Delhi High Court
Raj Kumar & Anr vs Syndicate Bank on 1 February, 2016
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 1st February, 2016
+ W.P.(C) No.886/2014 & CM No.1780/2014 (for stay)
RAJ KUMAR & ANR ..... Petitioners
Through: Mr. Arvind Nayar and Mr. Shashi
Mohan, Advs.
versus
SYNDICATE BANK ..... Respondent
Through: Mr. V. Sudeer, Ms.
Vandana Bakshi, Advs. and Mr.
Devender Kumar on behalf of Bank.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The petition seeks a mandamus to the respondent Syndicate Bank
(Bank) to release the title documents of property bearing plot no.3490,
Block-C, Green Field Colony, Faridabad deposited by the petitioner to
secure re-payment by the petitioners of the dues of the cash credit limit
availed of by the petitioners in the name of petitioner no.2 M/s. ACE
Exports of which petitioner no.1 is the sole proprietor.
2. It is the admitted position that the petitioner no.1 is also a guarantor of
the advances made by the respondent Bank to one M/s. K.B. International
and Sh. Dayanand Basoya and which advances according to the respondent
Bank are still outstanding. It has also come on record that the respondent
W.P.(C) No.886/2014 Page 1 of 15
Bank had invoked the guarantee admittedly given by the petitioner for the
dues of M/s K.B. International and Shri Dayanand Basoya and instituted
proceedings before the Debt Recovery Tribunal (DRT) for recovery and in
which though a settlement was arrived at, but has not been honoured.
3. The contention of the counsel for the petitioners is that the petitioners
had deposited the aforesaid title deeds to create equitable mortgage of the
property only to secure the dues in the account of M/s. Ace Exports and not
as a guarantor for the dues of M/s K.B. International. It is argued that the
security given for dues in one account cannot be utilised for dues of another
account.
4. The counsel for the petitioners does not dispute that the respondent as
a banker has a right of general lien, as held by the Supreme Court in
Syndicate Bank Vs. Vijay Kumar (1992) 2 SCC 330. Reliance however is
placed on the judgment of the Division Bench of the Orissa High Court in
Alekha Sahoo Vs. Puri Urban Co-operative Bank Ltd. AIR 2004 Ori 142.
5. The Division Bench of the High Court of Orissa was concerned with a
challenge to the general lien exercised by the bank qua the gold ornaments
deposited by the petitioner therein for the gold loan availed by her and
W.P.(C) No.886/2014 Page 2 of 15
which gold loan had been repaid. The bank refused to return the ornaments
exercising general lien for securing the dues of another customer of the bank
for whom the petitioner had stood guarantee. It was held i) that the bank had
not placed the bye-laws / rules of grant of gold loan to show that the gold
pledged for gold loan could be retained as additional security for loan
granted to another customer for whom the petitioner was the guarantor and
even when the petitioner had repaid the gold loan; ii) there is no provision in
the Indian Contract Act, 1872 to the effect that the properties of a surety can
be retained by the creditor as security for the dues from the principal debtor;
iii) a bank can exercise general lien over the properties of a customer for the
general balance in such customer‟s account and not for the general balance
of some other customer‟s account unless the customer has expressly agreed
that his property can be retained as security for the outstanding balance in
the account of some other customers; iv) that even in the guarantee
agreement executed by the petitioner there was no provision that the bank
could retain the properties of the petitioner as security for the outstanding
balance in the loan account of the principal debtor.
W.P.(C) No.886/2014 Page 3 of 15
6. It is not as if the dicta of the Supreme Court in Vijay Kumar supra
was not noticed by the Division Bench of the High Court. However
notwithstanding the same, it was held as aforesaid.
7. I am afraid the High Court of Orissa appears to have misread the dicta
of the Supreme Court in Vijay Kumar supra. In fact I have enquired from
the counsel for the petitioner whether the said judgment of the Orissa High
Court was subject matter of appeal before the Supreme Court and he has
fairly stated that he is not aware.
