Dealing with accounts of lunatic and insolvent persons remains a delicate job for bankers. Whenever bankers learn that one of their customers is incapable of operating the account due to mental incapacity the operation in such customer’s account shall be immediately stopped.
While dealing with such accounts, bankers need be to extra careful. Any act of stopping the operation by the bankers on wrong information received by them may put them in embarrassment and difficulty.
Accounts of lunatic persons
Lunatics are persons of unsound mind. A contract with the insane person is void ab-initio. Banks are in such cases relied upon the ‘Guardianship Certificate’ issued either by the District Court under Mental Health Act 1987 or by the Local Level Committees set up under “Mental Retardation and Multiple Disabilities Act 1999”.
Though the persons of unsound mind are disqualified from contracting, the disqualification does not apply to contract already entered into by lunatics, during the period of their sanity or contracts which are ratified by them during such period. The banks upon receipt of a notice that a customer of their bank has been declared incapable stop the operation immediately in the customer’s account. Whenever banks learn that the customer is suffering from mental incapacity and no declaration is received by them on his mental health, the Bank Manager will make proper enquiry and then suspend the operation in the account till the customer is recovered from his illness.
Bankers as a matter of abundant precaution will write a letter to the hospital where he is admitted or to his attending doctor if he is at home. The operation in the account will be allowed or stopped only on the basis of doctor’s certificate or a court order.
If a Power of Attorney is operating the account, the authority to operate the account when customer himself becomes mentally incapable to operate the account. The same rule applies to the operation of account with joint names, when one of them becomes mentally incapable, the operation in the account will be stopped.