Supreme Court clarifies bank’s duty of care for locker management: Amitabha Dasgupta vs. United Bank of India (2021)

Date of the Judgment: 19 February 2021
Citation: (2021) INSC 79
Judges: Justice Mohan M. Shantanagoudar, Justice Vineet Saran
Can a bank be held responsible for the loss of valuables from a locker, even if they claim ignorance of its contents? The Supreme Court of India addressed this critical question in a case concerning a bank’s liability for the mismanagement of a safety deposit locker. The court clarified the extent of a bank’s responsibility towards its customers regarding locker facilities, emphasizing a separate duty of care beyond the contents of the locker itself. This judgment was delivered by a two-judge bench comprising Justice Mohan M. Shantanagoudar and Justice Vineet Saran.

Case Background

In the early 1950s, the appellant’s mother rented a locker (No. A-222) at the Deshapriya Park branch of United Bank of India in Kolkata. In 1970, the appellant, Amitabha Dasgupta, was added as a joint holder. On May 27, 1995, Mr. Dasgupta visited the bank to operate the locker and pay the rent. He was shocked to learn that the bank had broken open his locker on September 22, 1994, due to alleged non-payment of rent for 1993-1994. The locker had also been reallocated to another customer.

Mr. Dasgupta communicated with the bank on May 29 and June 2, 1995, asserting that he had cleared all dues for 1994-1995 on July 30, 1994, prior to the locker being broken open. The Chief Manager of the bank acknowledged the error, apologized for the inadvertent action, and admitted that there were no outstanding dues. However, the bank claimed that only two ornaments were found in the locker when it was opened, while Mr. Dasgupta claimed that seven ornaments were deposited.

On June 17, 1995, when Mr. Dasgupta went to collect the contents of the locker, he found only two ornaments in a non-sealed envelope, instead of the seven he had deposited. The bank contended that only those two ornaments were found during the opening of the locker, as documented in an inventory prepared in the presence of a witness.

Subsequently, Mr. Dasgupta filed a consumer complaint seeking the return of all seven ornaments or compensation of Rs. 3,00,000, along with damages for the inconvenience caused.

Timeline

Course of Proceedings

The District Consumer Forum ruled in favor of the appellant, holding the bank liable for deficiency of service. The forum directed the bank to return all seven ornaments or pay Rs. 3,00,000, along with Rs. 50,000 as compensation. The State Consumer Disputes Redressal Commission upheld the deficiency of service but reduced the compensation to Rs. 30,000. However, it directed the appellant to approach a civil court for the dispute regarding the contents of the locker, citing the consumer forum’s limited jurisdiction for summary trials. The National Consumer Disputes Redressal Commission dismissed the revision petition, agreeing with the State Commission on the limited jurisdiction of consumer forums for such matters.

Legal Framework

The Supreme Court examined the concept of bailment under the Indian Contract Act, 1872, specifically Section 148 and Section 149, which define bailment and how delivery to a bailee is made. Section 148 of the Indian Contract Act, 1872 defines ‘bailment’, ‘bailor’ and ‘bailee’ as follows:

“A ‘bailment’ is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the ‘bailor’. The person to whom they are delivered is called the ‘bailee’.”

Section 149 of the Indian Contract Act, 1872, defines how delivery to bailee is made:

“The delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf.”

The Court noted the absence of specific domestic legislation or sector-specific regulations addressing the responsibility of banks for loss of articles placed inside lockers. The Court also referred to a draft circular issued by the Reserve Bank of India (RBI) in 2006, which clarified the relationship between a bank and locker hirer as that of a bailor and bailee. However, the Court also noted that the RBI and various public sector banks, in response to an RTI query in 2017, stated that banks have no liability for loss or damage of articles placed inside bank lockers.

Arguments

Appellant’s Submissions:

• The appellant argued that even if the case is remitted to civil court, it would be nearly impossible to ascertain the contents of the locker since only the locker holder knows what was kept inside.
• Relying on the case of Charan Singh v. Healing Touch Hospital & Ors., the appellant contended that compensation should be awarded to bring about a positive change in the service provider’s attitude.

Respondent’s Submissions:

• The respondent argued that the National Commission’s holding did not warrant interference.
• The respondent contended that compensation for the loss of jewelry could only be awarded after a thorough appreciation of evidence by the trial court.

The court noted that the primary issue was whether the bank owed a duty of care to the locker holder under the laws of bailment or any other law, and whether this could be effectively adjudicated in consumer dispute proceedings. The court also considered whether the bank owed an independent duty of care to its customers regarding the diligent management and operation of the locker, separate from its contents, and whether compensation could be awarded for non-compliance with such a duty.

