2021 (2) TMI 1316 - SC - Indian Laws

Duty of care of locker in the bank - Whether the Bank owes a duty of care to the locker holder under the laws of bailment or any other law with respect to the contents of the locker? - Whether the same can be effectively adjudicated in the course of consumer dispute proceedings? - whether the Bank owes an independent duty of care to its customers with respect to diligent management and operation of the locker, separate from its contents? - Whether compensation can be awarded for noncompliance with such duty? HELD THAT - In light of the conflicting decisions of the National Commission, it is found that the approach adopted by the National Commission in the impugned judgment is the correct approach - In the present case, the Respondent bank has not disputed their negligence in breaking open the locker in spite of clearance of rental dues by the Appellant. However, the number of items originally deposited by the Appellant inside the locker is a contested fact. Hence, we do not propose to record any conclusions on whether the Appellant locker holder in the present case is entitled to claim return or recovery of the value of the ornaments alleged to have been deposited by him. We are in agreement with the findings in the impugned judgment to the extent that the Appellant must file a separate suit before the competent civil court for seeking this relief and for proving that the aforesaid items were actually in the custody of the bank. Separate Duty of Care of the Bank with regard to Locker Management - HELD THAT - The imposition of liability upon the bank with respect to the contents of the locker is dependent upon provision and appreciation of evidence in a civil suit for such purpose. However, this does not mean that the Appellant in the present case is left without any remedy. Banks as service providers under the earlier Consumer Protection Act, 1986, as well as the newly enacted Consumer Protection Act, 2019, owe a separate duty of care to exercise due diligence in maintaining and operating their locker or safety deposit systems - This duty of care is to be exercised irrespective of the application of the laws of bailment or any other legal liability regime to the contents of the locker. The banks as custodians of public property cannot leave the customers in the lurch merely by claiming ignorance of the contents of the lockers. In Mahendar Singh Siwach 2006 (10) TMI 518 - NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI the bank negligently allowed a third party, who was the previous allottee of the locker, to break open the appellant s locker and take away the valuables therein. It was found that the bank had failed to duly record and complete the required formalities with respect to change of allotment from the third party to the current allottee, i.e., the appellant. The present state of regulations on the subject of locker management is inadequate and muddled. Each bank is following its own set of procedures and there is no uniformity in the rules. Further, going by their stand before the consumer fora, it seems that the banks are under the mistaken impression that not having knowledge of the contents of the locker exempts them from liability for failing to secure the lockers in themselves as well - it is imperative that this Court lays down certain principles which will ensure that the banks follow due diligence in operating their locker facilities, until the issuance of comprehensive guidelines in this regard. Looking to the facts and circumstances of the case, we deem it appropriate to impose costs of Rs. 5,00,000/on the Bank which should be paid to the Appellant as compensation. The amount of Rs. 5,00,000/shall be deducted from the salary of the erring officers, if they are still in service. If the erring officers have already retired, the amount of costs should be paid by the Bank. Additionally, the Appellant shall be paid Rs. 1,00,000/as litigation expense - Appeal disposed off.

Summary

Issues Involved:
1. Duty of care owed by the Bank to the locker holder under the laws of bailment or any other law.
2. Independent duty of care owed by the Bank to its customers regarding the management and operation of the locker.

Issue-wise Detailed Analysis:

I. Relief with Respect to the Contents of the Locker:

1. The dominant view globally is that banks act as bailees for goods placed inside lockers. This view is supported by various precedents such as Roberts v. Stuyvesant Safe Deposit Co. and Cussen v. Southern Cal. Savings Bank, where courts held that banks must exercise due care under bailment laws. However, the application of bailment laws depends on whether the bank had knowledge of the locker contents and whether possession was transferred to the bank.

2. Under Indian law, the Indian Contract Act, 1872 defines bailment and requires delivery of goods, an express or implied contract, and delivery for a purpose. The Reserve Bank of India (RBI) had issued a Draft Circular in 2006 suggesting that the relationship between banks and locker holders is that of bailor and bailee. However, subsequent guidelines and responses from banks indicate a shift in position, with banks disclaiming liability for locker contents.

3. High Court judgments in India, such as Jagdish Chandra Trikha v. Punjab National Bank and Atul Mehra v. Bank of Maharashtra, have addressed the issue of bank liability for locker contents. These judgments highlight the need for evidence of entrustment and knowledge of locker contents by the bank to establish bailment.

4. The Supreme Court concluded that the consumer fora are not equipped to adjudicate disputes regarding the contents of lockers. Such disputes require detailed evidence and should be decided by civil courts. The Court directed the appellant to file a separate suit in a civil court to seek relief regarding the locker contents.

II. Separate Duty of Care of the Bank with regard to Locker Management:

1. Banks owe a separate duty of care to exercise due diligence in maintaining and operating locker systems. This duty includes ensuring proper functioning, guarding against unauthorized access, and providing safeguards against theft and robbery, irrespective of the application of bailment laws.

2. The RBI has issued guidelines emphasizing the duty of care in locker management. These guidelines include maintaining a locker register, notifying locker holders of changes, and ensuring security procedures are followed. However, the guidelines are not comprehensive, and banks often draft locker agreements favoring their interests.

3. The Supreme Court emphasized the need for uniform regulations and laid down principles for banks to follow in locker management. These principles include maintaining updated registers, notifying locker holders of changes, using technology for security, and ensuring proper verification procedures.

4. In the present case, the bank's negligence in breaking open the appellant's locker without notice and despite cleared dues was deemed a gross deficiency in service. The Court imposed costs of Rs. 5,00,000 on the bank as compensation, to be deducted from the salaries of erring officers or paid by the bank if the officers had retired. Additionally, Rs. 1,00,000 was awarded as litigation expenses.

Conclusion:

The Supreme Court highlighted the significant role of banks in providing locker services and the need for comprehensive regulations to ensure the safety and security of lockers. The RBI was directed to issue suitable rules within six months, and the principles laid down in the judgment were made binding on banks until such rules are issued. The appeal was disposed of accordingly.