Introduction
In a significant judgment delivered on November 26, 2025, by the High Court of Jammu & Kashmir and Ladakh, Justice Sanjay Dhar quashed criminal proceedings against The Hongkong & Shanghai Banking Corporation Ltd. (HSBC) and Mrs. Shabeena Ibrahim in the case of Shabeena Ibrahim & Anr. v. Mir Usman Disooki (CRM(M) No. 485/2023). The court unequivocally held that payment to the surviving joint account holder under an “either or survivor” mandate constitutes a full and valid discharge of the bank’s liability, insulating it from any criminal liability arising from subsequent disputes among heirs. This ruling reinforces the sanctity of banking contracts governed by Reserve Bank of India (RBI) guidelines and underscores the principle that civil disputes over fund entitlement must not be weaponized as criminal complaints against banks.
The decision aligns with longstanding RBI directives and judicial precedents from the Supreme Court of India and various High Courts, emphasizing that banks act as mere custodians when honoring survivorship clauses. It serves as a bulwark against the misuse of criminal law for what are essentially inheritance battles, providing much-needed clarity to the banking sector amid rising family disputes over deceased depositors’ assets.
Case Background:
The dispute traces its roots to a joint fixed deposit account held by the late Habibullah Mir and his son, Jehan Habibullah, at HSBC under an “either or survivor” mandate. Following Habibullah Mir’s death, the fixed deposits matured between 2021 and 2022. In accordance with the mandate, HSBC transferred the proceeds to Jehan Habibullah, the surviving holder, without notifying other legal heirs, including the complainant, Mir Usman Disooki (Habibullah’s grandson). Disooki alleged fraud, claiming unauthorized changes to account numbers and diversion of funds, especially since a civil suit regarding the estate was pending.
Disooki filed a criminal complaint under Sections 403, 406, 420, and 120-B of the Indian Penal Code, 1860 (IPC), arraigning HSBC and Shabeena Ibrahim (Jehan Habibullah’s attorney) as accused. The trial magistrate took cognizance, prompting the petitioners to seek quashing under Section 482 of the Code of Criminal Procedure, 1973 (CrPC). Key facts mitigating criminality included: no premature encashment of deposits; routine account number updates upon maturity (a standard banking practice); and the absence of a binding succession certificate prohibiting the transfer.
Key Ruling: Bank’s Discharge Under RBI Guidelines
Justice Dhar’s 25-page order meticulously dissected the interplay between banking contracts, RBI regulations, and criminal jurisprudence. Central to the ruling was the interpretation of the “either or survivor” clause as a tripartite contract between the depositors and the bank, which authorizes payment to either holder during their lifetime or to the survivor upon death, without further inquiry into heirship.
The court relied heavily on RBI’s Master Circular on Customer Service in Banks (DBOD.No.Leg.BC.95/09.07.005/2004-05, dated June 9, 2005), which mandates that banks incorporate survivorship clauses in account opening forms and publicize their benefits. Paragraph 5.1 of the circular clarifies: “In the case of deposit accounts where the depositor had utilized the nomination facility and made a valid nomination or where the account was opened with the survivorship clause (‘either or survivor’, or ‘anyone or survivor’, or ‘former or survivor’ or ‘latter or survivor’), the payment of the balance in the deposit account to the survivor(s)/nominee of a deceased deposit account holder represents a valid discharge of the bank’s liability.” This discharge holds provided the bank verifies the survivor’s identity and death certificate, and no court order restrains payment—conditions fully met here.
Echoing the RBI’s Master Circular on Maintenance of Deposit Accounts (RBI/2014-15/17,DBR.No.Dir.BC.10/13.03.00/2014-15, dated July 1, 2014), the court noted that for term deposits with survivorship, premature withdrawals require joint consent if both are alive, but post-death payments to the survivor are routine and liability-free. The judgment quoted: “Payment to survivor in joint deposit accounts with survivorship clause ‘would be a valid discharge of a bank’s liability,’ though not prejudicing third-party claims against the survivor.”
Justice Dhar emphasized that the clause creates a contractual shield: “Once the petitioner bank… transferred the amount from the joint account to… the survivor, the petitioner bank is discharged from its liability towards all claims.”
The court rejected fraud allegations, finding no mens rea (guilty intent) in HSBC’s actions. Account number changes were deemed administrative, not manipulative, and the pending civil suit did not bind the bank absent an injunction. Proceedings against Shabeena Ibrahim were quashed for lack of specific averments, while jurisdiction under Section 181(4) CrPC was upheld but deemed irrelevant given the absence of an offence.
Alignment with Supreme Court Precedents:
The J&K High Court’s ruling is buttressed by SC jurisprudence, which consistently upholds the operational sanctity of survivorship clauses while probing the survivor’s accountability to heirs.
