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Amitabha Dasgupta Vs UBI & Ors (2021): Banks As Service Providers Under The Consumer Protection Act, 1986, Are Under Obligation To Exercise Due Diligence In Maintaining And Operating Their Locker Systems

Tushar Bansode ,
  04 August 2021       Share Bookmark

Court :
The Supreme Court of India
Brief :

Citation :
Civil Appeal No. 3966 OF 2010


Date of Judgement:
19 February 2021

Bench:
Justice Mohan M. Shantanagoudar
Justice Vineet Saran

Parties:
Appellant – Amitabha Dasgupta
Respondent – United Bank of India &Ors.

Subject

The following judgement clarified the applicability of the law of bailment in the relation between banks and their customers in terms of locker facility. It also established the duty of care, that the banks owe to their customers as service providers.

Overview

  • Amitabha Dasgupta (Appellant) had a locker in the Kolkata branch of the United Bank of India (Respondent). On 27.05.1995 when he went to the bank to deposit locker rent, he was informed that his locker was broken open by the bank on 22.09.1994 due to non-payment of dues for 1993-94.
  • The Appellant apprised the bank that the breaking of his locker was illegal because he had already paid his dues on 30.07.1994 i.e. two months before the said breaking of his locker. After cross-checking, the bank explicitly admitted that a mistake was indeed committed on their part and subsequently apologized.
  • A month later when the Appellant went to the bank to collect the contents of his locker, he found that only 2 out of the 7 ornaments (gold) were found that he had deposited in the locker. The bank maintained that they recovered only 2 ornaments when the locker was broken opened. Hence, he complained before the District Consumer Forum.
  • The District Forum ordered the bank to return the ornaments or pay 3 lakh Rs to the appellant for the cost of jewelry and 50,000 Rs as compensation for damages and litigation costs. However, when appealed to State Consumer Dispute Redressal Commission it, reduced the compensation to 30,000 Rs.
  • Also, with respect to the contents of the locker, they asked the Appellant to approach the civil court for remedy.
  • This order was also upheld by the National Consumer Dispute Redressal Commission (NCDRC). Hence, the aggrieved appellant approached the Supreme Court under Article 136 of the Constitution of India.

Issues

  • Do banks owe a duty of care towards a locker holder with respect to the contents of the locker?
  • Whether or not any compensation can be given for non­compliance with such duty of care?
  • Whether the law of bailment is applicable to the bank locker system or not?

Legal Provisions

  • Section 148 of the Indian Contract Act, 1872 – Definition of bailment, bailor and bailee.
  • Section 149 of the Indian Contract Act, 1872 –How delivery is made to the bailee.
  • Article 136 Constitution of India – Special Leave to appeal by the Supreme Court.

Judgement

  • Firstly, the Supreme Court held that clearly, the relationship between the bank and locker holder is in the nature of the bailor and bailee, even though the bank was not privy to the contents of the locker. This has always been the global perspective as established in Roberts v. Stuyvesant Safe Deposit Co.
  • The Court also just pointed out that in judgements like Mahender Singh Siwach v. Punjab and Sind Bank and also Punjab National Bank v. K.B.Shetty, compensation was awarded to appellants for articles that have been stolen or gone missing from bank lockers.
  • It was held that the affidavit furnished by the locker holder should be accepted for proving the contents of the locker.The Court fully agreed to the decision of NCDRC and also said that the dispute is now left open before the civil court to decide on the merits of the case.
  • Pronouncing its own decision, it said that banks as service providers under the Consumer Protection Act, 1986, are under the obligation to exercise due diligence in maintaining and operating their locker systems.
  • This includes ensuring their proper functioning, guarding them against unauthorized access and providing safeguards against theft and robbery. Hence, the banks as custodians of public property are under some duty.
  • The Supreme Court made an observation that the locker management system in our country is inadequate and muddled. Hence, it laid down certain principles to ensure that the banks follow due diligence in operating their locker facilities until proper guidelines are issued by the competent authority.
  • Some of the important guidelines were - maintenance of locker register, notice to locker holder if any changes, using modern technologies for digitisation, maintaining a record of access to lockers, undertaking locker verification procedures, etc.
  • Finally, Court held that the bank's decision to break open the appellant's locker without any proper cause or notice, even though he had paid all his dues, is not justified. Hence, it was a breach of responsibility that the bank owed to the customer as a service provider and as a result a gross deficiency in service.
  • In addition to this, the Apex Court imposed a cost of Rs. 5,00,000/­ on the bank which they must pay to the Appellant as compensation and said, ‘This amount shall be deducted from the salary of the concerned officers if they are still in service. If the officers have already retired, then the amount should be paid by the bank. Additionally, the Appellant shall be paid a sum of Rs. 1,00,000/­ as litigation expense and mental agony.’
  • For future references, the Court reiterated that banks cannot be exempted from liability in such cases. The very purpose of the locker facility is to assure the customers that their assets are safe and being taken care of in a proper manner.
  • Hence, if not followed, violations arise under the Consumer Protection Act,1986 and it also taints the reputation of the country's growing economy.

Conclusion

Just like the relationship between a bailor and bailee, the banks too owe a separate duty of care to their customers. They are not entitled to the defence that they were unaware of the contents of the locker. If the no liability principle is followed by the banks, it would only shake the confidence of the investors and the customers of the bank itself. Keeping this in mind, the Supreme Court in this judgement directed the RBI to issue comprehensive guidelines in order to mandate the steps to be taken by banks for locker facility management. It also stated that these guidelines must be issued within 6 months and until then, the detailed set of principles laid down in this judgement shall be followed.

Click here to download the original copy of the judgement

 
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