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ORISSA HIGH COURT
Dr. S.K. Panigrahi, J.
Balaram Choudhury – Petitioner
versus
Indian Bank, Bhubaneshwar – Opp. Party
W.P.(C) No.26178 of 2023
Decided on 28.3.2024
Contract Act, 1872 – Section 171 – Banker’s lien over documents of security – Home loan – Lien is right to retain property belonging to another until a debt due from latter is paid – This is a possessory lien – No law for time being in force, permits bank to retain title deeds alleging dues in respect of any other transaction, under Section 171 of Contract Act – Bank is bound to receive balance and issue a ‘No Due Certificate’ in respect of loan and return all documents deposited by petitioner – No document has been placed before court to show that borrower had given any authorization to Bank to hold documents of mortgaged property for the purpose of any other loan other than purported home loan – Retention of title deeds of petitioner by Bank was without any authority of law and is arbitrary – Impugned notice quashed. (Paras 6, 11, 15 and 22)
Result: Writ Petition allowed.
JUDGMENT
Dr. S.K. Panigrahi, J.—The present Writ Petition has been filed by the Petitioner challenging the notice dated 05.08.2023 issued by the Indian Bank, Bhubaneswar and praying for return of his title deed on the ground of payment of the loan amount.
I. Factual Matrix of the Case
2. Succinctly put, the facts of the case goes as follows:—
(i) The petitioner acquired a home loan of Rs.6,71,000/- vide A/c No.6572029945 with both the petitioner and his wife, Saswati Choudhury, listed as joint borrowers.
(ii) For the said loan, the Petitioner had deposited the original title deeds of his self acquired property details of which are: Flat No. WIG-1108, in Ground Floor, along with Land situated on Plot No. 312 (p) in Khata No. 142/143 with Area: Ac.0.01.15 Dec out of total area of Ac. 9.77dec in District Puri, D.S.R. Puri, P.S. Puri Sadar, No. 78 of Mouza Sipasurubuli.
(iii) The Petitioner’s wife Saswati Choudhury has a separate business with one Mrs. Anita Dutta under the partnership Firm namely M/s. Koshish.
(iv) The partners availed a loan from the same bank, on behalf of the firm, of Rs.20 Lakh dated 06.02.2018 under Loan account No.OCC6609955107 and also availed a Term Loan of Rs.30 Lakh dated 06.02.2018 under Term Loan account No.6605504055.
(v) Due to non-operation of the Open Cash Credit Account and non- payment of instalment in respect of the aforementioned OCC and Term Loan, both the accounts became NPA on 28.12.2019.
(vi) On 05.08.2023, the Petitioner was issued with a notice by the bank stating therein that the CIA (Certified Internal Auditor) number of his wife would be link to the debt account of M/s. Koshish indicating the outstanding amount Rs.21,63,291/- in respect of the Open Cash Credit Account No.6609955107 and Rs.24,66,361/- in respect of Term Loan Account No.6605504055.
(vii) The notice further stated that if the dues are not cleared, then the personal CIF of the wife of the Petitioner would get linked to the loan dues of the firm.
(viii) The impugned notice dated 5.8.2023 also indicated that the loan account of the Petitioner would be classified as NPA only because the loan account of the firm has been classified as NPA even when the Petitioner had made no default in home loan account.
(ix) After getting the said notice, the petitioner immediately rushed to the bank and paid the outstanding amount of Rs.3,30,000/- of the home loan account and closed the account.
(x) Even though the Petitioner has already cleared the debts and closed the account, the title deeds have not been returned.
II. Submissions:
A. On behalf of the Petitioner:
3. Mrs. Pami Rath, learned Senior Counsel with Ms. S. Gumansingh, learned counsel appearing on behalf of the petitioner urged the following submissions:—
(i) The notice dated 05.08.2023 was baseless for there was no reason to assert that the loan account should be made NPA only because the firm which has a separate juristic entity, has its account declared NPA.
(ii) In the said partnership firm, the Petitioner has no business interest nor has any kind of financial relation. Petitioner is neither associated with the firm as a borrower, partner, guarantor, nor has the property in question been mortgaged. It is not a Secured Asset as far as the loan to M/s. Kosish is concerned. No Security-Interest has been created in favour of the bank as regards to the property and the loan of M/s. Kosish is concerned.
(iii) The bank has made an illegal demand to the Petitioner that the overdue amount along with all legal and other charges should be cleared up by 20.8.2023. It did not mention which loan(s) have to be cleared. The request for clearance is ambiguous. As on 05.08.2023, the only legal due which the Petitioner vis-a-vis the bank is for the home loan as for Rs.6,71,000/-.
(iv) The Petitioner has made no default against the home loan account. In order to avoid any further complication, the Petitioner after getting the said notice, immediately rushed to the bank
Home loan – No law for time being in force, permits bank to retain title deeds alleging dues in respect of any other transaction, under Section 171 of Contract Act.
A bank cannot assert a general lien over title deeds related to a home loan to secure unrelated debts; repayment of the home loan extinguishes the lien.
A general lien under Section 171 of the Indian Contract Act is not applicable to title deeds of immovable property; they must be returned upon loan settlement unless an express agreement allows other....
The main legal point established in the judgment is that the bank's right of general lien under Section 171 of the Indian Contract Act cannot be extended after the satisfaction of the loan amount, an....
A bank can exercise its general lien over securities deposited by customers in ordinary banking business, as provided in Section 171 of the Indian Contract Act, even after discharge of specific liabi....
The main legal point established is that a bank's right to exercise a general lien is limited to specific circumstances, and the mortgagor has the right to redeem the mortgage under the Transfer of P....
A bank cannot exercise a general lien over the documents of a property mortgaged as security for a loan for recovery of amounts other than the loan for which the lien was created.
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.
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