on man 20d sit ave 1H cour life. Th 4 functions, the) ats, wraders 20d 8 A Today, banks have become a part and pal enjoy their services. Now banks offer access untouched. Apart from their traditional busin responsibilities. Banks cater to the needs of agri society. Thus, they accelerate the economic growth self-reliance in all fields”. It natura cour interest in knowin and activities connected with i. s orie ultursts, industrial a country and steer thew 1g more about the —————— & ORIGIN OF BANKING n different countries were started in diff ford “bank”. The word, Since bankis regarding the origin of ti eBaneus’ or ‘Banc’ or “Banque” which means, a “bench’. In fae banking, business by sitting on benches. When their business failed, th ‘bankrupt’ came into vogue. But, Macleod in his book, Theory and Prac According to him, the money changers were never called “Benchiesi’ im mere conjecture Another common held view is that the word ‘bank’ might be origin means a joint stock fund. Of course, 2 bank essentially deals with Frenchised into ‘bank’ and finally Anglicise bank’. This view is most ani’ is BANKER (person who is ding banking business is called banker Bu, its nt at 2 precisely because a banker performs multifarious functions: (First, a banker must be He deals with others’ money but with his own mental faculties. Secondly, 2 banker depository or agent, but also as a repository of financial advices. The scope of Thus, a banker is dealing in the field of banking which is highly cater 10 the ever growing requirements of millions of people belonging to d fer diversified their activities on an accelerated pace to cater to the sophisti segments of trade and industry. Hence, the banking terminology seems to be the Still, some attempts have been made to define the term “banker’. ThisEarlier Views ey id mo oi scape ms i thus: ‘Banks The cay detnons were not postive it te SI pe ane S'S ofthe News % Danker. For instance, The Bill of Exchange Act of 1852 °° oF banking’ 5°" ompany acting ay . Whether incorporated or not who earry on the BUSINESS % gration OF 8 ME cr ae Act states that ‘the term banker includes a perso" OF * cos gs a bamker definitions are vague. They amount to saying that @ Experts’ Views ‘the: as ‘ome attempts were made by experts 10 define eee panker is to buy mone, wntial business of a r Macleod’s viey i ate inn 04's view: According to Macleod, ‘The credit. “seating other debts. A banker is essentially a dealer in debts oF &* ig that *A banker is one who ig, cour Hart's view: Dr. L. Hart sates in bis book ‘Law of Bambi and for whom be reine S ‘urse of his business honours cheques drawn upon him by Pe 7 current accounts,’ the _ ne term “bank: Sir John Paget's ‘Law of re ‘aget's view: his boots ene me pein a ye an 0 ne SP rent accounts, (ii) j ad (i) cone ims wh He embellishes his definition i eee 1 and ing to be a banker must profess himsel toy, banker and the public must accept him as such and his main business must be that of banking jy, Senerally, he should be able to earn his living.” a Alll these experts have pointed out some aspects of a banker. They are the following: receiv ainds, lending money or creating credit, issuing cheques, honouring cheques and collecting cheg Fecchtial functions of a bank. However, these definitions do not include any agency and genera tendered by modern bankers, term ‘banker’. Among them. the Later on, Indian View scp) wes definition given in India in the Banking Regulation Act appears to be more precise and accept (B) of the above-mentioned Act defines the term “Banking company’ as ‘a company which transact the bee banking in India’, and the term, "Banking has been defined as ‘Accepting for the purpose of kai investment, of deposits of money from the public, repayable on demand, order or otherwise and wie by cheque, draft order or otherwise’. This definition also pinpoints the principal functions o receiving deposits, lending or investing these deposits and repaying these deposits on demand Even this definition does not indicate the subsidiary services rendered by the bankers. By now. it is gu tion of the term ‘banker’ will be a complete one. }ANKING AND OTHER BUSINESS. In this connection, an interesting question may arise as to whether to call a money Traditionally, moneylenders and indigenous bankers have been advancing loans. But they do not re the public. They rely upon their own resources. In Samyukta Samajan Vs. Goli Kalyani, it was be “sney out of its own capital was not a bank, Moreover, their main business is rot banking “f trading business. In Stafford Vs. Henry, it was held that carrying on the basking 1d not entitle a man to be called a banker. Similarly, these moneylenders & | functions of the