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JURISPRUDENCE PROJECT,
THEORIES OF ORIGIN OF STATE
THEORIES OF ORIGIN OF STATE
A Project Submitted to:-

ARMY INSTITUTE OF LAW, MOHALI

In partial fulfilment of the requirements of the award of degree of B.A. L.L.B

Submitted to: -
Dr. Vibhuti Jaswal

Submitted by: -
PRATIKSHA (2014)

PUNJABI UNIVERSITY PATIALA (PUNJAB)

Semester – 6th

ARMY INSTITUTE OF LAW, MOHALI

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DECLARATION

It is certified that the project work presented in this report entitled “Theories of
Origin of State” embodies the results of original research work carried out by
me. All the ideas and references have been duly acknowledged.

Pratiksha
(2014)

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ACKNOWLEDGEMENT

In preparation of my assignment, I had to take help of and guidance of some

respected persons, who deserve my deepest gratitude. As the completion of this
assignment gave me much pleasure, I would like to show my gratitude towards
Dr Vibhuti Jaswal for giving me guidance for assignment throughout numerous
consultations. I would also like to extend my gratitude to all those who have
directly and indirectly guided me in writing the assignment.

I would like to thank my family and peers, whose constant encouragement kept
me motivated to work towards the completion of this project. I would also like
to extend my gratitude towards Army Institute of Law, Mohali and Dr. Tejinder
Kaur, the Principle, Army Institute of Law, Mohali for giving me this golden
opportunity of making a project on such an interesting and engaging topic.

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TABLE OF CONTENTS
Declaration.................................................................................................................................2

Acknowledgement......................................................................................................................3

Table of Contents.......................................................................................................................4

Introduction................................................................................................................................5

DIVINE RIGHT Theory............................................................................................................5

Force Theory..............................................................................................................................6

Natural Law Theory...................................................................................................................6

Social Contract Theory..............................................................................................................7

Patriarchal Theory......................................................................................................................9

Matriarchal Theory.....................................................................................................................9

Conclusion................................................................................................................................10

References................................................................................Error! Bookmark not defined.

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INTRODUCTION

It is of utmost important that the bank ensures all banking records of the customers are
protected and are not available to any other party or organisation with the customer’s consent.
Section 13 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970,
specially requires them to “observe, except as otherwise required by law, the practices and
usages customary amongst bankers and in particular not to divulge any information relating
to the affairs of the constituents except in circumstances in which they are, in accordance
with law or practices and usages or appropriate for them to divulge such information.”

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circumstances where there are provisions to access the details to one’s account:
(a) Disclosure of Information required by Law.
A banker is under statutory obligation to disclose the information relating to his customer’s
account when the law specially requires him to do so.
The provisions are:
i. Under the Income- Tax Act, 1961. According to Section 131, the income tax
authorities possess the same powers as are vested in a Court under the Code of
Civil Procedure, 1908, for enforcing the attendance of any person including any
offer of banking company or any offer thereof, to furnish information in relation
to such points or matters, as in the opinion of the income-tax authorities will be
useful for or relevant to any proceedings under the Act. The income –tax
authorities are thus authorized to call for necessary information from the banker
for the purpose of assessment of the bank customers. Section 285 of the Income-
tax Act, 1961, requires the banks to furnish to the Income-tax Officers the names
and addresses of all persons to whom they have paid interest, mentioning the
actual amount of interest paid by them.
ii. Under the Companies Act, 1956. When the Central Government appoints an
Inspector or to investigate the affairs of any joint stock companyunder Section 235
or 237 of the Companies Act, 1956, it shall be the duty of all officers and other
employees and agents (including the bankers) of the company to-
(a) produce all books and papers of, or relating to, the company, which are in their
custody or power, and
(b) otherwise to give the Inspector all assistance in connection with investigation
which they are reasonably able to give (Section 240). Thus the banker is under an
obligation to disclose all information regarding the company but no of any other
customer for the purpose of such investigation (Section 251).
iii. By order of the court : under the Banker’s Books Evidence Act, 1891. When the
court orders the banker to disclose information relating to a customer’s account,
the banker is bound to do so. In order to avoid the inconvenience likely to be
caused to the bankers from attending the Courts and producing their account
books as evidence, the Banker’s Books Evidence Act, 1891, provides that certified
copies of the entries in the banker’s book are to be treated as sufficient evidence
and production of the books in the Courts cannot be forced upon the bankers.
According to Section 4 of the Act, “a certified copy of any entry in a banker’s
book shall in all legal proceedings be received as prima facie evidence of the
matters, transitions and accounts therein recorded in every case where, and to the
same extent, as the originalentry itself is now by law admissible, but not further or
otherwise.” Thus if a banker is not a party to a suit, certified copy of the entries in
his book will besufficient evidence. The Court is also empowered to allow any
party to legal proceedings to inspect or copy from the books of the banker for the
purpose of such proceedings.
iv. Under the Reserve Bank of India Act,1934. The Reserve Bank of India collects
credit information from the banking companies and also furnishes consolidated
credit information from the banking company. Every banking company is under a

