Topic Name
Accounts of Minors

MINOR

A person who has not completed 18 years of age is a minor. If a guardian of his person or property is appointed by the Court before he completes 18th year, he remains minor till he completes his 21st year. According to the Indian Contract act, 1872, a minor is not capable of entering into a valid contract and a contract entered into by a minor is void. A contract for the supply of necessaries of life to a minor is, however, a valid contract. A banker should, therefore, be very careful in dealing with a minor and take the following precautions:

1.The banker may open a saving bank account (and not a current account) in the name of a minor, in any of the following ways:

(i)††††† in the name of the minor, to be operated upon by the natural guardin of the minor or the guardian appointed by the Court. Such account can also be opened in the joint names of two or more minors, to be operated upon by the guardian.

(ii) †††† in the name of the minor, to be operated upon by himself, if he has attained the age of 12 years. Two such minors can jointly open such an account, to be operated upon by them jointly.

2.The bank records the date of birth of the minor as given by the minor or his/her guarding. On the attainment of majority, the account of the minor in the name of the guardian should be closed and the balance paid to the minor (then major) or be transferred to a new account in his/her own name. In case of a joint account, the minor is also permitted to operate the account and his signature are taken on the account opening form.

3.The legal provisions regarding guardianship are discussed later. If the father of a Hindu minor dies, his mother becomes his natural guardian. After the death of the mother, during the minority of the boy there is either the testamentary guardian or the guardian appointed by the Court. The banker may return the money to such guardian.

4. In case the minor dies, the balance in the account is permitted to be withdrawn by the guardian and in case of joint account the balance will be held at the absolute disposal of the guardian.

5. No risk is involved if an account is opened inthe name of a minor so long as the account is not overdrawn by the minor. But if an overdraft or advance is granted to a minor, even by mistake or unintentionally, the banker has no legal remedy to recover the amount from the minor. The assets of a minor pledged with the banker as security for the advance taken by the minor are not legally available to the banker because such pledge itself is invalid. The banker shall have to return these securities to the minor and he cannot exercise this right of sale in case of default by the minor.

6. If an advance is granted to a minor on the guarantee of a third party, such advance cannot be recovered from the guarantor also because the contract of guarantee is invalid on the ground that the contract between the creditor and the principal debtor (minor) itself is a void contract. According to Section 128 of the Indian Contract Act, 1872, the liability of the surety is co-existence with that of the principal debtor, unless it is otherwise provided by the contract. The surety, therefore, cannot be held liable on a guarantee given for default by a minor. According to the law a minor cannot enter into a valid contract and he cannot undertake a liability upon himself. Thus he cannot default. Suerty''''s liability is a secondary one and does not arise, if the liability of the primary debtor does not arise. In Edavan Nambiar vs. Moolakai Raman (A.I.R. 1957 Madras 164), the Madras High Court also upheld the above viewpoint. The liability ofa surety is ancillary. It materializes if there is a valid obligation on the part of the debtor whose debt or obligation is guaranteed. However, if the contract of guarantee specially provides contrary to the above, the guarantor may be held liable for the debts of a minor.

But if a minor enters into an agreement by representing himself asmajor and later on claims such a contract as void on account of his minority at the time entering into contact, the minor must restore the benefit derived by him under the agreement. In M/S Thiru Arooram Sugars Ltd. Vs. State Bank of India, the High Court observed as above on the basis of Section 65 of the Indian Contract Act which states that " when an agreement is discovered to be void or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it or to make compensation for it to the person from whom he recovered it."

7. A minor may draw, endorse or negotiate a cheque or a bill but he cannot be held liable on such cheque or bill. He cannot be sued in respect of a bill accepted by him during his minority. Such bill or cheque, nevertheless, will be valid instrument and all other parties will be liable in their respective capacities (Section 26 of the Negotiable Instruments Act, 1881). The banker should, therefore, be very cautious in dealing with a negotiable instrument, to which a minor is a party.

8. A minor can be admitted to the benefit of partnership with the consent of all the partners but he will not be liable for the losses or debts of the firm. Within six months after he attains majority he should repudiate his liability as partner otherwise he will be held liable as a partner of the firm from the date he was admitted to the benefit of the partnership [Section 30(7) (a) of the Indian Partnership act, 1932].

9. A minor may be appointed as an agent to act on behalf of his principal. According to Section 184 of the Indian Contract Act, 1872, "as between the principal and third person may become an agent; but no person who is not of the age of majority and of sound mind can be appointed as an agent, so as to be responsible to his principal." Thus a minor agent cannot be held responsible to his principal. The principal may be held responsible to the third parities in respects of the acts of his minor agent. Therefore, all of his dealings with the banker will be valid and binding on his principal. The banker should obtain written authority of the principal specifying he power and the extent of authority entrusted to the agent in this regard and should see that the minor-agent does not deal beyond such delegated powers.

Legal Provisions Regarding Guardianship of a Minor

††††††††† The guardian of a minor may be eitheró

(i)††††††††††††††† a natural guardian, or

(ii)††††††††††††† a testamentary guardian, or

(iii)††††††††††† a guardian appointed by the Court.

The first two of guardians are governed by the provisions of the Hindu Minority and Guardianship Act, 1956, whereas a guardian is appointed by a Court under the Guardians and Wards Act, 1890.

(i) Natural Guardian. According to Section 6 of the Hindu Minority and Guardianship Act, 1956, in case of a minor boy or an unmarried girl, his/her father and after him the mother shall be the natural guardian. In case of a married girl (minor), her husband shall be natural guardian. The terms father or mother does not include step-father or step-mother. If the father becomes a sanyasi or does not remain Hindu, he shall not be entitled to remain as guardian. If the father is alive and is not removed from guardianship, the mother does not become the natural guardian of her minor child.

