the complainant within 30 days from the date of this order failing which OP shall be liable to pay interest on the entire awarded amount @ 10% per annum from the date of this order till the date of payment. If OP fail to comply with the order within 30 days, the complainant may approach this Forum u/s 27 of the Consumer Protection Act.”
3. Aggrieved by the aforesaid order of the District Forum, the Appellant has preferred the present appeal contending that the District Forum failed to appreciate that the respondent is not a consumer as per the Consumer Protection Act, 1986. The Appellant further submitted that the District forum failed to appreciate the fact that appellant had exercised his Banker’s Rights of Lien, as per 171 Section of the Indian Contract Act, 1872. Pressing the aforesaid contentions, the Appellant prayed for setting aside the order of the District Forum.
4. The respondent, on the other hand, denied all the allegations of the appellant and submitted that there is no error in the impugned order as the entire material available on record was properly scrutinized before passing the said order.
5. We have perused the Appeal, Reply of the respondent, the District Forum Record and Impugned Order.
6. The appellant submitted that the respondent is not a consumer in accordance with the definition of section 2(1)(d) of Consumer Protection Act, 1986. To comment on this issue, we deem it appropriate to refer section 2(1)(d) and Section 2(1)(b)(v) of Consumer Protection Act, 1986, The Consumer Protection Act, 1986 defines a Consumer as follows:
“(2)(1)
(d) “consumer” means any person who—
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who ‘hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purposes;
Explanation.— For the purposes of this clause, “commercial purpose” does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment;”
Section 2(1)(b) “complainant” means—
(i) a consumer; or
(ii) any voluntary consumer association registered under the Companies Act, 1956 (1 of 1956) or under any other law for the time being in force; or
(iii) the Central Government or any State Government; or
(iv) one or more consumers, where there are numerous consumers having the same interest;
(v) in case of death of a consumer, his legal heir or representative; who or which makes a complaint;
7. From the aforesaid statutory position, it is clear that in case of death of the consumer, his legal heir or representative on behalf of the deceased has the right to file the consumer complaint.
8. Further, in accordance with the fact of the present case, we deem it appropriate to refer to the Revision Petition No. 625 of 2006 and Appeal No. 233/SC/1997, titled as Niraj Awasthi vs Jagdish Bharti. decided on 02.02.2010, wherein the Hon’ble NCDRC has held as under:
“5. ……Section 2(i)(b)(v) postulates that “complainant” means in case of death of a consumer, his legal heir or representative who or which makes the complaint. The legal heirs of the deceased claimant were brought on record by legal fiction and that apart, claim brought by deceased was not a claim for his personal right. Legal heirs of deceased too, would be beneficiary in case complaint succeeds and hence we are driven to conclusion that right to sue petitioner is not extinguished with death of claimant, Jagdish Bharti.”
9. Relying on the above settled law, it is clear that a consumer complaint can be filed by a legal representative or legal heir of the deceased claimant. The contention of the appellant, that the complaint is not maintainable as the same was filed by the deceased claimant’s wife, therefore, holds no merit.
10. The next ground on which the appellant has filed the present appeal that the District forum failed to appreciate that the appellant has rightly exercised his Banker’s Rights of Lien, as per Section 171 of the Indian Contract Act, 1872.
11. To deal with this issue, we deem it appropriate to refer to the RBI circular dated 09.06.2005, wherein the RBI has clearly given the instructions regarding ‘Settlement of claims in respect of deceased depositors’ which reproduce as follow:
“(A) Accounts with survivor/nominee clause:
2.1 As you are aware, in the case of deposit accounts where the depositor had utilized the nomination facility and made a valid nomination or where the account was opened with the survivorship clause (‘either or survivor’, or ‘anyone or survivor’, or ‘former or survivor’ or ‘latter or survivor’), the payment of the balance in the deposit account to the survivor(s)/nominee of a deceased deposit account holder represents a valid discharge of the bank’s liability provided :
a. the bank has exercised due care and caution in establishing the identity of the survivor(s) / nominee and the fact of death of the account holder, through appropriate documentary evidence;
b. there is no order from the competent court restraining the bank from making the payment from the account of the deceased; and
c. it has been made clear to the survivor(s) / nominee that he would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to him shall not affect the right or claim which any person may have against the survivor(s) / nominee to whom the payment is made.
