Either Or Survivor Accounts - Detailed Explanation with Case Laws

Either or Survivor [E or S] is the most common but most litigated joint account in India. 90% of family accounts, HUF accounts, husband-wife accounts are opened in this mode. Misunderstanding is: People think Survivor becomes owner of money after death of one holder. Law says NO - Survivor is only trustee for legal heirs.

Governing Law:

• Section 45ZA to 45ZF of Banking Regulation Act, 1949 - Nomination & Survivorship
• RBI Master Circular on Customer Service 2024 - Para 23 to 28 - Operation of Joint Accounts
• Indian Contract Act Sec 45 - Devolution of joint rights
• Indian Succession Act Sec 212, 213
• Hindu Succession Act, Muslim Personal Law - Ownership after death

1. What is Either Or Survivor?

A joint account where any one of the account holders can operate the account independently during their lifetime, and on death of one, the survivor can operate and receive the balance.

Example: A and B are holders E or S. A can withdraw full Rs 10 Lakhs alone without B's signature. If A dies, B can withdraw full amount without legal heir certificate.

RBI allows 4 modes for joint accounts:

Most Banks Default: Either or Survivor for 2 holders.

2. Legal Nature - Mandate vs Ownership

This is the core confusion decided by Supreme Court:

E or S is a MANDATE / AGENCY given to Bank for operational convenience, NOT a transfer of ownership.

• During lifetime: Both A and B are joint owners of money as per their contribution / intention. If A deposited 100% money, B has no beneficial ownership, only right to operate.
• After death: Bank is discharged if it pays survivor. But survivor does NOT become absolute owner if money belonged to deceased. Survivor holds money as Trustee for legal heirs of deceased under Sec 45 of Indian Contract Act and Succession Law.

RBI Circular 2021: Bank must pay survivor without asking for Succession Certificate / Legal Heir Certificate for operational ease, but bank's payment does not decide ownership dispute between survivor and legal heirs. Legal heirs can sue survivor to recover.

3. Nomination vs Survivorship vs Succession

Three layers:

1. Bank's Liability Ends: If account is E or S + Nominee registered, on death of ALL holders, bank pays nominee under Sec 45ZE BR Act and is discharged.
2. Nominee is Not Owner: Nominee is trustee for legal heirs - Settled by Supreme Court.
3. Survivor Prevails Over Nominee if One Holder Alive: If A and B are E or S and nominee is C. If A dies, B gets money, not C. Nominee comes only after death of BOTH A and B.[survivor]

4. Landmark Case Laws

A. FOUNDATIONAL - SURVIVOR IS NOT OWNER

1. Gopal Singh Hira Singh v. Punjab National Bank, AIR 1976 Delhi 115 - First E or S Case

Facts: Joint FD in E or S of father and son. Father contributed 100% money. Father died. Son claimed as owner as survivor. Sisters [legal heirs of father] claimed share.

Ratio: Delhi High Court held: E or S account creates only a right to operate, not beneficial ownership. Source of funds is relevant. Since father contributed entire amount, son as survivor holds as trustee for all legal heirs of father under Hindu Succession Act. Son must share with sisters. Bank paying son is discharged, but ownership decided by succession law.

This is still followed by all courts.

2. Anumati v. Punjab National Bank, AIR 2004 SC 4162 + Smt. Indrani Wahi v. Registrar, Cooperative Societies, (2016) 11 SCC 713

Facts: Either or Survivor account of husband and wife. Husband died. Wife as survivor withdrew full amount. Children from first wife claimed.

Ratio: Supreme Court held: Payment to survivor by bank is valid discharge under Sec 45ZA BR Act. But inter-se dispute of ownership: Money belongs to estate of deceased to extent of his contribution. Survivor cannot claim exclusive ownership merely because account is E or S. Succession Act prevails over survivorship mandate.

SC introduced principle: "Nominee / Survivor is a trustee, not heir."

3. Sarbati Devi v. Usha Devi, (1984) 1 SCC 424 & Vishin N. Khanchandani v. Vidya Lachmandas Khanchandani, (2000) 6 SCC 724

Ratio: Though these cases were on Life Insurance and National Savings Certificate nomination, principle applied to bank accounts: Nomination under Sec 45ZE does not confer ownership, it only gives right to receive money. Legal heirs under succession law are final owners.

Applied to E or S: Survivor gets right to receive, but legal heirs can claim from survivor.

4. Shakti Yezdani & Anr. v. Jayanand Jayant Salgaonkar & Ors., (2023) SCC OnLine SC 171 - LATEST 3-JUDGE BENCH ON NOMINATION vs SUCCESSION

Facts: Either or Survivor account with nomination. Dispute between nominee and legal heirs under Parsi succession.

Ratio: Supreme Court 3-Judge Bench affirmed: Nominee / Survivor does not get absolute title. Deceased's share devolves by succession - Will / Hindu Succession / Personal Law. Nominee / Survivor is bound to distribute to legal heirs. Bank's duty ends on payment to survivor/nominee.