bankers. Hence, moneylenders and indigenous bankers *°™ lending m combine banking with part of any business wou which is onc of the essentia Kers in the strict sense of the term. he banke like IFC, SFC, IDBI, Cooperative Land Develo ae é ons Some financial ion Te They are not regarded a8 banks since they do not accept depo to: industries and agriculut™ uses and industries have begun to invite fixed deposits from th Ps gularly. Of |: many igre * annot be strictly called banks because they do not lend and issue any c? roe f interest. = stive rates of 1 attractive a0 BANKER AND CUSTOMER = CUSTOMER cis equally difticut t© define the term ‘custor under the law, the term “customer” is not defined, But this term, “customer banker because he can get protection under See, 131 of the Negotiable Instru cheque for his customer in good fith and without negligence, Thus, to solve m banking transactions, a clear-cut definition of the term, customer is essential, Who is.then a customer? haye a proper understanding of this subject, a study of the term) customer’ as they obtained at different stages ean be made. Different views have been expressed at different times. Even is of much significance to a collecting nts Act only if he collects a crossed ny of the disputes that may arise in Early Stage — Some Sort of an Account In Great Western In carly periods, a man who held some sort of an account was considered to be a customer Railway Co. Vs, London and County Bank, it was held that ‘there must be some sort of account either @ deposi current account or some similar relation to make a man the customer of a bank’, ‘The opening of an account is the only qualification needed by a man to become a customer, This argument appears to be logical. However, in those days, other different opinions were also prevalent. For instance, Lord Brampton was of the view, ‘It is not necessary to say that the keeping of an ordinary banking account is essential fo constitute a person as customer of a bank’. It is not prudent to call a person having no account as a customer and so itis totally unacceptable, Thus, we can say that some sort of an account is necessary for a person to be called a customer Second Stage — Frequency of Transactions re made to the early definitions. Since the word ‘customer’ itself impli m, ‘to constitute a customer, there must be some inking business.” Hence, a person cannot become s to establish a recognisable a At this stage, some refinements w custom, Sir John Paget puts forth a different view. According to h recognisable course or habit of dealing in the nature of regular a customer on mete opening of an account and so there must be frequent transactions so 2 course between a banker and his customer. Thus, Sir John Paget gives importance to the time clement and therefore his theory is popularly known as the ‘duration theory’. The same view was expressed in the case of Mathews Vs Williams Brown & Co. His view regarding the dealing of banking nature has been universally accepted. But his view about ‘duration’ is subject to several criticisms, It is very difficult to say how many transactions will make a person a customer or how much time should elapse between two successive transactions to qualify a person as a customer @ THE MODERN VIEW Single Transaction Eminent jurists in recent times have completely exploded the view expressed by Sir John Paget. According to them, even a single transaction can constitute a person as a customer. They have gone to the extent of saying that the moment a banker has agreed to collect a cheque for a person, the latter becomes a customer. It means that a person becomes a customer the moment his banker agrees to admit him as a customer. Thus, in Ladbroke Vs. Todd, Justice Bailhache rightly observed: “the relation of banker and customer begins as soon as the first cheque is paid in and accepted for collection and not merely when it is paid’. Commenting upon the case, Lord Chorely observed: ‘By accepting a request to open an account, the banker enters into a contract with the offeror in which considered that such a continuous relationship is implicit. Again, the same view was expressed in Commissioner of Taxation Vs. English Scottish and Australian Bank, wherein it was confirmed by Lord Dunedin that, ‘the word customer signifies a relationship in which duration is not the essence’. [t is now hevond voubt that neither the number of transactions nor the period is material in deciding whether or not a person isa cactomer, In Savory & Co. Vs Lloyds Bank Lid, Mr. Smith had instructed the Lloyds Bank to collect the cheques stolen by him and credit them to his wife's account at the Red Hill Branch, His wife did not have any account at all’ But it wes