Banker's lien and right of setoff

No lien over spousal property - as it belongs to her exclusively. 

NBFC cannot exercise general lien against the debentures of the wife of X

(1) Since Mr X works for the NBFC and is not a customer/account holder. So question of excercising banker's lien or the right to set-off does not arise at all.

(2) NBFCs are not considered as Banks and hence the right to excercise 'banker's lien' or the 'right to set-off' is not applicable on NBFCs.

For Banks to apply 'banker's lien (BL)' or the 'right to set-off (RTSO)', following things should be noted:

(a) Where RTSO is available, banks cannot apply BL. (b) Both apply to Banks with their relationship to customers as Debtor-Creditor relationship only. (c) Dues of Mr Z cannot be recovered from Mr M. (d) BL & RTSO do not apply to Goods and securities left by the customer in the branch premises by oversight, things kept in safe custody (e) all branches in the bank are to be seen as one single entity, meaning debit balance in an a/c with branch A can be set off with credit balance in an a/c with branch B (f) Dues outstanding and accrues as on date of excercise of BL or RTSO are applicable - amounts should be certain and no future amounts can be BL-ed/RTSO-ed. (g) Unavailed portion of a cash credit/overdraft a/c cannot be BL-ed/RTSO-ed.

I agree with Mr.Prasun Chandra Dass

Kindly clarify:

"Can bank apply BL to FD of the customer if a case is already being heard by DCDRF for CC dues?"

{(v) Lien

Banks have a right to exercise lien under section 171 of the Indian Contract Act against the dues from constituents/customers. However, the banks cannot exercise lien over the personal account of a customer on the ground that money was due to the bank in another account where he acts in a different capacity, if there is no agreement to that effect}

Brief history of the matter is given below:

A is CC holder of a leading Pvt Sector bank since 7 years and has been paying on time without a single default. Bank has not provided copy of CC application form signed by customer and is not supplying the same despite many representations. Customer is sure that 7 years back he has not signed any agreement that bank can exercise lien on other accounts.

--Bank defaults on service and customer lodges’ complaint in writing from customer care to the highest level of VP-Customer Services Credit Cards and MD.

--bank does not resolve the complaint as customer is adamant on getting reply and apology in writing. Bank is not willing to beg apology in writing. Bank resorts to unethical practices e.g. bank has been supplying CC bills by courier and stops courier. Customer lodges complaint on non receipt of bill in time and escalates the complaint. Bank does not supply the bill. Customer blocks the payment and states bill shall be paid if bank supplies the bills at his doorstep. Bank's collection/recovery agents resort to coercion/threats and customer lodges police complaint, and also with MD of the bank.

 Bank dispatches its Zonal Collection Head to the o/o lawyer of customer to apologize in verbal and this man promises in verbal to supply all bills and revalidate the CC. Nothing happens. Customer lodges consumer complaint. While, the hearing is in progress in DCDRF, bank resorts to another malpractice. It creates banker's Lien on FD of the customer and notice of BL reaches customer on the last day mentioned in the notice. Hence lien is created.

Lawyer of the customer issues legal notice to the bank. Bank starts calling customer on phone from various locations and vacates the lien. Customer takes premature payment of all FD's and suffers loss of interest.

Other query is :

“Can customer claim this amount from bank’s MD or has to go to DCDRF again? What are the chances of getting payment of loss suffered? Kindly provide, if available, some suitable decisions from National Commission or State Commissions”

DCDRF decides in favor of the customer and orders the bank to waive off all charges and supply valid CC. Customer gets CC by execution petition.

Again bank resorts to unethical practices and does not activate the CC. Customer lodges written complaint and bank activates the CC. Bank again does not supply the bill. Customer lodges complaints in writing. Bank does not supply the bills despite repeated reminders in writing and invalidates the CC.

Can the customer demand severe punishment/penalty as bank has committed same offense like a habitual willful offender?

What should be the strategy?

 

 

 

Dear Kumar Doab, I am quite confused by the judgement. (1) In all cases of savings/current/fixed deposit a/cs, customer is creditor and bank is debtor. If banker's lien does not apply to FDs, by the same logic it should not apply to savings and current a/cs also. This is against all theory and practice of the banker's lien concept. (2) "In the same capacity" is important. It means that if I have a CC in my name, a banker's lien or rtight to set off cannot apply to my FD a/c jointly with my wife. Only those a/cs where I am the sole holder are applicable. The 1st point, however, baffles me.

