Facts of the Case
- Mr. Gopal has a credit balance in his individual account with the bank.
- There exists an overdraft account in the joint names of Gopal and Kamat.
- The bank wants to set off Gopal’s individual credit balance against the joint overdraft liability.
- The issue is whether such a right of set-off is legally available to the bank.
Issues in the Case
- Can a bank set off a customer’s individual credit against a joint liability account?
- Is the bank allowed to adjust the balance of a single account holder for debts owed jointly with another?
- Does the right of set-off extend across individual and joint accounts?
Principles Associated With It
- The right of set-off allows a bank to combine accounts and adjust balances where mutual debts exist.
- However, the right of set-off can only be exercised when both accounts are in the same name and capacity.
- The credit in Gopal’s individual account belongs to him solely, while the overdraft liability is joint.
- Courts have held that no right of set-off exists between an individual account and a joint liability account, as the parties are not the same.
Judgement
- The bank cannot exercise the right of set-off in this situation.
- Since the credit balance is in Gopal’s individual account, and the overdraft is in joint names, the capacity is not identical.
- Therefore, the bank’s attempt to set off the individual balance against a joint debt is legally impermissible.
- The bank must pursue recovery jointly from both Gopal and Kamat, not from Gopal’s individual funds alone.