eld that Mrs, Smith became souatbouad fete inoitlant doe ballbes had eccente ‘ all. But, it was held that Mrs. Smith beca wanker had accepted those cheques for collection,* @-telationship fall Valuabh Morsover, person does not ecomme # <0 und une SS Tor safe custody or giving change fOr @ patomner: banking nature. " constitute a person #84 To sum up, th following are the prerequisites (2) He mast have some sort of an account customer CY vena single rama my costs im as 8 (©) Frequency of transaction is anticipated but notin (2 The deatings mast be of a banking mature. sting relationshiy Js of the nature of the exis by Any dispute been i led only on the basis of the banker and the custin, a Wye re sane ean. ip "hy cxact relationship between me, Sunder on bread sane mamely (genera elatonsip, and (Hi speetal relationship Sunder two broad categories, namely General Relationship ith a banker, there sot JS there a Depository Relatio hip? en ‘a person opens an et) “somali st se the Teetual relationship by implication, Dnee, the banker was thought of as a dep aS Bar tid OF Goldsmiths of London. & dpe isn who receives some valbles an retums the same oad sta besent, a banker isnot bound to retum the same eons and currency nates deposited by a custome. nse Seized to give the same amount, So, he isnot a depository Ifa customer insists upon the return ofthe sinc, deme tY 80%, then a banker cannot run his main business; namely, debe Bie if a banker is acingy Ghository, he caunot make use ofthe mone to his best advange. A banker has to make wse ofthe mony Tat bim for caring the maximum profit and the whole ineome isnot retumed to the customer. Only « pat Fetumed to the customer. That is why Lord Cottenham rightly observed in Foley Vs, Hill, ‘the money paid into abe oe Nes altogether to be the money ofthe principal; it is then the money ofthe banker. He is known to daly BS his own ...... He is bound to return an equivalent by paying a similar sum that was deposited with bia ve he is asked for i _ A banker as a baile: safe c: articles A banker becomes a baile when he receives gold omaments and important doc 'stody, In that case, he cannot make use of them to. his best advantage because he is bound to return the on demand. Moreover, a banker cannot acquire any title in respect of stolen articles. A banker does 1 Sny interest on these articles. It is only the customer who has to pay rent for the lockers, So, a banker acts 81 only when he receives articles for safe custody and not when he receives money on deposit account > Is there a Trustee Relationship? Prof, Keeton defines a trust as & relationship which arises wherever ® called trustee is compelled in equity to hold property, whether real or Personal by legal or equitable title benefit of some person.” If a banker is regarded as a trustee, he cannot make use of the money deposited! by 1° to his best advantage. He will be bound by the rut deed and he will have to render an accocnt fe: cecrsthis with the money. For this reason, he is not a trustee when he opens an account for a customer ’ ee: A banker becomes a trustee only under gertuin circumstances. For i eee arc purpose, il at purpose ffl, le BIG scice fr tat Te ee oe viadres Vs. JV. Irvin certain sum of nee dere een, oe Official Assigns of res When tat bank file, it was held thatthe Banker Wns a rusts fo thar wt i {nstruction to buy share ne specific purpose. So also, when 4 cheque is given for-eolleedion tt th p= which was earmarked cava iste. But the proceds arent {abe Bld in tt That ig wiy Lor e cheque as a g Corpora , " collected, he holds ta rchinson Vs. Swiss Banking Corporation undertakes to receive m0) has rightly observed in Joachi ‘ecount, The proceeds so received are mot to be held in trust for the here an Agent Rel in dealing wil Ist er ort for another e, when ance 1o represent another! any act fWhen a bank = FAS choeld coe te an aN te cantons he innot repent an an agent of ie cnctment: ibe sem ‘agent, ae ¢ deposit money according to the instruchoas of his principal (customer) ito seturt Ca sree The agent is also accountable so the prancipal amd as Se ot ar - yw he used the deposit mosey, the income camod thereon and 9° ot A banker ee settee so8 oe The agent-principal relationship is said to exist between 2 hrastker and this customer. whet ‘ ee - Shares, collects cheques, bills, dividend warrants, coupons and peys ameucamce pronua — behalf of his customer. The banker is acting as an agent of his customer under euch cxrommstamn : - executes the will of a cusjomer, he is acting as an Executor, when he adasmisters tie enue of s pape e is regarded as an Administrator, This kind of relationship docsn’t exist when he rocenes depontts from 2 2 What then is the