Bank Doesn't Hold Customer's Deposit In Trust; Banker-Depositor Relationship That Of Creditor-Debtor: Supreme Court

The Supreme Court has observed that the money that is deposited by the customer in the bank is not held by it as a trustee but it becomes a part of the banker's fund who is under a contractual obligation to pay the sum deposited by a customer to him on-demand with the agreed rate of interest.A bench comprising Chief Justice of India NV Ramana, Justice Surya Kant and Justice Hima Kohli made this observation while deciding the appeal of a former bank manager, who was convicted for offences relating to criminal breach of trust, cheating and falsification of accounts under Sections 409, 420 and 477A of the Indian Penal Code.The Court observed :"...it is fruitful to point out that the banker is one who receives money to be drawn out again when the owner has occasion for it. Since the present case involves a conventional bank transaction, it may be further noted that in such situations, the customer is the lender and the bank is the borrower, the latter being under a super added obligation of honouring the customer's cheques up to the amount of the money received and still in the banker's hands. The money that a customer deposits in a bank is not held by the latter on trust for him. It becomes a part of the banker's funds who is under a contractual obligation to pay the sum deposited by a customer to him on demand with the agreed rate of interest. Such a relationship between the customer and the Bank is one of a creditor and a debtor. The Bank is liable to pay money back to the customers when called upon, but until it's called upon to pay it, the Bank is entitled to utilize the money in any manner for earning profit."Factual Background C. Vinay Kumar (Accused No. 3) who was the Treasurer of the Nishita Educational Academy had opened Current Account No. 282 in Sri Rama Grameena Bank, Nizamabad Branch in his capacity as an authorized signatory of the Academy. The account was opened with an initial deposit of Rs. 5,00,000/-. The appellant (N. Raghavender), Accused No.1, was the brother-in-law of Accused No.3 and was the bank's Branch Manager. The appellant and A. Sandhya Rani (Accused No. 2) who worked as a Clerk- cum-Cashier in the same Bank from 1991-1996 allegedly abused their respective position in the Bank and conspired with Accused no. 3 by allowing withdrawal of amounts up to Rs. 10,00,000/- from the account of the Academy, notwithstanding the fact that the account did not have the requisite funds for such withdrawal.The alleged modus operandi of the accused persons was that the Appellant, in his capacity as a Branch Manager, issued 3 loose-leaf cheques and despite withdrawal of the said amount, the debit was deliberately not entered into the ledger book. The endorsement on the third cheque issued by the Appellant showed the payment in favour of Accused No.3 but the signature on the cheque did not tally with that of Accused No.3. The Appellant was further accused of pre- maturely closing two FDRs on February 24, 1995 and February 25, 1995 for a sum of Rs. 10,00,000/- and 4,00,000/- respectively which stood in the name of B. Satyajit Reddy. As per the vouchers issued by the Bank, a total of Rs. 14,00,000/- were credited to account but only Rs. 4,00,000/- were shown in the ledger. The remaining Rs. 10,00,000/- were allegedly adjusted towards the secret withdrawal from account during 1994.When the irregularities were noticed by the Auditor, the appellant was shifted from Nizamabad Branch to the Head Office and an internal inquiry was ordered. The same prompted the Bank's Chairman to make a written complaint to the Superintendent of Police, Central Bureau of Investigation at Hyderabad.CBI registered a case u/s 409, 477(A), and 120B IPC, and Section 13(2) read with 13(1)(c) & (d) of the PC Act. After the investigation and filing of chargesheet the Special Judge CBI framed charges against the appellant and co accused. The Special Judge thereafter on March 28, 2020 unequivocally acquitted all the accused of offences u/s 120B IPC and u/s 13(2) r/w Section 13(1)(c) of the PC Act. Accused No.2 and Accused No. 3 were further acquitted of all the other charges as well but the Appellant, however, was held guilty of offences punishable under Sections 420, 409 and 477A IPC as also u/s 13(2) r/w Section 13(1)(d) of the PC Act.Aggrieved by the Trial Court's judgement, the appellant approached the High Court but the High Court while concurring with the findings held that the Appellant had misused his official position as the Bank Manager to prematurely encash the two FDRs, and thereafter transfer the amount into the account of the Academy.Assailing the High Court's judgement the appellant approached the Top Court.Submission of Counsels Appearing for the appellant, Senior Advocate Siddharth Luthra submitted that the most serious accusation attributed to the Appellant was he unauthorizedly closed two FDR's belonging to B. Satyajit Reddy pre-maturely but neither was B. Satyajit Reddy examined by the CBI as a witness nor was his...

Bank Doesn't Hold Customer's Deposit In Trust; Banker-Depositor Relationship That Of Creditor-Debtor: Supreme Court

Shruti Kakkar

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Bank Doesn't Hold Customer's Deposit In Trust; Banker-Depositor Relationship That Of Creditor-Debtor: Supreme Court

Shruti Kakkar

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