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statutory obligation under Section 45-B of the Reserve Bank. The Act, however,
provides that the Credit information supplied by the Reserve Bank to the banking
companies shall be kept confidential. After the enactment of the Reserve Bank of
India (Amendment) Act, 1974, the banks are granted statutory protection to
exchange freely credit information mutually among themselves.
v. Under the Banking Regulation Act, 1949. Under Section 26, every banking
company is required to submit a return annually of all such accountsin India
which have not been operated upon for 10 years. Banks are requiredto give
particulars of the deposits standing to the credit of each such account.
vi. Under the Gift Tax Act, 1958. Section 36 of the Gifts Tax Act, 1958, confers on
the Gift Tax authorities powers similar to those conferred on Income- Tax
authorities under Section 131 of the Income Tax Act.
vii. Disclosure to Police. Under Section 94 (3) of the Criminal Procedure Code, the
banker is not exempted from producing the account books before the police. The
police officers conducting an investigation may also inspect the banker’s books
for the purpose of such investigations (section 5. Banker’s Books Evidence Act).
viii. Under the Foreign Exchange Management Act, 1999, under section 10. Banking
companies dealing in foreign exchange business are designated as ‘authorized
persons’ in foreign exchange. Section 36, 37 and 38 of this Act empowers the
officer of the Directorate of Enforcement and theReserve Bank to investigate any
contravention under the Act.
ix. With Express or Implied Consent of the Customer. The banker will be will be
justified in disclosing any information relating to his customer’s account with the
latter’s consent. In fact, the implied term of the contract between the banker and
his customer is that the former enters into a qualified obligation with the latter to
abstain from disclosing information as tohis affairs without his consent.

(Tourniers vs. National Provincial and Union Bank of India). The consent of the
customer may be expressed or implied. Express consent exists in case the
customer directs the banker in writing to intimate the balance in his account or any
other information to his agent, employee or consultant. The banker would be
justified in furnishing to such person only the required information and no more. It
is to be noted that the banker must be very careful in disclosing the required
information to the customer or his authorized representative. For example, if an
oral enquiry is made at the counter, the bank employee should not speak in a
louder voice so as to be heard by other customers. Similarly, the pass-book must
be sent to the customer through the messenger in a closed cover. A banker
generally does not disclose such information to the customer over the telephone
unless he can recognize the voice of his customer; otherwise, he bears the risk
inherent in such disclosure. In certain circumstances, the implied consent of the
customer permits the banker to disclose necessary information. For example, if the
banker sanctions a loan to a customer on the guarantee of a third person and the
latter asks the banker certain questions relating to the customer’s account. The
banker is authorized to do so because by furnishing the name of the guarantor, the
customer is presumed to have given his implied consent for such disclosure. The
banker should give the relevant information correctly and in good faith. Similarly,