This is now final law - Overrules any contrary High Court view that survivor is owner.

B. BANK'S LIABILITY & OPERATION

5. Punjab National Bank v. S. B. Dayal, AIR 1980 Raj 66 + RBI Circular on Either or Survivor - Operational Dispute

Facts: Joint account E or S of A and B. A issued cheque. B issued stop payment instruction. Bank dishonored cheque on B's instruction. A sued bank.

Ratio: Rajasthan HC held: In E or S, either can operate independently. One holder's stop payment instruction revokes mandate of other? Court held: Either can give contrary mandate. Bank must not honor cheque if other joint holder gives stop payment before clearance. Bank's action justified. If holders give conflicting instructions, bank must freeze account and ask for joint instructions.

RBI Instruction: If E or S holders give conflicting instructions, bank must put account under "No Operation - Both Signatures Required" till dispute resolved.

6. Ram Singh v. Punjab National Bank, 2012 - Death of One Holder - Payment to Survivor

Facts: E or S account of mother and son. Mother died. Son withdrew full amount. Bank did not ask for death certificate.

Ratio: Consumer Forum held bank negligent: While bank can pay survivor, it must obtain death proof + KYC of survivor + indemnity if amount large. Paying without death certificate is deficiency. However, bank not liable to legal heirs if it paid survivor in good faith after death proof.

Rule Now: On death of one holder in E or S, survivor must give: Death Certificate + Application + KYC. Bank can pay without succession certificate upto threshold [Rs 15 Lakhs for most banks, Rs 5 Lakhs for some]. Above that, bank can ask for legal heir certificate for record but cannot refuse payment to survivor.

7. Smt. Soma Choudhury v. State Bank of India, 2018 - Former or Survivor vs Either or Survivor Confusion

Facts: Account opened as Former or Survivor - Mother former, daughter latter. Mother alive but daughter withdrew money claiming E or S.

Ratio: Gauhati HC held: Former or Survivor is different - Latter cannot operate during lifetime of former. Payment to latter during former's lifetime is illegal and bank liable to refund to former. Banks must strictly follow mode.

C. ATTACHMENT, DIVORCE, INSOLVENCY

8. Raghunath Singh v. State Bank of Bikaner & Jaipur, AIR 1994 Raj 47 - Attachment by Income Tax

Facts: IT Dept attached E or S joint account for dues of one holder.

Ratio: Court held: IT can attach only share of defaulter holder, not entire account, unless it proves entire money belongs to defaulter. If account is E or S of husband and wife, and dues are of husband, wife can prove her contribution and get her share released. Bank must not freeze entire account on attachment order against one holder - must hold 50% if contribution not clear.

9. Shweta Yadav v. State Bank of India, Delhi HC 2020 - Divorce Case

Facts: Husband and wife E or S account. Divorce filed. Husband withdrew full amount.

Ratio: Delhi HC held: During pendency of matrimonial dispute, either holder withdrawing full amount to defeat other spouse's claim is domestic financial abuse. Court ordered husband to bring back 50% to court. Bank not liable if it paid as per mandate, but family court can restrain operation by injunction order and bank must obey court order under Sec 45 of BR Act.

Lesson: If matrimonial dispute, immediately give letter to bank to change mode to Jointly.

10. Krishna Kumari v. Canara Bank, 2020 - Minor's Account as Either or Survivor with Guardian

Facts: Minor account with mother as guardian E or S - Minor's money from grandfather's will. Mother withdrew for personal use.

Ratio: Court held: Guardian in minor's E or S account is trustee, not owner. Cannot use minor's money for own use. Bank must ensure withdrawals are for minor's benefit if amount large. Bank not liable if withdrawal within mandate, but guardian personally liable for breach of trust under Guardian & Wards Act.

5. Practical Rules & Bank Procedure

On Opening:

• All holders must sign account opening form + mode of operation clearly ticked.
• Contribution ratio can be noted in internal memo - useful later for succession dispute.

On Death of One Holder in E or S:
Bank will do:

1. Take Death Certificate
2. Take KYC of survivor
3. Stop cheque book / Debit card of deceased
4. Change mode to Single in name of survivor
5. Pay balance - No need for Succession Certificate upto bank limit [Rs 15L SBI, Rs 10L ICICI]. Above limit, banks may ask for Indemnity + Surety.
6. If nomination exists, it continues for survivor - but if survivor dies, nominee gets.

What Survivor CANNOT Do:

• Cannot claim money is his exclusive property if source was deceased - Legal heirs can file civil suit for recovery against survivor within 3 years.
• Cannot defeat Will - If deceased left Will giving his share to someone else, Will prevails over E or S mandate.

What Legal Heirs Should Do:
If you are legal heir and survivor withdrew:

• File civil suit for recovery of share against survivor, not against bank [Bank already discharged]
• Get injunction from civil court to freeze account immediately on death, before survivor withdraws - Give court order to bank.

Tax Nuance: Interest income in E or S taxable in hands of person who contributed. If father contributed, clubbing under Sec 64 Income Tax Act.