Relationship? (Ar exists between a banker and his customer. When a banker receives deposits from 2 customer, hie 2s techmucal borrow money from the customer. So, he is acting as 2 debtor who is bound so return the money ao demir: creditor, namely, his customer,» / Debtor-creditor relationship: According to Sir John Paget, “The relation of a banker an thief a dcbior and a creditor tbe reqpectve poiion being drained by the existing sit P the money being set apart in a saferoom, it is replaced by a debt due from the banker. The money depostied by 2 customer with the banker the latter's property and is absolutely at his disposal” Hence. there existe # relationship of debtor and creditor: (be banker, being the debtor, is bound to repay the deposit as znd when the cusses asks for it. ( The as a privileged debtor: A ordinary commercial debtor's duty is to seek out the creditor and pay the money. But. 2 banker a 2 6 privileges and hence, be is called a privileged debtor. The privileges enjoyed by a banker have been list 1. The creditor, ie, the customer must come to the banker and make an express demsod i= wasting Sor Ys. Swiss Banking Conponatiom, 2 : repayment of the money. According to the decision given in Joachinson F ‘demand by a customer in writing is essential to get back the deposit money. But for this privilege. the banker will have to go to the very doors of thousands of his customers and find out whether or mot they wre a= need of money. This will be detrimental to the very business of banking >. In the case of an ordinary commercial debt, the debtor can pay the money to the creditor at any place. Bat. = the case of a banking debt, the demand by the creditor must be made only at the particular brancis where: dhe account is kept. It was held in Clare & Co. Vs. Dresdner Bank, that locality is an essential clement a 2 ponking debt and the banker should pay'the money only when the demand is made at the branch where th ‘account is kept. But, today. this privilege bas lost its significance due to the soductom of ¢-bari-x practices and adoption of anywhere banking strategy. Time is not an essential element in the case of an ordinary commercial debt whereas the demun: repayment of a banking debt should be made only during the specified banking hours of business = e Sunutorily laid down. In Arab Banks Vs. Barclays Bank, it was held that a banker is liable to honour = cheaue provided it is presented during the banking hours. However, e-banking facilitates 24-hour banksne j 4, The banker is able to get the deposit money without giving any security to the customer while = 20° | possible in the case of an ordinary debtor. Thus, the customer is acting only as an unsecured credsor. really an enviable privilege given to the banker. (i ich i to all debts lays down that 2 debt will become 2 bad oo= after thc ee ies usta eee scancon According t© of the Law of | of demand for siage, we are curious so know the exact nature of the selatimshiy that aud us banker, as a debtor is not the same as an ordinary commercial Getuar- Aw cojoys manyJy where the account is kept a, stomer in provided he has 1, 5 cu a custome! : 0 an express demand by th ne the scouts OF 8 CO Tivilege. ln the carly da" vanking hours. bine nother of mission of the.’ the right £0 COM This is a ning the permission of the 6. A banker as a debtor has 1 capacity without obtarands the banker gettin, accounts in his name and in the sat of a customer prudence demat been clearly ‘was allowed to combine the accounts Mekerva jowevels mints. Now it has vie YY esta ‘was decided inthe ease of Garmett VS Mer ine the ACCOUNE oe the accounts Of @ customer, beforehand for exerising his sight 10 MP banker aN CO er to gota letter of setae Greenhalgh Vs. Union Bank of Mani’ cable on he PORES cris will avert many compli, gesting the consent of his customer It is a0 ce acute on without SiViNE any pny » by a customer at the time of his opening the right to set-off © cS letter of set-off permits the banker to exercise ; i customer. his reditor at any time. But, a banker can, 7. Similarly, an ordinary debtor can close the yea y ‘or approval. account of his creditor at any time without getting his Pi ‘od in the case of a deposit accoun, g, anker as a creditor: The debtor-ereditor relationship Holds £08 1 tomer assumes the roe loan. cash credit and overdraft, the banker ‘becomes Se - fred orgditor. He insists upon the nal , Here again, the banker isa privileged person because he i acting a8 reitesioreover, the Law of Line oh tdeguate securities by the customer to aval the loan or cash ordi fal nt ‘perate in such cases from the date of the loan unless it is renewed! Special Relationship | Apart from these general features of the