Chapter 17
My Rights
Banker s Rights to Combine Accounts A banker can combine several accounts kept by a customer. He is under obligation to keep them separate. The banker cannot combine a customer s personal account with a joint account of the customer and another person. The right to combine two or more accounts is applicable to existing debts from the customer and not to contingent debts or liabilities falling due at a future date.
Banker must be given reasonable time to credit cheques deposited before they are drawn upon A banker is not bound to credit the customer s account until cheques have been realized. Sometimes, bankers permit customer to draw against unclear cheques.
Payment of Domiciled bills In the absence of an agreement, the banker is not bound to honor bills accepted by his customers and made payable by the banker.
Bankers General Lien It generally means right of a creditor to retain the goods and securities owned by the debtor until the debt has been discharged Bankers may, in the absence of an agreement to the contrary retain as security for a general balance of accounts any goods and securities bailed to them. It is a right to retain goods not only for the debt incurred but also for the general balance owing by the owner of the goods to the person exercising the right of lien.
Several Factors to the Lien Lien an implied pledge General lien to apply in the absence of express contract to the contrary Lien can be enforced if mutual demand exists between banker and customer No agreement for creation of lien necessary Banker has no lien on safe custody deposits No lien on bills of exchange or other documents entrusted for special purpose
Several Factors to the Lien Banker s lien not available against FDR in joint names Lien attaches to bonds and coupons deposited for collection No lien on money deposited for a specific purpose Lien on securities allowed to remain in banker s hand after repayment of loan secured
Several Factors to the Lien No lien on documents or valuables left in the banker s hand inadvertently Credit and the liability must be in the same right Banker s lien and the Limitation Act No lien for the amounts not due No lien in respect of the Trust Account
Banker s right of set-off Right of set off is also known as the right of combination of accounts When a customer keeps two or more accounts at the bank, some of which are overdrawn and some in credit, the bank has the right to combine such accounts and pay the resultant balance. When certain securities e.g. shares, debentures etc. are in the hands of a banker, he has a right of lien and not set-off.
Banker s right of set-off "A legal set-off is where there are mutual debts between the plaintiff and defendant, or if either party sue or be sued as executor or administrator one debt may be set against the other "(S.13 Insolvent Debtors Relied Act 1728)
Banker s right of set-off A banker can exercise right of set-off provided the following conditions are satisfied: The amount of the debt must be certain The debt must be due and payable The accounts must be between the same parties and in the same right The debt due must be immediate and not a future debt Liability should not be contingent There should be no agreement to the contrary The banker may exercise this right at his discretion The banker has right to exercise this right before a garnishee order is made effective
Banker s right of set-off The right to set-off all accounts arises immediately in the following instances: On the death, mental incapacity or insolvency of a customer On the insolvency of a firm, or on the liquidation of the company On receiving a garnishee order On receiving notice if assignment of a customer s credit balance On receiving notice of a second mortgage over security charged to the bank
Rights of a collecting Banker Section 131of the Act provides that A banker who has in good faith and without negligence received payment for a customer of a cheque crossed generally or specially to himself, shall not, in case the title to the cheque proves defective, incur any liability to the true owner of the cheque by reason only of having received such payment
Rights of a collecting Banker The burden is on the bank to prove that it collected the cheque in good faith and without negligence
Right to charge interest The banker has the right to charge interest on advances granted to a customer. This interest is charged monthly on the amount due.
Right to charge Incidental Charges As long as the relation of banker and customer exists, the banker has the right to claim incidental charges. This is based on the average daily balances the customer has maintained during a period.
Right of appropriation of Payments If the customer owes several debts to the banker and makes payments, he has the right to request the banker to apply the payment to the discharge of some particular debt However, where neither the customer nor the banker makes an appropriation, such payment shall be applied in discharge of the debts in order of time they were incurred and the money received will be applied towards the payment of the first debt.
Right of appropriation of Payments Current account is held that receipts or income received would be utilized to reduce the first amount due The rule in Clayton s case affects all current accounts, whether overdrawn or not. As far as the banker is concerned he is only concerned about overdraft accounts to determine the liability of each party
Applicability of Clayton s Rule to banking transaction Death or insolvency of a partner or joint account holder Determination of a guarantee Notice of second charge