Banks want to recover their dues, and often without taking recourse to the legal mechanism available to them. In the bargain, they end up misinterpreting the right of lien to funds and assets of other family members who are in no way responsible for or connected with the dues the bank has to recover.
Here is an interesting case where a bank misappropriated a minor's money, forcing him to fight for his money right from a district forum to the National Commission. [Judgement dated 30.5.2012 in Revision Petition No. 598 of 2008 in the case of Lipina Das (minor) & Anr. v/s Urban Co-operative Bank Ltd].
Lipina Das's father had taken a loan of Rs 22,000 from the bank. He had also invested Rs 24,000 in the bank's Samrudi Reinvestment Scheme. After Lipina's father expired, the investment of Rs 24,000 was paid to her mother on the strength of an indemnity bond that the bank would have the right to set off any amount that is due to it from any deposit placed by her with the bank. The loan amount, however, remained due.
Another investment of Rs 13,000 was made in the same scheme by Lipina's mother. The maturity value of Rs 27,206 was payable after six years. This investment was in the name of the minor, with the mother as the nominee. On maturity, the bank refused to pay the maturity value, compelling her to file a consumer complaint before the district forum.
The bank defended itself and justified its refusal to pay on the ground that the loan of Rs 22,000 taken by the minor's father had remained unpaid, and this amount could be set off from the deposit placed by her mother in view of the indemnity bond executed by her. The forum held the bank was not entitled to claim a set-off as this deposit was in the name of the minor daughter. The bank was directed to pay the maturity value along with interest at nine per cent per annum from the date of maturity till realisation, plus a compensation of Rs 2,000 and costs of Rs 500.
The bank appealed to the Orissa State Commission, which concurred with the bank's contention that it had the right to claim set-off and adjust the outstanding loan amount from the maturity value of the fixed deposit.
Lipina and her mother then approached the National Commission through a revision petition. Vineeta Rai, delivering the judgment on behalf of judges Ashok Bhan, herself and Justice Chaudhari, observed the outstanding dues were of the minor's father, the indemnity bond was given by her mother, but the deposit was in the single name of Lipina. The bank would have the right to claim set-off from the accounts of the minor's father who had taken the loan, or from the mother in view of the indemnity bond executed by her, or from a joint account in which the father or mother were account holders. However, such right of set-off would not extend to the deposit in the name of the minor, who had nothing to do with the other transactions.
The National Commission, accordingly, set aside the State Commission judgment and restored the order of the district forum. The bank was, thus, held liable to pay the maturity value of the deposit along with compensation and costs.
So, do not blindly believe your bank's claim to have a right of lien. Instead, check the law to ensure that you are not taken for a ride.