8. If the proposition as is canvassed by the counsel for the petitioner
were to be accepted, there would in fact be no general lien, as the banks have
been held to have. If it were to be held that without a customer expressly
agreeing that his properties deposited with or in custody of bank be utilized
for recovering due of the bank for which the customer is liable, we would be
not giving effect to the word „general‟ in the expression „general lien‟.
Supreme Court in Vijay Kumar has held:-
"The above passages go to show that by mercantile system the
Bank has a general lien over all forms of securities or negotiable
instruments deposited by or on behalf of the customer in the
ordinary course of banking business and that the general lien is a
valuable right of the banker judicially recognised and in the
W.P.(C) No.886/2014 Page 4 of 15
absence of an agreement to the contrary, a Banker has a general
lien over such 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. ......Even
otherwise having regard to the mercantile custom as judicially
recognised the Banker has such a general lien over all forms of
deposits or securities made by or on behalf of the customer in the
ordinary course of banking business."
9. There is another important fact which distinguishes the facts of the
present case from that subject matter of the case before the Orissa High
Court. Here the respondent Bank has a Recovery Certificate against the
petitioner. Once a Recovery Certificate has been issued in favour of the
respondent Bank against the petitioner, the distinction which the Division
Bench of the High Court of Orissa sought to make between the principal
debtor and a guarantor / surety ceases to exist. As of today, the petitioner is
the debtor of the respondent Bank and if it were to be held that
notwithstanding the same, the respondent Bank is not entitled to exercise the
right of general lien over the title deeds of the immovable property of the
petitioner in lawful custody of the respondent Bank, it would be as good as
giving a go-bye to the right of a banker of general lien and which in my
humble opinion would be detrimental to the interest of the banks on which
W.P.(C) No.886/2014 Page 5 of 15
carrying on of large trade and businesses depend and resultantly be
prejudicial to trade and commerce. Also, the opinion of the Division Bench
of the High Court of Orissa appears to be premised on the terms of grant of
gold loan constituting a „contract to the contrary‟ within the meaning of
Section 171 of the Contract Act codifying the general lien of Bankers and
which is also not the case here.
10. The counsel for the respondent Bank also draws attention to the order
dated 16th March, 2012 of the High Court of Madras in W.P.(C)
No.19096/2011 titled C. Lalitha Raj Vs. The Assistant General Manager,
State Bank of India holding the Bank in that case to be having a general
lien.
11. A Single Judge of the High Court of Madras in the order supra was
concerned with the general lien exercised by the bank in that case to the
monies lying in the account of a customer for the dues outstanding in the
loan account of the son of the customer and for which loan account the
customer had stood guarantee. It was held that once it was not disputed that
the petitioner was the guarantor of the loan and in terms of the guarantee
W.P.(C) No.886/2014 Page 6 of 15
could be treated as the principal debtor, it was open to the bank to exercise
banker‟s general lien to attach the amount outstanding.
12. The counsel for the petitioner then contended that the respondent
Bank is also holding security of another property of M/s. K.B.
International/Mr. Dayanand Basoya for recovery of its dues and the recovery
can be made from that property and not from the property of the petitioner.
13. I am afraid, the petitioner cannot compel the Bank to make any such
choice. Till the dues of the respondent Bank from M/s. K.B. International
and Mr. Dayanand Basoya for whom the petitioner had admittedly stood as
guarantor are re-paid, no direction for return of the title deeds can be given.
14. No other argument was urged and in fact the counsel for the petitioner
upon being faced with the queries about general lien and upon my showing
disagreement with the judgment of the High Court of Orissa in Alekha
Sahoo supra did not even opt to make argument in rejoinder and left.
