Banker-Customer Relationship,

Special Modes of Relationship,

Rights & Obligations,
Lien, Right of Set Off & Garnishee
Order.
Presentation by:
Jagadish Chandra Debnath
Principal
NCC Bank TI.

What is Bank
BANK shall be considered those institutions
where a substantial part of their business
consists of the receipts of money on Current
Account to be drawn upon by Cheques.
In Bangladesh a Bank company which run a
Bank Business complying the formalities of
Bank Company Act 1991. ( Sec-5-Na & Ta).
Main function of the bank is Bank Business that
is Banking.

Who is Banker?....
Dr. H.L Hart defines a Banker as a person or company
carrying on the business of receiving moneys and
collecting drafts, for customers subject to the obligation
of honoring cheques drawn upon them from time to time
by the customers to the extent of the amounts available
on their current accounts .
Sir John Paget says no person or body corporate or
otherwise, can be a Banker who dont

(i) take deposit accounts

(ii) take current accounts
(iii) Issue and pay cheques and
(iv) Collect cheques crossed and uncrossed for his
customers."

Who is Banker?
Section-3(b) of the NI Act, 1881,
"Banker" means a person transacting the
business of accepting, for the purpose of
lending or investment, of deposits of money
from the public, repayable on demand or
otherwise and withdraw able by cheque, draft,
order or otherwise and includes any post
office Savings Bank.

Who is a Customer?
According to Sir. John Paget
"To constitute a customer there must have dealing in the nature of
regular Banking Business.
" that is customer of a bank should have a Bank Account and
transaction were to be in nature of regular bank business.

According to the judgment in the case 'Lad Broke Vs Todd'

"The relationship of Banker & Customer begins as soon as the first
cheque is paid in and accepted for collection and merely when it is
paid."
To Constitute a Customer the following essential requirement must
be fulfilled
A Bank Account- Current, Savings or any nature in money deposit.
The Dealing between the banker and customer must be of the nature of
banking business

Who is a Customer?
A customer is a person who has entered into a
contract with a bank for the opening an account in his
or her name.
The term 'customer' has not yet been statutorily defined.

In order to constitute customer, a person should

satisfy two conditions:

1.
2.

He should have an account with the bank,

The dealing should be of banking nature.

In the Section-4-104(1)E of Uniform Commercial

Code (US) defines a Customer as

Any person having an account with a bank or for whom a

bank has agreed to collect items and includes a bank
carrying an account with another bank.

Mode of Banker Customer relationship.

The banker customer relationship is essentially a
debtor-creditor contractual relationship.
This relationship may be divided into
(a) legal relationship
(b) behavioral relationship.

Mode of Relationship depends on the

Nature of Transactions with the Bank

Special Mode of Relationship

Customer

Banker

Nature of Bank Business / Transactions

Creditor

Debtor

When a Banker open deposit Account and

take deposit

Debtor

Creditor

When Banker lend money to the borrower.

Principal

Agent

When banker receive a cheque for collection

Bailer

Bailee

When Banker takes bailment of goods

Pledger

Pledgee

When Banker take pledge of goods as

security

Beneficiary Trutsree

When a banker acts as trustee function

Mortgagor

Mortgagee

When Banker takes immovable property as

security - mortgage

Guarantor

Creditor

When Banker takes guarantee as security.

..

..

Basis of Banker Customer Relationship

Contractual relationship is established

between banker and customer through
opening of ACCOUNT.
Banker- Customer Relationship is guided
by different related Laws and Act. of this
land.

Legal rights and obligations..

On the basis of establishment of legal

relationship, between banker and
customer, both have got the legal rights
and obligations on another as to opening
and operations of different accounts.

Rights of a Customers
i) Right to deposit money in his Account on time.
ii) Right to demand repayment by issuing cheque or written order properly
in proper time and place.
iii) Right to get pass book/ Statement of account.
iv) Right to stop payment of his cheque. v) Right to give Standing
Instruction.
vi) Right to claim interest of his deposit balance in the interest bearing
account.
vii) Right to have secrecy of his account.
viii) Right to claim damages for any loss and defamation due to
wrongful/willful dishonour of cheque by bank.
ix) Right to demand the proceeds of the instrument deposited for collection
and collected accordingly.
x) Right to claim money paid by bank from his account wrongly or payment
is not made in due course.

Banker's Right
i) Right to return deposit if not proper manner and time.
ii) Right to return the cheque if not drawn properly or in
time or for some other reason.
iii) Right to debit customer's account for any charges,
interest, and commission if recoverable.
iv) Right

of lien- Bankers Lien, Right of setoff etc.

