The main legal point established in the judgment is that the bank has a general lien over all forms of securities or negotiable instruments deposited by or on behalf of the customer in the ordinary course of banking business, and the general lien is a valuable right of the banker, judicially recognized. The court's decision was influenced by the interpretation of banker's lien and its application to the adjustment of amounts in possession of the bank towards the debt due from the customer.

( 1 ) THE petitioner-plaintiff has preferred this revision petition against the judgment and decree dated 31-10-1998 passed in S. C. No. 22 of 1993 by the learned principal civil judge (junior division), madhugiri, dismissing the suit for recovery of a sum of Rs. 2,208. 16.

( 2 ) THE facts in brief are as hereunder. One ramakrishna availed a loan of Rs. 4,000. 00 in 1983 from the defendant-bank. The plaintiff stood as a surety for the aforesaid loan. The plaintiff had purchased a janatha cash certificate on 3-9-1985 which was due for encashment on 3-3-1992 and the amount payable on maturity was Rs. 1,852. 41. When the principal debtor ramakrishna did not repay the loan the plaintiff was informed of the same and he was called upon to get the loan repaid by ramakrishna and it was made clear to him that the amounts due in the janatha cash certificate would be paid to him. Thereafter, when the plaintiff demanded the payment due under the said certificate he was given an endorsement to the effect that the said amount shall be attached to the crop loan of Sri ramakrishna. It is thereafter the plaintiff has filed the above suit for recovering the said amount.

( 3 ) IT is not in dispute that the bank has not filed any suit against the said ramakrishna for the recovery of the amount. It is also not in dispute that the claim against ramakrishna is barred by time. On the day the endorsement came to be issued the claim against ramakrishna was time barred. However, the bank has adjusted the amount due under the janatha cash certificate to the plaintiff towards the loan borrowed by ramakrishna on the ground that the plaintiff being a guarantor his liability is co-extensive as that of the principal debtor. The suit of the plaintiff came to be dismissed by the small causes court holding that the bank had the right to adjust the amounts due to the plaintiff under the aforesaid fixed deposit receipt towards the loan amount of ramakrishna as the plaintiff was a guarantor for the said loan. It is that finding which is challenged before this court.

( 4 ) SRI gunjal, learned counsel for the petitioner-plaintiff submitted firstly that as the aforesaid fixed deposit was created subsequent to the loan transaction where the plaintiff stood as a guarantor the said amount could not have been adjusted towards the aforesaid loan. Secondly, it was contended the bank could riot have adjusted the amounts due under the said fixed deposit receipts towards discharge of a time barred debt. Thirdly, it was contended the banker's lien which is sought to be exercised by the bank would not apply to fixed deposit receipts.

( 5 ) PER contra, Sri s. Shivananda, learned counsel appearing for the respondent, submitted the bank has a right to adjust the amounts in their possession belonging to the debtor irrespective of the fact whether the said amount came into possession of the bank prior to the loan transaction or subsequent to the loan transaction. Further he submitted when a claim for money is said to be barred by law of limitation what is lost is only the remedy but not the right to the said amount and in that view of the matter it is settled law that if the creditor is in possession of money belonging to the debtor, the same could be adjusted even in respect of time barred debts. Lastly, he submitted the banker's lien applies even to the fixed deposit receipts as in law no distinction could be made regarding the amount belonging to the debtor whatever may be the nomenclature under which the said amount is lying with him.

( 6 ) NOW the point for my consideration is as under. Whether the respondent-bank was justified in adjusting the amounts due by it to the petitioner under the janatha cash certificate towards the loan borrowed by the principal debtor from the bank, which loan had become time barred and no suit had been filed against the principal debtor, when the aforesaid fixed deposit was created subsequent to the loan transaction.

( 7 ) IN respect