Whether bank can refuse to make payment to nominee? read expert lawyer opinion

Nomination made by a depositor/account holder is the reflection of his wish upon identification by him of the recipient of the deposit lying in an account in the event of death of such depositor/account holder and to hold the same in his (recipient's) custody for being distributed according to the law of succession. Nomination, which is made without any coercion, undue influence or misrepresentation and is accepted by a banking company upon a satisfaction that the nomination does not suffer from any of the vitiating factors and clothes the nominee to receive the amount, ought to be acted upon after the death of the depositor/account holder, for, that would result in honouring his wish. If at all the nomination is, at a subsequent stage, found to suffer from any technical defect precluding the banking company to act on such nomination, it ought to be the bounden duty of the officials of the bank to get the nomination rectified/altered so as to bring it in conformity with the statutory requirements provided the depositor/account holder is alive. Once the opportunity to get the nomination rectified/altered is lost by the tardy and indolent acts of the officials of the bank, it would not be in the interest of justice to allow the banking officials to refuse to honour the wish expressed by the depositor/account holder.

IN THE HIGH COURT OF CALCUTTA

W.P. No. 983 of 2015

Decided On: 30.03.2016

Communist Party of India (Marxist)

Vs.

United Bank of India and Ors.

Hon'ble Judges/Coram:

Dipankar Datta, J.

Citation: AIR 2017(NOC)15 Cal

1. Although the dispute that this Bench is called upon to examine is between a political party on the one hand and a nationalized bank on the other, the basic question that would engage the attention of this Bench is, whether the wish of a person, who is no longer alive in this mortal world, should be allowed to prevail over a technical objection.

2. The aforesaid question emerges in view of the facts narrated hereafter.

3. Tushar Kanti Das Purakayastha (since deceased), during his lifetime, maintained a savings bank account (hereafter the said account) with the Syed Amir Ali Avenue Branch (hereafter the said branch) of the United Bank of India (hereafter UBI). Being a member of the Communist Party of India (Marxist) [hereafter the petitioner], late Tushar Kanti Das Purakayastha [hereafter the customer] had nominated the Secretary, Kolkata District Committee of the petitioner to whom the amount lying in deposit in such account may be returned by the said branch in the event of his death. After his death on January 20, 2014, the petitioner by its letter dated February 17, 2014 requested the Manager of the said branch, the respondent No. 2, to release and disburse the available credit balance in its favour since it was the lawful nominee. The respondent No. 2 by his letter dated March 28, 2014 informed the petitioner that the nomination made by the customer is not a valid one under section 45ZA of the Banking Regulation Act, 1949 (hereafter the Act) and rule 2(1) of the Banking Companies (Nomination) Rules, 1985 (hereafter the Rules) and consequently, did not accept the petitioner's request. This was followed by a notice dated August 18, 2015 issued by the petitioner's learned advocate demanding justice from the respondent No. 2. The same did not yield any result, leading to presentation of this writ petition before this Court on August 5, 2015.

4. Mr. Sen, learned senior advocate for the petitioner, by referring to the statutory provisions having a bearing on the question noted above and upon placing reliance on numerous authorities, contended that the action of the respondent No. 2 is arbitrary, illegal and unauthorised and, hence, unsustainable in law.

5. According to Mr. Sen, in the absence of a definition of the expression "person" in a statutory provision, section 3(42) of the General Clauses Act, 1897 (hereafter the G.C. Act) has been made applicable to the following statutes:--

"(i) Excess Profits Tax Act 1940 MANU/TN/0449/1954 : AIR 1954 Madras 1049 (A.G. Pandu Rao & anr. v. Collector of Madras & anr.);

(ii) Displaced Persons (Debts Adjustment) Act 1951 MANU/PH/0018/1958 : AIR 1958 Punjab 57 (Punjab National Bank Ltd. v. Punjab Property Development Co. & ors.);

(iii) Right to Information Act, 2005 MANU/DE/4461/2011 : AIR 2012 Delhi 39 (Jamia Millia Islamia v. Sh. Ikramuddin);

