Banks cannot impose unilateral and unfair terms on the consumers while operating bank lockers, the Supreme Court ruled while cautioning banks against breaking open lockers without adhering to the relevant laws and regulations (Amitabha Dasgupta v. United Bank of India).
The Court also made it clear that while any imposition of liability with respect to contents of locker is dependent on appreciation of evidence in civil suit, the remedy under Consumer Protection Act can also be invoked.
“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,” the Court reaffirmed.
The judgment came in an appeal against a 2008 judgment of the National Consumer Dispute Redressal Commission (NCDRC).
A Bench of Justices Mohan M Shantanagoudar and Vineet Saran ordered the Reserve Bank of India (RBI) to lay down comprehensive directions mandating the steps to be taken by banks with respect to locker facility/safe deposit facility management.
“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,” the Court said.
The RBI had issued clear directions as far back as in 2007 imposing duty of care in respect of protection of the bank lockers and mandating transparency vis-a-vis the locker holder in allotment and breaking open of the lockers, the Court noted.
However, the banking regulator had left it to the discretion of the individual banks to formulate the exact procedures for fulfilling this duty of care, the Court observed.
The Court, therefore, proceeded to issue a slew of guidelines to ensure that proper procedures are followed by banks while allotting and operating the locker facility.
Until the RBI frames guidelines, the guidelines issues by the Court will have to followed by banks which are providing locker or safe deposit facilities.
The following guidelines were issued by the top court:
(a) This includes 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 always guarded.
(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.
By way of background, the appellant’s mother took a locker on rent in the Deshapriya Park, Kolkata Branch of United Bank of India in the early 1950s. In 1970, the Appellant/Complainant was included as a joint holder of the locker. On May 27, 1995, the Appellant visited the bank to operate the locker and deposit the locker rent. However, the Appellant was informed that the Bank had broken open his locker in 1994 for non-payment of rent dues for the period of 19931994. Further, that the locker had subsequently been reallocated to another customer.
The appellant, however, wrote to the bank claiming that breaking open the locker was illegal since he had cleared the dues. The Chief Manager of the bank responded to the communication and admitted to having inadvertently broken open the locker, though there were no outstanding dues to be paid, and apologized for the same.
Subsequently, when the appellant went to collect the contents of the locker, it is alleged that he found only two (one pair of bangles and one pair of ear pussa) of the seven ornaments that had been deposited in the locker in a no sealed envelope.
The bank, however, contended that only those two ornaments were found in the Appellant’s locker when it was broken open. The same was evident from the inventory prepared by the bank when the locker was broken open in the presence of an independent witness.
The appellant filed a consumer complaint before the District Consumer Forum (District Forum) calling upon the bank to return the seven ornaments that were in the locker; or alternatively pay Rs. 3,00,000 towards the cost of jewellery, and compensation for damages suffered by the appellant.
The District Forum allowed the complaint directed to return the entire contents of the locker, or alternatively pay the Appellant Rs. 3,00,000 towards cost of the jewellery and, Rs. 50,000 as compensation for mental agony, harassment, and cost of litigation.
On appeal, the State Commission by an October 2004 order 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 observed that the dispute on the contents of the locker can only be decided upon provision of elaborate evidence. That the Consumer Forum was not equipped to undertake this evaluation since it only has jurisdiction to conduct a summary trial. Therefore, the appellants were directed to approach the civil court for adjudication on the contents of the locker.
This decision was upheld by the NCDRC resulting in the present appeal before the Supreme Court.
The Supreme Court in its judgment noted that the present state of regulations about locker management is inadequate and muddled. Each bank is following its own set of procedures and there is no uniformity in the rules, the Court noted.
The Court also said that while 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, that does not leave the appellant without any remedy.
Banks are liable under Consumer Protection act; the Court said and has to exercise due diligence as per the Consumer Protection Act when it comes to extending and operating locker facility.
“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 Court said.
In the instant case, the Court noted that the bank 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 dark about it and came to know about the development only when he visited the bank to withdraw the valuables.
Thus, the Court ordered the bank to pay Rs. 5 lakhs as compensation to the appellant and Rs 1 lakh as litigation expense.
“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 officers 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,” the judgment said.