††††††††† (ii) Testamentary Guardian. A Hindu father, who is entitled to act as the naturalguardian of his mother legitimate children may, by will, appoint a guardian for any of them in respect of the minor''''s person or property. Such guardian acts as after the death of the father or the mother.

††††††††† (iii) Guardian appointed by Court. A guardian may be appointed by the Court under the Guardians and Wards Act, 1890, but the Court shall not be authorized to appoint or declare a guardian of the person of a minor, if his father is alive and is not, in the opinion of the Court, unfit to be guardian of the person of a minor. Similar is the case with the minor girl, whose husband is not, in the opinion of the Court, unfit to be guardian of her person. Thus the father (or the husband in case of a married girl) is exclusively entitled to be the guardian. The welfare of the minor shall be a paramount consideration of the court while appointing a guardian.

Mother as Natural Guardian

In a landmark judgement on the guardianship of a minor under the above mentioned two Acts, the Supreme Court has held that the mother can also act as natural guardian of a Hindu minor even during the lifetime of the father. In (Githa Hariharan & another vs. Reserve Bank of India 1999 (I) SC 524) the Supreme Court held that in all situations where the father in nit in actual charge of the affairs of the minor either because of indifference or becauseof an agreement between him and the mother of the minor (oral or written) and the minor is in the exclusive care and custody of the mother or, the father for any other reason is unable to take care of the minor because of his physical and /or mental incapacity, the mother can act as natural guardian of the minor.

††††††††† The Court further held that the definition of ''''guardian'''' and ''''natural guardian'''' do not make any discrimination against the mother and she, being one of the guardians mentioned Section 6 of the 1956 Act, would undoubtedly be a ''''natural guardian'''', as defined in that Act. The Supreme Court further clarified that the words '''' the father, and after him, the mother, need not necessarily mean ''''after the lifetime of the father''''. Rather the word ''''after'''' means in the absence of and the word absence refers to the father''''s absence from the care of the minor''''s property or person for any reason whatever.

††††††††† Reserve Bank has advised the banks to allow opening he minor''''s account (fixed, saving and recurring deposit accounts) with mother as guardian. Thus banks are now permitted to open account of minors in the guardianship of the mother, even if the father of the minor is alive.

Minors

A minor(of Indian domicile) is a person who has not completed 18 years of age.Where a guardian is appointed by the Court (for minor''s person or property both)before he completes or where a Court of Ward is appointed as a guardian before he completes 18th year, he remains minor till he completes his 21st year. A minor is not capable of entering into a contract except for the supply of necessaries of life to a minor as per Indian Contract Act, 1972. However, he can be represented by his lawful guardian, who has the power in dealing with minor''s property only for the "benefit of the minor", as he has a fiduciary relationship.

A guardian can be a testamentary guardian, legal guardian, or natural guardian. A testamentary guardian is appointed as per "Will" of the minor''s father, who can act only after the death of the father and mother of the minor child. A legal guardian is appointed by a Court (as per the provisions of Guardian and Wards Act,1890) where there is no natural guardian or testamentary guardian.

Section 6 of Hindu Minority and Guardianship Act, 1956 provides for a minor boy or unmarried girl, the father and after his death the mother shall be the guardian (both for the person and property). After their death, a minor can be represented only though a legal guardian. A step father or mother cannot act as natural guardian. In the case of a married minor girl, her major husband is the natural guardian. In case the husband is a minor, her husband''s father (or mother, if the father is dead) will be a natural guardian. Where the minor married girl is a widow, her husband''s father (mother, if father is dead) is to act as natural guardian. The natural guardian of an adopted son is his adoptive father/mother. Where the father changesreligion, he ceases to remain guardian.

In the case of a Muslim Minor, the father is the natural guardian (for property only) and after his death, the executor appointed by father''s Will and thereafter father''s father. Where none of these person is alive, the minor can be represented only by a legal guardian.A Muslim mother cannot act asexcept when appointed by Court or by Will (of father or father''s father.

As regards the Christians and persons of other religion, the father and on his death, the mother can act as natural guardian. If they are dead, a person appointed by Court can alone act as guardian.

A natural guardian continues to be the natural guardian even after conviction. A legal guardian appointed forperson and not for property, is not entitled to open, operate and receive deposit o behalf of the minor.

Deposit accounts of minors

Banks can open different types of deposit accounts such as account operated by guardian, account operated by mother or account operated byhimself. Account can be opened in the sole name of the minor by the guardian/mother, to be operated by him/her on behalf of the minor. He can also open a joint account in the name of the minor and himself, subject to the conditions that the minor has completed 10 years of age and is capable of signing consistently. Such guardian can obtain pre-mature payment of the term deposit or avail loan against the same, for the benefit of the minor, till the minor attains majority. When the minor becomes a major, he has the sole right to operate the account (account should be conducted as per his instructions) and guardian''s power ceases.

Minors who have completed 10 years of age, who is literate and can sign uniformly can open savings and term deposits in their own name and operate the same. In such accounts cheque book can be issued but the drawls should be allowed only in cash to the minor himself. He is capable of giving proper discharge on receipt of payment. No nomination can be permitted in this account, as minor is not competent for appointing an agent. No loan should be granted against the security of term deposits which is in the sole name of minor without guardianship. Two literate minors (from the same family) can also open a joint account to be operated by both jointly (and not "either of survivor").

The bank record the date of birth of the minor as given by the minor or his/her guardian. On the attainment of majority, the account of the minor in the name of the guardian should be closed and the balance paid to the minor(then major) or be transferred to a new account in his/her own name. In case of a joint account, the minor is also permitted to operate the account (on becoming major) and his signature is taken on the account opening form.