General Studies · Bankers Special Contractual Relationships
Mr. Vivek maintains a Current Account (CA) with a debit balance of INR 5 lakhs and two separate Fixed Deposit Accounts (FD-A of INR 10 lakhs and FD-B of INR 20 lakhs) with the same bank branch. FD-A is held in the joint names of Vivek and his spouse (payable to either or survivor), and FD-B is held in the single name of Vivek. Vivek defaults on his loan repayment with a separate bank. The present bank decides to exercise its General Lien and Right of Set-off on the deposit accounts against the CA debit balance. Considering the principles of mutuality of debt and Banker's General Lien (Section 171, Indian Contract Act, 1872), which of the following is the bank legally entitled to set off against the CA debit balance of INR 5 lakhs?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank is entitled to set off the entire amount of FD-B (INR 20 lakhs), but only 50% of FD-A (INR 5 lakhs), totaling INR 25 lakhs.
- 2The bank is entitled to set off the entire amount of FD-B (INR 20 lakhs), but none of FD-A, as the joint account lacks the necessary mutuality of debt.✓
- 3The bank is entitled to set off the entire amount of FD-A (INR 10 lakhs) and FD-B (INR 20 lakhs), totaling INR 30 lakhs, using its General Lien.
- 4The bank is entitled to set off the entire amount of FD-B (INR 20 lakhs), and the total set-off against the INR 5 lakhs debit balance is INR 20 lakhs.
Correct answer
The bank is entitled to set off the entire amount of FD-B (INR 20 lakhs), but none of FD-A, as the joint account lacks the necessary mutuality of debt.
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