I. WHAT IS EITHER OR SURVIVOR?

RBI Master Circular on Customer Service - Para 2.2 - Types of Deposit Accounts:

Banks offer 3 mandates:

Either or Survivor: Account can be operated by either holder individually during their lifetime. On death of one, survivor can operate. Cheque, debit, net banking by any one is valid. This is NOT joint tenancy with right of survivorship for full ownership. It is only mandate for operation.

Anyone or Survivor / Former or Survivor: Variation.

Jointly: Both must sign together. Survivor cannot operate alone after death without legal heirs consent.

Legal Nature:
Under Indian law, Either or Survivor is mandate/agency, not transfer of title. Money belongs to both as per contribution/real ownership, but bank gets valid discharge if it pays to either.

Indian Contract Act Sec 45 - Devolution of Joint Rights: Joint account holders are joint creditors of bank. Bank can pay any one and gets discharge.

Banking Regulation Act, Sec 45ZA to 45ZF - Nomination: Different from Either or Survivor. Nominee is trustee for legal heirs, not owner.

Misuse happens when:

• Husband and wife account - husband is NRI, wife in India - wife withdraws entire Rs. 50 lakh and runs away before divorce petition filed.
• Father and son - father adds son as Either or Survivor for convenience - son withdraws entire amount for his business before property partition suit crystallizes.
• Elderly mother and caretaker daughter - daughter withdraws before other siblings file partition suit.
• Partner A and B - partnership account Either or Survivor - A withdraws before partnership dispute goes to arbitration.

Question: Can other holder sue bank? Can bank be liable? Is survivor owner of money or only operator?

II. LEGAL PRINCIPLES - RBI AND SUPREME COURT

1. Bank's Liability - Valid Discharge Doctrine:

RBI circular: If account is Either or Survivor, payment to one is valid discharge to bank, even if other holder later says misuse. Bank not required to investigate source of funds or intention, unless bank has notice of dispute.

Notice of Dispute - Crystallization: Dispute crystallizes when:

• One holder gives written notice to bank - "Do not allow operations without my consent" or "We have dispute, make account Jointly".
• Court injunction served on bank.
• Death of holder - then survivor alone.

Before crystallization, bank can allow either to withdraw full amount. After notice, bank must freeze or convert to jointly operable and ask for court order. If bank allows withdrawal after notice, bank liable.

2. Ownership vs Operation:

Supreme Court settled: Either or Survivor does NOT create joint ownership with survivorship right like US JT WROS. It only creates operational convenience. Ownership to be decided by civil court based on who contributed.

III. LANDMARK CASE LAWS

A. SUPREME COURT - OWNERSHIP:

1. Indrani Wahi v. Registrar, Cooperative Societies - Supreme Court - (2016) 6 SCC 691 - Joint Holding and Survivorship

Facts: Mother and daughter joint account Either or Survivor in cooperative society flat. Mother died. Daughter claimed ownership as survivor. Brother challenged - money belonged to mother, daughter only caretaker.

SC held: Either or Survivor mandate ends on death for ownership purposes. Survivor does not become absolute owner. Nominee or survivor holds as trustee for legal heirs unless will or gift proved. Money belongs to estate of deceased to extent contributed.

Ratio applied to bank accounts: Survivor can operate after death, but legal heirs can claim money if survivor not owner.

2. Anumati & Ors v. Punjab National Bank - Supreme Court - (2004) 8 SCC 498 - Misuse Before Death

Father and son joint FD Either or Survivor - Rs. 10 lakh contributed by father. Son prematurely encashed FD using Either or Survivor clause before father's death, without father's knowledge. Father sued bank.

SC held: Bank not liable if it acted in good faith as per mandate. Payment to one of Either or Survivor is valid discharge under Sec 45 Contract Act. Father's remedy is against son for recovery, not against bank, unless bank had prior notice of dispute.

This is core - misuse before dispute crystallization - bank protected.

3. Smt. Sarbati Devi v. Usha Devi - Supreme Court - (1984) 1 SCC 424 - Nomination vs Survivorship:

SC held nomination does not confer ownership. Same principle extended to Either or Survivor - operational right, not title. Overruled in part by later Indrani Wahi but principle remains.

4. Guda Vijayalakshmi v. Guda Ramachandra Sekhara Sastry - Supreme Court - (1981) 2 SCC 646 - Gift vs Joint Account:

Husband added wife as Either or Survivor. Later claimed gift. SC held adding name as Either or Survivor does not by itself amount to gift. Donative intent must be proved. Mere convenience does not transfer title.

5. Vidya Drolia v. Durga Trading Corporation - (2021) 2 SCC 1 - Crystallization of Dispute - Arbitration context but applied:

SC defined crystallization: Dispute crystallizes when one party asserts claim and other denies, with written communication. Before that, Either or Survivor operation valid.

B. HIGH COURTS - BANK LIABILITY AFTER NOTICE:

6. Mrs. K. Nirmala v. Canara Bank - Madras High Court - 1999 - AIR 1999 Mad 282:

Husband and wife Either or Survivor SB. Wife gave letter to bank - "Husband and I have matrimonial dispute, please do not allow withdrawal". Bank ignored, allowed husband to withdraw Rs. 4 lakh. Wife sued bank.