The direction on Banker's lien and right to set of is given by RBI, BCSBI.

In adittion to that there are court judgements.

How does a bank daree to defy all.

 Either there are some trendsetting judgements by apex court or no one has raised the voice.

However purpose of the query raised in this post is to seek guidance and citations, rules, clarification, knowledge to help the fellow citizens who face harassment.

Valuable advice of learned experts/members is sought.

If "How does a bank daree to defy all" is directed to me just because I am a Banker, then it is misdirected.

I have not challenged anything in my post. I have said I am confused and baffled by the judgement. All viewpoints are most welcome.

Dear Kumar Doab, In your word file attachment it is stated "The depositor would accordingly cease to be the owner of the money in fixed deposit .The said money becomes money of the bank, enabling the bank to do as it likes, that however, with the obligation to repay the debt on maturity .In the same ruling it was further held that the bank being a debtor in respect of the money in FD, had no right to pass into service the doctrine of banker’s lien and the money in Fixed Deposit." But in various illustrations in the PDF file that you have attached, courts have ruled that banks can apply banker's lien on FDs. Nowhere (even in illustrations where courts have ruled that banker's lien cannot be applied) have the courts pointed out what is said in the word file attachment. Please explain this.

Dear Prasun Chandra Das Nothing in this thread is directed against you.

The forum is visited by many of the learned experts/members from multiple fields. They make immense contribution and enrich the forum.

The details which have been posted are sought to invite opinion, advice, and all relevant citations, judgments.

The bank and concerned banker hurriedly vacated the lien after the legal notice was issued. This implies that bank and banker had willfully stepped on the toes of the customer. The bank and banker later agreed that customer has not given explicit consent in the CC issuance form for banker's lien and right to set off. Customer agitated with force and the bank has transferred the employees to far off location. The transferred employees claim that bank has spared the actual erring officials. These actual or designated officials in the bank are expected to look into all facts, evidences, and documents before passing or signing the document to exercise lien and right to set off or report the customer as defaulter to credit rating agencies. Their job is to defend the interest of the bank. Later while the courts of law declare the decision of the bank (thus banker) as bad, does the customer actually gets relief since the same official is allowed to continue in the same chair without any punishment. Are all customers against whom bank proceeds are indeed defaulters? We have seen bank lawyers commenting in confidence that bank has done wrong and has lost a good customer.

For the first time litigant it is initial hiccups, later the customer does not mind to proceed to punish the bank.

RBI has advised the banks to insert the clause in the proposal/account opening/CC issuance form that customer agrees that bank shall have lien and right of set off.

Does this imply that if the facts prove that customer was not at fault and exercise of lien and right to set off was blatant abuse of power by the bank, banks and concerned banker should be severely punished? After all an official in the bank is expected to act fairly and shout to even his employer that exercise of lien and right to set off shall be wrong in this case.

The RBI has set course for Compensation Policy for the Banks. The essence is bank compensates the customer in case of default, lapse by the bank and avoids burden of litigation on both the bank and customer.

We are at loss to understand despite this policy why the burden of litigation is increasing? A careful analysis may lead to the fact banks or bankers do not refer the matter to grant compensation. Probably the bank has internal policy to insert the page into the personnel file of the employee of the bank.

If any judgement, citation, news is received it shall be posted in the thread.

 

One of my friend in a psu bank has been chargesheeted for misappropriation of funds and presently Disciplinary action is going on.

He also had a Savings Account as well as some FDs in another bank.

The employer bank has put a lien on all his accounts as well as written letter to the other bank to put lien on his account.

The other banks (without any court order / Garnishee order) , based on letter from the employer bank set lien on his savings account as well as fixed Deposit.

As per my limited knowledge of banking law, the bankers' right to lien does not apply in case of matter pertaining to any other bank, unless there is a specific order from court or any other authority like income tax attachment order / sale tax / excise etc. But In this case there is no such order.

Therefore the action putting lien by another bank (based on letter from employer bank) may not be legally tenable.

Experts please confirm or deny this. Please also enlighten the relevant section of the particular banking law which would apply here.