Banker And Customers relationship
Banker:
As per section-3
of NI Act. 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”.
q An
organization involved in “Banking business” to be treated as Bank as well as
Banker.
q All
officials representing the organization involved in “banking business” are also
to be treated as Banker.
Investment and
finance companies etc. cannot be treated as Banker, since they may accept term
deposit but cannot use cheque for withdrawal of deposits.
Customer:
In general any
individual/organization who maintains account with the bank is treated as a
customer. But in some situations Banker extend their services to the
individuals/organizations even if they are not customer as defined above.
According to
duration concept a customer should run transactions of banking business for a
recognizable period.
But in practice
period of transactions is not an important factor for considering an entry as a
customer.
Broadly
Bank-Customer relationship may be divided into two categories:
i.
General relationship.
ii.
Special relationship.
Different kinds
of General relationship are given below:
Contractual
relationship: Basically Banker-Customer is a contractual
relationship established through opening of account. This contract shall remain
valid till the account is closed. As per contract as well as Section 5(P) of
Bank Company Act. deposit of the customer is repayable on demand.
Besides this
contractual relationship, there are other kinds of general relationships
between the banker and customer depending on the services rendered by the bank.
Generally the following are the major forms of relationships between a banker
and his customers:
Debtor-
Creditor: The
general relationship between a banker and customer (account holder) is that of
a debtor and creditor. If the customer’s account shows credit balance, the bank
is debtor and customer is creditor. The bank in this case has to repay on
demand. On the other hand, if the account of customer is overdrawn,
relationship is just the reverse and here the customer has to repay since he is
the debtor.
Agent- Principal:
Banks provide agency services to their customers. When
a banker buys or sells securities on behalf of his customers he performs an
agency function. Similarly when he collects cheques, bills, interest and
dividend etc. or when he pays insurance premium from the customer’s account, as
per his mandate, he acts as an agent. In case of agency services, the law of
agency governs the relationship between the banker and customer. Here banker is
the agent and customer is the principal.
Bank as trustee: A
trustee is one who holds property for the benefit of a person or beneficiary.
The banker is a trustee when a customer deposits his valuables and securities
for the safe custody. The bank cannot use the articles kept for safe custody
anyway he likes. Fund, if any, coming to the hands of the bank, as a trustee
must also be applied for specific purposes as the trust deed indicates.
Bailor-Bailee: When a bank
advances money to a customer against merchandise, the bank might bring the
merchandise under his control. In this case, the relationship between a
customer and a banker is that of a bailor and bailee. Here law of contract
operates.
Special Relationship between
Banker-Customer:
The rights of one party are the duties of
other and vice versa. The rights and duties are the subjects of special
relationship between a bank and it’s customers. Special relationship between a
banker and customer are discussed under the following heads:
Banker’s obligation to a customers:
a)
Acceptance of deposit
b)
Honoring Cheques
c)
Maintenance of secrecy of the account
d)
Notice to be given in case of closure of accounts
e)
Payment of interest
f)
Furnishing statement
g)
Providing services
Banker’s rights to customers:
Bankers’ lien:
A banker has the right of general lien in
respect of the dues to him by the customer. It is the right of the creditor to
retain the goods and securities in his possession, belonging to the debtor,
until the debt is discharged.
Right of appropriation:
When
more than one debt remain outstanding by the debtor, then frequently a relevant
question arises as to which of the debts is to be discharged if the amount paid
by the debtor is not enough to discharge all the debts. The problem has been
addressed by the contract act. As per this act, the debtor has the first choice
and he can appropriate the amount, as he likes at the time of payment. If the
creditor does not agree, he may refuse to accept the payment and take the
recourse of ordinary law.
Banker’s right of set-off:
Banker has the right to set-off. This right
entitles him to adjust a debt balance in some account/accounts of a customer
against any credit balance in his other accounts.
Banker’s right of automatic set-off:
Banker has the automatic right of set-off in
circumstances like death, insanity or insolvency of the customer, on receipt of
a garnishee order etc.
Right to charge interest and commission:
Banker has an implied right on the customers
to realize charges for various services rendered to them. The charges are
required to be reasonable.
Customer’s obligation to Banker:
a) Draw cheques within
the balance available in the account or under previous arrangements with the
bank.
b) Draw cheques in
such a manner that reduces chances of fraudulent alterations.
c) Keep the cheque
book carefully so that third parties may not have easy access to them.
d) Pay reasonable
charges.
e) Make deposits only
at the branch where the account is maintained if not otherwise allowed.
f) Make a formal
demand for payment of deposit by issuing cheque or by any other approved
manner.
g) Inform the banker
about any fraudulent attempt of encashment of his cheque.
