Supreme Court directs compensation of Rs. 5 Lakhs after a bank breaks customer’s locker without just cause. RBI to frame rules for Locker management [Read obligations of bank]

Supreme Court: In a case where United Bank of India inadvertently broke the Appellant’s locker, without any just or reasonable cause, even though he had already cleared his pending dues, the bench of MM Shantanagoudar* and Vineet Sarana, JJ Imposed costs of Rs. 5,00,000/­ on the Bank to be paid to the Appellant as compensation. The said is to be deducted from the salary of the erring officers, if they are still in service and if they have already retired, the amount of costs should be paid by the Bank. Additionally, the Appellant shall be paid Rs. 1,00,000/- as litigation expense.

Noticing that the customer is completely at the mercy of the bank, which is the more resourceful party, for the protection of their assets, the Court said that in such a situation, the banks cannot wash off their hands and claim that they bear no liability towards their customers for the operation of the locker.

“The very purpose for which the customer avails of the locker hiring facility is so that they may rest assured that their assets are being properly taken care of. Such actions of the banks would not only violate the relevant provisions of the Consumer Protection Act, but also damage investor confidence and harm our reputation as an emerging economy.”

The Court also issued various directions to the Banks. (See below)

Background

Bank inadvertently broke the Appellant’s locker, without any just or reasonable cause, even though he had already cleared his pending dues. Moreover, the Appellant was not given any notice prior to such tampering with the locker. He remained in the dark for almost a year before he visited the bank for withdrawing his valuables and enquired about the status of the locker. Irrespective of the valuation of the ornaments deposited by the Appellant, he had not committed any fault so far as operation of the locker was concerned. Thus, the breaking open of the locker was in blatant disregard to the responsibilities that the bank owed to the customer as a service provider. The alleged loss of goods did not result from any force majeure conditions, or acts of third parties, but from the gross negligence of the bank itself. It is case of gross deficiency in service on the part of the bank.

Obligations of Banks while allotting and operating the lockers

It was noticed that each bank is following its own set of procedures and there is no uniformity in the rules and it seems that the banks are under the mistaken impression that not having knowledge of the contents of the locker exempts them from liability for failing to secure the lockers in themselves as well.

“In as much as we are the highest Court of the country, we cannot allow the litigation between the bank and locker holders to continue in this vein. This will lead to a state of anarchy wherein the banks will routinely commit lapses in proper management of the lockers, leaving it to the hapless customers to bear the costs.”

Hence, it is imperative to lay down certain principles which will ensure that the banks follow due diligence in operating their locker facilities, until the issuance of comprehensive guidelines in this regard.

Noticing that irrespective of the value of the articles placed inside the locker, the bank is under a separate obligation to ensure that proper procedures are followed while allotting and operating the lockers, the Court enumerated a list of obligations:

(a)  Maintenance of a locker register and locker key register.

(b) The locker register shall be consistently updated in case of any change in allotment.

(c)  The bank shall notify the original locker holder prior to any changes in the allotment of the locker, and give them reasonable opportunity to withdraw the articles deposited by them if they so wish.

(d) Banks may consider utilizing appropriate technologies, such as blockchain technology which is meant for creating digital ledger for this purpose.

(e) The custodian of the bank shall additionally maintain a record of access to the lockers, containing details of all the parties who have accessed the lockers and the date and time on which they were opened and closed.

(f) The bank employees are also obligated to check whether the lockers are properly closed on a regular basis. If the same is not done, the locker must be immediately   closed   and   the   locker   holder   shall   be promptly   intimated   so   that   they   may   verify   any resulting discrepancy in the contents of the locker.

(g)  The concerned staff shall also check that the keys to the locker are in proper condition.

(h) In case the lockers are being operated through an electronic system, the bank shall take   reasonable steps to ensure that the system is protected against hacking or any breach of security.

(i) The customers’ personal data, including   their biometric data, cannot be shared with third parties without their consent. The relevant rules under the Information Technology Act, 2000 will be applicable in this regard.

(j)  The bank has the power to break open the locker only in accordance with the relevant laws and RBI regulations, if any. Breaking open of the locker in a manner other than that prescribed under law is an illegal act which amounts to gross deficiency of service on the part of the bank as a service provider.

(k)  Due notice in writing shall be given to the locker holder at a reasonable time prior to the breaking open of the locker. Moreover, the locker shall be broken open only in the presence of authorized officials and an independent witness after giving due notice to the locker holder. The   bank must prepare a detailed inventory of any articles found inside the locker, after the locker is opened, and make a separate entry in the locker register, before returning them to the locker holder. The locker holder’s signature should be obtained upon the receipt of such inventory so as to avoid any dispute in the future.

(l) The bank must undertake proper verification procedures to ensure that no unauthorized party gains access to the locker. In case the locker remains inoperative for a long period of time, and the locker holder cannot be located, the banks shall transfer the contents of the locker to their nominees/legal heirs or dispose of the articles in a transparent manner, in accordance with the directions issued by the RBI in this regard.

(m) The banks shall also take necessary steps to ensure that the space in which the locker facility is located is adequately guarded at all times.

(n) A copy of the locker hiring agreement, containing the relevant terms and conditions, shall be given to the customer at the time of allotment of the locker so that they are intimated of their rights and responsibilities.

(o) The bank cannot contract out of the minimum standard of care with respect to maintaining the safety of the lockers as outlined supra.

 

Direction to RBI

It is necessary that the RBI lays down comprehensive directions mandating the steps to be taken by banks with respect to locker facility/safe deposit facility management. The banks should not have the liberty to impose unilateral and unfair terms on the consumers.

Hence, the RBI was directed to issue suitable rules or regulations as aforesaid within six months.

“Until such Rules are issued, the principles stated in this judgment, in general and at para in particular, shall remain binding upon the banks which are providing locker or safe deposit facilities.”

RBI may also issue suitable rules with respect to the responsibility owed by banks for any loss or damage to the contents of the lockers, so that the controversy on this issue is clarified as well.

[Amitabha Dasgupta v. United Bank of India, 2021 SCC OnLine SC 124, decided on 19.02.2021]


*Judgment by: Justice MM shantangoudar

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