A customer of my bank has given a credit card againt the security (lien )of the Fixed deposit of Rs. 20000 , which was in joint names of him and his father with mode of operation EITHER OR SURVIVOR. Both of them had singned an irrevocable letter of authority (mandate) in favour of the bank that in case of any default in payment of credit card beyond 90 days the bank will pay the dues to credit card company by making premature payment of this Fixed deposit. A clause was also in mandate that the payment made by the bank to credit card will be deemed as payment made to me and will be a valid discharge to the bank.
The customer had defaulted in payment of a bill of the card. as such the credit card had revoked the FDR and instructed bank to pay the same as per the mandate. some disputes arosen with the card holder and credit card company. At the mean time one of deposit died. The customer had informed the bank well in advance that you can not pay my dues to credit card company as one of the depositors died.
Despite this, the branch had broken the fixed deposit and made payment to Credit card company on the basis of irrevocable letter of authority. the card holder has disputed the premature payment of Fixed deposit and also payment made to credit card company contesting that the bank had paid the Fixed deposit unlawfully despite having information of death of one of the depositors.
since the branch had paid the FDR on the basis of irrevocable letter of authority you please advise me whether the bank's action is correct or not