The Banking Companies (Legal Practitioners’ Clients’ Accounts) Act, 1949


[ACT NO.46 OF 1949]

[8th December, 1949.]


Under the rules framed by the Bombay High Court, an attorney practicing there has to keep an account at a bank for clients’ moneys in the title of which the word “client’“ shall appear and he can operate on that account only for the purposes specified in the rules. The legal effect of these rules is that a bank is fixed with a notice of trust and is bound to enquire into the purposes of withdrawal, whenever any transaction is sought to be made on such clients’ accounts. These rules have placed on banks a great measure of special responsibility and they also interfere with the free transferability of cheques drawn on such accounts. The object of the present Bill is to protect banks in India by relieving them of such special responsibility and to ensure free transferability of cheques. In the United Kingdom, where similar rules are in force in regard to the clients’ accounts of Solicitors, the banks are protected by the Solicitors Act of 1933.The present Bill seeks to give similar protection to the banks in India.


The proposed measure will, in the first instance, apply to the Presidency town of Bombay where such rules are in force. But it may be later extended to other places, if and when similar law or rules are made for those places

An Act to restrict the liability of banking companies in connection with certain transaction by legal practitioners;

WHEREAS it is expedient to restrict the liability of banking companies in connection with certain transactions by legal practitioners;

It is hereby enacted as follows: –

2. Definitions.

In this Act, unless there is anything repugnant in the subject or context,-

1[(a) “Banking company” means any banking company as defined in section 5 of the Banking Companies Act, 1949 (1 of 1949), and includes the State Bank of India 2[a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertaking Act, 1970 ( 5 of 1970),] 3[ a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976),] 4[ a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980) and any subsidiary bank]] as defined in the State Bank of India (Subsidiary Banks ) Act, (38 of 1959);]

(b) ” Legal practitioner ” has the same meaning as in the legal Practitioners Act, 1879 (18 of 1879).

1. Subs. by Act 38 of 1959, s. 64 and Sch. III, for cl. (a) (w.e.f. 10-9-1959 ).

2. Subs. by Act 5 of 1970, s. 20, for “and any subsidiary bank” (w.e.f. 19-7-1969 ).

3. Subs. by Act 21 of 1976, s. 33, forand any subsidiary bank (w.e.f. 26-9-1975 ).

4. Subs. by Act 40 of 1980, s. 20, for and any subsidiary bank (a) (w.e.f. 15-4-1980 ).

3. Restriction of liability of banking companies in certain cases.

(1) Where, under any law or rule shaving the force of law, a legal practitioner keeping an account in banking company for clients,’ moneys may only operate on such account for specified purposes, then, neither the banking company with which such an account is kept nor any other banking company shall, in connection with any transaction relating to such account, incur any liability, or be under nay obligation to make any enquiry, or be deemed to have nay knowledge of any right of any person to any money paid or credited to such account, which it would not incur, or be under, or be deemed to have, in the case of an account kept by a person entitled absolutely to all the money paid or credited to the account :

Provided that nothing in this sub-section shall-

(i) Apply to the case of an account kept by a legal practitioner as trustee for a specified beneficiary, or

(ii) Relieve a banking company form any liability or obligation which it would incur or be under, apart form this Act.

(2) Notwithstanding anything contained in sub-section (1), a banking company in which a legal practitioner keeps an account for clients’ moneys shall not, in respect of any liability of such practitioner to the banking company, not being a liability in connection with that account, have or obtain any recourse or right, whether by way of set-off, counter-claim, charge or otherwise, against moneys standing to the credit of that account.

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