A bank cannot exercise its general lien over documents against a co-borrower for debts related to a different loan. The right to redeem property arises upon repayment of loans secured against it.

ORDER :

A. The Writ Petition:

The prayer in this Writ Petition is to quash the order of the 1^st respondent, the Banking Ombudsman and to direct the 2^nd respondent, IndusInd Bank Limited to issue No Objection Certificate, in respect of the loan account cleared by the petitioner. By the impugned order, the complaint that is preferred by the Writ Petitioner against the 2^nd respondent – Bank was rejected by the 1^st respondent.

B. Case of the Petitioner:

2. The brief facts are that the petitioner – S.Balaji, availed a loan for purchase of LPG tanker lorry with Registration No.KL 09 AG 6814 with the 2^nd respondent - Bank, vide loan account bearing reference No.TAN03010D dated 27.03.2018. The petitioner fully repaid the loan and the account was closed on 27.10.2021. However, the Bank is refusing to issue No Objection Certificate (NOC) and to release the title documents.

C. Case of the 2nd respondent:

3. The case of the Bank is that, apart from the above loan account, there was another loan in Account No.TAN02932D where one K.Leelavathi is the principal borrower and the petitioner is a co-borrower. The said loan remained outstanding and the Bank therefore, invoked arbitration proceedings in ACP No.IND/SP/278/2021 and already an award was passed on 26.12.2022. Even the said loan was also for purchase of a vehicle and the vehicle could not be located or seized by the Bank. Therefore, since the amount remains unpaid, the Bank had marked the lien on the above NOC and the title documents. In terms of paragraph No.20.2 of the loan agreement, the Bank withheld the issue of NOC. The clause No.20 of the loan agreement is extracted hereunder for ready reference:-

“20.0 SET-OFF AND LIEN

20.1 Notwithstanding anything contained in this Agreement, the Lender shall have a lien over all the assets of the Borrower(s)/ Co –borrower(s) in the lender’s control and a right of set off against any monies due to the Lender from the Borrower/Co-borrower(s) and to combine all accounts of the Borrower(s)/ Co-borrower(s) for recovery of the Lender's dues hereunder.

The Borrower(s)/Co borrower(s) understand, accept and agree that the Lender is also further entitled to withhold No Objection Certificate (NOC) or No Dues Certificate (NDC) or Loan Clearance Letter for those contracts which are closed, until recovery of overdue amounts in all other contracts, in which the Borrower(s)/Co-borrower(s) are one of the Party(ies).

20.2 It is hereby agreed and understood by the Borrower(s)/Co-borrower(s) that, in the. event the Borrower(s)/Co-borrower(s) defaults in payment of the Installments/charges/fees, without prejudice to the right of termination, the Lender shall have the right to set-off all monies, securities, deposits, other assets and properties of the Borrower(s)/Co-borrower(s) that is held by the Lender as secured asset, against the amount in respect of which the default has been committed under this Agreement or any other Agreement. For this purpose the Lender can combine all accounts held in the name of the Borrower, Co Borrower and/or Guarantor.”

Accepting the above stand of the Bank, the impugned order was passed by the Banking Ombudsman. Aggrieved by which, the present Writ Petition is filed.

D. Contention of the Petitioner:

4. It is the contention of the petitioner that the mortgage was specifically with reference to the 1^st loan alone and when the entire amount is repaid, the mortgager has a right of redemption and accordingly, when the petitioner-mortgager redeemed the property, the Bank has no right to withhold the NOC and title deeds.

4.1. The Writ Petition is resisted by the Bank, by filing a counter affidavit.

E. Contention of the 2nd respondent:

5. It is contended