Right of lien- Bankers Lien, Right of set-off

LIEN : According to Contract Act 1872 Sec: 170,

a lien is the right of a creditor in possession of

goods, securities or any other assets belonging to
the debtor to retain them until the debt is repaid.

Particular Lien:
General Lien:
Banker's Lien:
Negative Lien:

Banker does not have lien over the

following items:
Credit balance of deposit account of the
borrower.
Securities received by Bank for sale.
Goods or securities left by the customer in the
Banker's hand inadvertently.
Money deposited for a special purpose.
Instruments deposited for collection .
Articles deposited for safe custody etc.

RIGHT OF SET OFF

The right of set off is the right of a creditor to the total or
partial merging of a claim against the counter claim of the
debtor.
In other words, a set off is a right which, enable a creditor
to adjust wholly or partially a debit balance in the debtors
account with any credit balance lying in his (debtors)
favour.

Essential Features of SET OFF :

Mutual debts must be certain:
Debts must be due :
Debts in the same right:
No agreement to the contrary:
Notice of set off:

Right of Set Off without serving any notice

Without serving any notice Banker can exercise
his right of set off in the following cases even
before the loan becomes due:

On the death, insanity or insolvency of the customer.

On the insolvency of a partner of a firm.
On the winding up of a company.
On receipt of a garnishee order.
On receipt of an information of a second mortgage
over the security which is charged to the Bank.
On receipt of a notice of assignment of the credit
balance of the customer.

Duties & Obligations of a Banker

i) Must credit the deposited amount to the customer's account.
ii) Must honour cheque if otherwise in order.
iii) Must supply pass book/ Statement of account as demanded.
iv) Must abide by the stop payment order.
v) Must abide by the Instruction. vi) Must pay interest as per rule.
vii) Must maintain secrecy of customer account if the banker's not
bound to disclose it under certain conditions.
viii) Must compensate the loss if it is incurred for bankers
negligent .
ix) Must collect the proceeds of the instrument in customer's
account and honour the cheque drawn against the amount.
x) Payment should be made in due course, in good faith and
without negligence.

Customer's Duties & Obligation

i) Must deposit the amount properly and in
time.
ii) Must demand payment by issuing
cheque or written order properly.
iii) Must pay the bank's charges interest
and commission if payable.
iv) Must abide by the laws.

Banker is not legally liable to the customer

If the cheque is dishonored under the following
conditions, although the cheque is drawn properly: If the fund is insufficient.
If payment is stopped by the drawer.
If payment is stopped by the court by issuing 'Garnishee
Order'.
Attachment order is issued by any competent authority.
Cheque presented after the death of the customer.
Notice of assignment.
Cheque presented after business/banking hour as
declared earlier.

Secrecy of Customer's Account.

Banker's obligation is to maintain strict secrecy of customer's

account. This obligation continues even after the customer has
closed his account with the bank.
However, the banker may dispense with the above rule under
following circumstances: -

Where customer's consent has been obtained.

Where bankers own interest require.
Where credit information is required by other banks.
Disclosure in National Interest

Disclosure under compulsion of law:

Bankers' Books Evidence Act-1891.

Money Laundering Prevention Act, 2002.
Income Tax Ordinance-1984.
Bank Companies Act-1991.
Criminal Procedure Code-1898.
Foreign Exchange Regulation Act-1947.
Code of Civil Procedure-1908
Anticorruption Commission Act 2007

TERMINATION OF RELATIONSHIP:
How does the relationship subsist:- The relationship
continues so long as it is carried out according to the
terms of contract embodied in the rules of the bank
When Relationship Terminate:
Under following circumstances banker - customer relationship may
be terminated.
Termination by the customer- Application for closing the account
and bankers do accordingly.
Termination by the Banker Misconduct by Customer FraudCheque issued without maintaining sufficient Balance
Termination on the Death of Customer
Termination due to insolvency of
Suspension due to Lunacy of Customer
Suspension due to attachment of Account by the Court
Garnishee Order.

Garnishee Order
As per Civil Procedures Code Rule 21/46
is the attachment of Credit balance in a
bank account by the count.
When Credit Balance Attachment Order
issued by the Court to a banker on
judgment debtor account than this order
is known as Garnishee Order
Garnishee Order Nishee & Order Absolute

Execution of Garnishee Order

On receipt of Garnishee Order bank must
execute the order without delay.
If the order received by HO it should be thrown
to the concerned branch without delay.
Loans & advances to at first adjusted that is right
of set off than inform the court.
No withdrawal / payment to be allowed.
If the there absolute order than certain balance
to be transferred in sundry deposit account. In
such cases customers transaction may be
allowed.

Q & A ???

Thank You All.