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if the customer furnishes the name of the banker to a third party for the purpose of
a trade reference, not only an express consent of the customer exists for the
discloser of relevant information but the banker is directed to do so, the non –
compliance of which will adversely affect the reputation of the customer. Implied
consent should not be taken for granted in all cases even where the customer and
the enquirer happen to be very closely related. For example, the banker should not
disclose the state of a lady’s account to her husband without the express consent
of the customer.
x. The banker may disclose the state of his customer’s account in order to legally
protect his own interest. For example, if the banker has to recover the dues from
the customer or the guarantor, disclosure of necessary facts tothe guarantor or the
solicitor becomes necessary and is quite justified.
xi. Banker’s Reference. Banker follows the practice of making necessary enquires
about the customers, their sureties or the acceptors of the bills fromother bankers.
This is an established practice amongst the bankers and is justified on the ground
that an implied consent of the customer is presumed to exist. By custom and
practice necessary information or opinion about the customer is furnished by the
banker confidentially. However, the banker should be very careful in replying to
such enquiries. Precautions to be taken by the banker. The banker should observe
the following precautions while giving replies about the status and financial
standing of a customer:
 The banker should disclose his opinion based on the exact position of the
customer as is evident from his account. He should not take into account
any rumour about his customer’s creditworthiness. He is also not expected
to make further enquiries in order to furnish the information. The basis of
his opinion should be the record of the customer’s dealings with banker.
 He should give a general statement of the customer’s account or his
financial position without disclosing the actual figures. In expressing his
general opinion, he should be very cautious—he should neither speak too
lowabout the customer nor too high. In the former case he injures the
reputation of the customer; in the latter, he might mislead the enquirer. In
case unsatisfactory opinion is to be given, the banker should give his
opinion in general terms so that it does not amount to a derogatory remark.
It should give a caution to the enquirer who should derive his own
conclusions by inference and make further enquiries, if he feels the
necessity.
 He should furnish the required information honestly without bias or
prejudice and should not misrepresent a fact deliberately. In such cases he
incurs liability not only to his own customer but also to the enquirer.

(b) Duty to the public to disclose: Banker may justifiably disclose any information
relating to his customer’s account when it is his duty to the public to disclose such
information. In practice, this qualification has remained vague and placed the banks in
difficult situations. The Banking Commission, therefore, recommended a statutory

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provision clarifying the circumstances when banks should disclose in public interest
information specific cases cited below:
(i) when a bank asked for information by a government official concerning the
commission of a crime and the bank has reasonable cause to believe thata
crime has been committed and that the information in the bank’s possession
may lead to the apprehension of the culprit.
(ii) where the bank considers that the customer’s is involved in activities
prejudicial to the interests of the country.
(iii) where the bank’s books reveal that the customer is contravening the provisions
of any law, and
(iv) where sizable funds are received from foreign countries by a constituent.Risks
of Unwarranted and Unjustifiable Disclosure. The obligation of the banker to
keep secrecy of his customer’s accounts – except in circumstances noted
above – continue even after the account is closed.

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If a banker discloses information unjustifiably, he shall be liable to his
customer and the third party as follows:(a) Liabilities to the customer. The
customer may sue the banker for the damages suffered by him as a result of
such disclosure. Substantial amount may be claimed if the customer has
suffered material damages. Such damages may be suffered as a result of
unjustifiable disclosure of any information or extremely unfavourable opinion
about the customer being expressed by the banker.(b) Liabilities to third
parties. The banker is responsible to the third parties also to whom such
information is given, if –(i) the banker furnishes such information with the
knowledge that it is false, and(ii) Such party relies on the information and
suffers losses.Such third party may require the banker to compensate him for
the losses suffered by him for relying on such information. But the banker
shall be liableonly if it is proved that it furnished the wrong or exaggerated
information deliberately and intentionally. Thus he will be liable to the third
party on the charge of fraud but not for innocent misrepresentation. Mere
negligence on his part will not make him liable to a third party. The general
principles in this regard are as follows:(1) A banker answering a reference
from another banker on behalf of the latter’s constituent owes a duty of
honesty to the said constituent.(2) If a banker gives a reference in the form of a
brief expression of opinion in regard to creditworthiness, it does not accept
and there is not expected of it any higher duty than that of giving an honest
answer.(3) If the banker stipulates in its reply that it is without responsibility,
it cannot be held liable for negligence in respect of the reference.
The decision of the Madras High Court in Oakley Bowden and Co. vs. The Indian Bank Ltd.
(A.I.R., 1964, Madras 202) says that “generally speaking, a bank owes a duty to its customer
to maintain proper and accurate accounts of credits and debits. If a bank makes wrong credit
entrieswithout knowing the fact at the time the entries were made and intimates to its
customers the credit entries and the customer acting upon the intimation of credit entries,
alters his position to his prejudice, the bank, therefore, will be stopped from contending that
the credit entries were wrongly made and that the amounts covered by them should be
refunded to it by the customer. Such an intimation by the bank is obviously a representation
made to the customer, which the customer is at liberty, in fact, entitled, to act upon. Once it is
acted upon by the customer bonafide, of course, it will then be too late for the bank to realize
from the credit entries they made mistakenly and seek to have recompensed by means of
adjustment in the accounts or recovery of the amounts from the customer.”

ARMY INSTITUTE OF LAW, MOHALI