relationship, there exists some special features which are di, hereunder: 1. Statutory Obligation to Honour Cheques When a customer Virtue of which the obligation si T opens an account, there arises a contractual relationship between the banker and the cum banker undertakes an obligation to honour his customer’s cheques. This obligation is sia ince Sec. 31 of the Negotiable Instruments Act compels a baniker to do so. Sec. 31 runs as follows Ad ie drawee of a cheque having sufficient funds of the drawer in his hands, properly applicable to the payne drawer foro, st Pay the cheque when duly required soto do, and in default of such payment, must corps ‘wer for any loss or damage caused by such default” Limited Obligation Even though law compel if pels a banker to honour all cheques, he cannot blindly h tora The obligation jis A d blindly honour all cheques. following waye, ” “*elute but only a qualified one. The statutory obligation to honour cheque i ii! (@) The availability of money in the account of the customer: A bankers obligation to pay {0 fhe amount available in the deposit account. IF thets is nolmMefent balante, the ve te, il overriding his obligation. At times, this obligation may be extended to the etert cr Con veaone credit sanctioned by the banker. If there i a prior amangement for OD, the taster ns ac «bo cheque as was decided in the case of Rayner & C rete by issts, ‘0. Vs. Hambros By ® Precedent and he will be expected a cheque is cheque in the absence of sufficient balances, it will be taken as cheques in future also in the absence of sufficient balance. (b) The correctness of the cheque: The obligation to pay a che Al the required particulars like the date, name of the payee, the drawer ought to have been correctly filled in. “tue depends upon the correctness of te * Smount in words and figures and the sist sing of the cheque: The cheque will be honoured onl Feng ee ete sate ae supplied by t Ly when it is drawn accor he banker and it should not requirements of law. It mus : unt. “request” to pay the amout : ‘e : tion of the funds: The banker will honour a cheque only when the funds are me licat f trust funds are withdrawn by a cheque for private use, the banker wil 0! fd) Proper application 0 evant Forint : aBANKER AND CUSTOMER (e) Proper Presentati lation: The banker will undertake to honour ch » honour cheques provided they ar hey are presented at the bra s kept a the ostensible dave font a4 during the banking hours. Ifthe chetue i issue, they will be reparde Fe presented after six tmonths fr igation of the banker to honour cheqey stale cheques and they will not b oo tae ir cheques is conditioned b ee Rewonable ime for caleton: be oned by the proper presentation of cheque us % lomet Innot impos Bay Hs cues nly ven wha har enn he ane cndon ht ier stl ed. In Underwood Ve Been ey drawn aginst cheques sent for collection before they ar Saeed Gaeta ‘clays Bank, it was held that in the absence of an expre é on Mee aa nee of an express. or implicd cl cheques with the remete aa choses against uncleared items, a banker is entitled to return (@) Existence lies eee 3 of legal bar: i there is enna ar: A banker is relieved from his statutory duty of honouring bis cusiomers’ cheques if an ese teil he ts my dey ee iow tae alien o he JVes isa: ? Ioan . Seated hc ee exercise his jewels were Specifically ¢ Bt the customer pleaded that he banker come Mane ee cele Decause: (i) the Waiver Ba ans oat nate waiver scheme of te Sze his general lien OM oid ornaments for all the oy gold loans only. I id that the bank cam ex ae fo retail Beever. is in any capacity the bank has a general lien on the FD, liberty of adjusting the proceeds to any not applicable to private banks, and (ii) there is an agree! owing, or which shall, at any time thereafter be owing, Bank Vs. Vijayakumar (1992), it \with a special agreement giving power t0 to the ban! was held that the bank the were OD. A Banker's Lien as an Implied Pledge It mu a banker's lien is generally described Js but als gives a right to sell the secures A oes ce any steps to cl : m ee ate why Sir John Paget ighily says i his book, “Low of Boxy derstood that the banker’s lien conferred rights more extensive than ordinary ie, Tight of sale is nor available only in the case of a pledge. That is why lien is regarded as an implied 9 is right of sale is available only in exceptional circumstances in the case of lien. as an implied pledge. It means that alien no on, jes and goods of the customer after giving arrears. In Deverges Vs. Sanden m1, mp Lien on Negotiable and Quasi Negotiable Securities curities entrusted to him in the capacity of a banker. In Miia Vs. Currie, it to bills, cheques and money paid to bankers in the