Submissions Table

Issues Framed by the Supreme Court

1. Whether the Bank owes a duty of care to the locker holder under the laws of bailment or any other law with respect to the contents of the locker? Whether the same can be effectively adjudicated in the course of consumer dispute proceedings?
2. 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 compensation can be awarded for non-compliance with such duty?

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court:

• Roberts v. Stuyvesant Safe Deposit Co. [(1890) 123 N.Y 57] (Court of Appeals of New York): Established the relationship of bailment between the bank and locker holder.
• Emma M. Lockwood v. The Manhattan Storage & Warehouse Company [50 N.Y.S 974 (N.Y. 1898)]: Reaffirmed the position of law stated in Roberts v. Stuyvesant Safe Deposit Co.
• Mayer v. Brensinger [54 N.E 159 (1899)]: Reaffirmed the position of law stated in Roberts v. Stuyvesant Safe Deposit Co.
• National Safe Deposit Co. v. Stead [95 N.E. 973 (1911)]: Reaffirmed the position of law stated in Roberts v. Stuyvesant Safe Deposit Co.
• Cussen v. Southern Cal. Savings Bank [65 P. 1099 (1901)] (Supreme Court of California): Held the bank liable under the laws of bailment for lost money kept in a safe deposit vault, but stated that the plaintiff would have to make a prima facie case that they had deposited the money inside the locker, and that it was subsequently lost.
• Jagdish Chandra Trikha v. Punjab National Bank [AIR 1998 Delhi 266] (Delhi High Court): Held the bank liable as a bailee for the loss of ornaments entrusted to it.
• Natioal Bank of Lahore Ltd. v. Sohan Lal Saigal [AIR 1962 P H 534] (Punjab and Haryana High Court): Applied bailor-bailee relationship where the bank manager had tampered with the locker.
• Blair v. Riley [175 N.E.R 210] (Court of Appeals of Ohio): Referred to in Natioal Bank of Lahore Ltd. v. Sohan Lal Saigal.
• National Safe Deposit Company v. Stead, Attorney General [95 N.E.R. 973] (Supreme Court of Illinois): Referred to in Natioal Bank of Lahore Ltd. v. Sohan Lal Saigal.
• Mohinder Singh Nanda v. Bank of Maharashtra [1998 ISJ (Banking) 673] (Punjab & Haryana High Court): Held the bank not liable for loss of articles if the bank had no knowledge of the contents of the locker.
• Atul Mehra v. Bank of Maharashtra [AIR 2003 P&H 11] (Punjab & Haryana High Court): Held that mere leasing of a locker does not establish bailment unless the bank had knowledge of the contents.
• Punjab National Bank, Bombay v. K.B. Shetty [1991 (1) C.P.C. 592] (National Commission): Awarded the value of articles stolen from bank lockers and made a separate finding on the negligence of the bank.
• Mahender Singh Siwach v. Punjab and Sind Bank [(2006) 4 CPJ 231 (NC)] (National Commission): Held the bank liable for gross deficiency in service for allowing a third party to access the locker.
• Pune Zilla Madyawarti Sahakari Bank Limited v. Ashok Bayaji Ghogare [2015 SCC OnLine NCDRC 2832] (National Commission): Held that the affidavit of the locker holder should ordinarily be accepted for proving the contents of the bank locker.
• UCO Bank v. RG Srivastava [1996 (1) CPR 97] (National Commission): Held that disputes on the contents of a locker can only be decided upon provision of elaborate evidence in a civil court.
• Mamta Chaudaha v. Branch Manager/Head Manager, State Bank of India [(2020) 1 CPJ 276 (NC)] (National Commission): Dismissed the complaint for recovery of the value of ornaments due to lack of evidence.
• Charan Singh v. Healing Touch Hospital & Ors. [(2000) 7 SCC 668]: Relied upon by the appellant for arguing that compensation must be awarded to bring a qualitative change in the attitude of the service provider.

Legal Provisions Considered by the Court:

• Section 148 of the Indian Contract Act, 1872: Defines ‘bailment’, ‘bailor’, and ‘bailee’.
• Section 149 of the Indian Contract Act, 1872: Defines how delivery to a bailee is made.
• Sections 45 ZC to 45 ZF of the Banking Regulation Act, 1949: Referred to in the context of the return of safe custody of articles to the survivors/legal heirs of deceased locker holders.
• The Banking Companies (Nomination) Rules, 1985: Referred to in the context of the return of safe custody of articles to the survivors/legal heirs of deceased locker holders.
• The Indian Succession Act: Referred to in the context of the return of safe custody of articles to the survivors/legal heirs of deceased locker holders.
• Information Technology Act, 2000: Applicable to the sharing of customers’ personal data.

