E in case of a joint account a debt due from one of

(e) In case of a joint account, a debt due from one of the joint account- holders in his individual
capacity cannot be set-off against an amount due to him by the bank in the joint account. But
the position may appear to be different if the joint account is payable to ‘ former or survivor’.
Such an account is deemed to be primarily payable to the former and only after his death to the
survivor. Thus the former’s debt can be set-off against the balance in the joint account.
(ii) The right can be exercised in respect of debts due and not in respect of future debts or
contingent debts.
For example, a banker can set-off a credit balance in the account of customer towards the
payment of a bill which is already due but not in respect of a bill which will mature in future. If a
loan given to a customer is repayable on demand or at a future date, the debt becomes due
only when the banker makes a demand or on the specified date and not earlier.
(iii) The amount of debts must be certain. It is essential that the amount of debts due from both
the parties to each other must be certain. If liability of any one of them is not determined
exactly, the right of setoff cannot be exercised. For example, if A stands as guarantor for a loan
of ` 50,000 given by a bank to B, his liability as guarantor will arise only after B defaults in
making payment. The banker cannot setoff the credit balance in his account till his liability as a
guarantor is determined. For this purpose it is essential that the banker must first demand
payment from his debtor. If the latter defaults in making payment of his payment of his debt,
only then the liability of the guarantor arises and the banker can exercise his right of set-off
against the credit balance in the account of the guarantor. The banker cannot exercise this right
as and when he realizes that the amount of debt has becomes sticky, i.e., irrecoverable.
(iv) The right may be exercised in the absence of an agreement to the contrary. If there is
agreement—express or implied—inconsistent with the right of set-off, the banker cannot
exercise such right. If there is an express contract between the customer and the banker
creating a lien on security, it would exclude operation of the statutory general lien under Section
171 of the Indian Contract Act, 1872. In Krishna Kishore Karv. Untitled Commercial Bank and
Another (AIR 1982 Calcutta 62), the UCO Bank, on the request of its customer K.K. Kar, issued
guarantee for ` 2 lakhs in favour of the suppliers of coal guaranteeing payment for coal supplied
to him. The customer executed a counter- guarantee in favour of the Bank and also paid margin
money ` 1.83 lakhs to the Bank. After fulfilling its obligations under the
guarantee, the Bank adjusted ` 76,527 due from the customer under different accounts against
the margin money deposited by the customer in exercise of its lien (or alternatively the right of
set-off). The High Court held that the bank was not entitled to appropriate or adjust its claims