capacity of bankers. A bi ities applies even to instruments which are not the property of the customer. It is soe ‘omes a holder in due course provided he has acted in good faith. Hence, his title will be sup. cer. The lien also extends to quasi negotiable securities like a policy of insurance, share documents of title to goods, deposit receipts, etc. No General Lien on Safe Custody Deposits Bankers have no general lien on safe custody deposits Z documents and jewellery for safe custody. Such ia aes ae see mene bare, ‘Mulla, it was held that the general lien of a banker does not extend to securities si @ Specific purpose. In purpose. Moreover, the banker becomes a bilee in such cases and as such he casted {0F Safe custody or for his customer from whom he got them. Hence, a banker's lien does not cover cca edie & better title than Paget again, ‘a banker's lien only attaches to such securities as a ba ail Safe custody deposits. To quote Sir/ otherwise than for safe custody, when there is no question or cont ordinarily deals with for his customer’. But, Heber Harot in the Gilbert lectures has expressed a di emplation of indebtedness on the part of? the banker can exercise his particular lien on them forthe locker cha a Wiew Which does not hold good. H°¥" No Lien on Documents Entrusted for a Specific Purpose In Greenhalgh Vs. Union Bank of Manchester, it has been el ‘ document or money is entrusted for a special purpose, a banker's [i lished that if a bi they are entrusted for a specific purpose, the banker becomes rou cSmaOt be ex ill of exchange oF avail of his right of lien. In K. agadeshwar Reddy Vs. Andhra Bank att hat aa oe of any agreement to the contrary, the bank has no general lien in a™#b8d (1988), led. Hence, spect of ) it was held that in the for a particular loan. specifically for a pa Securities which weBANKER AND CUSTOMER No Lien on Articles Left by Mistake A banker cannot exercise any lien in respect of the property which comes into his hands by mistake. t amous unlawful possession. In Lucas Vs. Dorrien, the banker had refused to grant an advance against certain wecusiliG® customer by mistake forgot to take back the securities while leaving the bank premises. It was held that the bank could not exercise his right of lien over those securities because they came into his possession in an unlawful man Lien on Securities Not Taken Back After the Repayment of the Loan ‘The banker can exercise the right of lien on securities which are allowed to remain with him even on repayment of the loan. This is so because the securities are supposed to be redeposited with him. This view was held & London and Globe Finance Corporation. Lien on Bonds and Coupons Lien applies to:bonds and coupons that are deposited for the purpose of collection. The reason is « acting merely as a collecting agent. But, Lord Chorley has questioned the validity of this view. Howev and bonds are left in safe custody, a banker's lien cannot cover them. The court will therefore apply Custody Test”. If the bonds are deposited with the condition that the banker can cut off the interest coupon collection, then lien would attach both to coupons and bonds. On the other hand, if the customer himself cuts coupons, then lien does not apply to coupons since the customer’s intention is to provide for the “safety” of the coupons In the case of bonds, however, lien appli hat the banker is f the coupons ‘Collection No Lien Until the Due Date of a Loan When a specific amount is given as loan for a definite period, no lien arises until the due date. The reason is that no debt arises till that date. In the same way, a banker cannot retain any money belonging to the customer against the discounted bills which have not yet been matured. The reason is that no liability arises till the date of maturity Moreover, even on the date of maturity, this liability may or may not arise. No Lien on Deposits Generally speaking, a banker has no lien upon the deposit account of a customer in respect of a loan account due from the same customer. However, he has a right to set off one account against the other. Set-off is an accounting situation which is always available to the banker and it should not be confused with lien. Sec. 171 gives a right of lien only in respect of goods bailed as security. Under bailment, the same goods should be returned to the borrower. But, in the case of a deposit, the money deposited into any account ceases to be the property of the customer and it need not be repaid in identical coins and currency notes. Hence, a deposit does not come within the meaning of bailment and hence a banker’s general lien is not available in respect of a deposit account. In Official Liquidator, Hanuman Bank