15. Accordingly, the petition was dismissed in open Court.
W.P.(C) No.886/2014 Page 7 of 15
16. However, while correcting the order in chamber and finding the
language of Section 171 of the Indian Contract Act codifying the general
lien of the banker‟s as under:-
"171. General lien of bankers, factors, wharfinger, 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."
and the language of Section 148 defining bailment as under:
"148. 'Bailment', 'bailor' and 'bailee' defined - A „bailment‟ is
the delivery of goods by one person to another for some purpose,
upon a contract that they shall, when the purpose is accomplished, be
returned or otherwise disposed of according to the direction of the
person delivering them. The person delivering the goods is called the
„bailor‟. The person to whom they are delivered is called the „bailee‟.
Explanation: If a person already in possession of the goods of
other contracts to hold them as a bailee, he thereby becomes the
bailee, and the owner becomes the bailor of such goods, although
they may not have been delivered by way of bailment."
and further finding that the right of general lien has been prescribed
against "any goods bailed" to the banker and bailment to be by delivery of
goods only, I wondered whether the title deeds with the bank by way of
W.P.(C) No.886/2014 Page 8 of 15
equitable mortgage would qualify as goods and qua which a right of general
lien under Section 171 can be exercised.
17. My search has yielded:
(a) Paget‟s Law of Banking, Twelfth Edition in Chapter 29 titled
"Lien and Set-off" and under the Head "The banker‟s lien" to
be opining that "what class of securities may be the subject of
lien is not entirely clear" and under the heading "Documents of
title to land" authoring as under:
"29.5 The lien does not extend to title deeds (or any other
property) which is delivered to a banker for mere safe custody.
Until the Law of Property (Miscellaneous Provision) Act, 1989, a
deposit of title deeds could create an equitable mortgage.
However, by S. 2(1) of the Act, a contract for the sale or other
disposition of an interest in land must be in a signed document
which incorporates all the terms which the parties have expressly
agreed. It is therefore no longer possible to create an equitable
mortgage by a mere deposit of title deeds1. It seems doubtful
whether an ineffective mortgage can give rise to a lien because
the banker would not be exercising a right of retention over
property delivered to him for some other purpose.
In Wylde v. Radford2, a customer deposited with his bankers a
deed of conveyance of two distinct properties, giving them at the
same time a memorandum charging one of the properties as
security both for a specific sum and also for his general balance.
W.P.(C) No.886/2014 Page 9 of 15
The bankers later claimed a general lien over the other property.
This claim was rejected, but on the basis of the construction of the
memorandum rather than on the ground that the general lien does
not extend to conveyances. The case is therefore of little
assistance. As Buckley J. said of Wylde v. Radford in Re London
and Globe Finance Corpn3:
„All that Kindersley V-C held was that, upon the true construction
of the memorandum, the result of the transaction in that case was
that property B was never intended to be charged at all; that the
deed was deposited because it contained property A, and not
because it contained property B; and that as regarded B there was
no security given‟
1. United Bank of Kuwait v. Sahib [1997] Ch 107, CA.
2. (1863) 33 LJ Ch 51.
3. [1902] 2 Ch 416 at 420."
(b). A Single Judge of this Court in Sadhna Gupta Vs. R.C. Gupta
2009 (112) DRJ 376 to have held title deeds to be goods within
the meaning of Section 171 of the Contract Act and to have
further held that it cannot be considered as immovable properties
as long as possession of the property was not taken over by the
bank.
(c). Single Judges of this Court in State Bank of India Vs. Diwanji
Buildwell (India) Pvt. Ltd. 111 (2004) DLT 267 and Texla
W.P.(C) No.886/2014 Page 10 of 15
Towers Ltd. Vs. Punjab National Bank (2004) 109 DLT 975 to
have also proceeded on the premise that the banker‟s lien
extends to title deeds of immovable property deposited with the
bank.
(d). A Single Judge of the High Court of Andhra Pradesh in Mohan
Enterprises Vs. Andhra Bank MANU/AP/0614/2007 to have
held the right of a banker to general lien to extend to title deeds
of immovable property deposited with it though without
discussion whether the same are goods or not.
(e). Yet another Single Judge of the High Court of Andhra Pradesh
in V. Srinadha Reddy Vs. The Branch Manager, Indian Bank
MANU/AP/0752/2011 to have held the right of general lien to
extend to gold deposited for a gold loan also and to be a valuable
right of the banker judicially recognized.
