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2022 Supreme(Online)(KER) 39756
HIGH COURT OF KERALA
P.V.KUNHIKRISHNAN, J
BABU GEORGE – Appellant
Versus
STATE BANK OF INDIA – Respondent
WP(C)/5331/2019
A banker has a general lien on all securities or bills received from a customer in the ordinary course of banking business, including pledged ornaments, even if there are other defaulted loan accounts in the customer's name.
Headnote:
{"BANKER'S LIEN - GENERAL LIEN - PLEDGED ORNAMENTS - BANK'S RIGHT TO RETAIN": "In the absence of a contract to the contrary, a banker has a general lien on all securities or bills received from a customer in the ordinary course of banking business and has a right to use the proceeds in respect of any balance that may be due from the customer by way of reduction of customer's debit balance."}
Fact of the Case:
The petitioner had availed two agricultural gold loan facilities from the respondent bank in 2017. Due to crop failure and fall in market price for agricultural products, he could not renew the gold loan account. The bank informed the petitioner that even if he closed the gold loan account, the gold ornaments pledged would not be returned to him because there were other defaulted loan accounts in his name.
Finding of the Court:
The court held that the bank was entitled to retain as security the gold ornaments pledged till the personal loan was also cleared, relying on Section 171 of the Indian Contract Act and the Supreme Court's decision in Syndicate Bank's case.
Issues: Whether a bank has a general lien on all securities or bills received from a customer in the ordinary course of banking business, including pledged ornaments, even if there are other defaulted loan accounts in the customer's name.
Ratio Decidendi: The court relied on Section 171 of the Indian Contract Act, which provides that bankers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them.
Final Decision: The court dismissed the writ petition, holding that the bank was entitled to retain the pledged gold ornaments until the petitioner cleared his personal loan.
JUDGMENT
The above writ petition is filed with following prayers:
“(1) Issue a Writ of Mandamus or appropriate Writs directions or orders directing the Respondent to consider Ext.P-5 and Ext.P6 and to release the ornaments pledged vide Ext.P-1 and Ext.P-6, upon closure of loan.
(2) Pass such further or other orders as this Hon'ble Court may deem fit and proper as per the circumstances of this case and thus render justice.”
2. The petitioner availed two agricultural gold loan facilities from the respondent bank in the year 2017. It is the case of the petitioner that, due to crop failure and fall in the market price for agricultural products, he could not renew the gold loan account. Therefore, Exts.P3 and P4 demand notices were issued to the petitioner informing that the gold will be auctioned. The petitioner approached the respondent bank to close the gold loan. At that stage, the bank authorities informed the petitioner that, even if the petitioner close the gold loan account, the gold ornaments pledged will not be returned to the petitioner because there are other defaulted loan accounts in his name. In such situation, the petitioner approached this Court with the above prayers.
3. Heard the learned counsel for the petitioner and the learned Standing counsel for the respondent bank.
4. The learned counsel for the petitioner reiterated his contentions in the writ petition. The learned counsel relied on the Division Bench judgment of this Court in W.A.No.656/2013. On the other hand the learned Standing Counsel for the respondent bank submitted that a detailed statement is filed by the respondent . The learned counsel submitted that the judgment of this Court in W.A.No.656/2013 is already challenged before the Apex Court. Moreover, the learned counsel also takes me through the judgment of this Court in W.P.(C)No.30600/2013 in which this Court distinguished the judgment of the Division Bench of this Court relying some of the judgments of the Apex Court.
5. After considering the contentions of the petitioner and the respondent, according to me, there is some substance in the argument of the learned counsel for the respondent. I perused the judgment dated 18.12.2013 in WP(C)No.30600/2013. It will be better to extract the relevant portion of the judgment.
“5. Section 171 of the Act is as follows:-
171. General lien of bankers, factors, wharfingers, attorneys and policy brokers - Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect. (emphasis supplied).
The following excerpt from Syndicate Bank v. Vijay Kumar and others [(1992) 2 SCC 330] which is the oft quoted decision of the Supreme Court on this point is apposite and sets at rest the controversy:
In Halsbury's Law of England, 2nd Edn., Vol.20, p.552, para 695, lien is defined as follows:-
“Lien in its primary sense is a right in one man to retain that which is in his possession belonging to another until certain demands of the person in possession are satisfied. In this primary sense it is given by law and not by contract.”
In Chalmers on Bills of Exchange, 13 th Edn., p.91 the meaning of “Banker's lien” is given as follows:
“A banker's lien on negotiable securities has been judicially defined as 'an implied pledge'. A banker has, in the absence of agreement to the contract, a lien on all bills received from a customer in the ordinary course of banking business in respect of any balance that may be due from such customer.”
In Chitty on Contract, 26 th Edn., p.389, para 3032 the Banker's lien is explained as under:
“Extent of lien - By mercantile custom the banker has a general lien over all forms of commercial paper deposited by or on behalf of a customer in the ordinary course of banking bus
