Banks liable towards safety of lockers: Supreme Court

THE SC GIVES RBI SIX MONTHS TO FRAME NEW BANK LOCKER RULES

NEW DELHI: Banks offering lockers and safe storage space owe a duty of care to customers using the facilities and are responsible for their safety, the Supreme Court held in a significant ruling on Friday, awarding ₹5 lakh in compensation to a customer whose locker had been broken open by management of a Kolkata branch of his bank almost 27 years ago .

“Banks as service providers under the Consumer Protection Act owe a separate duty of care to exercise due diligence in maintaining and operating their locker or safety deposit systems,” a bench of justices Mohan M Shantanagouder and Vineet Saran said. “This includes ensuring the proper functioning of the locker system, guarding against unauthorized access to the lockers and providing appropriate safeguards against theft and robbery.

“The very purpose for which the customer avails of the locker hiring facility is so that they may be rest assured that their assets are being properly taken care of,” the bench said in its order.

It observed how in a globalised world, steady movement towards a cashless economy has made lockers an essential service for the common man.

“The banks cannot wash off their hands and claim that they bear no liability towards their customers for the operation of the locker…. this will lead to a state of anarchy wherein the banks will routinely commit lapses in proper management of the lockers, leaving it to the hapless customers to bear the costs,” the bench observed.

Such actions by banks would not only be a violation of the Consumer Protection Act but also damage investor confidence and harm reputation of our emerging economy, the judges added. The ruling came on a case before the court of a hapless consumer whose locker was broken open by a Kolkata branch of United Bank of India in September 1994 for non-payment of rent. He approached the district consumer court for compensation.

The top court held: “The breaking open of the locker was in blatant disregard to the responsibilities that the bank owed to the customer as a service provider,” and went on to award ₹5 lakh compensation to the petitioner and ₹1 lakh towards litigation expenses.

The bank was directed to pay the amount to the petitioner either by itself or by deducting it from the salaries of the bank officials who had been responsible for the act, provided they are still in service.

Examining the case, the court stumbled on the fact that the Reserve Bank of India (RBI) did not specify the liability of banks in such a scenario. In 2007, RBI issued directions to banks, imposing duty of care in respect of protection of bank lockers and mandating transparency vis-àvis the locker holder in allotment and breaking open of the lockers.

But it was largely left to the individual banks to formulate the exact procedures for fulfilling this duty of care. Going by past decided cases before National Consumer Commission and high courts, the top court noticed that the banks often took the defence that they were not liable as they were not aware of the locker’s contents.

Taking a proactive approach, the bench gave RBI six months to spell out the steps to be taken by banks with respect to locker/ safe deposit facility management. Banks should not have the liberty to impose unilateral and unfair means on consumers, the bench said. Till such time the RBI guidelines are framed, the court directed the principles laid down in its judgment to be binding on banks.