Banks cannot wash off their hands and claim that they bear no liability towards their customers for operation of locker: Supreme Court of India
Locker Hiring Facility will now be governed by principles laid down by SC that shall remain binding upon the banks which are providing locker or safe deposit facilities while directing RBI to lay down comprehensive guidelines for locker facility/safe deposit facility management. This auspicious judgment was passed by the Supreme Court of India in the matter of AMITABHA DASGUPTA V. UNITED BANK OF INDIA &amp; ORS. [CIVIL APPEAL 3966 of 2010] by Honourable Justice Mohan M. Shantanagoudar. This petition is filed against the judgment of the National Consumer Disputes Redressal Commission wherein the commission dismissed a revision petition filed against the judgment of the State Consumer Disputes Redressal Commission. The facts of the case are, Appellant’s mother (deceased) rented a locker and the appellant was added as a joint holder. Later, the Appellant tried to operate the locker and deposit the locker rent the Bank informed that they have broken it open due to non -payment and have also re-allotted it. Appellant argued it was illegal and admitted to having inadvertently broken open the locker. Additionally, the appellant found some things missing, however, bank contended that these were the only things in records. Consequently, the appellant approached District Consumer Forum for returning seven ornaments or compensation for damage of Rs. 3,00,000/­. The respondent was directed to return the entire contents of the locker, or alternatively pay Rs. 3,00,000 and 50000 for compensation. However, the State Commission held that a Consumer Forum has a limited jurisdiction to adjudicate on the recovery of the contents of the locker and the National Consumer Forum also held this impugned judgment. Thus, the Court answered the issues of whether the bank has a duty under bailment laws and whether it could be adjudicated in a consumer forum. Additionally, the court also deliberated upon whether the bank owes an independent duty of care to its customers with respect to diligent management and the issue of compensation in such cases. The Court stated, “Even in the relevant foreign precedents which we have noted, the application of the principles of bailment was contingent on determining whether possession was transferred in the facts of the case. This in turn requires factual findings on whether the bank had knowledge of the contents of the locker, or whether the locker holder had prepared any receipt or inventory of the articles placed inside the locker or was otherwise able to prove the particulars of the items deposited in the locker. We are of the considered opinion that these questions cannot be adjudicated upon in the course of proceedings before Consumer Courts and have to be evaluated by Civil Courts.“ Thus, the SC held the National Commissions’ judgment of leaving the question of law and fact upon civil courts as correct.  The Court acknowledged that “Banks as service providers under the earlier Consumer Protection Act, 1986, as well as the newly enacted Consumer Protection Act, 2019, owe a separate duty of care to exercise due diligence in maintaining and operating their locker or safety deposit systems. This includes ensuring the proper functioning of the locker system, guarding against unauthorized access to the lockers, and providing appropriate safeguards against theft and robbery. This duty of care is to be exercised irrespective of the application of the laws of bailment or any other legal liability regime to the contents of the locker. The banks as custodians of public property cannot leave the customers in the lurch merely by claiming ignorance of the contents of the lockers.“ The Apex Court relied on previous judgment and also RBI Guidelines which cast duties on banks for maintenance of locker which grants permission to each bank to formulate their own regulations. In regard to this, SC stated that ” Present state of regulations on the subject of locker management is inadequate and muddled. Each bank is following its own set of procedures and there is no uniformity in the rules. Further, going by their stand before the consumer forum, 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. Hence, we find it imperative that this Court lays 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.” Thus, the court laid down guidelines and stated that “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.“
