The court affirmed the validity of a bank's general lien over fixed deposits as collateral for a loan, based on prior agreements executed by the depositors.

JUDGMENT :

Ramachandra D. Huddar, J.

Appellants who are respondents in W.P.No.8646/2017 assail the order dated 02.05.2023 passed by the learned Single Judge of this Court in the said writ petition by filing this appeal under Section 4 of the Karnataka High Court Act.

2. For convenience, parties to this appeal are referred as per their rank in the writ petition.

3. The brief facts as set out in the writ petition are as under:

By filing the said writ petition, the petitioners challenged the Endorsement dated 02.07.2016 issued by the Corporation Bank, (now Union Bank of India) Asset Recovery Management Branch, Bengaluru, wherein, it is stated that:

"M/s.Shreshashayana Enterprises had availed a loan from Corporation Bank, Pandeshwara Branch, Mangalore for a sum of Rs.4,75,000/- for purchase of a fishing boat and loan documents were executed in favour of the Bank and the said boat was hypothecated to the Bank.

In this connection you are aware that our Bank is holding Fixed Deposits in your name as collateral security for the loan sanctioned to M/s.Shreshashayana Enterprises and same were assigned to the Bank as Collateral Security towards the limit sanctioned to M/s.Shreshashayana Enterprises and M/s.Shreshashayana Enterprises have not discharged its liability to the Bank. Therefore, Bank has exercised its general lien over the deposits under Section 171 of Contract Act, as the Bankers have a general lien, over the deposits and the proceeds of deposits received from our Pandeshwar, Mangalore Branch was credited Rs.35,16,163/- to LICU/1/140001 M/s.Shreshashayana Enterprises on 31.03.2016.

Yours faithfully

Sd/-

For Corporation Bank

Chief Manager

7/16 Chief Manager

Mission Road, Bangalore-27

Ph:080-22131600, 22110109

Email ID: cb478@corpbank.co.in

4. It is stated that the petitioners are the sons of late Devadas.S.Kamath. As per the contents of the writ petition, M/s.Sheshashayana Enterprises availed a loan of Rs.4,75,000/- for purchase of fishing boat and the said boat was hypothecated with the respondent-Bank. To that effect, loan documents were executed in favour of the Bank.

5. According to the petitioners, in the said Bank, certain Fixed Deposits were standing in the name of their Father and after his demise, they were standing in their name. But according to the Bank, the said Fixed Deposits were given as collateral security by their father towards the loan sanctioned to M/s.Sheshashayana Enterprises. It is alleged that as the said M/s.Sheshashayana Enterprises did not discharge the liability to pay the loan so availed, the Bank has exercised general lien over such deposits and transferred the proceeds of the deposits towards the loan account of the said M/s.Sheshashayana Enterprises on 31.03.2016. According to the petitioners, such an exercise or a lien is not proper as there was a suit filed by the Bank for recovery of money in O.S.No.9/1993 before the Civil Judge at Mangaluru against the borrower and subsequently it was transferred to the Debt Recovery Tribunal, Bengaluru (for short 'Tribunal'). Even the said boat so purchased was insured, the Bank ought to have proceeded against the Insurance Company as well as borrower. The suit in O.S.No.9/1993 so filed by the Bank before the Civil Judge, Mangaluru was decreed and the Insurance Company preferred an appeal before this Court in RFA.No.2471/2006 which came to be dismissed by this Court by confirming the Judgment and decree passed in O.S.No.9/1993. The respondent-Bank has recovered the decreetal amount from the Insurance Company as per ledger extract produced before the Civil Court as on 15.03.1993. The dues were Rs.6,58,209.34 as against the claim of the respondents-Bank was settled at Rs.6,03,000/- along with upto date interest.

6. It is stated that, the appellants-Bank filed a memo on 24.05.2012 before the Tribunal in O.A.No.936/1995 seeking further orders and the Tribunal issued notice to the defendants therein. It is stated that the respondents herein filed an application on 08.04.2013 to