In Anumati v. Punjab National Bank (2004) 8 SCC 511, a bench led by Justice R.C. Lahoti ruled that the “either or survivor” clause facilitates convenient operation and payment but does not confer unilateral authority on one holder to pledge the deposit without the other’s consent.The court clarified: “An ‘either or survivor’ clause in a joint FD account is a tripartite agreement… the amount payable on maturity may be paid by the bank to either holder… for it to be a valid discharge.” This protects banks from liability when honoring the mandate, mirroring the instant case where no pledge or unauthorized variation occurred.
Similarly, in Indranarayan v. Roop Narayan (1971) 3 SCC 495, the SC placed the onus on the survivor to prove the deceased’s intent to confer absolute ownership, failing which the survivor holds funds as a trustee for legal heirs. Justice A.N. Ray observed that joint accounts do not presume gifting; disputes must be civil, not criminal, against the bank. This principle was reiterated in Devender Kumar Talwar v. Baldev Krishan Talwar (2010) 10 SCC 671, where the SC held nominees/survivors as mere custodians, discharging banks upon payment but preserving heir claims against the recipient. The apex court affirmed that Section 45ZA of the Banking Regulation Act, 1949, read with RBI guidelines, validates bank payments to survivors as full discharge, without affecting inter-se heir rights.These SC rulings collectively shield banks from vicarious liability, a stance echoed by Justice Dhar.
High Court Perspectives and Evolving Jurisprudence:
High Courts across India have uniformly endorsed RBI’s framework, quashing criminal overreach in survivorship disputes.
The Delhi High Court in Prabha Bennett v. Rohit Sharma (2022 SCC OnLine Del 2934) held that a surviving joint holder is authorized to withdraw but accountable to the deceased’s heirs unless intent to confer sole ownership is proven. Justice Prathiba M. Singh referenced Indranarayan (supra), ruling:
“In a joint bank account… payable to either of the survivors, if the facts and circumstances do not establish the intention of the first holder… the joint account holder would be accountable to the heirs.” This civil accountability doctrine prevents criminalization, aligning with the J&K ruling.
In Smt. Bharati Phulki v. Smt. Kamala Bala Das (2017 SCC OnLine Gau 140), the Gauhati High Court quashed proceedings against a bank for paying the survivor, citing RBI Circular DBOD.No.Leg.BC.75/09.07.005/2005-06 (November 2, 2005), which deems such payments a “complete discharge.” The court noted: “The surviving joint account-holder… are entitled to draw the money in their own right,” but heirs’ claims lie civilly.
The Kerala High Court in For the Petitioners v. Govind Bhargavi (2017 SCC OnLine Ker 8417) echoed this, holding that joint accounts with survivorship do not imply gifting; banks are discharged upon payment, per RBI’s 2004 circular. Similarly, the Calcutta High Court in Hanuman Prasad Khemka v. State Bank of India (2021 SCC OnLine Cal 2543) quashed fraud charges, affirming RBI’s mandate for simplified settlement without legal heir consent in survivor cases.
Recent RBI Directions on Settlement of Claims (RBI/2025-26/82, DOR.LEG.REC/82/09.07.005/2025-26, dated September 26, 2025, effective March 31, 2026) further streamline processes: Banks must settle survivor claims within 15 days using only a death certificate and ID, without succession certificates for amounts up to ₹15 lakh (commercial banks).This reinforces the J&K judgment’s emphasis on expediency and bank protection.
Broader Implications:
This ruling fortifies banks against frivolous litigation, encouraging adherence to RBI protocols without fear of reprisal. It deters heirs from invoking IPC Sections 420 (cheating) or 406 (criminal breach of trust) for what the SC terms “civil wrongs” (R. v. Joginder Singh, 1980 Supp SCC 53). For families, it highlights the need for clear estate planning—wills, nominations, or explicit non-survivorship mandates—to avert disputes.
Policymakers may view this as a cue to amend the Banking Regulation Act for explicit criminal immunity clauses, building on Sections 45ZA-45ZF. Banks must amplify publicity of survivorship benefits, as mandated by RBI’s 2005 circular, to mitigate misunderstandings.
Conclusion:
Shabeena Ibrahim is a clarion call for delineating civil from criminal realms in banking disputes. By anchoring its holding in RBI’s Master Circulars and SC/HC precedents like Anumati and Prabha Bennett, the J&K High Court has not only discharged HSBC but elevated contractual certainty in joint accounts.
As India’s financial ecosystem evolves, this judgment ensures banks remain facilitators, not battlegrounds, of familial legacies. Heirs aggrieved by survivor’s actions must turn to civil courts, preserving the criminal justice system’s integrity for genuine malfeasance.
Written By: Inder Chand Jain
Ph no: 8279945021, Email: [email protected]
