Banks Duty-Bound To Exercise Due Diligence In Maintaining And Operating Their Locker Facility: Supreme Court Issues Guidelines

The Supreme Court observed that the banks owe a duty of care to exercise due diligence in maintaining and operating their locker or safety deposit systems and that they cannot contract out of the minimum standard of care in this regard.The banks cannot wash off their hands and claim that they bear no liability towards their customers for the operation of the locker. the bench comprising Justices Mohan M. Shanthanagoudar and Vineet Saran said while directing the Reserve Bank of India to lay down Rules and Regulations mandating the steps to be taken by banks with respect to locker facility/safe deposit facility management. Until such regulations are framed and issued by the RBI, the bench observed that the following guidelines have to be followed by the bank Irrespective of the value of the articles placed inside the locker, the bank is under a separate obligation to ensure that proper procedures are followed while allotting and operating the lockers:(a) This includes maintenance of a locker register and locker key register. (b) The locker register shall be consistently updated in case of any change in allotment. (c) The bank shall notify the original locker holder prior to any changes in the allotment of the locker, and give them reasonable opportunity to withdraw the articles deposited by them if they so wish. (d) Banks may consider utilizing appropriate technologies, such as block chain technology which is meant for creating digital ledger for this purpose. (e) The custodian of the bank shall additionally maintain a record of access to the lockers, containing details of all the parties who have accessed the lockers and the date and time on which they were opened and closed. (f) The bank employees are also obligated to check whether the lockers are properly closed on a regular basis. If the same is not done, the locker must be immediately closed and the locker holder shall be promptly intimated so that they may verify any resulting discrepancy in the contents of the locker. (g) The concerned staff shall also check that the keys to the locker are in proper condition. (h) In case the lockers are being operated through an electronic system, the bank shall take reasonable steps to ensure that the system is protected against hacking or any breach of security.(i) The customers' personal data, including their biometric data, cannot be shared with third parties without their consent. The relevant rules under the Information Technology Act, 2000 will be applicable in this regard. (j) The bank has the power to break open the locker only in accordance with the relevant laws and RBI regulations, if any. Breaking open of the locker in a manner other than that prescribed under law is an illegal act which amounts to gross deficiency of service on the part of the bank as a service provider. (k) Due notice in writing shall be given to the locker holder at a reasonable time prior to the breaking open of the locker. Moreover, the locker shall be broken open only in the presence of authorized officials and an independent witness after giving due notice to the locker holder. The bank must prepare a detailed inventory of any articles found inside the locker, after the locker is opened, and make a separate entry in the locker register, before returning them to the locker holder. The locker holder's signature should be obtained upon the receipt of such inventory so as to avoid any dispute in the future. (l) The bank must undertake proper verification procedures to ensure that no unauthorized party gains access to the locker. In case the locker remains inoperative for a long period of time, and the locker holder cannot be located, the banks shall transfer the contents of the locker to their nominees/legal heirs or dispose of the articles in a transparent manner, in accordance with the directions issued by the RBI in this regard. (m) The banks shall also take necessary steps to ensure that the space in which the locker facility is located is adequately guarded at all times. (n) A copy of the locker hiring agreement, containing the relevant terms and conditions, shall be given to the customer at the time of allotment of the locker so that they are intimated of their rights and responsibilities. (o) The bank cannot contract out of the minimum standard of care with respect to maintaining the safety of the lockers as outlined supra.The bench issued these directives while disposing an appeal against a judgment of National Consumer Disputes Redressal Commission. In this case, the complainant filed a consumer complaint before the District Consumer Forum seeking a direction to United Bank of India to return the seven ornaments that were in the locker; or alternatively pay Rs. 3,00,000/ towards the cost of jewelry, and compensation for damages. The Forum...

Banks Duty-Bound To Exercise Due Diligence In Maintaining And Operating Their Locker Facility: Supreme Court Issues Guidelines

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