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2026 Supreme(Ker) 115
IN THE HIGH COURT OF KERALA AT ERNAKULAM
ANIL K.NARENDRAN, MURALEE KRISHNA S., JJ.
The Divisional Manager & Assistant General Manager, Canara Bank – Appellant
Versus
Agi Kumar S., S/o. Suryanarayana Pillai, Residing At Chellam, – Respondent
WA No. 3077 of 2025, WP(C)34654 of 2025, WA NO. 3176 of 2025
Decided On : 09-02-2026
Important Points
Subject
Banking Law - Banker's Lien
Act Referred
SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT : S.13(2), S.13(4)
CONTRACT ACT : S.148, S.171
CONSTITUTION OF INDIA : Art.226
CIVIL PROCEDURE CODE : S.60(1)(i)
SALE OF GOODS ACT : S.2(7)
Headnote
Facts of the case:
The 2nd petitioner, running a proprietorship, applied for a loan under the PMEGP Scheme with the 1st petitioner as a guarantor. Due to the bank's failure to process a Margin Money Subsidy, the loan account became non-performing, affecting their financial status.
Findings of Court:
The court found that the bank had the right to exercise a general lien over the salary account of the first petitioner despite its classification as NPA.
Issues: Whether a bank can exercise lien over a salary account and the applicability of Section 60(1)(i) of CPC in such cases?
Ratio Decidendi: The court ruled against limiting the lien of the bank, affirming its validity under existing contractual obligations despite claims for protection under statutory provisions regarding salary attachments.
Result: Writ Petition dismissed.
For the Appellant : Shri. p. Paulochan Antony Shri. G. Viswanathan Smt. Aswni m.p.
For the Respondent: Shri. M.P. Shameem Ahamed Shri.Ahamed Iqbal Shri. Muhammed Ashique Smt. K. Reeha Khader Smt. O.M. Shalina Dsgi
| Table of Content |
|---|
| 1. loan application and bank's obligations under pmegp scheme (Para 2) |
| 2. court's findings affirming legal principles governing banker's lien (Para 4 , 6 , 9) |
| 3. respondents dispute claims regarding bank's lien (Para 5) |
| 4. interpretation of lien and protections under cpc (Para 7 , 8 , 11 , 12) |
| 5. final decision on applicability of lien over salary account (Para 10 , 18) |
Judgment :
[WA Nos.3077/2025, 3176/2025]
Muralee Krishna S., J.
1. W.A.No.3077 of 2025 is filed by respondents 1 to 3, and W.A.No.3176 of 2025 is filed by the petitioners in W.P.(C)No.34654 of 2025, invoking the provisions under Section 5(i) of the Kerala High Court Act, 1958, challenging the judgment dated 14.11.2025 passed by the learned Single Judge in that writ petition. Since the point to be decided in both these writ appeals is the same, they are heard together and are being disposed of by this common judgment. For convenience of reference, the parties are referred to in this judgment as they were referred to in the writ petition.
2. The 1stpetitioner is a Senior Technical Assistant in the Fluid Control Research Institute (FCRI), which is a Central Government undertaking. The 2ndpetitioner is the daughter of the 1stpetitioner, who is running a proprietorship firm, by name ‘A & A Carton’, which is engaged in the manufacturing of corrugated carton boxes. The 2ndpetitioner applied for financial assistance from the 2ndrespondent Canara Bank, SME, Kanjikode branch, under the Prime Minister’s Employment Generation Scheme (PMEGPScheme) with a project cost of Rs.50 lakhs. For the loan, the 1stpetitioner stood as a guarantor and had extended the property on which the unit is running as collateral security, which is in the joint name of the 1stpetitioner and his wife. The 3rdpetitioner is yet another guarantor to the loan. The 1stpetitioner is maintaining his salary account with the 3rdrespondent, Canara Bank,Sultanpetbranch,Palakkad. The 1strespondent is the regional office of the Canara Bank, having administrative control over respondents 2 and 3.
2.1. The PMEGP Scheme was implemented through the Khadi and Village Industries Commission (KVIC). As per the scheme, the loan availed by the 2nd petitioner is eligible for 35% of the project cost as a percentage of Margin Money Subsidy. The petitioners state that, as per the PMEGP Scheme guidelines, the 2nd petitioner has to deposit her contribution and a copy of the EDP training certificate with photo and other number to the financing bank within thirty days of receiving the communication of the sanction of the loan. As per Clause 11.17 of the PMEGP Scheme, the financing bank will release the first instalment of the loan and submit the claim for Margin Money Subsidy through the online portal of the nodal Bank/KVIC portal. The petitioners produced the circular dated 01.06.2022 pertaining to the PMEGP Scheme as Ext.P1 in the writ petition.
2.2 According to the petitioners, as per Ext.P1 guidelines, the 2nd respondent, which is the financing bank, was supposed to file the application for Margin Money Subsidy as soon as the 2nd petitioner had deposited her contribution and the copy of the EDP training certificate to the Bank as per the procedure prescribed under the PMEGP Scheme. As per Ext.P2 sanction letter dated 30.11.2022 issued by the 2nd respondent, the term loan of Rs.40.54 lakhs was sanctioned for the construction of a shed and purchase of machines, apart from the working capital limit of 6.9 lakhs sanctioned for the day-to-day business requirements. The 2nd petitioner made her contribution of Rs.2,14,000/- and had deposited all the EDP training certificates and related documents with the 2nd respondent Bank, and hence, the 2nd respondent Bank was supposed to make the application for Margin Money Subsidy at the earliest with the KVIC through the portal. It is the further case of the petitioners that the 2nd respondent Bank failed to complete the necessary formalities in connection with the availment of the lo
