Safe deposit lockers: What banks owe their customers

Bank customers hire safe deposit lockers from private or public sector banks to keep their valuables. Sometimes they complain that their valuables have gone missing. It is vexatious to fix responsibility for such missing items. The following case reveals the magnitude of the problem.

One Amitabha Dasgupta, along with his mother (since deceased), was a joint holder of a locker in the Union Bank of India at its Deshapriya Park Branch, in Kolkata, from 1979. The bank illegally broke open the said locker on November 12, 1994, for alleged non-payment of dues without any intimation whatsoever to the complainant. In fact, Dasgupta had paid the locker charges. He came to know about the bank’s action on June 17, 1995, when he went to the bank to operate the locker.

Dasgupta filed a complaint before the District Consumer Disputes Redressal Forum claiming a sum of ₹3 lakh for the loss of ornaments and articles kept in the locker, in addition to compensation and costs.

The bank admitted that it broke into the locker – through inadvertence. The District Forum believed the petitioner’s claim that he had kept ornaments in the locker, and that their value was ₹3 lakh. Accordingly, the bank was directed to return the entire contents of the locker as detailed in the body of the judgment, or pay a sum of ₹3 lakh as damages together with a further sum of ₹50,000 as compensation for mental agony, harassment and cost of litigation.

The bank filed an appeal before the State Consumer Disputes Redressal Commission, which modified the order and asked the bank to pay ₹30,000 as compensation. It further decided that the claim for the missing jewellery had to be decided by a civil court upon adducing elaborate evidence by both the parties.

Then Dasgupta filed revision petition with the National Consumer Disputes Redressal Commission, New Delhi, which dismissed the case.

Dasgupta later filed a civil appeal with the Supreme Court, which delivered its judgment on February 19, 2021. The judgment is important for banks providing safe deposit lockers, locker customers and also the Reserve Bank of India. The judgment seeks an end to recurring occurrences of missing locker contents. The SC analysed various dimensions of the locker facility extended by banks and also gave directions taking into account the adoption of technology-operated environment of locker facility. This will cover modern banks that allow operations of modern lockers which are operated by using passwords instead of physical keys.

Detailed Analyses Made by SC

There used to be perennial discussion about the relationship between a customer and banker whenever a locker is hired – whether it is ‘bailment’ or ‘lease’. A customer hiring a locker generally signs an agreement with the bank, without reading or understanding any conditions mentioned therein. Bank agreements invariably contain a clause that the banks are not responsible for the contents of the lockers as they are not aware what is kept inside; they are simply leasing the space.

If it is ‘bailment’, then the bank will be under obligation to return the items kept in the locker; if it is ‘lease’, it is leasing out the place without any responsibility for the contents. The SC analysed various international judgments on this and also a draft circular of 2006 of the RBI. The draft circular was not a direction but only an opinion seeking communication. Both were treating the relationship as bailment. But subsequent RBI circulars are clear that the relationship should be treated only as that between a lessor and lessee.

Problem of Customers When It Is Treated as Lease

Banks used to claim that as contents kept in the locker are not known to them, they are not answerable for the contents. But the Supreme Court in this case made the following observation:

“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 includes ensuring the proper functioning of the locker system, guarding against unauthorised access to the lockers and providing appropriate safeguards against theft and robbery. 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.”

The Judgment

The Supreme Court ordered the bank to pay ₹5 lakh to the customer, which shall be deducted from the salary of erring officers if they are still in service and if they are retired to be paid by the bank. Additionally the bank was asked to pay ₹1 lakh as litigation expenses.

The SC directed the RBI to issue suitable rules or regulations within six months. Further, the court said that it is also left open to the RBI to issue suitable rules with respect to the responsibility owed by banks for any loss or damage to the contents of the lockers, so that the controversy on this issue is clarified as well. The SC further discussed the problem that may crop up when the locker is also operated with electronic keys (passwords) instead of physical keys and advised for formation of necessary guidelines.

So the ball is now in the RBI’s court and we have to wait for its direction. We must also understand that locker facility is not a banking activity of the banks and that is why banks display ‘locker facility available’ separately as part of name board. Hence RBI regulation on bank locker business is a grey area.

(S Kalyanasundaram is a retired banker)