Payment To 'Either' Or 'Surviving' Joint Account Holder Is Full Discharge Of Bank's Liability: J&K&L High Court
The High Court of Jammu & Kashmir and Ladakh has held that when a joint bank account carries the “either or survivor” mandate, payment of the matured deposit to the surviving account holder constitutes a complete and valid discharge of the bank's liability.Any dispute regarding entitlement to those funds, the Court made clear, lies exclusively between the survivor and the legal heirs,...
The High Court of Jammu & Kashmir and Ladakh has held that when a joint bank account carries the “either or survivor” mandate, payment of the matured deposit to the surviving account holder constitutes a complete and valid discharge of the bank's liability.
Any dispute regarding entitlement to those funds, the Court made clear, lies exclusively between the survivor and the legal heirs, and cannot be transformed into criminal proceedings against the bank.
Justice Sanjay Dhar made these observations while allowing two connected petitions filed by Mrs. Shabeena Ibrahim and The Hongkong & Shanghai Banking Corporation Ltd. (HSBC), both of whom had been arraigned as accused in a criminal complaint filed by one Mir Usman Disooki.
Background:
The proceedings stemmed from a complaint filed by Disooki alleging that after the death of his grandfather, Habibullah Mir, HSBC had “fraudulently changed account numbers” and diverted funds to accused Jehan Habibullah, the surviving joint account holder. The complainant claimed that substantial amounts were transferred in 2021 and 2022 without notice to the legal heirs, and despite the pendency of a civil recovery suit. Cognizance was taken by the trial Magistrate, prompting the petitioners to approach the High Court.
Observations:
Addressing the question of territorial jurisdiction, the Court observed that even if the alleged acts occurred in New Delhi or Mumbai, Section 181(4) CrPC allows jurisdiction where property “was required to be returned or accounted for,” and since the complainant resides at Srinagar, “the learned trial court does have the jurisdiction to entertain the complaint.”
Turning to the allegations against petitioner Shabeena Ibrahim, the Court found that the complaint was bereft of any specific accusation. Justice Dhar noted that the allegations against her were merely “bald and vague” and that the only act attributed to her, ie filing an application as attorney of accused Jehan Habibullah for revocation of a succession certificate “can, by no stretch of reasoning, be taken to mean that she was in connivance with other accused.” The Court concluded that even if the contents of the impugned complaint are taken to be true at their face value, no offence is made out against petitioner Shabeena Ibrahim.
On the central issue concerning the bank's alleged liability in transferring funds to the surviving joint holder, Justice Dhar reproduced and analysed the RBI Master Circulars governing joint accounts, noting that where a joint account is opened with “either or survivor” instructions, payment can be made to the survivor on maturity and such payment constitutes a valid discharge of a bank's liability.
Referring to the RBI Circular, the Court remarked,
“… in a case where joint account is opened with survivorship clause, the payment of the balance lying in the deposit account to the survivor of deceased deposit account holder, would be a valid discharge of a bank's liability. However, the payment made to a survivor would not affect the right or claim which any person may have in respect of the amount released in favour of the survivor”.
On the factual matrix, the Court recorded that Habibullah Mir and Jehan Habibullah “were, admittedly, joint account holders containing the survivor clause 'either or survivor',” and that no fixed deposits were prematurely encashed. Once the deposits matured, the bank was legally permitted to credit the funds to the survivor's account. The Court declared,
“Once the petitioner bank, upon death of deceased Habibullah Mir, transferred the amount from the joint account to the account of Jehan Habibullah (the survivor), the petitioner bank is discharged from its liability towards all claims.”
The Court further emphasised,
“The complainant, if he has any claim in respect of the amount left behind… the same cannot be fastened against the petitioner bank but can be enforced against accused Jehan Habibullah.”
With regard to the allegation of “changed account numbers, the Court accepted HSBC's explanation that the numbers changed due to routine generation of new numbers upon creation and maturity of term deposits. Justice Dhar noted that the original succession certificate did not even pertain to the accounts maintained with HSBC, and thus there was no valid court direction on the basis of which the petitioner bank could have refused to release the amounts.
In view of these findings, the Court held that prosecuting the petitioners under such circumstances would constitute misuse of the criminal process and remarked,
“Filing of the complaint by the respondent/complainant against the petitioner bank and against petitioner Shabeena Ibrahim in these circumstances is nothing but an abuse of process of law.”
Holding that no offence was made out, the Court allowed both petitions and quashed the complaint and all proceedings arising from it insofar as they concerned the petitioners.
Case Title: MRS. SHABEENA IBRAHIM THE HONGKONG & SHANGHAI BANKING CORPORATION LIMIT Vs MIR USMAN DISOOKI