(iv) A.P. Charitable & Hindu Religious Institutions & Endowments Act 1966 MANU/AP/0112/1979 : AIR 1979 AP 173 (Kanyakaparameswari Varthaka Sangham v. Commissioner of Endowments, Andhra Pradesh);

(v) Jammu & Kashmir State Lands (Vesting of Ownership of Occupants) Act 2001 MANU/JK/0122/2008 : AIR 2009 J&K 12 (Ghulam Qadir Wagay v. State & ors.);

(vi) C.P. Village & Sanitation & Public Management Act 1920 MANU/NA/0077/1935 : AIR 1935 Nagpur 242 (Nathmal & anr. v. Sanitation Panchayat Committee, Bramhapuri);

(vii) Civil Procedure Code - (Or. 30 Rule 10) MANU/BH/0097/1962 : AIR 1962 Patna 360 (Rameshwar Prasad Golwara & ors. v. Keshab Prasad Bhagat & ors.); (Or. 33 Rule 1) MANU/TN/0164/1917 : AIR 1918 Madras 362 (Perumal Koundan v. Tirumalrayapuram Jananukoola Dhanasekhara Sanka Nidhi Ltd.); AIR 1955 NOC 4030 (Rajasthan)[Motilal v. Kistoorchand & ors.]; MANU/TN/0021/1937 : AIR 1937 Madras 549 (FB) (Swaminathan v. Official Receiver, Ramnad & anr.); MANU/KE/0065/1961 : AIR 1961 Kerala 180 (Mathew v. Kerala United Corporation Ltd.); and

(viii) Income Tax Act 1922 MANU/SC/0060/1958 : AIR 1959 SC 213 (Y. Narayana Chetty & anr. v. The Income Tax Officer, Nellore & ors.); and MANU/SC/0219/1962 : AIR 1962 SC 970 (Commissioner of Income Tax, Madras & anr. v. S.V. Angidi Chettair)."

6. It was, therefore, contended by him that there could be no valid reason for not looking at the G.C. Act for ascertaining the meaning of the expression "person" in section 45ZA(1) of the Act, and since the petitioner is covered by the expression "person" appearing in section 45ZA(1) of the Act with the aid of the G.C. Act, the impugned action of the respondents in refusing to accede to the petitioner's request is indefensible.

7. Mr. Sen further contended that the respondents' must be held to have waived their right to declare the nomination made by the customer as invalid, after his death. Reliance was placed by him on the decision reported in AIR 1988 Andhra Pradesh 289(Chandramma and another v. The General Manager, State Bank of Hyderabad and another) wherein, in more or less similar circumstances, a learned judge of the Andhra Pradesh High Court overruled the objection raised by the banking company and held that the banking company having accepted the nomination, it had waived its right to object at a later stage.

8. Mr. Sen also cited the decision reported in MANU/SC/0158/1964 : AIR 1965 SC 1387 (Banarasi Dass v. Wealth Tax Officer, Spl. Circle, Meerut), wherein the word "individual" in Entry 86, List I of Schedule VII of the Constitution was construed and it was held that the word must receive the widest interpretation.

9. It was, accordingly, prayed that the petitioner is entitled to relief as claimed in the writ petition.

10. Per contra, Mr. Mukherjee, learned advocate for UBI and its officers contended that the respondent No. 2 did not act illegally in informing the petitioner that the nomination made in its favour was not valid and hence it was not entitled to receive the credit balance in the savings bank account of the customer. He also referred to a Master Circular issued by the Reserve Bank of India in 2013 and invited the attention of this Bench to clause 19.7.1 thereof to buttress his contention that the impugned action of the respondents is unexceptionable. He, thus, prayed for dismissal of the writ petition.