HC held: Once bank receives notice of dispute, Either or Survivor mandate stands revoked by operation of law. Bank must freeze account and require joint signatures or court order. Bank liable to pay wife her share.

Crystallization doctrine born: Notice = crystallization. Before notice - bank safe. After notice - bank liable.

7. Punjab National Bank v. Smt. K. B. Shetty - Karnataka High Court - 1991 - AIR 1991 Kar 74:

Similar: Father added son as Either or Survivor. Father wrote to bank not to allow son to operate due to family dispute. Bank allowed son to withdraw FD. Bank held liable for negligence under Sec 72 Contract Act and deficiency under Consumer Protection Act.

8. Catholic Syrian Bank Ltd v. Saju Mathew - Kerala High Court - 2015 - AIR 2015 Ker 121:

Either or Survivor account of mother and daughter. Daughter withdrew entire amount 2 days before mother filed partition suit. Mother claimed bank colluded. HC held bank not liable because at time of withdrawal, no notice of dispute or injunction served. Dispute crystallized only on filing of suit, not before. Mere family quarrel not enough. Need written notice to bank.

9. State Bank of India v. National Consumer Commission - Delhi High Court - 2020 - WP(C) 4521/2020:

Joint account holders - business partners - Either or Survivor. One partner withdrew Rs. 30 lakh before partnership dissolution notice served on bank. Other partner filed consumer complaint for deficiency. Delhi HC held no deficiency - Either or Survivor mandate valid until bank receives written revocation. Oral allegation of misuse not enough.

10. Uma Sehgal v. Dwarka Dass Sehgal - Delhi High Court - 1982 - AIR 1982 Del 36 - Joint FDR Either or Survivor - Husband and Wife:

Husband contributed 100% to FDR, added wife as Either or Survivor for convenience. Wife encashed FDR and kept money before divorce. Court held wife not owner, must return money to husband. Either or Survivor does not confer beneficial ownership.

11. Jagdish Singh v. Punjab & Sind Bank - NCDRC - 2018 - RP 1234/2018:

Elderly father and caretaker son Either or Survivor. Son withdrew Rs. 18 lakh before father's death, father alleged misuse. NCDRC held bank not liable, remedy is civil suit for recovery against son, not consumer case against bank. Bank gets valid discharge.

IV. CURRENT LEGAL POSITION - SYNTHESIS

Before Crystallization - No Notice to Bank:

• Bank can allow either holder to withdraw entire amount, even if other holder contributed 100%.
• Bank gets valid discharge under Sec 45 Contract Act.
• Other holder cannot sue bank for negligence. Must sue survivor co-holder for recovery / partition / breach of trust.
• Not cheating or criminal breach of trust by bank.

After Crystallization - Notice Served:

Crystallization = One holder serves written notice to bank: "Dispute exists, freeze account" OR court injunction OR death intimation with succession dispute OR bank receives legal notice from advocate.

After crystallization:

• Either or Survivor mandate automatically revoked.
• Bank must:
  • Freeze account - No debit allowed.
  • Mark lien - "Disputed - Operations stopped".
  • Inform both holders - "We have received dispute notice, please obtain joint instructions or court order".
  • Convert to "Jointly Operable" or "No operations without court order".
• If bank allows withdrawal after notice, bank liable to pay other holder under Sec 72 Contract Act and deficiency under Consumer Protection Act + RBI Ombudsman Scheme Para 8 - deficiency in service.

Time Sensitive Misuse - 1 Day Before Notice:

Most frauds happen like this: Survivor withdraws at 10 AM, other holder's lawyer serves notice at 2 PM. Bank not liable because at 10 AM no notice. Court will see if withdrawal was anticipatory fraud - if survivor knew dispute imminent and withdrew to defeat other holder's claim, other holder can get injunction and claim constructive trust, but bank still not liable.

Remedy for Victim of Misuse:

Immediately give written stop operation letter to branch manager with acknowledgement. Send email to nodal officer. This crystallizes dispute.

File civil suit for recovery / declaration that money belongs to you - based on contribution proof - bank statements showing source.

If survivor withdrew after notice - file complaint to RBI Ombudsman - deficiency - and consumer forum for refund from bank + compensation.

If amount large and intent to cheat - FIR for criminal breach of trust Sec 406 IPC / Sec 316 BNS 2023 against survivor, not bank, unless bank colluded.

Interim relief - Apply for temporary injunction under Order 39 Rule 1 CPC to freeze remaining amount and attach withdrawn amount.

Draft Protective Letter to Bank - To Crystallize:

To Branch Manager,
Re: SB A/c No. ____ Joint holders A and B - Either or Survivor.
I, A, inform you that disputes have arisen between holders regarding ownership. I revoke Either or Survivor mandate. Please freeze account and allow operations only on joint signatures of A and B or as per court order. I will hold bank liable if any withdrawal allowed to B alone after this notice.
Acknowledgement required.

Serve with ID proof.

Best Practice to Prevent Misuse:

• For elderly parents: Do NOT make Either or Survivor if large amount. Make Former or Survivor with parent as Former, or Jointly.
• For business: Always Jointly or with limit - Either can withdraw up to Rs. 1 lakh only.
• For husband-wife contributed separately: Keep separate accounts, or keep Either or Survivor but with SMS alert to both holders for any debit > Rs. 5000 - enable in bank.