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SC sends notice on plea over deceased bank account holders
Advocate Prashant Bhushan who represented the petitioner informed the court that the unclaimed money in dormant/inactive accounts is making its way to government owned funds which has seen a sharp rise over the last decade.
The Supreme Court on Friday sought a response from the Centre, the Reserve Bank of India (RBI) and Securities Exchange Board of India (SEBI) on a petition seeking directions to set up a centralized website providing information about bank accounts, insurance, post office funds etc. held by deceased account holders.
“It raises an important issue if money belonging to dead investors and depositors lies unclaimed in banks, post offices and financial institutions without information of the same being communicated to the legal heirs of the deceased,” said the Supreme Court.
A bench of justices S Abdul Nazeer and JK Maheshwari issued notice to the Union ministries of finance, corporate affairs, SEBI and RBI on a public interest litigation filed by journalist Sucheta Dalal.
Advocate Prashant Bhushan who represented the petitioner informed the court that the unclaimed money in dormant/inactive accounts is making its way to government owned funds which has seen a sharp rise over the last decade.
The petition said, “Funds from the inoperative or dormant bank accounts that are transferred to the Depositors’ Education and Awareness Fund (DEAF) often remain unclaimed because the legal heirs or nominees of the deceased bank account holders are unaware of the very existence of the bank accounts of the deceased and the banks fail to track down and inform them about its existence.”
Dalal said that the DEAF fund, which stood at ₹33,114 crore by the end of March 2020 grew by more than ₹ 6,000 crore in just one year, as the fund reported a total of ₹39,264 crore for the period ending March 2021.
Similar has been the steep rise in the unclaimed funds lying in debentures and investment instruments as the corresponding Investors’ Education and Protection Fund (IEPF) stood at ₹ 400 crore in 1999 and grew 10 times to ₹4,100 crore by end of March 2020.
The petition proposed that the legal heirs of unclaimed investors/depositors are mostly not aware of the accounts lying in the name of their deceased relatives. This issue was taken note of by the RBI which issued several circulars and guidelines in the past to all central, state cooperative banks, and local area banks to provide a mechanism so as to gather details of account holders who have not operated their accounts or the money in their funds lies unclaimed.
To overcome this challenge, the petitioner said, “There is an urgent need to develop a centralized online database under the control of RBI that will provide information about the deceased account holder including such details as the name, address and last date of transaction by the deceased account holder.” The bank should simultaneously intimate RBI about the presence of these accounts.
Even in cases where legal heirs approach banks for refund, the petition said that the process was so cumbersome that getting refund is an uphill task and people are forced to engage middlemen. The petition drafted by advocate Rashmi Singh said, “Majority of banks, both public and private, as well as non-banking financial companies (NBFCs) and depositories such as National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) insist on legal documents such as a succession certificate, probate etc that require the legal heirs to approach the court.”
The petition urged the Court to make the process of refund “hassle-free” by which banks and other financial institutions do not insist on production of court orders in cases where there is a clear and undisputed Will or if the legal heirs have filed a claim along with an undertaking/affidavit giving an indemnity against the amount claimed from the bank and the said claim upon being advertised in appropriate media is not disputed.
