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Are the Banks responsible for loss of valuables in Bank Lockers due to Dacoity, Loot, negligence of the Bank or otherwise?

It is common knowledge that all consumers have maximum faith in Banks when they park their hard earned money in the Bank Accounts/ Fixed Deposits or their jewellery, cash & valuables in Bank Lockers. There are regular news/reports of theft of valuables in the Bank Lockers in the event of Loot/ Dacoity or negligence of the Bank Officials in maintaining safety norms of lockers.The Apex Court has recently had an occasion to deal with these relevant issues and legally address them. The Apex Court on February 19, 2021 in the case of Amitabha Dasgupta vs United Bank Of India (Civil Appeal No. 3966 of 2010) addressed these issues elaborately.

The brief facts of the case are that the Appellant/Complainant had a bank locker in the Deshapriya Park, Kolkata Branch as a joint holder with his mother. On 27.05.1995, the Appellant visited the said Bank to operate the locker and deposit the locker rent wherein he was informed that the Bank had broken open his locker on 22.09.1994 for non�payment of rent dues for the period of 1993�- 1994.

It was also transpired that the said locker had been subsequently reallotted to another customer. The Appellant sent written communications to the Bank claiming that such breaking of his locker by the Bank was illegal since he had cleared dues for 1994�-1995 on 30.07.1994 much prior to the breaking of the locker. The Chief Manager admitted that he had inadvertently broken open the locker although there were no outstanding dues towards locker rent and apologized for the same.

When the Appellant went to collect the contents of the locker, he found only one pair of bangles and one pair of ear pussa out of the seven ornaments that had been kept in the locker. However, the Bank contended that only those two ornaments were found in the Appellant's locker when it was broken open as is evident from the inventory prepared by Bank when the locker was broken open in the presence of an independent witness.

The Appellant filed a consumer complaint before the District Consumer Forum pleading the Bank to return the seven ornaments that were in the locker failing which to pay Rs. 3 lacs towards the cost of jewellery and to award compensation for damages suffered by the Appellant. The District Forum allowed the complaint and held the Bank liable for deficiency of service and directed the Bank to return the entire contents of the locker, or alternatively pay the Appellant Rs. 3,00,000/� towards cost of the jewellery and also Rs. 50,000/� as compensation for mental agony, harassment and cost of litigation.

The Bank filed an appeal against the award of the District Consumer Forum before the State Commission which accepted the District Commission's findings on the question of deficiency of service but reduced the compensation from Rs. 50,000/� to Rs. 30,000/�. However, with respect to recovery of the cost of the ornaments the State Forum observed that the Consumer Forum was not equipped to undertake this evaluation since it only has jurisdiction to conduct a summary trial.

Accordingly, the State Commission directed the present Appellant to approach the civil court for adjudication on the contents of the locker. The said order of the State Commission was upheld by the National Commission which accepted the State Commission's finding on the limited jurisdiction of the Consumer Forum to adjudicate on the recovery of the contents of the locker.

The Appellant feeling aggrieved by the order of the National Commission filed an appeal against the verdict of the National Commission in the Apex Court pleading that the case be not relegated to the civil court for adjudication on the issue of the contents of the locker. It was also pleaded that exemplary compensation/damages be awarded to the appellant to being in a qualitative change in the attitude of the service provider as per the dictum of the Apex Court in Charan Singh v. Healing Touch Hospital & Ors.(2000) 7 SCC 668.

The questions posed before the Apex Court are as follows:
  1. Whether the 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?
  2. Whether the same can be effectively adjudicated in the course of consumer dispute proceedings?
  3. Whether the Bank owes an independent duty of care to its customers with respect to diligent management and operation of the locker, separate from its contents?
  4. Whether compensation can be awarded for non�compliance with such duty?
  5. Whether any relief with respect to the contents of the locker can be granted?
There have a plethora of cases throughout the globe wherein there have been disputes between banks and locker holders pertaining to loss of valuables placed inside the locker. The Courts have univocally held that the laws of bailment can only be applied when the court finds that the plaintiff had transferred possession of the articles to the bank. Applying the relevant provisions under the Indian Contract Act, 1872, the Apex Court has held that the law of bailment is not applicable to the instant facts.

