The 'Former or Survivor' Account After the First Holder Dies
Mahesh Verma and his younger brother Ashok opened a joint savings account at a semi-urban branch in 2014 with the mandate 'Former or Survivor'. Mahesh, the first-named holder, died on 12 March without leaving a will. The account holds ₹7,40,000. On 18 March three things land on the branch manager's desk at once: (i) Ashok submits a withdrawal form for ₹1,50,000 for funeral expenses; (ii) a cheque for ₹38,000 signed by Mahesh on 2 March is presented by a supplier who had done repair work at Mahesh's shop; (iii) Mahesh's widow, Sunita, arrives with the death certificate and claims the whole balance, saying Mahesh had registered her as nominee two years earlier and had told her the money was meant for her. The manager must decide all three before the branch audit next week, and the clerk wants to know whether the account should simply be frozen until the family settles the matter.
1. Can the branch pay Ashok ₹1,50,000? Explain what 'Former or Survivor' means and how it differs from 'Either or Survivor', and list what the branch must collect before paying.
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Meaning of the mandate
- Either or Survivor: either holder may operate while both are alive; on the death of one, the survivor continues to operate.
- Former or Survivor: only the first-named holder may operate during the joint lifetime. The second holder gets a right to operate only after the first holder dies.
So Ashok had no authority to sign before 12 March, but on Mahesh's death he becomes the person entitled to operate the account and to receive the balance.
Can the branch pay? Yes, after completing the death-claim formalities:
- Death certificate, original seen and copy retained (or verified from the issuing authority).
- Fresh KYC of the survivor, since the account is now effectively single.
- Signed claim/indemnity form and change of mandate in the system, cancelling the deceased's cheque book, debit card and net-banking access.
- No succession certificate or legal-heir certificate is needed where a survivor mandate exists - the contract itself names the payee.
The clerk's suggestion to 'freeze everything' is wrong. The bank's contract with the survivor is clear. Freezing the account without a legal order would itself be a service failure. The branch should pay Ashok and, separately, reply in writing to Sunita recording her claim.
2. Should the bank honour the ₹38,000 cheque signed by Mahesh on 2 March and presented on 18 March? Give the rule and the practical action.
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No. Two separate rules apply, and they point the same way.
- Validity period: the cheque dated 2 March, presented on 18 March, is still within its three-month validity, so it is not a stale cheque.
- Death of the drawer: the authority of a drawer to bind his account ends with his death. Once a bank has notice of death (here, a death certificate was produced at the branch), it must not pay any cheque or instruction signed by the deceased, even one dated before death and still within validity.
Action: return the cheque unpaid with the reason 'Drawer deceased - refer to drawer's legal representative', and note the stop in the system so it is not re-presented. The supplier should be told politely, in writing, that his claim now lies against the surviving holder or against Mahesh's estate, and that the bank cannot settle it from the account.
Contrast worth remembering: if the cheque had been paid before the branch received notice of death, in the ordinary course of business, the payment would have been valid and the bank protected. The bank's duty is triggered by notice, not by the date of the cheque.
3. Sunita claims the entire balance on the strength of the nomination. Advise the branch on the legal position and on how to reply to her.
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Nomination does not create ownership. A nominee is a trustee who receives the money and holds it for the persons entitled under the law of succession; the nomination tells the bank to whom to release the money when a death claim arises, not who owns it.
In this account the survivor clause prevails. In a joint account with a survivor mandate, the surviving holder is contractually entitled to the balance on the death of the other holder. A nominee steps in only where no holder survives - that is, in a single-holder account or where all joint holders have died. So the branch pays Ashok (subject to the formalities in the first answer), not Sunita.
How to reply to Sunita
- Acknowledge her claim in writing, give her a claim reference number and keep a copy on record, so the bank cannot be accused of ignoring her.
- Explain that the bank's mandate is 'Former or Survivor', that Ashok is the person entitled to receive the balance, and that any share she is entitled to as an heir or as a beneficiary of Mahesh's estate must be settled between the family members or through a court of law.
- Do not release the balance twice; if Ashok's entitlement is disputed by a legal notice, seek the bank's legal opinion, not an informal freeze.
- Update the nomination register and close the deceased's records properly before the audit.