Special Relationship: Obligations & Rights ⚖️

Apart from general relationships, bankers have specific statutory obligations (duties) and rights.

A. Obligations of a Banker (Duties) 🛡️

1. Obligation to Honor Cheques ✍️

Section 31, NI Act: Banker MUST pay customer's cheque if:

• Customer has sufficient balance.
• Cheque is properly drawn (date, sign correct).
• Presented within banking hours.
• No legal bar (attachment order).

Consequence: If bank wrongly dishonors cheque, it must compensate customer for loss/damage to reputation.

2. Obligation to Maintain Secrecy 🤫

Banker must NOT disclose customer's account details to outsiders. Exceptions (When bank CAN disclose):

• Compulsion of Law: Income Tax, Court, Police demand.
• Public Duty: If customer is funding terrorism/crime.
• Bank's Interest: To recover loan (suing customer).
• Customer's Consent: If customer agrees (e.g., for reference).

B. Rights of a Banker ⚡

1. Right of General Lien 🔒

Lien = Right to retain goods/securities until debt is paid.

Banker's General Lien (Section 171, Contract Act):

• Bank can retain any goods/securities of customer (cheques, bonds) coming into its possession in ordinary course.
• Until all dues are paid.
• Exception: Cannot retain goods given for specific purpose (e.g., Safe Custody).

Example: You have a loan due. You give a cheque for collection. Bank collects money but refuses to give it to you, adjusting it against your loan. This is Lien.

2. Right of Set-Off ⚖️

Right to combine two accounts to adjust debit against credit.

Example:

• Account A (Savings): Credit balance ₹50,000.
• Account B (Overdraft): Debit balance ₹30,000 (Overdue).
• Bank can combine: Take ₹30,000 from A to pay off B.
• Remaining in A: ₹20,000.

Conditions:

• Both accounts must be in same name and same right.
• Debt must be due (cannot set-off against future debt).
• Usually, bank gives notice before set-off (good practice).

3. Right of Appropriation 📝

If customer makes a payment, how to adjust it against multiple loans? Clayton's Rule:

1. As per Customer: If customer says "Adjust against Loan A", bank MUST do that.
2. If Customer Silent: Bank can adjust against any lawful debt (even time-barred debt).
3. FIFO (First In First Out): In running accounts (OD), first payment clears earliest debt.

4. Right to Charge Interest/Commission 💰

Bank has implied right to charge:

• Interest on loans.
• Commission for services (DD, collection).
• Incidental charges (SMS charges, minimum balance penalty).

Quiz Time! 🎯

💡 Final Wisdom: "Bankers have the right to protect their money (Lien/Set-off), but the duty to protect your secrets and honor your cheques!" 🛡️⚔️

Next up: KYC Norms - Why bank wants your Aadhaar! 🆔