Authorities Table

Judgment

The Supreme Court held that while the question of whether the bank is liable as a bailee for the contents of the locker requires a detailed factual inquiry in a civil court, banks have a separate duty of care to maintain and operate their locker systems. The Court emphasized that banks cannot contract out of the minimum standard of care with respect to maintaining the safety of the lockers.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court relied on Roberts v. Stuyvesant Safe Deposit Co. [CITATION] and other foreign precedents to establish that the relationship between a bank and a locker holder is akin to that of a bailor and bailee.
• The Court distinguished Mohinder Singh Nanda v. Bank of Maharashtra [CITATION] and Atul Mehra v. Bank of Maharashtra [CITATION], stating that mere leasing of a locker does not establish bailment unless the bank had knowledge of the contents.
• The Court referred to Jagdish Chandra Trikha v. Punjab National Bank [CITATION], where the Delhi High Court held the bank liable as a bailee.
• The Court endorsed the view in UCO Bank v. RG Srivastava [CITATION] that disputes on locker contents should be decided in a civil court.
• The Court also referred to Punjab National Bank, Bombay v. K.B. Shetty [CITATION] and Mahender Singh Siwach v. Punjab and Sind Bank [CITATION], where the National Commission had found the banks to be negligent.

What weighed in the mind of the Court?

The Supreme Court’s decision was influenced by several key factors. The Court emphasized the need for banks to act responsibly as custodians of public property. The Court also highlighted the inadequacy of existing regulations and the need for uniformity in rules regarding locker management. The Court noted that banks cannot evade their duty of care merely by claiming ignorance of the contents of the lockers. The Court also recognized the importance of maintaining investor confidence and the need to protect consumers from unfair practices.

Fact:Law Ratio

Logical Reasoning

The Court rejected the argument that banks are not liable for loss of valuables in lockers due to lack of knowledge of the contents. The Court emphasized that banks must follow proper procedures for locker allotment and operation.

The Court observed that:

“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 also stated:

“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.”

Further, the Court mentioned:

“The banks should not have the liberty to impose unilateral and unfair terms on the consumers.”

The Court held that the breaking open of the locker in the present case was a gross deficiency of service on the part of the bank. The Court imposed costs of Rs. 5,00,000 on the bank, to be paid to the appellant as compensation, and Rs. 1,00,000 as litigation expenses. The Court also directed the Reserve Bank of India (RBI) to issue comprehensive guidelines on locker management within six months.

Key Takeaways

• Banks have a separate duty of care for locker management, irrespective of the contents of the locker.
• Banks must maintain proper records, update locker registers, and notify locker holders of any changes.
• Banks must follow due process when breaking open lockers, including giving notice to the locker holder and preparing a detailed inventory.
• The RBI is directed to issue comprehensive guidelines on locker management within six months.
• Customers can claim compensation for deficiency of service if banks fail to maintain proper locker management.

Directions

The Supreme Court directed the Reserve Bank of India (RBI) to issue suitable rules or regulations regarding locker facility management within six months from the date of the judgment. Until such rules are issued, the principles stated in the judgment, particularly in paragraph 12, shall remain binding on banks providing locker or safe deposit facilities. The RBI is also given the liberty to issue suitable rules with respect to the responsibility owed by banks for any loss or damage to the contents of the lockers.

Development of Law

The ratio decidendi of this case is that banks have a separate duty of care for locker management, irrespective of the contents of the locker. This judgment clarifies the obligations of banks towards their customers regarding locker facilities, emphasizing a separate duty of care beyond the contents of the locker itself. It also highlights the need for comprehensive regulations to ensure that banks follow due diligence in operating their locker facilities. This marks a change in the previous position of law by establishing that banks cannot escape liability for mismanagement of locker facilities by claiming ignorance of the locker contents.

Conclusion

The Supreme Court’s judgment in Amitabha Dasgupta vs. United Bank of India clarifies the responsibilities of banks regarding locker facilities. While disputes regarding the contents of lockers must be addressed in civil court, banks have a separate duty of care to ensure proper locker management. This judgment mandates the RBI to issue comprehensive guidelines and sets a precedent for banks to be held accountable for their services, ensuring greater protection for consumers.