A bank is obligated to pay the fixed deposit proceeds to its holder without needing consent from third parties involved in the funding of the deposit.

JUDGMENT

Can a public sector Nationalised Bank, refuse to pay the proceeds of a fixed deposit, to the holder of the deposit, on the ground that a consent is required from a person from whose account the amount for opening the fixed deposit account was debited; is the question that needs to be decided in this writ petition. A question which may seem simple and ridiculous at the same time, for a person familiar with banking laws and the fundamentals of the law of contract, but which has some wedged corners as can be seen from the facts narrated below.

2. The following facts are not disputed. The petitioner, a Charitable Trust, is conducting an educational institution by name Sree Krishna College of Pharmacy and Research Centre at Parassala in Thiruvananthapuram district. The college was granted provisional affiliation on 19.09.2006. The petitioner had to provide a financial guarantee for a sum of Rs.10 lakhs for the purpose of the affiliation. The petitioner furnished the financial guarantee on 20.09.2006, by means of a fixed deposit receipt, issued in the name of the petitioner by the 1st respondent Bank and endorsed in favour of the University. Ext.P3 is the copy of the fixed deposit. The receipt shows that the amount has been received from the petitioner. During 2009, the Kerala University of Health Sciences was established and the furnishing of financial guarantee was no longer required. The Syndicate of the University at its meeting held on 30.12.2015 considered the request of various Educational Agencies of Self Financing Colleges, for return of the fixed deposit receipts submitted at the time of affiliation with the University, whose affiliations had been shifted to the Kerala University of Health Sciences and it was resolved to release the FD receipts only to those colleges whose affiliations have been shifted to the Kerala University of Health Sciences, which have no outstanding dues including annual administration fee towards the University. The petitioner had outstanding dues of Rs.3,75,000/-, which was cleared by submitting a demand draft dated 17.08.2019. By Ext.P7 dated 02.11.2019, the Registrar returned the fixed deposit to the Bank requesting to release the same to the depositor after cancelling the lien endorsed in favour of the Registrar, University of Kerala.

3. Coming to the dispute. The 1st and 2nd respondents (representing the concerned Bank) took a stand that the fixed deposit was opened in the name of the petitioner as per instructions by one Gokul Govind, who is the 5th respondent in the writ petition and by debiting the account of Sri Gokul Govind and that there was no Banker-customer relationship between the Bank and the petitioner. One fails to understand how a Bank which has issued a fixed deposit receipt in the name of a person, take a stand that there is no Banker-customer relationship with such person!!. In Ext.P11 issued by the 2nd respondent it is stated that the Bank requires confirmation from the 5th respondent for making the payment to the petitioner. The aggrieved petitioner approached the 3rd respondent Banking Ombudsman contending that the Bank was bound to release the proceeds of the fixed deposit to the depositor and there is no requirement to get approval from any stranger to the transaction. By Ext.P13, the 3rd respondent passed orders finding that the deposit was opened as per instructions from Gokul Govind who was a customer of the Bank, by debiting his account and that the interest of the fixed deposit has been regularly credited to the account of Sri Gokul Govind, for which the petitioner had not raised any objection. The 3rd respondent has noticed the stand of the Bank that they have never refused to refund the money and that the proceeds of the fixed deposit was either to be refunded to the account of Gokul Govind or to any other account as per his instructions for closure. The 3rd respondent closed the complaint under Section 13 (a) of the Banking Ombudsman Scheme, 2006 and sinc