This appeal by special leave arises out of the judgment of the National Consumer Disputes Redressal Commission Revision Petition filed against the judgment of the State Kolkata Branch of the Respondent No. 1 Bank. In 1970 the Appellant Complainant was included as a joint holder of the of 1993­1994. Further that the locker had subsequently been 2.2 On 29.05.1995 and 2.06.1995 the Appellant sent communications to Respondent No. 1 claiming that such breaking of his locker by the Bank was illegal since he had cleared dues for 1994­1995 on 30.07.1994 i.e. prior to the is Respondent No. 3 in the present appeal responded to the communication and admitted to having inadvertently broken open the locker though there were no outstanding dues to be that reminders for the payment of dues had been sent on 2.3 On 17.06.1995 when the Appellant went to collect the However Respondent No.1 Bank contends that only those two ornaments were found in the Appellant’s locker when it was broken open. That the same is evident from the inventory 2.4 Subsequently the Appellant filed a consumer complaint before the District Consumer Forum calling in the locker or alternatively pay Rs. 3 00 000 ­ towards the cost of jewelry and compensation for damages suffered by the 2.5 The District Forum allowed the complaint and held Respondent No. 1 liable for deficiency of service relying upon rent dues. Further on the claim for the cost of seven ornaments been only two ornaments in the locker since there were no opened. Hence Respondent No. 1 was directed to return the Rs. 3 00 000 ­ towards cost of the jewelry and Rs. 50 000 ­ as compensation for mental agony harassment and cost of 2.6 On appeal the State Commission vide order dated 12.10.2004 accepted the District Commission’s findings on the question of deficiency of service though it reduced the compensation from Rs. 50 000 ­ to Rs. 30 000 ­. However with respect to recovery of the cost of the ornaments the State Commission relying upon the judgment of the National not equipped to undertake this evaluation since it only has 2.7 The Revision Petition against the order of the State Commission was dismissed vide the impugned order. The National Commission by the impugned judgment accepted the State Commission’s holding on the limited jurisdiction of the the contents of the locker it would be highly improbable to 3.1 Per contra learned counsel for the Respondents submitted that the National Commission’s holding does not warrant interference. He submitted that compensation for the loss of the record the following issues arise for consideration in the other law with respect to the contents of the locker Whether the same can be effectively adjudicated in the course of consumer dispute 4.2 Second irrespective of the answer to the previous issue whether the Bank owes an independent duty of care to its customers with respect to diligent management and operation of the locker separate from its contents Whether 5. Disputes between banks and locker holders pertaining to loss of articles placed inside the locker have been subject to judicial consideration in various jurisdictions for nearly a century. For a broader understanding of the subject we find it necessary to briefly refer to certain judgments of foreign placed inside the locker by the locker holder. In Roberts v Stuyvesant Safe Deposit Co. 3 the defendant company permitted the police under a search warrant to confiscate the articles that were inside the plaintiff’s locker. However the to comply with the duty of care required under the law by permitting the police to take away articles that were not mentioned in the search warrant. Affirming the plaintiff’s observations about the relationship of bailment between the “The legal relationship which the defendant held to the plaintiff and out of which this controversy has fundamental question in the case is whether the defendant upon the undisputed evidence in the The Manhattan Storage & Warehouse Company 4 Mayer v Brensigner 5 National Safe Deposit Co. v. Stead.6 In Cussen the bank’s safe deposit vault was lost. The Supreme Court of California held that the bank was liable under the laws of bailment the court must first find on the facts of the case the outset to refer to the relevant provisions under the Indian “148. ‘Bailment’ ‘bailor’ and ‘bailee’ defined.—A ‘bailment’ is the delivery of goods by one person to shall when the purpose is accomplished be returned intended bailee or of any person authorised to hold Thus from the aforementioned provisions it can be inferred that three components need to be fulfilled for the existence of bailment. These are: delivery of goods from one person to another by transfer of possession actual or constructive an express or implied contract for delivery delivery should be for or sector­specific regulations which may throw light upon the issue of whether banks are responsible under the laws of bailment for the loss of articles placed inside the locker. On does not have any binding value. However it is useful in 2.1 It is clarified that the relationship between the and bailee and not landlord and tenant though the and the bank is required to exercise due care and On perusal of the 2006 Circular it is evident that at that holder even if the bank has no knowledge of the contents of the 7.1 The RBI had also issued guidelines covering inter alia the subject of safe custody of articles placed inside the lockers Circular No RBI 2006­2007 325) on 17.04.2007 as being in the nature of an anti­competitive practice. The CCI dismissed the suggest any understanding consensus arrangement the aforesaid prohibited activities. Suspicion of a Opposite Parties allegedly do not take responsibility RTI replies of some of the Opposite Parties suggest that they are not completely absolved for loss of to theft or burglary etc. of safe custody locker the by the terms and conditions laid down in the memorandum of hiring of locker and the guidelines issued by RBI from time to