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In the High Court of Bombay at Nagpur
B.P. DHARMADHIKARI & A.S. CHANDURKAR, JJ.
Surendra S/o Laxman Nikose
Versus
Chief Manager & Authorized Officer State Bank Of India Retail Assets Central Processing Centre (Maintenance)
Writ Petition No.416 of 2013
Decided On : 14-08-2013
Bank cannot exercise right of General lien on title deeds of property for loan availed by borrower as suit for recovery of amount on account of fraud is pending. - Section 171 of the Act employs the expression "goods bailed to them". The word "bailment" has been defined in Section 148 of the said Act to mean delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. Section 160 of the said Act stipulates that it is the duty of the bailee to return the goods bailed, without demand, or the purpose for which they were bailed having been accomplished. Similarly, under Section 172 of the said Act, pledge has been defined as bailment of goods as security for payment of a debt or performance of a promise. Under Section 174 of the said Act, the pawnee cannot in absence of a contract to that effect, retain the goods pledged for any debt or promise order than the debt or promise over which they are pledged.
These provisions, therefore, indicate that the right to retain goods bailed is based on a contract and retaining the same in absence of any contract is not permissible. The only right that has been recognized will regard to goods bailed is the right of general lien of a banker to retain as security for a general balance of account any goods bailed to them. It is, therefore, clear that such right of general lien cannot be extended by a Banker for any other purpose after the general balance of account has been cleared by the person bailing the goods. Permitting a Banker to extend its rights of general lien even after clearance of the debt would result in negating the effects of the words "as a security for a general balance of account". In any event, exercise of such general lien after determination of the relationship of Banker and customer does not arise at all.
The relationship of Banker and Customer between the parties also came to an end. In such situation, it is difficult to accept the stand of the respondent-Bank that it was exercising its right of general lien under Section 171 of the said Act.
It is also relevant to consider that there was a relationship of employer and employee between the parties. According to the respondent-Bank, the petitioner who was its employee had committed a fraud resulting in monetary loss to the Bank, and for recovering the said loans, it had filed a civil suit. It is to be seen that the relationship of Banker and Customer was independent of the relationship of employer and employee. The recovery that was sought to be made by the respondent-Bank was in its capacity as an employer who had been defrauded by its employee. This is further clear from the pleadings in aforesaid civil suit. It is not the case of the respondent-Bank that aforesaid lien was being exercised so as to safeguard the amount of loan that remained due and payable. In fact, the bank admits that the loan amount has been fully received along with interest. In such situation, it is not open for the respondent Bank to continue to exercise its general lien for the securities deposited with it especially when it seeks to recover the amount from the petitioner on account of fraud committed by him and on the basis of the employer and employee relationship. It is not in dispute that such general lien is not being exercised for a general balance of account as required under Section 171 of the said Act. Further, it would not be open for a bank to exercise its right of general lien for the securities with it on culmination of the banker and customer relationship. It cannot exercise such general lien under Section 171 as an employer against an employee especially when such employee who had borrowed the amounts from the Banker had fully repaid the same. It is thus, clear that there is no legal justified on the part of the respondent-Bank to retain said documents by relying upon the provisions of Section 171 of the said Act.
A.S. Chandurkar, J.
1. Heard Mr. P. S. Tiwari learned Counsel for the petitioner and Mr. S. N. Kumar learned Counsel for the respondent.
2. Rule. Rule is made returnable forthwith and heard by consent of the parties.
3. The short question that arises for consideration in the present writ petition is whether a Banker has general lien over documents of security under Section 171 of the Indian Contract Act, 1872 after the customer has fully repaid the amount of loan?
4. The aforesaid question arises on the following facts:-
5. The petitioner was in the employment in the respondent - Bank on the post of the Senior Assistant. During his course of employment, he had obtained a housing loan for a sum of Rs.6.56 lakhs. As a security for the said loan, the petitioner on 23-11-2001 had deposited title deeds of Plot No.605, House No.650 that was owned by him. During the course of employment, disciplinary proceedings were held against the petitioner on account of the alleged fraud committed by him. The petitioner was, ultimately, dismissed from service on 26-5-2010. On 21-7-2012, a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act) was issued by the respondent – Bank to the petitioner. Thereafter, on 5-11-2012, possession notice under Section 13(4) of the said Act was issued by the respondent – Bank. The petitioner challenged the aforesaid action under SRFAESI Act, by preferring an application under Section 17(1) before the Debt Recovery Tribunal, Nagpur. The petitioner in said proceedings repaid the entire outstanding amount and on 5-12-2012 a “No Due Certificate” came to be issued to him by the respondent – Bank. The proceedings before the Debt Recovery Tribunal, Nagpur also came to be disposed of on 6-12-2012 as having become infructuous. The petitioner thereafter on 10-12-2012 sought return of the original documents of title that were deposited by him towards loan amount with the respondent – Bank. The Bank on 18-12-2012 informed the petitioner that it had filed a Civil Suit against the petitioner for recovery of an amount of Rs.2.57 crores with interest being an amount involved in the fraud committed by the petitioner when he was in service with the Bank. The Bank, therefore, exercised its right of general lien over the documents of title and, therefore, refused to return the same. In that view of the matter, the petitioner has filed the present writ petition seeking a writ of mandamus against the respondent – Bank and has sought release of all the documents of title that have been retained by the respondent – Bank.
6. Shri P. S. Tiwari, learned Counsel for the petitioner has submitted that the documents of title had been furnished as security towards loan accounts. The said loan accounts had been liquidated and the Bank had issued 'No Due Certificate' on 5-12-2012. According to the learned Counsel, it was not open for the Bank after liquidation of the accounts to retain the documents of title. Relying upon the decision of the Hon'ble Apex Court in the case of Zonal Manager, Central Bank of India Vs. M/s Devi Ispat Ltd., and Ors., 2010 AIR SCW 5935, it was urged that the respondent Bank had no legal right to retain said documents of title.
7. Per contra, Shri S. N. Kumar with Shri S. Lawatawar appearing for the respondent – Bank has relied upon the provisions of Section 171 of the Indian Contract Act, 1872 (hereinafter referred to as the said Act) to justify the action of the Bank of retaining the documents of title. It was submitted that though the petitioner had cleared the amount of loan that he had availed, during his course of employment, the petitioner had committed a fraud thereby causing financial loss to the respondent – Bank. For this purpose, the petitioner had been dismissed from service and the Bank had also filed Special Civil Suit No.281 of 2011 against the petitioner for rec
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