Banker-Depositor Relationship That Of Creditor-Debtor: SC

• A bench comprising CJI NV Ramana, Justice Surya Kant and Justice Hima Kohli has held in the case of N. Raghavender vs. State of Andhra Pradesh has held that the money deposited by a customer in the bank is not held by it as a trustee. The court also observed that the same forms part of the fund of the bank and can be withdrawn by the depositor as and when the occasion arises.
• This observation was made in the case of an appeal filed by the bank manager who has been convicted of offences under Sections 409, 420 and 477A of the IPC.
• In the instant case, Accused no. 3, the Treasurer of the Nishita Educational Academy had opened a current bank account in his capacity as the authorized signatory of the academy, with an initial deposit of Rs.5,00,000. The appellant (Accused no. 1) was the brother-in law of accused no. 3 and was the bank’s Branch Manager.
• The appellant, in his capacity as the branch manager, issued 3 loose cheques, and despite the withdrawal of Rs.10,00,000, the debit was not entered by him into the ledger book.
• He was further accused of closing two FDR’s prematurely of a sum of Rs.10,00,000 and 4,00,000. A total of 14,00,000 was credited into the account but only 4,00,000 was shown. The remaining 10,00,000 were allegedly adjusted to the withdrawal done in the past.
• After the irregularities were noted, an inquiry was set up. And later, the accused were ultimately convicted both by the trial court as well as by the HC.
• The Supreme Court however, disagreed with the decision of the lower court and the HC. The bench observed the following-

a) “The crucial word used in 405 IPC is dishonestly and therefore, it presupposes the existence of mens rea. Mere retention of property entrusted to a person, without any misappropriation cannot fall within the ambit of criminal breach of trust. Thus, unless it is proved that the accused was entrusted with the property which he is duty bound to account for, and that person has committed criminal breach of trust, section 409 cannot be attracted.

b) Unless the complainant can show that the accused has a dishonest intention at the time the complainant parted with the money, section 420 cannot be attracted.”

c) On the aspect of loose cheques, the Court has held that “Since no explicit prohibition on issuing of loose cheques has been proved, the mere fact that the appellant issued those loose cheques, is not sufficient to conclude that he acted unlawfully or committed a criminal misconduct”.

• In light of the aforesaid observations, the Court allowed the appeal and acquitted the accused of all charges.