time. Reply dated 19th October 2015 of Andhra Bank states that the relationship between the bank and its customer in case of safe deposit locker is that of ‘lessor and the bank and hence the bank cannot take stated that the bank however takes all necessary measures and precautions to safeguard the lockers its safety lockers depends upon the parameters on to avoid responsibility liability for loss of valuables kept by locker facility will depend upon the relevant facts and circumstances of each case such as the terms of the locker hiring agreement the circumstances under which the articles bailees or in any other capacity for any loss or damage to the National Bank.11 In this case the appellants had before the respondent bank in Peshawar on the payment of a fee for subsequently to the Lahore branch and finally to India in November 1961 under the Indo­Pakistan Movable Property the market value of the ornaments. Referring to the relevant would be liable in the capacity of a bailee for the loss of the is demanded on such matters would be undertaken...it is established that the defendant not take care of the goods of the parents of the plaintiff as one would under similar circumstances It is important to note that in the facts of Jagdish Chandra Trikha the High Court found that there was complete entrustment of possession of the appellant’s proved from evidence that the appellant’s predecessors had handed over a detailed list of the jewellery which was placed the customer did not have any access to the same after 8.1 However the locker service provided by the banks has Complete access to the valuables if any remained with the bank due to modernization of the locker system banks now provide system the bank allocates a locker to the customer on the locker through which he can gain partial access to the locker and the locker holder’s key is required for opening a locker providing neither with complete access. In more advanced have any receipt of the exact particulars of the articles placed inside the locker as was the case in Jagdish Chandra Trikha supra). The question that therefore arises for consideration bank locker system is that in Natioal Bank of Lahore Ltd. v Sohan Lal Saigal.12 In that case the appellant bank had provided locker service for the safe custody of valuables. The locker could be operated jointly by the locker holder and the bank’s custodian. However the respondent locker holder was Civil Court concluded that the Manager had exclusive control Court of Appeals of Ohio in Blair v. Riley13 and the Supreme Court of Illinois in National Safe Deposit Company v. Stead Attorney General 14 the Punjab and Haryana High Court held that the bailor­bailee relationship applied. In this regard the the plaintiffs then at once any impediment in the 8.3 In Mohinder Singh Nanda v. Bank of Maharashtra 15 forty­four safe keeping lockers in the Respondent bank were liable for the loss of articles if any since the bank had no “4. But there is no evidence on record to show that in the locker. Unless there is entrustment of the held responsible for the theft. The plaintiffs have 8.4 Subsequently the Punjab and Haryana High Court again undertook a comprehensive look into the present­day locker system in Atul Mehra v. Bank of Maharashtra 16 which pertained to the same bundle of facts as in Mohinder Singh that due to the robbery jewels worth Rs. 4 26 160 ­ were stolen the customer and the bank did not have notice of the same Further the appellants had not produced any evidence at the stage of trial to establish the contents of the locker “17…The respondent bank could only be fastened with liability on the contents of the locker being 18…These authorities are of no assistance to the appellants in the present case. In all these cases for bailment. Therefore I have no hesitation in coming to the conclusion that mere hiring of the of bailment as provided under Section 148 of the Indian Contract Act 1872. In order to constitute bailment as provided in Section 148 of the Act it is further necessary to show that the actual exclusive know the quantity quality or the value of the jewelry which was allegedly kept in the locker at the time when the robbery occurred. … In the present case the plaintiffs alone had the knowledge of contents of lockers therefore the plaintiffs had to if the plaintiffs had proved this peculiar fact they of the locker ipso facto would not establish a relationship of bailment between the bank and the locker holder. In order to bank had knowledge of the contents of the locker. Alternatively where the locker holder alone has knowledge of the contents 8.5 However Nijjar J. differentiated the holding in Sohan Lal entrustment and the valuation of jewelry had been proved…..On the twin grounds of exclusive entrustment thereof to the Bank it has been held Therefore in Sohan Lal Saigal entrustment of trial court. However in Mohinder Singh Nanda and of jewelry to the bank and hence the claimant locker holders were unable to succeed in obtaining relief. Nijjar J. further undoubtedly in the custody and possession of the to joint possession of the locker. The Banker can without the assistance of the bank. The hirer has access to the locker only during specified banking hours. The