It is pertinent that there is no substantive domestic legislation on the issue of responsibility of banks under the laws of bailment for the loss of articles placed inside the locker. It is relevant that in response to a Right to Information enquiry made in 2017, the RBI and various public sector banks have clarified that as per the agreement entered into with the customers who are hiring/leasing the lockers, the banks have no liability for loss or damage of articles placed inside the bank lockers.

However, the RTI replies by certain Banks state that in case of loss suffered by the lessee due to theft or burglary etc. of safe custody locker, the liability of the bank will depend upon the facts and circumstances surrounding the burglary while some Banks state that the responsibility of the bank shall be governed by the terms and conditions laid down in the memorandum of hiring of locker and the guidelines issued by RBI from time to time.

Some Banks state that the relationship between the bank and its customer, in case of safe deposit locker, is that of �lessor and lessee' and the particulars of the articles kept in safe deposit locker are not to be disclosed by the customer to the bank and hence, the bank cannot take responsibility for compensating any loss as the extent of such loss cannot be assessed.

It has been further stated that the bank, however, takes all necessary measures and precautions to safeguard the lockers provided to the customers. Some Banks state that the liability in case of theft/loss of valuables kept in its safety lockers depends upon the insurance parameters of the bank policies taken for the contents of the lockers.

The Apex Court observed that under the current system, the bank allocates a locker to the customer on the payment of rent. The customer is then provided with a key to the locker through which he can gain partial access to the locker. The bank has a master key to the locker and the customer can gain complete access to the locker only when the bank uses its own key to the locker. Therefore, a combination of the bank's key and the locker holder's key is required for opening a locker, providing neither with complete access.

In more advanced, digitally operated locker systems, such �keys' may not be physical keys but may consist of passwords or data which is exclusively known to the bank and the customer. Further, the bank may not have any receipt of the exact particulars of the articles placed inside the locker. Therefore the modern� day bank locker system cannot be guided by the laws of bailment.

The Apex Court approved the dictum of Punjab & Haryana High Court in Mohinder Singh Nanda v. Bank of Maharashtra 1998 ISJ (Banking)673 wherein 44 safe keeping lockers in the Respondent bank were broken open by miscreants and the contents were emptied. The Punjab & Haryana High Court held that the bank would not be liable for the loss of articles, if any, since the bank had no knowledge of the contents of the locker.

Later, the Punjab and Haryana High Court again undertook a comprehensive look into the present�day locker system in Atul Mehra v. Bank of Maharashtra AIR 2003 P&H 11 wherein the facts were identical to Mohinder Singh Nanda (supra).

The appellant locker holder filed a suit alleging that due to the robbery, jewels worth Rs. 4,26,160/� were stolen from his locker. It was claimed that the respondent bank had not complied with the duty of care owed under the laws of bailment. However, the trial court found that the knowledge of the weight and value of the articles stored inside the locker was exclusive to the customer, and the bank did not have notice of the same. Further, the appellants had not produced any evidence at the stage of trial to establish the contents of the locker. Consequently, the Bench opined that the provisions with respect to bailment under the Contract Act would not apply.

It is relevant that the National Commission has, in the case of Punjab National Bank, Bombay v. K.B. Shetty. 1991 (1) C.P.C. 592 & Mahender Singh Siwach v. Punjab and Sind Bank (2006) 4 CPJ 231 (NC) awarded the value of articles which have been stolen or gone missing from bank lockers. In the case of Pune Zilla Madyawarti Sahakari Bank Limited v. Ashok Bayaji Ghogare 2015 SCC OnLine NCDRC 2832, the National Commission had held that the affidavit of the locker holder should ordinarily be accepted for proving the contents of the bank locker.

However in the case of National Commission in UCO Bank v. RG Srivastava 1996 (1) CPR 97 it was held that the dispute on the contents of the locker can only be decided upon provision of elaborate evidence and the Consumer Forum is not equipped to undertake this evaluation since it only has jurisdiction to conduct a summary trial. In this case the Appellant/locker holder had claimed that their locker had been tampered with and broken open and valuables were subsequently lost due to the negligence of the bank.

