The Supreme Court on 19th February 2021 comprising of a bench of Justices Mohan M. Shanthanagoudar and Vineet Saran while cautioning banks against breaking open lockers without adhering to the relevant laws and regulations, ruled that Banks cannot impose unilateral and unfair terms on the consumers while operating bank lockers.(Amitabha Dasgupta v. United Bank of India).
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 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.
The bench observed that until such regulations are framed and issued by the RBI, 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:
- Maintenance of a locker register and locker key register.
- Locker key register to be consistently updated in case of any change in allotment.
- Bank to 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.
- Banks to consider utilizing appropriate technologies such as block chain meant for creating digital ledger for this purpose.
- Custodian of bank to additionally maintain a record of access to the lockers, containing details of all the parties who have accessed the lockers and date/time on which they opened and closed.
- Bank employees also obligated to ensure rightful access, including open/close, from time to time.
- Concerned staff to check if keys to the locker are in proper condition.
- In case it is operated through electronic means, the Bank should ensure that the system is protected against hacking and breach of other security practices.
- Personal Sensitive Data, including Biometrics cannot be shared with third parties.
- Bank has the authority to break open the locker only in accordance with relevant RBI regulations.
- 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 in the presence of the authorized officials and independent witness after giving due notice. An inventory of articles found must be made.
- Bank must undertake proper verification procedures to ensure that no unauthorized party gains access to the locker.
- Banks shall also take necessary steps to ensure that the space in which the locker facility is located is adequately guarded at all times.
- Copy of locker hiring agreement, containing relevant terms and conditions to be given to the customer at the time of allotment.
- Banks cannot contract out the minimum standard of care with respect to maintain the safety of the lockers.
Facts of the case
The appeal was filed by Kolkata resident Amitabha Dasgupta against an order of National Consumer Disputes Redressal Commission.
He filed a complaint before the district consumer forum seeking a direction to United Bank of India's Kolkata branch to return the seven ornaments that were in the locker, or alternatively pay Rs 3 lakh towards the cost of jewellery and compensation for damages.
He then moved the top court against an order of the National Consumer Disputes Redressal Commission (NCDRC), which agreed to the State Consumer Forum's decision to reduce the Rs 3 lakh compensation, ordered by the District Consumer Forum to Rs 30,000. Both the national and state forums were of the view that 'the civil court can decide on the loss of the contents'.
Issues raised
The appeal before the Apex Court filed by the appellant raised these issues:
- Whether Bank owes a duty of care to the locker holder under the laws of bailment or any other law with respect to the contents of the locker? Whether the same can be effectively adjudicated in the course of consumer dispute proceedings?
- Whether Bank owes an independent duty of care to its customers with respect to diligent management and operation of the locker, separate from its contents? Whether compensation can be awarded for non-compliance with such duty?
Contention of the parties
The counsel for the Appellant submitted that even if the case is remitted to the civil court for adjudication on the issue of the contents of the locker, it would be highly improbable to ascertain the same since the contents of a locker are exclusively known only to the locker holder. On the question of damages, he relied on Charan Singh v. Healing Touch Hospital & Ors. to argue that compensation must be awarded to bring a qualitative change in the attitude of the service provider.
The counsel for the Respondents submitted that the National Commission’s holding does not warrant interference. He submitted that compensation for the loss of jewellery can only be awarded after appreciation of evidence by the trial court.
Courts Observation & Judgment
The bench however did not answer the first issue conclusively. It upheld the NCDRC finding that the complainant must file a separate suit before the competent civil court for seeking this relief and for proving that the missing items were actually in the custody of the bank. The bench said that all the questions of fact and law are left open before the civil court to decide on the merits of the case, including as to whether the law of bailment is applicable, or any other law as the case may be.
The bench considering the second issue observed that Banks as service providers under the earlier Consumer Protection Act, 1986, as well as the newly enacted Consumer Protection Act, 2019, owe a separate duty of care to exercise due diligence in maintaining and operating their locker or safety deposit systems
"It appears to us that the present state of regulations on the subject of locker management is inadequate and muddled. Each bank is following its own set of procedures and there is no uniformity in the rules. Further, going by their stand before the consumer fora, it seems that the banks are under the mistaken impression that not having knowledge of the contents of the locker exempts them from liability for failing to secure the lockers in themselves as well. In as much as we are the highest Court of the country, we cannot allow the litigation between the bank and locker holders to continue in this vein. This will lead to a state of anarchy wherein the banks will routinely commit lapses in proper management of the lockers, leaving it to the hapless customers to bear the costs. Hence, we find it imperative that this Court lays down certain principles which will ensure that the banks follow due diligence in operating their locker facilities, until the issuance of comprehensive guidelines in this regard.", the court said.
While disposing off the appeal, the court of law also observed that the banks cannot wash off their hands and claim that they bear no liability towards their customers for the operation of the locker. It observed:
Before concluding, we would like to make a few observations on the importance of the subject matter of the present appeal. With the advent of globalization, banking institutions have acquired a very significant role in the life of the common man. Both domestic and international economic transactions within the country have increased multiple folds. Given that we are steadily moving towards a cashless economy, people are hesitant to keep their liquid assets at home as was the case earlier. Thus, as is evident from the rising demand for such services, lockers have become an essential service provided by every banking institution. Such services may be availed of by citizens as well as by foreign nationals. Moreover, due to rapid gains in technology, we are now transitioning from dual key operated lockers to electronically operated lockers. In the latter system, though the customer may have partial access to the locker through passwords or ATM pin, etc., they are unlikely to possess the technological knowhow to control the operation of such lockers. On the other hand, there is the possibility that miscreants may manipulate the technologies used in these systems to gain access to the lockers without the customers' knowledge or consent. Thus the customer is completely at the mercy of the bank, which is the more resourceful party, for the protection of their assets. In such a situation, the banks cannot wash off their hands and claim that they bear no liability towards their customers for the operation of the locker. The very purpose for which the customer avails of the locker hiring facility is so that they may rest assured that their assets are being properly taken care of. Such actions of the banks would not only violate the relevant provisions of the Consumer Protection Act, but also damage investor confidence and harm our reputation as an emerging economy.
The court also directed RBI to lay down comprehensive directions mandating the steps to be taken by banks with respect to locker facility/safe deposit facility management.
Thus it is necessary that the RBI lays down comprehensive directions mandating the steps to be taken by banks with respect to locker facility/safe deposit facility management. The banks should not have the liberty to impose unilateral and unfair terms on the consumers. In view of the same, we direct the RBI to issue suitable rules or regulations as aforesaid within six months from the date of this judgment. Until such Rules are issued, the principles stated in this judgment, in general and at para in particular, shall remain binding upon the banks which are providing locker or safe deposit facilities. It is also left open to the RBI to issue suitable rules with respect to the responsibility owed by banks for any loss or damage to the contents of the lockers, so that the controversy on this issue is clarified as well.
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