banker has no such limitation. It must 148 of the Indian Contract Act are complied with plaint. There being no entrustment or delivery of contemporary dual­key locker system if the bank is in the they had indeed handed over possession of certain articles for not satisfied the Court is barred from going into other issues such as whether the locker holder and the bank were in joint 8.6 Having perused the aforementioned precedents we find that what was commonly contested in all these cases is whether was contingent on determining whether possession was or inventory of the articles placed inside the locker or was the consumer fora. This aspect must be evaluated by the civil court upon appreciation of evidence led by the parties as was done in all the aforementioned decisions of Jagdish Chandra Trikha Sohan Lal Saigal Mohinder Singh 8.7 It is true that the National Commission has in previous decisions such as Punjab National Bank Bombay v. K.B Shetty 17 and Mahender Singh Siwach v. Punjab and Sind gone missing from bank lockers. Moreover in Pune Zilla Madyawarti Sahakari Bank Limited v. Ashok Bayaji Ghogare 19 the National Commission has gone to the extent of the complainants had produced detailed and precise documentary proof for corroborating the extent of jewellery placed inside the locker which has not been done in the present 8.8 In UCO Bank similar situation arose as in the his locker was tampered with and broken open and valuables bank not only disputed the value of jewellery kept inside the locker. The locker holder had only produced an affidavit in competent civil court after adducing of elaborate evidence on 8.9 In the recent case of Mamta Chaudaha v. Branch Manager Head Manager State Bank of India 20 the National not produced any evidence apart from a standard affidavit to 8.10 In light of the aforementioned conflicting decisions of the National Commission in the impugned judgment is the correct approach. In the present case the Respondent bank has not a contested fact. Hence we do not propose to record any conclusions on whether the Appellant locker holder in the agreement with the findings in the impugned judgment to the extent that the Appellant must file a separate suit before the merits of the case including as to whether the law of bailment is 9. As discussed supra imposition of liability upon the bank with respect to the contents of the locker is dependent upon provision and appreciation of evidence in a civil suit for such present case is left without any remedy. Banks as service providers under the earlier Consumer Protection Act 1986 as well as the newly enacted Consumer Protection Act 2019 owe a operating their locker or safety deposit systems. This includes against unauthorized access to the lockers and providing appropriate safeguards against theft and robbery. This duty of the locker. The banks as custodians of public property cannot 9.1 In this regard we may refer to the observations made by the opinion. In Punjab National Bank in addition to Commission also made a separate finding on the negligence of “4. The last and the most important question is whether the appellant Bank has been guilty of locker. The State Commission has taken adverse notice of the fact that the appellant Bank did not probe departmentally when the locker had been found open on the 9th June 1988and treated the locker is with the Bank the locker can be opened holder. The mechanism is however such that the custodian of the Bank that all the lockers operated locked. Such a certificate was also recorded on the 21stApril 1988. The State Commission therefore respondent complainant. This Commission fully 9.2 In Mahendar Singh Siwach the bank negligently allowed a third party who was the previous allottee of the locker complete the required formalities with respect to change of allotment from the third party to the current allottee i.e. the appellant. The National Commission arraigned the gross “…We find that the record itself proves gross opposite party Bank in rendering service. Firstly O.P. s argument is that fraud committed by Mr the contents of the locker comes under criminal Consumer Protection Act. There is no other valid argument given on behalf of the bank except to contend that they did not know the details of the same. It is also interesting to see the evidence granting bail to Mr. Grover which is reproduced committed without the connivance of the bank be allotted to Mahendra Singh Siwach in the year 1979. Further when Mahendra Singh Siwach has account No. 284 it is not understandable how the Bank could without verifying from record accept the as the key had been lost. It was necessary for the bank authorities to have referred to the bank record and should have also intimated Mahendra Singh Siwach about this request of the applicant. Not only bank authorities have prepared an inventory of the articles and the same to the applicant. It does not appear that that he was the owner of the property kept in the locker and the locker belonged to him. In these the bank authorities I think it proper to release the Manual of Instructions of United Commercial Bank This Register should be maintained lockerwise in the name(s) their addresses operational instructions rent paid etc. should be