A banker in branch daily comes across the problems relating to various types of Bank Accounts.   One such category of accounts is "Accounts of Minors".   Most of the bankers are aware of the broad rules they have to keep in mind while dealing with minors, but they are ill informed of the legal provisions and the risks attached to such accounts.  In this article, I will try to explain some of the legal aspects which every bankers needs to keep in mind while handling such accounts.

Who is a Minor :

As per section 3 of Indian Majority Act, 1875, a minor is a person who has not attained the age of 18 years. A person will become major at the age of 18 whether guardian is natural or appointed by a court of law.

Who is a Guardian of a Minor :

(a) Hindus : As per section 6 of the Hindu Minority and Guardianship Act, 1956, father is the natural guardian of a Hindu minor boy or an unmarried girl and after him, the mother. In case of a married Hindu minor girl, her husband is the natural guardian. If the husband is minor or minor girl becomes widow, her father in law and after him the mother in law will be the guardians though they are not natural guardian.

Under section 9 of the Hindu Minority & Guardianship Act, 1956, a Hindu father entitled to act as  the natural guardian of his minor legitimate child.   He may appoint a guardian by will in respect of minor’s person or property. Such a guardian is called a Testamentary guardian. But such guardian will come into   picture only on the death of father as well as mother. Similarly, mother can also appoint a testamentary guardian for her minor child. Where no testamentary guardian is appointed by a Hindu father/mother, the court can appoint a guardian for person or property of the Hindu minor

(b) Muslims :  As per Muslim Personal law,  father is the natural guardian.   A Muslim father can appoint a testamentary guardian and even mother of a Muslim child can be testamentary guardian. If the father dies without leaving behind a will, father’s father i.e. paternal grandfather is the guardian. However, the testamentary guardian appointed by the will of father will have priority over paternal grandfather. On the death of paternal grandfather, the person appointed by the will of the paternal grandfather will be guardian. If the father’s father dies intestate, court can appoint a guardian.

Whether Minor Can Enter Into a Contract :

As per section 11 of the Indian Contract Act, 1872 a minor is not competent to enter into a contract.  Thus the contract entered into by him is void ab-initio.   Moreover, a minor cannot ratify an agreement entered into by him during his minority period, evenafter attaining majority.  There is one exception to this general rule i.e. a contract for the supply of life to a minor is a valid contract, if it is done by a person who is legally bound to supply the necessities to the minor and these necessities must be suitable to the condition of his life.

Can Minor Appoint an Agent :

In terms of  Section 183 of Indian Contract Act, a minor cannot appoint an agent. However, as per section 184 of the Indian Contract Act, a minor can be appointed as an agent and he can make principal liable by his action.   Thus, a minor can not delegate authority in his self operated account.

Minor As A Partner in A Partnership Firm :

A minor cannot be f full fledged partner in a partnership concern as he can not enter into a valid contract and partnership is created by agreement.  However, in terms of Section 30 of Indian Partnership Act, 1932 a minor may be admitted to benefits of partnership with the consent of all partners. However, the liability of the partner will be limited to his share in business of the firm and he will not liable personally for the acts of the firm. On attaining majority, a minor has to give public notice within six months of attaining majority or when it comes to his knowledge after becoming major whichever is later, whether he wants to continues as a partner. If he remains silent, it amounts to his implied consent. If he chooses to become a partner, he will be held liable as a partner from the date he has been admitted to the benefits of the partnership firm. As minor is not partner, he cannot give stop payment instructions on a cheque issued by partnership.

Can A Minor Draw or Endorse or Negotiate a Cheque :

Yes but ..... In terms of  Section 26 of NI Act, a minor can draw or endorse or negotiate a cheque or a bill but he cannot be held liable on such cheque or bill.  However, such bill will be valid and other parties will be liable in their respective capacities.

Can A Minor Appoint A Nominee ?

No, he can not appoint a nominee,  but a minor can be appointed as a nominee..

Can a Minor Be Declared As Insolvent ?

No minor can not be declared as insolvent

Can Minor Be A Payee of Bearer Cheque ?

A bearer cheque presented for cash payment by a minor may be paid as a minor can give a valid discharge in the capacity of the payee.

Bank Accounts of a Minor :

(a) A minor can have account under guardianship as well as self operated  account.   

  (i) Self Operated Accounts :  A minor can open self-operated deposit account provided he has completed the age of 10 years and is literate. (As discussed above, a minor cannot appoint nominee in this account.  On his behalf nomination will be done by a person legally competent to act on his behalf). Joint  account of a minor is allowed with his guardian. Joint account is also allowed in the name of two minors provided both are of 10 years of age, are literate, belong to the same family and operation is jointly.

  (ii) Accounts Under Guardianship and Joint Accounts With Guardian :  As explained above, minor’s account can be under guardianship of the natural guardian and in such cases it will be operated by the Guardian.    An interesting case is that of a joint account with the guardian.   In that case the account is operated by the natural guardian in two capacities – one as joint account holder and the other as a natural guardian of minor joint account holder. In such accounts special instructions like ‘either or survivor’ or ‘ jointly or survivor’ should be obtained which remain dormant during minority of the minor and become operative after the minor becomes major.

(b)  Date of Birth of Minor :  In  the case of accounts under guardianship, the bank needs to record the date of birth of the minor as given by the minor or the guardian. Birth certificate is not necessary and the declaration about the date of birth given by the guardian is sufficient and conclusive proof regarding his date of birth. The account will be operated by the guardian during minority of the child and once the minor becomes major the debit in the account will be allowed only with the consent of minor who has become major even though the cheques might have been issued prior to his attaining majority.  If guardian dies during minority, next guardian will operate the account. In case the minor dies, the balance in the account will be paid to the legal heirs of the minor.

(c) Mother as Guardian in Bank Accounts : Though as per section 6 of the Hindu Minority and Guardianship Act, 1956, father is the natural guardian, RBI on the basis of Supreme Court Judgment has allowed  mother to open operate all types of deposit accounts even though the father is alive. As per this judgment, both mother and father will act in the capacity of natural guardian simultaneously.