Why Can't Information About Unclaimed Bank Accounts Of Dead Persons Be Given To Heirs? Supreme Court Asks Union, RBI

The Supreme Court today asked the Union Government and the Reserve Bank of India why details of the bank accounts of deceased persons could not be disclosed to heirs for them to access unclaimed funds. 

The bench of Justice Vikram Nath and Justice Sandeep Mehta was hearing a public interest litigation (PIL) filed in 2022 by financial journalist and Managing Editor of Money Life, Sucheta Dalal, concerning unclaimed funds of investors and depositors that are not accessible to the rightful legal heirs.

Advocate Prashant Bhushan, appearing for Dalal, stressed that a key issue arises when the heirs of the deceased are not aware of the details of how many accounts/ funds are left unclaimed. He submitted that the PIL sought directions for making the details of such unclaimed accounts public. 

Justice Mehta then intervened to ask that allowing the details of such unclaimed funds/accounts would attract online scammers and fraudsters to pose as heirs and claim the amounts.

Bhushan countered that the RBI had also recommended the need to have a 'Centralised & Searchable Database' by which people can find the accounts of their deceased parents. Bhushan added that the petitioner is seeking the centralised database not just for the banks, but also for other securities, as well as for insurance and post office accounts.

Bhushan also added that various welfare funds have also gone into these unclaimed accounts; the total unclaimed amount is 'huge' and is more than one and a half lakh crores.

Additional Solicitor General N Venkataraman, appearing for the Union, told the bench about the Depositor Education and Awareness Fund, to which amounts lying unclaimed in accounts for 10 years are transferred to fund public awareness and financial literacy schemes. He said that the petitioner was not challenging the transfer of money to the public scheme. He added that if a genuine heir comes forward, the amount is refunded to them from the Fund. He further argued that the PIL petition did not furnish any data on the issue.

Justice Mehta then inquired, "Supposing a man has got 10 different accounts in 10 countries, he dies intestate, how do his heirs get the details? He may not have done the KYC"

The ASG stressed that these were issues that lay within the policy domain. 

Justice Mehta remarked that giving details of accounts to the heirs of the deceased was not an issue of the policy domain.

"It's not a question of policy, we are not saying that the transfer is illegal. What we are saying is, what is wrong if we give the information to the legal heirs? What is wrong with that? " 

The ASG replied that several constraints were in putting the information in the public domain, like privacy, and the possibility of it being exploited.  

Sr Advocate Ranjith Kumar, appearing for the RBI, submitted that a facility of 'Central KYC' was already in place in cases.

 He added, "Now the money is in trust with the bank; therefore, as a trustee, if I am not satisfied with the person claiming the money, just by giving an indemnity bond.." 

The bench asked the Union and the RBI to submit their responses in 4 weeks. The matter will be heard on May 5.

What Is The Plea About ? 

The petition sought directions from the Court to the Respondents (Ministry of Finance, Reserve Bank of India, Ministry of Corporate Affairs and SEBI) to ensure that unclaimed funds of the public that get transferred to Government owned funds through the Depositor's Education and Awareness Fund (DEAF), Investor's Education and Protection Fund (IEPF) and Senior Citizen's Welfare Fund (SCWF), on the ground that the same were not claimed by the legal heirs/nominees, were made available to said legal heirs/nominees by providing information of holders of inoperative/dormant accounts on a centralized online database.

The petitioner submitted that the funds from the inoperative/dormant bank accounts that were transferred to the DEAF often remain unclaimed because the legal heirs and nominees of the deceased bank account holders were often unaware of the very existence of the bank accounts of the deceased and in such cases, the banks failed to track down and inform them about the existence of such accounts.

As per the petition, another reason for unclaimed funds was that the information of the deceased investors whose deposits, debentures, dividends, insurance and post office funds etc., had been transferred to the IEPF, were not readily available on the website of IEPF. The petition alleged that while the IEPF authority publishes the name of the people whose money has been transferred to the fund on the IEPF website, several technical glitches are encountered when the website is accessed. Resultantly, people were forced to engage middlemen to get their refunds.

Due to the same, the petitioner stated that the amount lying with the IEPF, started at Rs.400 crore in 1999, and skyrocketed 10 times higher at Rs.4,100 crore at the end of March 2020. The petition submitted that even those banks that do offer the data on deceased account-holders failed to serve the intended purpose as legal heirs were unaware of the very existence of a bank account.

In view of the above, the petitioner prayed for the development of a centralized online database under the control of the Reserve Bank of India, that would provide information about the deceased accountholder including such details as the name, address and last date of transaction by the deceased accountholder. Further, the petition stated that it should be mandatory for banks to inform RBI about the inoperative or dormant bank accounts

CASE TITLE: SUCHETA DALAL v. UNION OF INDIA AND ORS. | W.P. (C) No. 185/2022