The bank not only disputed the value of jewellery kept inside the locker but also denied any negligence in the matter. In the aforesaid circumstances, the National Commission remitted the matter to the competent civil court to decide both issues after adducing of elaborate evidence on both sides. In the recent case of Mamta Chaudaha v. Branch Manager/Head Manager, State Bank of India, (2020) 1 CPJ 276 (NC), the National Commission observed that the appellant locker holder had not produced any evidence apart from a standard affidavit to prove that they had kept a specified quantity of gold ornaments inside the bank locker and there was no evidence of forcible entry to the locker and therefore dismissed the complaint for recovery of value of the ornaments.

The Apex Court approved the later decisions of the National Commission wherein the matters were relegated to the the competent Civil Court for adducing relevant evidence & documentary proof of possession & loss of jewellery as the Consumer Forum proceedings are summary proceedings wherein elaborate evidences cannot be adduced. In the present case, the Respondent bank has admitted their negligence in breaking open the locker in spite of payment of rental dues by the Appellant. However, the Court observed that the number of items originally deposited by the Appellant inside the locker is a contested fact.

Hence, the Apex Court did not do not record any conclusions on the claim for return or recovery of the value of the ornaments alleged to have been deposited by him. The Court ordered that the Appellant must file a separate suit before the competent civil court for seeking this relief and for proving that the aforesaid items were actually in the custody of the bank.

The Apex Court also dealt with the issue of Separate Duty of Care of the Bank with regard to Locker Management and held Banks responsible for maintaining the lockers and ensuring their safety and held thus:

"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. This includes ensuring the proper functioning of the locker system, guarding against unauthorized access to the lockers and providing appropriate safeguards against theft and robbery.

This duty of care is to be exercised irrespective of the application of the laws of bailment or any other legal liability regime to the contents of the locker. The banks as custodians of public property cannot leave the customers in the lurch merely by claiming ignorance of the contents of the lockers."

The Apex Court was disappointed with the present state of regulations on locker management of the Banks and termed the same as 'inadequate and muddled'. The Court expressed discontent that every individual bank is following its own set of procedures and there is no uniformity in the rules of all the banks. The Court warned 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.

The Apex Court expressed fury at the state of affairs & observed thus:
" we are the highest Court of the 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 set the following rules & procedures while allotting and operating the lockers thus:
  1. This includes maintenance of a locker register and locker key register.
  2. The locker register shall be consistently updated in case of any change in allotment.
  3. 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.
  4. Banks may consider utilizing appropriate technologies, such as blockchain technology which is meant for creating digital ledger for this purpose.
  5. 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.
  6. 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.
  7. The concerned staff shall also check that the keys to the locker are in proper condition
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. The bank cannot contract out of the minimum standard of care with respect to maintaining the safety of the lockers as outlined supra.

Thus, the Apex Court summed up & held that it is undisputed that the Respondent Bank inadvertently broke the Appellant's locker, without any just or reasonable cause, even though he had already cleared his pending dues and the Bank grossly erred in not having given any notice to the Appellant prior to such tampering with the locker. The Court was irked by the fact that the Appellant remained in the dark for almost a year before he visited the bank for withdrawing his valuables and enquired about the status of the locker. The Court observed that the Appellant had not committed any fault so far as operation of the locker was concerned & held thus:

"Thus, the breaking open of the locker was in blatant disregard to the responsibilities that the bank owed to the customer as a service provider. The alleged loss of goods did not result from any force majeure conditions, or acts of third parties, but from the gross negligence of the bank itself. It is case of gross deficiency in service on the part of the bank."

The Court looking to the entirety of facts and circumstances of the case imposed exemplary costs of Rs. 5,00,000/� on the Bank as compensation to the Appellant. The Court ordered that the amount of costs/Compensation to be deducted from the salary of the erring officers, if they are still in service. If the erring officers have already retired, the amount of costs should be paid by the Bank. Additionally, the Court also awarded Rs. 1,00,000/� to be paid as litigation expense.

The Court hailed the role of Banks in the modern economy and cautioned the Banks to be more cautious & vigilant and observed thus:
"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 know�how 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 Apex Court finally directed the RBI to lay down comprehensive directions, rules & regulations mandating the steps to be taken by banks with respect to locker facility/safe deposit facility management within a period of six months from the date of this judgment and issue suitable rules with respect to the responsibility owed by banks for any loss or damage to the contents of the lockers. This authoritative case should prove eye-opener for the careless banks & its officials who show disregard to the valuable rights & privileges of the locker owners.

Written By: Inder Chand Jain
Ph no: 8279945021, Email: [email protected]

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