2.2 It may be noted that since payment made to the survivor(s) / nominee, subject to the foregoing conditions, would constitute a full discharge of the bank’s liability, insistence on production of legal representation is superfluous and unwarranted and only serves to cause entirely avoidable inconvenience to the survivor(s) / nominee and would, therefore, invite serious supervisory disapproval. In such case, therefore, while making payment to the survivor(s) / nominee of the deceased depositor, the banks are advised to desist from insisting on production of succession certificate, letter of administration or probate, etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee, irrespective of the amount standing to the credit of the deceased account holder.
(B) Accounts without the survivor/nominee clause:
2.3 In case where the deceased depositor had not made any nomination or for the accounts other than those styled as ‘either or survivor’ (such as single or jointly operated accounts), banks are advised to adopt a simplified procedure for repayment to legal heir(s) of the depositor keeping in view the imperative need to avoid inconvenience and undue hardship to the common person. In this context, banks may, keeping in view their risk management systems, fix a minimum threshold limit, for the balance in the account of the deceased depositors, up to which claims in respect of the deceased depositors could be settled without insisting on production of any documentation other than a letter of indemnity.”
12. From the aforesaid circular, it is clear that the banks are under an obligation to transfer the amount standing in the bank account of the deceased in favour of the nominee or representative after the death of the account holder.
13. Further, we deem it appropriate to refer to RBI circular dated 01.07.2011, where RBI has prescribed the time limit for settlement of claims from the deceased person’s bank account.
“20.6 Time limit for settlement of claims
Banks should settle the claims in respect of deceased depositors and release payments to survivor(s) / nominee(s) within a period not exceeding 15 days from the date of receipt of the claim subject to the production of proof of death of the depositor and suitable identification of the claim(s), to the bank’s satisfaction.
Banks should report to the Customer Service Committee of the Board, at appropriate intervals, on an ongoing basis, the details of the number of claims received pertaining to deceased depositors / locker-hirers / depositors of safe custody article accounts and those pending beyond the stipulated period, giving reasons therefor.”
14. On perusal of the aforementioned circular, it is clear that it is the duty of a banker to settle the claims in respect of the deceased depositors and release the payments in favour of nominee/legal heir within 15 days from the date of intimation.
15. However, in the present case, the Respondent’s husband died on 09.07.2008 and the bank was duly informed about his death vide the letter dated 27.09.2008 and 01.12.2008 respectively. However, despite this information, the claims were not settled by the bank in the due time and the deductions/adjustments were done by the bank on 24.09.2011, from the Demat Account in question, against the personal loan which was left unpaid by the Respondent’s husband before his death.
16. On perusal of RBI circular dated 09.06.2005 and 01.07.2011, we are of the view at the bank cannot make the adjustments in the bank accounts of the deceased person without the prior permission of the nominee or the legal heirs and the claims should have been settled within 15 days, after the intimation of the death of the account holder. In the present case, the knowledge of the death of the account holder is established vide the letters sent by the respondent. Therefore, the adjustment done by the appellant from the Demat Account to set off its unpaid personal loan in the year 2011 is not justified. As far as the right of lien is concerned under section 171 of the Indian contract act, 1872, the appellant may file a civil suit for the recovery of the respective unpaid loan amount. Therefore, the contention of the appellant that he has rightly exercised his right of lien holds no merit.
17. On perusal of the record before us, it is noted that the other contentions raised by the appellant in the present appeal were already taken into consideration by the District Forum before passing the impugned judgment. The District Forum had thoroughly answered all the contentions raised by the appellant in negative.
18. Infact, we are also in agreement with the reasons given by the District Forum and fail to find any cause or reasons to reverse the findings of the District Forum. Consequently, we uphold the judgment dated 05.01.2015 passed by the District Consumer Disputes Redressal Forum (Central), Kashmiri Gate, Delhi.
19. Application(s) pending, if any, stands disposed of in terms of the aforesaid judgment.
20. A copy of this judgment be provided to all the parties free of cost as mandated by the Consumer Protection Act, 1986. The judgment be uploaded forthwith on the website of the commission for the perusal of the parties.
File be consigned to record room along with a copy of this Judgment.
****
Disclaimer – This is solely for informational purposes/ knowledge sharing and this information should not be considered as legal, professional advice, service, advertisement, or solicitation in any manner whatsoever. Deepanshu Arora further assumes no liability for the interpretation and/or use of the information contained in this article, nor does it offer a warranty of any kind, either expressed or implied. The contents of the information are provided “as is”, with no guarantees of genuineness, completeness, accuracy, or timeliness, and without representations, warranties, or other contractual terms of any kind, express or implied. The Intellectual Property Rights reset with the Author and the same cannot be used without the written consent of the Author. Please reach out to your legal advisor for advice before making any decision w.r.t to the contents of the information.
Author Bio