Lid. Vs KPT. Nadar & Others, it was held that when moneys are deposited into a bank, the ownership of the money passes on to the bank. So, the right of the bank over the money deposited with it cannot be a lien at all. In the same way, a banker cannot exercise the right of lien on the deposit account of a partner in respect of a debt due from the partnership ‘Also, no lien arises on trust account in respect of the debt due from the person operating that trust account ‘A banker has no lien on a stolen bond given for sale if the true owner claims it before the sale is effected A banker’s lien is not barred by the Law of Limitation Act. ‘A banker has no lien on the security of fixed deposit receipt which has not been endorsed and discharged on ‘maturity. In Union Bank of India Vs. Venugopalan, it was held that the banker cannot exercise his lien on the fixed deposit account of the defendent's brother (Venugopalan’s brother) unless the FDR is duly discharged and given to the bank as a collateral cover to the loan given to the defendant. When a Bill of Exchange is handed over to the banker for the purpose of safety till maturity and thereafter for collection, then the banker's lien does not extend to that bill till maturity since that bill has been entrusted to him for a specific purpose. On the date of maturity, there is no objection to the exercising of the right of lien on that bill since it is given for collection which is a routine business of a banker. otherwise f ive lien, th iti the of -possessory lien. In the case of a negative lien, the securities are not in the possession the far But, a ee on undertaking that he will not create any charge on those securities in questionsancina- THEORY, LAW AI is ing must be duly stamp na tte of REE promise Or, withou ¢ aw tie Prior written permission of the creditor: debtor se of a negative lien, the possession of the sscourity is wit ‘over them until the loan is repaid. 5 Accounts | Such word ‘Secrecy’ is like 4 of Customer ye an oath of Secrecy ray, 3. A Banker’s Duty to Maintain Secrecy es ___A banker is expected to maintain secrecy of his customer's 8600UT 6 a Sword hanging oo the head tee canker an every mle Sy crancial polo’ Paria rtre ana customers accounts. The banker should not disclose His USE na Vs. Veasey, i wa his account. Even though this practice came into VogUe &S carly aS ar in 1924 in a leading case, popularly known as "Tournier’s case ei pecland Lid). tn the above case, the banker had dselos makers. It resulted in the loss of employment (0 the customer: I qualified contractual duty which has been acquited BY Hs bank in the © conceming the depositor. In this cae, it was not done and hence the suffered by the customer. ‘ a oe the duty of secrecy is not a st ie Banking Companies (Acquisition and Tra customers’ accounts. However, professional etiquette customer’s account to any third person. (8) in Ne cor a feid by Justice Bankes thay banker not to discl liable to compen anks in India are com #, 1970, to maintain y the nationalised Sok feveal the name (C + Undertakings) Act tatutory one. Onl} banker sho! insfer of demands that @ aintained even after th Sir John Paget goes to the extent of saying that this secreey should be inane ever i and even after the death of the customer. Ie is immaterial whetber the aceount is in debit oF i goes beyond the state of the account It extends to all transactions that Bo through the account. The disclonure of te foadcbl positon ofa errant at SEEDS and bring cons customer suffers any loss on account of the unwanted disclosure of Bis fecount, the banker will be comp compensate for the loss suffered by his customer. At the same time, a banker must remember tate cann certain reasonable grounds under which he ean justifiably disclose his is not absolute but qualified... prin Bankes, ‘the duty is a legal one arising out of contract, and the duty Tuhink that the qualifications can be classified under four heads: (a) Where disclosure is under compulsion b (by Where there isa duty tothe public to disclose; (@) Where the interests of the bank require disclosure; (d) Ve the disclosure is made by the express or implied consent of the customer. 