11. In reply, Mr. Sen contended that since nomination in the present case was made in 2009, the master circular of 2013 would not apply. In any event, since the customer was alive till January 20, 2014, the respondent No. 2 ought to have communicated to him that in terms of the master circular of 2013, the nomination made by him was invalid and that he could change the nomination. That not having been done, he argued that it is too late in the day for the respondents to deny the petitioner the benefit flowing from the nomination made in its favour by the customer.

12. The parties have been heard.

13. At the outset, the relevant statutory provisions need to be read along with the master circular to assess the worth of the contention raised by the respondents.

14. Section 45-ZA of the Act provides for "nomination" for payment of depositors' money and reads thus:

"45-ZA. Nomination for payment of depositors' money.- (1) Where a deposit is held by a banking company to the credit of one or more persons, the depositor or, as the case may be, all the depositors together may nominate in the prescribed manner, one person to whom in the event of the death of the sole depositor or the death of all the depositors, the amount of deposit may be returned by the banking company.

(2) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such deposit, where a nomination made in the prescribed manner purports to confer on any person the right to receive the amount of deposit from the banking company, the nominee shall, on the death of the sole depositor or, as the case may be, on the death of all the depositors, become entitled to all the rights of the sole depositor or, as the case may be, of the depositors, in relation to such deposit to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner.

(3) ***

(4) Payment by a banking company in accordance with the provisions of this section shall constitute a full discharge to the banking company of its liability in respect of the deposit:

Provided that nothing contained in this sub-section shall effect the right or claim which any person may have against the person to whom any payment is made under this section."

(underlining for emphasis)

15. Rule 2 of the Rules provides, inter alia, as follows:

"2. Nomination in respect of deposits. - (1) The nomination to be made by the depositor, or, as the case may be, all the depositors together in respect of a deposit held by a banking company to the credit of one or more individual shall be in Form DA 1.

(2) The said nomination may be made only in respect of a deposit which is held in the individual capacity of the depositor and not in any representative capacity as the holder of an office or otherwise.

(3) ***

(4) ***

(5) The cancellation of the said nomination to be made by the depositor or, as the case may be, all the depositors together, shall be in Form DA 2.

(6) A variation of the said nomination to be made by the depositor or, as the case may be, all the depositors together, shall be in Form DA 3.

(7) The said nomination shall be made in favour of only one individual.

(8) (a) A nomination, cancellation of nomination or variation of nomination may be made as aforesaid at any time during which the deposit is held by a banking company to the credit of the depositor or depositors, as the case may be.

****"

16. Form DA-1, which is part of the Rules, is extracted below:

"FORM DA - 1

Nomination under section 45ZA of the Banking Regulation Act, 1949, and

rule 2(1) of the Banking Companies (Nomination)

Rules, 1985, in respect of bank deposits

I/We, ........................................, [name(s) and address(es)], nominate the following person to whom in the event of my/our/minor's death the amount of the deposit, particulars whereof are given below, may be returned by .................................................(name and address of branch/office in which deposit is held):

2. As the nominee is a minor on this date, I/We appoint Shri/Smt./Kum...................... .................... (name, address and age) to receive the amount of the deposit on behalf of the nominee in the event of my/our/minor's death during the minority of the nominee.

Place..............

Date...............

..................................................

Signature (s)/Thumb impression(s)

of depositor(s).

Name(s), signature(s) and

Address(es) of witness(es)****"

17. Relevant part of clause 19.7.1 of the master circular reads as follows:

"19.7.1 Nomination facility in respect of deposits

(i) Nomination facility is intended for individuals including a sole proprietary concern.

(ii) Rules stipulate that nomination shall be made only in favour of individuals. As such, a nominee cannot be an Association, Trust, Society or any other Organisation or any office-bearer thereof in his official capacity. In view thereof any nomination other than in favour of an individual will not be valid.

***"

18. What follows from the above is that a nomination is open to be made by the depositor of money in a banking company in favour of a person i.e. the nominee, by filling up Form DA-1, which is the appropriate form which has to be used for nomination under section 45-ZA of the Act read with rule 2(1) of the Rules, and in the event of the death of the depositor, the banking company would be under an obligation to return the amount of deposit to such person, i.e. the nominee.

