Obligations of Banker

 

Obligations of Banker

·       Duty/Obligation to honor cheques:

o   It is the duty of the banker to honour cheque of customer which are drawn properly and presented during the working hours of the bank.

o   However the Bank has the right to dishonour the cheques under the following situations:

§  Date: Post-dated: a date yet to come; Stale: more than 3 months old

§  Payee: Not clear or Wrong person

§  Amount: In words and figures differ

§  Signature: If the signature is not according to the specimen signature or differs from the specimen

§  Endorsements: Not proper or defects in endorsements

§  Insufficient funds

§  Mutilated, Smudged, Material alteration of Cheque

·       Obligation to maintain secrecy:

o   The banker has an obligation towards customer to maintain secrecy about the status of account. He should not reveal the secrecy of customer’s account in the normal course of business. However, in the following conditions the secrecy of the customer’s account will be disclosed:

§  Express or Implied condition: Expressed: Customer has given in writing; Implied: When the customer acts as a guarantor for a principal Debtor, the banker has to reveal the secrecy of the customer’s account to the guarantor.

§  Under compulsion of law

§  In the course of banking business: A bank, in order to protect its own interest, may have to reveal the secrecy of the customer’s account. The banker may disclose the state of his customer’s account in order to legally protect his own interest. Example: Recovering debt.

§  Disclosure in the public interest: When a customer is amassing wealth by cheating the public and increasing the deposit account with the banker it is the duty of the bank to reveal the same to the public. Otherwise the banker will be held liable for abetting the crime.

§  Bankers among themselves: Between the bankers as per the trade custom, information can be shared in their own business interests. This is as per the custom of the trade. It is an established banking practice to provide credit information about their customers by one bank to another. The customer gives implied consent to this practice at the time of opening the account.

·       Garnishee Order:

o   The word "Garnishee" is derived from Latin word "Garnire" which means "to warn".

o   It is an order issued by the court to the banker to stop the payment of money belonging to a particular customer's account.

o   Garnishee order is an order issued by a court at the request of the creditor, to the banker(garnishee) not to pay the money to debtor until the claim of creditor is paid.

o   There are three parties in Garnishee Order:

§  Creditor (Judgement Creditor): File a case to recover dues.

§  Debtor (Judgement Debtor): Whose account is suspended

§  Garnishee: Banker to whom order is given

o   Garnishee order is issued by a civil court.

o   It is issued on behalf of judgement creditor.

o   It is issued on the bank(garnishee)

o   It is issued in two parts: In first part, the court directs the banker to stop payment out of the account of the judgement debtor. This order is called 'Order Nisi'.

o   Second Part: On receipt of the confirmation of the bank, court issue another order called as 'Order absolute' whereby the entire balance in the account or a specified amount is attached.