Andhra HC (Pre-Telangana)
K. Sita vs Corporation Bank, East Godavari ... on 9 April, 1999
Equivalent citations: 1999(3)ALD377, 1999(3)ALT443, AIR 1999 ANDHRA PRADESH 367, (2000) 1 BANKCAS 199, (1999) 3 ANDHLD 377, (1999) 3 ANDH LT 443, (1999) 3 ANDHWR 393, (1999) 3 CURCC 224, (1999) 2 BANKCLR 17
ORDER
1. The short question for decision in this writ petition is whether the respondent-bank, in exercise of the general right of Banker's lien has right to retain the gold ornaments, which were pledged to it by the petitioner for raising a particular loan, even after the discharge of the said loan, for the purpose of recovery of another loan subsequently advanced to the petitioner by the respondent. For a proper appreciation of the question involved, it is necessary to state briefly the facts of the case.
2. On 24-6-1995 (sic) the petitioner took an agricultural loan of Rs.3,000 from the respondent by pledging certain gold articles. In the year 1989 she repaid half of the said loan and the balance including interest as on 2-10-1989 was only Rs.2,765/-. On 8-9-1990 the petitioner was given credit for a sum of Rs.2,765/- under the Central Agricultural Debt Relief Scheme. Thus the said loan stood practically discharged. Meanwhile on 4-1-1986 the petitioner contracted another loan of Rs.21,000/- from the respondent-bank under Gramodaya scheme. She made some part-payments towards this loan and the balance due as on 2-10-1989 was Rs.10,800/-. The petitioner paid a further sum of Rs.500/-towards the Gramodaya loan on 30-9-1993. On 11-10-1993 the petitioner issued a notice to the bank to return the jewels pledged by her for raising the first loan i.e., the agricultural loan since the same has been fully discharged. The bank, however, sent a reply on 30-10-1993 claiming that it has a general lien over the jewels pledged to it and it is entitled to retain the same till the Gramodaya loan is also fully discharged. Questioning the said action of the bank in refusing to return the gold jewels even after the discharge of the, agricultural loan the petitioner has filed the present writ petition to direct the respondent to release the gold ornaments.
3. The petitioner contends that when the ornaments have been pledged with the bank against a specific loan the bank cannot have a general lien so as to cover the other debts in view of Section 174 of the Indian Contract Act (for short 'the Act'). In support of the said contention, strong reliance is placed by the learned Counsel for the petitioner on a decision of this Court in Jagadishwar Reddy v. Manager, Andhra Bank, 1988 (1) ALT 605.
4. On the other hand, it is the contention of the respondent-bank that it has a general lien under Section 171 of the Act and the fact that the jewels were pledged for raising a specific loan does not amount to a contract io the contrary. It is further contended that under Section 174 of the Act also, there is a presumption in favour of the pawnee in respect of subsequent advances. It is finally contended that, in any case, the writ petition is not maintainable and the remedy of the petitioner, if at all, is to approach the civil Court. In support of the above contentions, the learned Counsel for the respondent has placed reliance on the judgments reported in Syndicate. Bank v. Vijay Kumar, , Kimhan Mayan and others v. The Bank of Madras, (1896) ILR (19) Madras 234, N.T.P.C. Ltd. v. Bhami Construction Co. Ltd., , and Canara Bank v. Taraka Prabhu Publishers Pvt. Ltd., . It is also submitted that the judgment in Jagadislnvar Reddy v. Manager, Andhra Bank (supra) must be deemed to be impliedly overruled by the judgment of the Supreme Court Syndicate Bank v. Vijay Kumar (supra).
5. Section 171 of the Indian Contract Act deals with general lien of bankers, factors, wharfingers, attorneys and policy-brokers. It provides that bankers, factors, wharfingers, attorney 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 the effect. Sections 173 and 174 of the Act deal with pawnee's right of retainer of the goods pledged. Section 173 provides that the pawnee may retain the goods pledged, not only for payment of the debt or the performance of the promise but for interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged. Section 174 provides that the pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debt or promise for which they are pledged, but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee.
6. It is the contention of the petitioner that the general lien under Section 171 is not available when there is a specific pledge which implies a contract to the contrary. This contention, no doubt, finds support from the decision in Jagadishwar Reddy v. Manager Andhra Bank (supra). The petitioner in that case obtained a loan of Rs.6,000/- pledging his gold ornaments with the respondent-bank. He also stood surety along with another person for the loan obtained by a third party from the same bank. When the petitioner sought to repay the loan taken by him and demanded return of the gold ornaments pledged, the respondent-bank refused to return the gold ornaments unless and until the other loan for which he figures as a guarantor was also discharged. It was held that on repayment of the loan contracted by the petitioner, the contract of bailment/ pawn extinguishes and the bailee/pledgee/ pawnee is divested of his special property in the goods and the has to return the goods to the bailor/pledger/pawnor unless he has any other right to retain the goods under law. It was also held that when any deposit has been made for a special purpose, in a given circumstance, unless there is any contract to the contrary, it cannot be implied that the bank has a general lien over the property deposited for a specified purpose and it was not open to the bank to claim general lien over the gold ornaments pledged by the petitioner. The express" contract was for discharge of personal debt of the petitioner alone. The action of the respondent-bank in refusing to release the gold ornaments on the petitioner's offer to pay his personal debt is clearly illegal. The petitioner was, therefore, held entitled to repay the said debt and claim return of the pledged gold ornaments. For reaching the said conclusion, the Court placed reliance on the judgment of the Delhi High Court in Vijay Kitnuir v. Jullunder Body Builders, AIR 1981 Delhi 126. In the Delhi High Court case, a judgment-debtor deposited two fixed deposit receipts with the bank for issuing a bank-guarantee on his behalf in a pending execution proceeding. Subsequently the bank-guarantee was, however, discharged. When the decree-holder sought to attach the fixed deposit receipts, which were in the hands of the bank, the bank raised objection for attachment contending that the bank has a lien on the deposited receipts for the amounts due to it from the judgment-debtor and so the FDRs are not liable to attachment. The Delhi High Court negatived the contention of the bank holding that as the fixed deposit receipts were given in connection with the bank-guarantee only, the covering letter and the endorsement thereon relating to the bank-guarantee would constitute a contract contrary to the general lien of the bank and consequently the bank has no lien over it and the decree-holder is not entitled to; attach the fixed deposit receipts which belong to the judgment-debtor.
