(a) B deposits gold ornaments worth Rs.50,000 with the Banker for safe custody
Facts of the case
- B places gold ornaments worth ₹50,000 with the bank solely for safe custody.
- There is no associated loan or credit relationship for this deposit.
Issues in the case
- What is the legal responsibility of the banker in relation to the safekeeping of the ornaments?
- Whether the banker can use or claim a lien on the ornaments if B becomes a debtor.
Principles associated with the case
- The relationship between the banker and B is that of bailee and bailor under the Indian Contract Act.
- The banker is responsible for taking reasonable care of the goods deposited.
- The bank cannot use or claim a general lien over the ornaments as they were not deposited in the capacity of a debtor-creditor relationship.
- The ornaments must be returned on demand, unless they are lost due to negligence.
Judgement
- The banker is under a duty to safeguard the ornaments and return them to B upon demand.
- The banker has no right to set off or claim lien on the gold ornaments.
- If ornaments are lost due to the bank’s negligence, the bank is liable for compensation.
(b) D deposits Rs.40,000 with the Bankers to be held for two years as a fixed deposit
Facts of the case
- D deposits ₹40,000 with the bank under a fixed deposit scheme for a two-year term.
- The bank agrees to pay interest and return the principal after the agreed term.
Issues in the case
- What is the legal relationship between the banker and D in case of a fixed deposit?
- Can D withdraw the money before maturity?
- What rights does the bank have with respect to this money?
Principles associated with the case
- The relationship between the banker and D is that of debtor and creditor.
- The bank is under a legal obligation to repay the amount with agreed interest upon maturity.
- Unless otherwise specified, the bank can use the deposited money for its business purposes.
- Premature withdrawal may be allowed, subject to penalty or loss of interest, based on the bank’s terms.
Judgement
- The bank holds the money as a debtor and must return it as per the fixed terms.
- D cannot claim the money before the expiry of the two-year term unless the bank’s policy allows premature withdrawal.
- The banker can use the amount in the course of its normal banking business, but must ensure repayment with interest as per agreement.