recorded. The name(s) of the The branch should also maintain a Locker Key Register. This should be maintained keywise to lockerwise and lockerwise to keywise so as to facilitate tracing the number of Locker from the Key interchanged such changes should be immediately recorded in the Locker Key Register. It should be marked ‘Strictly Private’ and should be kept in personal custody of Custodian of locker cabinets. A 12.3.1 Breaking Open of Locker Due to Loss of a) An application should be obtained from hirer(s hirer(s) the Manager Accountant and Custodian of the in Locker Register Renewal Diary and Specimen guidelines has been completely flouted by the locker key register non­payment of rent dues and lastly the procedure that should be adopted for 9.3 In Mamata Chaudaha supra) though the National noted that the relationship between the bank and the locker holders who are also the account holders of the bank will be 10. We may also refer to the circulars which the RBI has issued “1.4 Banks are also advised to give a copy of the agreement regarding operation of the locker to the Banks should exercise due care and necessary their branches on an on­going basis and take necessary steps. The security procedures should be well­documented and the concerned staff should be properly trained in the procedure. The internal auditors should ensure that the procedures are more than three years for medium risk category or one year for a higher risk category banks should to either operate the locker or surrender it. This ask the locker hirer to give in writing the reasons why he she did not operate the locker. In case the of NRIs or persons who are out of town due to a to continue with the locker. Further banks should ask the locker hirer to give in writing the reasons why he she did not operate the locker. In case the of NRIs or persons who are out of town due to a does not respond nor operate the locker banks consultation with their legal advisers for breaking left to the discretion of the individual banks to formulate the exact procedures for fulfilling this duty of care. The banks are 10.1. On 1.07.2015 the RBI issued a Master Circular No 59 2015­16 on Customer Service in Banks which included updated guidelines on locker operation. However these were Circular. Further neither of the aforementioned Circulars provide any guidance on the degree of care that needs to be bank is following its own set of procedures and there is no impression that not having knowledge of the contents of the due diligence in operating their locker facilities until the 12. Thus we emphasize 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 c) The bank shall notify the original locker holder prior to any changes in the allotment of the locker d) Banks may consider utilizing appropriate e) The custodian of the bank shall additionally f) The bank employees are also obligated to check 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 electronic system the bank shall take reasonable steps to ensure that the system is protected against i) The customers’ personal data including their biometric data cannot be shared with third parties without their consent. The relevant rules under the 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 of the locker. Moreover the locker shall be broken locker holder. The bank must prepare a detailed locker register before returning them to the locker holder. The locker holder’s signature should be l) The bank must undertake proper verification access to the locker. In case the locker remains inoperative for a long period of time and the locker dispose of the articles in a transparent manner in accordance with the directions issued by the RBI in The banks shall also take necessary steps to ensure that the space in which the locker facility is o) The bank cannot contract out of the minimum or reasonable cause even though he had already cleared his valuables and enquired about the status of the locker was in blatant disregard to the responsibilities that the bank 14. Thus looking to the facts and circumstances of the case we deem it appropriate to impose costs of Rs. 5 00 000 ­ on the Bank which should be paid to the Appellant as compensation The amount of Rs. 5 00 000 ­ shall be deducted from the salary of the erring officers if they are still in service. If the erring by the Bank. Additionally the Appellant shall be paid Rs 1 00 000 ­ as litigation expense 15. Before concluding we would like to make a few observations With the advent of globalization banking institutions have Both domestic and international economic transactions within the country have increased multiple folds. Given that we are have become an essential service provided by every banking by foreign nationals. Moreover due to rapid gains in technology we are now transitioning from dual key­operated lockers to customer may have partial access to the locker through passwords or ATM pin etc. they are unlikely to possess the the operation of the locker. The very purpose for which the 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 to locker facility safe deposit facility management. The banks the date of this judgment. Until such Rules are issued the particular shall remain binding upon the banks which are