19. The word "person" in section 45-ZA(1) of the Act (who may be nominated by a depositor for receiving the amount of deposit in the event of his death) has not been defined in the Act. It would, therefore, be useful to refer to the definition of "person" in the G.C. Act. Section 3(42) defines "person" as:

"3. Definitions.--In this Act, and in all General Acts and Regulations made after the commencement of this Act, unless there is anything repugnant in the subject or context,-

(42) "person" shall include any company or association or body of individuals, whether incorporated or not;"

It is clear on reading of the above definition that unless the context requires otherwise, the inclusive definition of "person" would cover a body, whether incorporated or not.

20. Perusal of the contents of Form DA-1 also reveals that it refers to the "person" nominated by the depositor who would be entitled to return of the amount of deposit by the banking company.

21. There is no legal bar in construing the word "person" in section 45ZA(1) of the Act bearing in mind its definition in the G.C. Act and having regard to the decisions cited by Mr. Sen, there is no real difficulty in construing the word "person" to include a political party. So far so good.

22. The problem, if at all, seems to have arisen because firstly, rule 2 of the Rules and the master circular do not refer to "person" but to an "individual" who can be nominated by the depositor to receive the amount of deposit in the event of his death and secondly, the master circular expressly prohibits nomination for such purpose in favour of any association, trust, society or any other organisation or any office-bearer thereof in his official capacity.

23. This Bench is of the considered view that mindless framing of rules and issuance of circulars, which are at variance with the enactment conferring power to the executive to frame rules/issue circulars, is the root of all problems. When the Act in section 45ZA(1) and the Rules in Form DA-1 have used the word "person", it is open to question as to whether in rule 2 or in paragraph 19.7.1, the word "individual" could be used and thereby restrict the operation of the Act. It is well known that a rule framed under an enactment can only supplement such enactment and not supplant it; likewise, a circular cannot supplant a rule, it can only supplement. Bearing in mind the contours of the Act, it seems to be wrong in principle to interpret the rule/circular in such manner that would result in the amplitude of the word "person" in section 45ZA(1) being abridged, abrogated or cut down to mean an "individual". As the stream can rise no higher than its source, a rule/circular cannot rise above the enactment that is its source. The word "individual" cannot thus be construed in a narrow manner so as not to cover a body, which is covered by the meaning of the word "person", and it must receive the same meaning as "person".

24. That apart, Mr. Sen is right in his contention that the master circular cannot have any application in a case where Form DA-1 has been filled up prior to its birth. A party cannot ordinarily be denied of a vested right that has accrued to it in terms of the laws in force at the relevant point of time. The circular has no retrospective application. Form DA-1 is part of the counter affidavit of the respondents whereby on December 1, 2009, the customer had made the relevant nomination for receiving the amount of deposit, and such form was duly accepted by the branch without any demur. If at all any rectification/alteration were required, it was the duty of the respondent No. 2 to have the same effected by informing the customer. Admittedly, no such effort was made.

25. There is a presumption that official acts have been regularly performed. When the nomination was made by the customer in Form DA-1 on December 1, 2009, the respondent No. 2 must be presumed to be well and truly aware of the implications of the statutory provisions or else, the nomination in the manner the same was made would not have been allowed. The respondent No. 2 could not have declined to accept the request of the petitioner merely because of introduction of the master circular of 2013 in the interregnum. If indeed the master circular was binding on the UBI, it was the duty of the respondent No. 2 to check up the records to find out as to whether any nomination had been made by any depositor which is inconsistent with such master circular. As has been noted above, the customer was alive and if approached could have rectified/altered the nomination according to his free will. The respondent No. 2 not having so done, it must be held to have waived any right of objection based either on the rules or the master circular.