7. The judgment of the Delhi High Court was however, reversed by the Supreme Court in Syndicate Bank v. Vijay Kumar (supra). The Supreme Court, on a perusal of the covering letters accompanying the FDRs in question, came to the conclusion that a general lien is created in favour of the appellant-bank in respect of those two FDRs and the bank is given the authority to retain the FDRs so long as any amount on any account is due to it from the judgment-debtor. The Supreme Court further held that merely because the two FDRs were also furnished as security for the issuance of the bank-guarantee, the general lien thus created cannot come to an end when the bank-guarantee is discharged. It was also held that merely because on the basis of the security of the two FDRs, the appellant-bank gave a guarantee, it cannot be said that the banker had only a limited particular lien and not a general lien on the two FDRs. In its judgment, the Supreme Court, after referring to several treatises like Halsbury's Laws of England, Chitty on Contract, Paget's Law of Banking etc., explained the meaning and scope of the expression "Banker's lien". The Supreme Court also quoted with approval the following extract from Erando v. Barnett, (1846) 12 Cl & Fin. 787 :
"Bankers most undoubtedly have a general lien on all securities deposited with them as bankers by a customer, unless their be an express contract, or circumstance that show an implied contract, inconsistent with lien."
8. In Kunhan Mayan and others v. The Bank of Madras, (supra) a Division Bench of the Madras High Court had to deal with a case where the plaintiff deposited certain jewels with the defendant-bank to secure certain debts. Afterwards he paid the secured debts and demanded the return of the jewels while being otherwise indebted to the bank. It was held that the plaintiff was not entitled to recover the jewels without discharging the other debts unless he proved that the defendant agreed to give up the general lien. The Court held as follows:
"The rule of law with regard to general liens is clearly laid down in the 171st Section of the Contract Act. Bankers have such a lien on things bailed with them unless their is a contract to the contrary. It was for the plaintiff in this case to prove the existence of such contract..........
It being incumbent on the plaintiff to show that the bank had agreed to give up the general lien to which by law a bank is prima facie entitled, I must say that in my opinion the plaintiff has failed in his proof."
Another decision of the Madras High Court in Official Agency, Madras v. Ramaswamy, ILR (43) Mad. 47 - AIR 1920 Mad. 664, is also to the same effect. These judgments of the Madras High Court, which are binding precedents, have not been noticed by the learned single Judge in Jagadishwar Ready v. Manager Andhra Bank, (supra). That apart, the learned single Judge failed to note or consider the effect of the latter part of Section 174 of the Contract Act which contains the following crucial words:
"But such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee."
These words clearly mean that in the absence of anything to the contrary, it must be presumed that the pawnee has a right to retain the goods pledged with him to recover the subsequent advances made by him to the pawnor. It is not the case of the petitioner in the instant case that there was any such contract to the contrary displacing the presumption available under latter part of Section 174 or the right of general lien available under Section 171 of the Contract Act. It must, therefore, be held that the decision in Jagadishwar Reddy's case (supra) does not lay down the law correctly and it must be deemed impliedly overruled. It may also be mentioned that this decision was not approved and was specifically dissented from by a Division Bench on another point (with regard to the maintainability of the writ petition). In N.T.P.C. Ltd. v. Bhanu Construction Co. P. Ltd., (supra) the Division Bench held that the observations made by the learned single Judge on the said point must be treated as obiter.
9. In State Bank of India, Kanpur v. Deepak Malviya, , learned single Judge of the Allahabad High Court, after considering various precedents including the decision of the Supreme Court in Syndicate Bank v. Vijaykumar (supra), Kunhan v. Bank of Madras, (1896) 1LR 19 Madras 234, and also the decision in Jagadishwar Reddy 's case (supra), field; that pledge is only a form of bailment and all pledges are bailment. The banker's lien contemplated by Section 171 as such is specific provision relating to banker's lien and has an overriding effect on general provisions of Section 174 which provide for relationship of pawnee and pawner in respect of pledged goods. The banker's lien will carry over to such pledges and bank can retain pledged goods, if the debtor had not cleared his amount in connection with another loan.
10. For the foregoing reasons, it must be held that the decision in Jagadishwar Reddy's case (supra) is not good law and it must be deemed to be overruled. I do not, therefore, find any merit in the writ petition and it is accordingly dismissed with costs. Advocate's fees: Rs.1,000/-.