Maldives High Court cleared out ambiguity attached to money issued in excess of bank balance on a judgement delivered on Tuesday.
As such High Court has cleared that money issued to parties causing account overdraft will be considered as a debt owed by the lender to the bank in which the lender's account has been registered.
This issue came to light in the case of Ali Zahir, the Chief of Staff of President's Office, who issued out a MVR 2.3 million check in 2018 to a third party.
The money was issued out from the account he holds at Mauritius Commercial Bank (MCB).
In the case, an individual named Abdulla Naseer Mohamed had credited MVR 4.1 million to Zahir's MCB account, after which Zahir issued the check for the aforementioned MVR 2.3 million.
Though Zahir received the deposit slip for the amount transferred by Naseer, the money had not been deposited to his account at the time when Zahir issued out the check.
Following this, the bank had notified Zahir to repay the money he issued out to which he contested by filing the case for a revocation on the bank's order.
In High Court's judgement, two out of the three presiding judges of the case coincided on the nature of such issuance and the discretion the banks hold.
The judges agreed that banks had the discretion of issuing money out through the registered bank accounts on an overdraft basis; which is applicable by forming a contract between the bank and customers or without the presence of it.
The judges agree that such circumstances dictate that the bank holds authority on claiming for such monies back from the issuer; which in this case is the customer issuing out a check to a third party.
"Money borrowed on overdraft is a debt the customer owes to the bank, or it is considered as a loan," Judge Hassan Shafeeu opined based on the existing banking laws.
Shafeeu further noted that such overdraft issuance should not be confused as a "free gift", adding that the claimant, Mr. Zahir owed the questioned amount of MVR 2.3 million back to the bank.
Agreeing to Judge Shafeeu's opinion, the other presiding judge Justice Fathimath Faruheeza noted that banks held discretion of issuing money on overdraft basis, and due to this discretionary power the banks also hold authority of claiming it back.
However, the third judge presiding over the case Justice Mohamed Faisal had a dissenting opinion, claiming that banks do not have the authority of issuing money for checks in excess of the money the respective bank accounts held.
He further opined on the negligence of the bank for providing the deposit slip to Zahir when the money had not been transferred to his account. Justice Faisal pointed out that Zahir issued out the check on the guarantee of receiving confirmation of funds being transferred via the deposit slip.
Though Justice Faisal dissented about the bank's discretion, and further opining to dismiss the MCB's order, the case ended in favor of the bank in light coinciding opinion by the majority of the judges in the bench.