7 (A) Disclosure under the Compulsion of Law When law requires the disclosure of the state of @ customer's account, he cannot override it. His du law of the country. The following are the examples of this category ‘ot maintain cent per cent secrecy at all time customer’s account. In the customer is subject to his duty to the (i). Under Sec 4of the Bankers Book Evidence Act, 189, banker may be asked to produce «ce his customer's account in his ledger. « Indian Income Tax Act, 1961, a banker is asked to advise the Income Tax Oli" sy Under Sec. 285 of the ‘vho have earned € 10,000 or above as interest on deposits during any names of those Ntoreover, the officials have fee access to the books of accounts kept by bankers, vnkarlal Agarwalla Vs, State Bank of India and Another, it was held that the bank: K ye banker cannot In Sa se itor having disclosed the deposit of igh denomination notes as per law to the Income Tax Dep (uiy Undor Sec. 45B of the Reserve Bank of Inia Ach the Reserve Bank ee jaformation from banking companies relating o their customers lank is empowered to colle tin) Under See. 26 of he Banking Regulation Act, 1949, every tank . ite which femain unclaimed fo 10 years iS compelled to submit an annuel™" G ; Gift Tax Act, the Gift Tax Off y) Under Sec. 36 of the Gi a x Officer can 5 F 0 ruce the books of account €Xamine a banker on oath and compe! i Under the Exchange Control Act, 1947, the goverment hi he ower to Under 1 ton of customer whois suspected of vilating the provi gather information + Provisions of the above-mentionc? “° financial (ii) (i)(vit) Wheo a Gamishee order nisi is received, the banker must disclose the nature of the account of a customer (0 ‘the court, In Kattabomman Transport Corporation Lid. Vs. State Bank of Travancore (1992), it was held that banks re justified in disclosing the accoumt of a customer without his consent under the compulsion of law (8) Disclosure in the Interest of the Public As between individual interest and c individual interest V public interest, public interest is more important and so, the indiv : —_ be eee for the sake of public interest. Hence, a banker is justified in disclosing the state of he conta S account in the interest of the public 1s not easy to give an example of this spe: The following grounds generally fall (® Disclosure of the account where money is kept for extreme political purposes- (i) Disclosure of the account of an unlawful association (22) Disclosure of the account of a revolutionary body to avert danger to the state. (@) Disclosure of the account of an enemy in times of war. (C) Disclosure in the Interest of the Bank ‘When his own position is at stake, a banker may be compelied to ignore his oath of secrecy. Any prudent banker will safeguard his position before fulfilling his obligations. The following are the instances of this Kine! (@ Disclosure of the account of the customer who has failed to repay the loan to the guarantor. (ii) Disclosure to a fellow banker: Bankers amongst themselves have the practice of exchanging information about customers for the sake of common courtesy. When an enquiry of this type comes to a banker, be should in his own interest answer the enquiry because later on he may also be in need of such information for which he has to approach his fellow banker. Usually, when a piece of information about a customer who happens to be an acceptor of a bill under discount is required, the banker will make a courtesy call on his fellow banker This is called common courtesy. As a defence of past action disclosure can be made: in Sunderland Vs. Barclays Bank, the banker bad dishonoured the cheque of Mrs. Sunderland drawn in favour of a tailor. In fact, she had asked the banker to give proper reasons for the dishonour of that cheque to her husband, To defend his past action (&« dishonour), the banker had to reveal the fact of her having drawn cheques in favour of bookmakers without the knowledge of her husband. After having honoured the last cheque drawn in favour of a bookmaker, the banker had to dishonour the cheque in question for want of funds. Mrs. Sunderland couk! not tolerate this disclosure to her husband and so she sued the banker for unwarranted disclosure. It was held that the banker was not liable because the banker had to disclose the fact in his own interest. Besides, there were supposed to be no secrets between a husband and a wife. Moreover, she had permitted the banker to give proper reason for the dishonour of her cheque to her husband. (0) Disclosure under the Express or Implied Consent of Customer It is implied in the contract between a banker and his customer that the banker would not reveal anything about the state of the bank balance without the customer's express or implied consent (i) If a customer has given the name of his banker for trade reference, then the banker would be justified in —— = the banker regardi when a proposed guarantor puts questions to ing the account of the customer, the © nae carat to reveal the exact position. This is so because any guarantor who has assumed great . id be anxious to know about the monetary position ofthe person whose position is being "guaranteed. In all cases, it would be advisable to get the consent of the customer in writing