Banker-Customer Relationship, Special Modes of Relationship, Rights & Obligations, Lien, Right of Set Off & Garnishee Order. Presentation by: Jagadish Chandra DebnathPrincipalNCC Bank TI.

What is Bank BANK shall be considered those institutions where a substantial part of their business consists of the receipts of money on Current Account to be drawn upon by Cheques.

In Bangladesh a Bank company which run a Bank Business complying the formalities of Bank Company Act 1991. ( Sec-5-Na & Ta). Main function of the bank is Bank Business that is Banking.

Who is Banker?....Dr. H.L Hart defines a Banker as a person or company carrying on the business of receiving moneys and collecting drafts, for customers subject to the obligation of honoring cheques drawn upon them from time to time by the customers to the extent of the amounts available on their current accounts .

Sir John Paget says no person or body corporate or otherwise, can be a Banker who dont (i) take deposit accounts (ii) take current accounts (iii) Issue and pay cheques and (iv) Collect cheques crossed and uncrossed for his customers."

Who is Banker?Section-3(b) of the NI Act, 1881, "Banker" means a person transacting the business of accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise and includes any post office Savings Bank.

Who is a Customer?According to Sir. John Paget "To constitute a customer there must have dealing in the nature of regular Banking Business." that is customer of a bank should have a Bank Account and transaction were to be in nature of regular bank business.According to the judgment in the case 'Lad Broke Vs Todd' "The relationship of Banker & Customer begins as soon as the first cheque is paid in and accepted for collection and merely when it is paid."To Constitute a Customer the following essential requirement must be fulfilled A Bank Account- Current, Savings or any nature in money deposit.The Dealing between the banker and customer must be of the nature of banking business

Who is a Customer?A customer is a person who has entered into a contract with a bank for the opening an account in his or her name. The term 'customer' has not yet been statutorily defined. In order to constitute customer, a person should satisfy two conditions:He should have an account with the bank,The dealing should be of banking nature.In the Section-4-104(1)E of Uniform Commercial Code (US) defines a Customer as Any person having an account with a bank or for whom a bank has agreed to collect items and includes a bank carrying an account with another bank.

Mode of Banker Customer relationship.The banker customer relationship is essentially a debtor-creditor contractual relationship. This relationship may be divided into (a) legal relationship (b) behavioral relationship.

Mode of Relationship depends on the Nature of Transactions with the Bank

Special Mode of Relationship

Basis of Banker Customer RelationshipContractual relationship is established between banker and customer through opening of ACCOUNT. Banker- Customer Relationship is guided by different related Laws and Act. of this land.

Legal rights and obligations..On the basis of establishment of legal relationship, between banker and customer, both have got the legal rights and obligations on another as to opening and operations of different accounts.

Rights of a Customersi) Right to deposit money in his Account on time.ii) Right to demand repayment by issuing cheque or written order properly in proper time and place.iii) Right to get pass book/ Statement of account.iv) Right to stop payment of his cheque. v) Right to give Standing Instruction.vi) Right to claim interest of his deposit balance in the interest bearing account.vii) Right to have secrecy of his account.viii) Right to claim damages for any loss and defamation due to wrongful/willful dishonour of cheque by bank.ix) Right to demand the proceeds of the instrument deposited for collection and collected accordingly.x) Right to claim money paid by bank from his account wrongly or payment is not made in due course.

Banker's Righti) Right to return deposit if not proper manner and time.ii) Right to return the cheque if not drawn properly or in time or for some other reason.iii) Right to debit customer's account for any charges, interest, and commission if recoverable.iv) Right of lien- Bankers Lien, Right of set-off etc.

Right of lien- Bankers Lien, Right of set-offLIEN : According to Contract Act 1872 Sec: 170, a lien is the right of a creditor in possession of goods, securities or any other assets belonging to the debtor to retain them until the debt is repaid.

Particular Lien: General Lien: Banker's Lien: Negative Lien:

Banker does not have lien over the following items:Credit balance of deposit account of the borrower.Securities received by Bank for sale.Goods or securities left by the customer in the Banker's hand inadvertently.Money deposited for a special purpose.Instruments deposited for collection .Articles deposited for safe custody etc.

RIGHT OF SET OFF The right of set off is the right of a creditor to the total or partial merging of a claim against the counter claim of the debtor.In other words, a set off is a right which, enable a creditor to adjust wholly or partially a debit balance in the debtors account with any credit balance lying in his (debtors) favour.

Essential Features of SET OFF :Mutual debts must be certain:Debts must be due :Debts in the same right: No agreement to the contrary: Notice of set off:

Right of Set Off without serving any notice Without serving any notice Banker can exercise his right of set off in the following cases even before the loan becomes due:On the death, insanity or insolvency of the customer.On the insolvency of a partner of a firm.On the winding up of a company.On receipt of a garnishee order.On receipt of an information of a second mortgage over the security which is charged to the Bank. On receipt of a notice of assignment of the credit balance of the customer.

Duties & Obligations of a Banker

Customer's Duties & Obligationi) Must deposit the amount properly and in time.ii) Must demand payment by issuing cheque or written order properly.iii) Must pay the bank's charges interest and commission if payable.iv) Must abide by the laws.

Banker is not legally liable to the customerIf the cheque is dishonored under the following conditions, although the cheque is drawn properly: -If the fund is insufficient.If payment is stopped by the drawer.If payment is stopped by the court by issuing 'Garnishee Order'.Attachment order is issued by any competent authority.Cheque presented after the death of the customer.Notice of assignment.Cheque presented after business/banking hour as declared earlier.

Secrecy of Customer's Account.

Banker's obligation is to maintain strict secrecy of customer's account. This obligation continues even after the customer has closed his account with the bank.However, the banker may dispense with the above rule under following circumstances: -Where customer's consent has been obtained.Where bankers own interest require.Where credit information is required by other banks.Disclosure in National InterestDisclosure under compulsion of law:Bankers' Books Evidence Act-1891.Money Laundering Prevention Act, 2002.Income Tax Ordinance-1984.Bank Companies Act-1991.Criminal Procedure Code-1898.Foreign Exchange Regulation Act-1947.Code of Civil Procedure-1908 Anticorruption Commission Act 2007

TERMINATION OF RELATIONSHIP:How does the relationship subsist:- The relationship continues so long as it is carried out according to the terms of contract embodied in the rules of the bank

When Relationship Terminate: Under following circumstances banker - customer relationship may be terminated.Termination by the customer- Application for closing the account and bankers do accordingly.Termination by the Banker Misconduct by Customer Fraud- Cheque issued without maintaining sufficient BalanceTermination on the Death of CustomerTermination due to insolvency of Suspension due to Lunacy of CustomerSuspension due to attachment of Account by the Court Garnishee Order.

Garnishee OrderAs per Civil Procedures Code Rule 21/46 is the attachment of Credit balance in a bank account by the count.When Credit Balance Attachment Order issued by the Court to a banker on judgment debtor account than this order is known as Garnishee Order Garnishee Order Nishee & Order Absolute

Execution of Garnishee OrderOn receipt of Garnishee Order bank must execute the order without delay.If the order received by HO it should be thrown to the concerned branch without delay.Loans & advances to at first adjusted that is right of set off than inform the court.No withdrawal / payment to be allowed.If the there absolute order than certain balance to be transferred in sundry deposit account. In such cases customers transaction may be allowed.

Q & A ???

Thank You All.