High Court of Bombay

Sunil Vs. Union Bank of India

MANU/MH/1882/2022

13.06.2022

Contract

Bank has no right to withhold the documents of security under the right of general lien especially when the entire loan amount is repaid

By invoking the jurisdiction of writ, the question raised by the Petitioner in the present writ petition is whether the Respondent-Bank has right to withhold the documents of security in view of Section 171 of the Indian Contract Act, 1872 under the right of general lien especially when Petitioner has fully repaid the amount of loan.

The Petitioner has submitted that, the documents of title had been furnished as security towards loan account. He has already satisfied the amount towards the said loan account. After satisfaction of the loan amount, Bank has no right to retain the documents of title.

Admittedly, there was a relationship between the Petitioner and the Respondent as banker and customer. It is further clear from the pleadings that the Title Deed of the property in question was handed over to the Respondent-Bank as a security. Admittedly, said loan amount is repaid by the Petitioner. Though the Respondent-Bank has submitted that there is another loan account against the petitioner and Bank has already moved an application to the Debt Recovery Tribunal for obtaining necessary orders, Bank is at liberty to move against the petitioner and other Directors to recover the said loan amount. Admittedly, said security was given against the loan amount which was already satisfied by the Petitioner.

It is not open for the Respondent-Bank to continue to exercise its general lien for the security deposited with it especially when the entire amount was repaid. Such a general lien is not being exercised for a general balance of account as required under Section 171 of the said Act. Moreover, it would not be open for the Bank to exercise its right of general lien for the securities on the pretext of the banker and customer relationship. It cannot exercise such general lien under Section 171 of the said Act thus, there is no justification on the part of the Respondent-Bank to retain the said documents by relying upon the provisions of Section 171 of the said Act.

Respondent-Union Bank of India is a nationalised bank and, therefore, is amenable to writ jurisdiction. According to the Bank another loan account is yet to be cleared by the Petitioner and, therefore, it's security documents were not returned. On the basis of the same the bank sought to exercise its right under Section 171 of the said Act and not remitted the said documents to the Respondent.

Admittedly, bank has right to recover the loan amount regarding the loan advanced to the Company wherein the petitioner and other Directors are borrowers and guarantors. Bank is at liberty to recover the said loan amount and also at liberty to take the legal recourse but merely because another loan account is there, wherein the petitioner and other Directors are borrowers, bank has no right to retain the said documents by exercising the right of lien. Respondent-Bank has already filed an application before the Debt Recovery Tribunal for attachment of the property. Said application is already pending before the Debt Recovery Tribunal and the respondent-Bank is exercising its right to recover the loan amount by attaching the property. Bank is at liberty to exercise its right by taking legal recourse to recover the said amount.

It is open for the Respondent-Bank to take such steps to secure its interest regarding the said loan account however, by invoking the provision of Section 171 of the said Act. Respondent-Bank has no right to withhold the Title Deeds especially when there is no relationship between the Petitioner and the Respondent as banker and customer. Said act of the bank is not justifiable. The respondent-Bank has no right of general lien over the Title Deeds deposited by the Petitioner after the entire loan amount was fully satisfied by the Petitioner. The respondent-Bank is directed to release the documents of title and other documents within a period of four weeks. Petition partly allowed.

Tags : Right General lien Documents

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