Customer’s rights on banker:
a)
Deposit money and cheque etc. into his account.
b)
Issue a cheque on his account
c)
Transact within the banking hours
d)
Avail of any other services provided by the
bankers.
Negotiable
Instruments
NI Act. 1881
came into force on 1st March 1882. After liberation it was adapted
through Bangladesh Bank Order – 1972 (P.O.127). Originally there were 141
sections. As the section 2 & 139 have been repealed through Amendment, present
number of section of the Act is 139.
Definition of Negotiable
Instruments: Section 13 states as under:
A “Negotiable
Instrument” means a promissory note, Bill of Exchange, or cheque payable
either to order or bearer.
Specimen copy of Promissory Note
Specimen
copy of Bill of Exchange
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Specimen copy of Cheque
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Meaning of Negotiable: Section 14 states as under:
“When a
promissory note, Bill of Exchange or cheque is transferred to any person so as
to constitute that person the holder thereof, the instrument is said to
be negotiable.
Holder in due course
Promissory Note:
Section 4 states
as under:
A " promissory note" is an
instrument in writing (not being a bank-note or a currency-note) containing an unconditional
undertaking, signed by the maker, to pay a certain sum of money only to, or
to the order of, a certain person, or to the bearer of the instrument.
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Characteristics:
q It
must be written undertaking.
q The
maker must sign.
q The
amount payable must be specific(certain).
q Payee
of the note must be specific.
q Unconditional
promise.
q It
should be stamped.
q It
must be an undertaking to pay money and only money.
Parties involved:
Maker and payee.
Bill
of Exchange:
Section 5 states
as under:
A "bill of
exchange" is an instrument in writing, containing an unconditional
order, signed by the maker, directing a certain person to pay a certain sum
of money only to, or to the order of, a certain person or to the bearer of the
instrument.
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Characteristics:
q A
bill of exchange must be in writing, duly signed by its drawer, accepted by its
drawee and properly stamped as per Stamp Act.
q It
must contain an order to pay.
q The
order must be unconditional.
q The
sum payable mentioned must be certain.
q The
parties to a bill must be certain.
q The
order must be to pay money and money alone.
Parties involved:
Drawer, Drawee,
Acceptor, Payee (Endorser & Endorsee)
Cheque:
Section 6 states
as under:
A
"cheque" is a bill of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand.
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Characteristics:
q A
cheque must be in writing and duly signed by the drawer.
q It
contains an unconditional order.
q It
is issued on a specified banker only.
q The
amount specified is always certain and must be clearly mentioned both in
figures and words.
q The
payee is always certain.
q It
is always payable on demand.
q The
cheque must bear a date otherwise it is invalid and shall not be honoured by
the bank.
Parties involved:
Drawer, Drawee,
Payee (Endorser & Endorsee)
Types of Cheque:
i.
Bearer Cheque
ii.
Order Cheque
The cheque which
contains the word “bearer” after the payee’s name is a “bearer cheque”.
Specimen copy of
bearer Cheque
As regards bearer
cheque section-85(2) of NI. Act. states as under:
Where a cheque is
originally expressed to be payable to bearer, the -drawee is discharged by
payment in due course to the bearer thereof, notwithstanding any endorsement
whether in full or in blank appearing thereon, and notwithstanding that any
such endorsement purports to restrict or exclude further negotiation.
According to the
subject “section” a bearer cheque is as good as cash. It can be
transferred to anybody by mere hand to hand delivery i.e. without
written endorsement on the cheque. Even if a stolen bearer cheque is paid, over
the counter, drawee bank cannot be made liable for effecting payment if it is
made in due course. A cheque originally expressed as bearer cheque and if it is
subsequently made restricted for negotiation by endorsement, drawee bank shall
not be made liable for payment. It may be kept in mind that “once a cheque
is issued as bearer it is always bearer”.
As per section-50
legally a bearer cheque can be changed to order cheque by a restrictive
endorsement. Since intension of the transferor is to get the payment by a
specific person it is advisable that the paying bank to find out the bonafide
person before making payment to avoid dispute or litigation though law does not
require it.
Order cheque
The cheque in
which the words “or bearer” are striken out and order is given by the drawer to
a specific person for payment, is an order cheque.
Specimen copy of
order Cheque
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Section85(i)
states as under:
Where a cheque payable to order purports to be endorsed by
or on behalf of the payee, the drawee is discharged by payment in due course.
The order cheque
may be paid over the counter but the drawee bank shall have the responsibility
to verify the identification of the named person.
As per section 47
& 48 an order cheque is negotiable by endorsement and delivery thereof.
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