Jalandhar District Commission Upholds Nominee's Rights In The Event Of FD Depositor's Death, Directs Yes Bank To Disburse Amount, Pay Compensation

Brief Facts:

Smt. Asha Tiwari, the mother of the Complainant, had a fixed deposit of Rs. 2,00,000/- under the Reinvestment Senior Citizen Scheme of The Bank (“Bank”). The fixed deposit was renewed by the Bank on its due date, i.e., 10th May 2017, until 20th February 2019, for a sum of Rs. 2,30,554.67/- with due interest on the base amount of Rs. 2,00,000/-. Smt. Asha subsequently changed the nominee in the presence of the authorized officer of the Bank. The first nominee was cancelled, and the Complainant's name was registered and accepted by the Bank.

During the period of the fixed deposit, Smt. Asha fell ill and was admitted to a hospital. The Complainant incurred all medical expenses, but she did not recover despite continued and extensive medical treatment, eventually passing away. Subsequently, the Complainant, as the nominee, submitted an application along with the Death Certificate to the bank for the settlement of the fixed deposit claim and accrued interest. Despite continuous personal approaches, reminders, and legal notices, the bank did not honour the Complainant's request, stating that the deposit would be released as per court orders. Thereafter, the Complainant filed a consumer complaint in the District Consumer Disputes Redressal Commission, Jalandhar, Punjab (“District Commission”), against the bank arguing that the bank's refusal to settle the claim contravenes the statutory provisions of the Nomination Act, constituting a deficiency in service.

In response, the bank argued that the complaint was not maintainable under any provisions of the law and should be dismissed. It explained that Smt. Asha initially named someone else as the nominee, but the nomination was later changed in the presence of an authorized officer. The bank contended that after her death, her husband filed objections and requested the bank to stop further transactions in the account and release the payment in his favour, claiming to be the legal heir. The bank asserted that due to conflicting claims by legal heirs, it sought court orders before releasing the payment. The bank argued that the Complainant failed to disclose the objection by his father and suppressed material facts, making the complaint misleading and liable for dismissal.

Observations by the Commission:

The District Commission, to decide on the aspect of the nominee, referred to the decision of Calcutta High Court in Communist Party of India (Marxist) Vs. United Bank of India and Ors. cited Section 45-ZA of the Banking Regulation Act, outlining the nomination process for the payment of depositors' money and the rights of the nominee in the event of the depositor's demise. Payment made by the banking company under this section is considered a complete discharge of its liability, with a proviso that it does not affect the rights or claims of any other person against the payee.

As per Rule 2 of the Banking Companies (Nomination) Rules, 1985, the nomination is to be made by the depositor in Form DA 1. The nomination may be made only in respect of an individual deposit, and it is subject to cancellation or variation by the depositor(s) in the prescribed manner. The District Commission in this regard held that in the event of the death of the sole depositor (Smt. Asha) or all depositors, the nominee (Complainant) is entitled to receive the deposit amount, and the nominee's rights prevail over others unless the nomination is varied or cancelled as per the prescribed procedure.

Therefore, the District Commission held that in the event of the depositor's death, the banking company is obliged to return the deposit amount to the nominee. Consequently, it held that the Complainant, being the duly registered nominee, was entitled to receive the deposit amount. It directed the Bank to release the amount to the Complainant, along with compensation of Rs. 5,000/- for mental agony and harassment, and Rs. 3,000/- as litigation expenses. To protect the rights of any potential claimants, the District Commission directed the Complainant to furnish an indemnity bond of Rs. 4,00,000/-, with one surety of a similar amount, indemnifying the claim of any other claimant/opposite party in the future.

Case Title: Bhanu Kaushal vs Yes Bank Ltd.

Case No.: Complaint No. 113 of 2020

Advocate for the Complainant: Shelly Shukla

Advocate for the Respondent: V.K. Gupta