(f) Justice H.J. Kania speaking for the High Court of Bombay in
The Indian Cotton Company Ltd. Vs. Huri Poonjoo AIR 1937
Bom. 39 to have observed "it cannot be disputed that title deeds
of immovable property would fall under the definition of goods,
W.P.(C) No.886/2014 Page 11 of 15
within the meaning of the Indian Contract Act" though not in the
context of banker‟s lien.
(g) Supreme Court in R.D. Saxena Vs. Balram Prasad Sharma
(2000) 7 SCC 264 to have held "thus understood goods to fall
within the provision of Section 171 of the Contract Act should
have marketability and the person to whom it is bailed should be
in a position to dispose it of in consideration of money. In other
words, the goods referred to in Section 171 of the Contract Act
are saleable goods. There is no scope for converting the case
files into money, nor can they be sold to any third party. Hence,
the reliance placed on Section 171 of the Contract Act has no
merit".
(h) A Single Judge of the High Court of Calcutta in R.K. Agencies
Ltd. Vs. Central Bank of India AIR 1992 Cal. 193 to have also
observed that "the concept of banker‟s lien is generally in
respect of what are called collaterals, i.e. documents, securities
etc. which come into the hands of the banker and are intended to
cover the banker‟s claim against the customer.
W.P.(C) No.886/2014 Page 12 of 15
(i). A Single Judge of the High Court of Calcutta in Nayabuddin Vs.
Union of India MANU/WB/0881/2015 to have though without
considering the said aspect held the bank to be having a general
lien over title deeds of immovable property, deposited with it as
a security.
(j). A Division Bench of the High Court of Madras in The
Committee representing RBF Nidhi Limited Vs. Vipanchi
Investments Pvt. Ltd. MANU/TN/0143/2009 to have again
though without going into the said aspect held the right of
general lien to extend over title deeds of immovable property
deposited with it.
(k) A Single Judge of the High Court of Karnataka in Sri Nagendra
Prasad Vs. The Manager, State Bank of Mysore
MANU/KA/3074/2013 to have also proceeded on the premise
that the banker‟s lien extends to title deeds of immovable
property deposited with the bank.
(l) A Single Judge of the High Court of Madras in Sree
Vadivambigai Ginning Industries Pvt. Ltd. Vs. Tamil Nadu
W.P.(C) No.886/2014 Page 13 of 15
Mercantile Bank Limited MANU/TN/0913/2015 to have also
proceeded on the premise that the banker‟s lien extends to title
deeds of immovable property deposited with the bank.
(m). State Bank of India Vs. Jayanthi, Aarthi Lakshmi and Sanjai
Balaji AIR 2011 Mad. 179 to have also proceeded on the
premise that the banker‟s lien extends to title deeds of
immovable property deposited with the bank.
(n). A Division Bench of the Bombay High Court in Shri Surendra
Vs. Chief Manager & Authorized Officer State Bank of India
MANU/MH/1328/2013 to have also proceeded on the premise
that the banker‟s lien extends to title deeds of immovable
property deposited with the bank.
18. In view of the aforesaid position, the doubt which had arisen stands
cleared and I hold that the rights under Section 171 of the Contract Act can
be exercised with respect to title deeds of immovable property deposited
with the Bank as security.
19. The petition thus stands dismissed.
W.P.(C) No.886/2014 Page 14 of 15
20. Needless to state that after the dues of the respondent Bank relating to
M/s K.B. International / Mr. Dayanand Basoya are satisfied, the petitioner in
accordance with law shall be entitled for release of the title deeds, unless the
said dues are satisfied from the said property of the petitioners.
No costs.
RAJIV SAHAI ENDLAW, J.
FEBRUARY 01, 2016 „pp/gsr‟ (corrected & released on 29th February, 2016) W.P.(C) No.886/2014 Page 15 of 15