26. This Bench is inspired to hold so being in full agreement with the pronouncement in Chandramma (supra). There, two individuals were nominated by the depositor to receive the amount of deposit in the event of his death although the law permitted nomination only in respect of one individual. Repelling the contention of the banking company that the nomination was invalid, the Bench proceeded to observe as follows:

"In my opinion this is mistaken contention of the Bank and that in any event, such a contention is not open for the Bank to be advanced. A sum of money as large as ten lakhs of rupees had been deposited by late Adivappa with the Bank. On the same date i.e. on 14-2-1987 when he was making the deposit, late Adivappa nominated the present two petitioners as his nominees. The Bank, having accepted the deposit and having made use of that amount for all these years, cannot now be permitted to say that it will not allow withdrawal of the deposit by the petitioners who are admittedly the nominees of the depositor, on the ground that late Adivappa ought not to have nominated two persons instead of one person. Such a plea could have been taken only at the time of accepting the deposit. Having raised no such objection and having accepted the deposit, the Bank must be deemed to have waived its objection to the making of two nominees. The above Section does not relate to the legal validity of the deposit or nomination. It is merely a direction to the Bank to refuse to accept a deposit made with names of two nominees. It is not intended by the Section that in case the Bank disregards the said direction, the whole transaction of deposit together with the nomination should be treated illegal. The Bank today cannot go back on the conditions subject to which the deposit has been made by Adivappa and accepted by it.I, therefore, hold that the action of the Bank refusing to pay the nominees of the depositor the deposited money is unjustified. Further S. 45-ZA has nothing to do with the question of withdrawal of the deposit by the nominees. That Section only deals with the question of depositing the moneys with the Bank at the time of withdrawal of deposited money, the question of validity of nomination does not arise. Having accepted two nominations, the Bank cannot be permitted to take advantage of its own mistake."

27. Any other aspect apart, the nomination made by the customer appears to have been made in favour of the Secretary, Kolkata District Committee of the petitioner. It is the Secretary who had filled up the claim form. In the absence of any doubt having been raised in regard to such claim form being submitted before the respondent No. 2 by such Secretary, refusal to settle the claim appears to be arbitrary and unreasonable. The word 'individual' has been defined in Black's Law Dictionary to mean: 1. Existing as an indivisible entity; 2. Of or relating to a single person or thing, as opposed to a group. The Secretary, Kolkata District Committee of the petitioner does come within the comparatively narrow meaning of "individual" and, therefore, in terms of even rule 2 of the Rules, he is entitled to receive the amount of deposit lying in credit in the said account.

28.Nomination made by a depositor/account holder is the reflection of his wish upon identification by him of the recipient of the deposit lying in an account in the event of death of such depositor/account holder and to hold the same in his (recipient's) custody for being distributed according to the law of succession. Nomination, which is made without any coercion, undue influence or misrepresentation and is accepted by a banking company upon a satisfaction that the nomination does not suffer from any of the vitiating factors and clothes the nominee to receive the amount, ought to be acted upon after the death of the depositor/account holder, for, that would result in honouring his wish. If at all the nomination is, at a subsequent stage, found to suffer from any technical defect precluding the banking company to act on such nomination, it ought to be the bounden duty of the officials of the bank to get the nomination rectified/altered so as to bring it in conformity with the statutory requirements provided the depositor/account holder is alive. Once the opportunity to get the nomination rectified/altered is lost by the tardy and indolent acts of the officials of the bank, it would not be in the interest of justice to allow the banking officials to refuse to honour the wish expressed by the depositor/account holder.

29. For the reasons aforesaid, the refusal of the respondents to release and disburse the amount of credit balance in the savings bank account of the customer cannot be upheld. The impugned communication dated March 28, 2014 stands quashed. The petitioner is entitled to an order in terms of prayer 'a' of the writ petition. Let the amount of deposit with 10% interest be released and disbursed by the respondents in favour of the petitioner as early as possible but not later than 4 (four) weeks of receipt of a certified copy of this judgment and order.

30. The writ petition, thus, stands allowed without any order as to costs.

Urgent photostat copy of this judgment and order, if applied for, be furnished to the applicant at an early date.