Ordinarily, a banker is a debtor of his
customer in respect of the deposits made by the latter, but in certain circumstances he acts as a trustee also. A trustee holds money or
assets and performs certain functions for the
benefit of some other person called the beneficiary. For example, if the
customer deposits securities or other
valuables with the banker for safe custody, the latter acts as a trustee of his
customer. The customer continues to
be the owner of the valuables deposited with the banker. The legal position of
the banker as a trustee, therefore, differs from that of a debtor of his
customer. In the former case the money or documents held by him are not treated
as his own and are not available for distribution amongst his general creditors
in case of liquidation.
The position of a banker as a trustee or as
a debtor is determined according to the circumstances to the each case. If he does something in the ordinary
course of his business, without any specific direction from the customer, he
acts as a debtor (or creditor). In case of money or bills, etc., deposited with
the bank for specific purpose, the bankers' position will be determined by ascertaining whether the amount
was actually debited or credited to the customer's account or not. For example, in case of a cheque sent for
collection from another banker, the banker acts as a trustee till the cheques
is realized and credited to his customer's account and thereafter he will be
the debtor for the same account. If the collecting banks fails before the
payment of the cheque is actually received by it from the paying bank, the money so realized after the
failure of the bank will belong to the customer and will not be available for distribution amongst the
general creditors of the bank.
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