A bank is entitled to exercise a general lien under Section 171 of the Indian Contract Act and rely on contractual cross-collateralization clauses to retain security documents until all outstanding debts of the borrower are fully settled.

JUDGMENT

1. The Petitioners have filed this Writ Petition seeking direction to the Respondent No.2 to issue No Objection Certificate and other related documents held by the Bank with respect to Ext.P1 Loan Agreement by which the Petitioners availed a commercial vehicle loan from the Respondent Bank. The contention of the Petitioners is that the dues under the said loan are fully paid. In spite of that, the Respondent Bank is refusing to issue No Objection Certificate and release the related documents to the Petitioners.

2. Respondent Bank has filed a counter affidavit opposing the prayers in the Writ Petition. It is contended that there is a specific clause in Ext.P1 Loan Agreement that allows the Bank to retain the security provided by the borrower for any other loan granted by the Bank to the borrower. The learned Counsel for the Respondent Bank further relies on the general lien under Section 171 of the Indian Contract Act, 1872, in order to retain the security.

3. Though the Respondent Bank has filed a counter affidavit stating that another loan is outstanding, the Petitioners have not disputed the same. The parties are governed by contractual obligations arising out of the Ext.P1 Loan Agreement. When the Ext.P1 Agreement specifically contains a clause that the security can be retained for other loans also to be granted to the Borrower, the Petitioner cannot claim NOC for the loan granted as per the Ext.P1 Agreement. No relief can be granted in this Writ Petition.

4. Accordingly, this Writ Petition fails and the same is dismissed.