Pankaj Neema vs State Bank Of India on 13 June, 2022

[Cites 21, Cited by 1]

Madhya Pradesh High Court

Pankaj Neema vs State Bank Of India on 13 June, 2022

01. By this petition preferred under Article 226 of the Constitution of India the petitioners have prayed for a direction to the respondents Bank to release the original documents of their property situated at 418, VIP Paraspar Nagar, I.D.A Scheme No. 97, Part-4, Slice-3, District Indore.

02. Facts of the case in brief are that the petitioners were granted a home loan of Rs. 64 lacs by the respondents Bank on 17-10-2017. The loan was subsequently increased by the respondents Bank by way of a top up loan for a sum of Rs. 6.4 lacs on 23-12-2017. The loan as well as the top up loan was provided on the basis of equitable mortgage created on the property of the petitioners as stated above.

03. As per the petitioners they have repaid the entire loan amount which has been accepted by respondent No.1, who thereafter requested respondent No.2 to release the property documents of the aforesaid property of the petitioners to them. In October, 2020 when petitioners approached respondent No.2 for release of the documents, the same was not done. They hence approached respondent No.1 and were informed that the respondent Bank has sanctioned cash credit limit loan to M/s 3 Chemitx (India) Indore the proprietor of which is petitioner No.1 in the sum of Rs. 130 lacs which loan still remains unpaid and until the same is done the property documents cannot be released to the petitioners as per Section 171 of the Indian Contract Act hence the petitioners have been forced to approach this Court.

04. Learned counsel for the petitioners submits that the action of the Bank in not releasing the property documents of the petitioners is wholly illegal and without any authority. The petitioners have repaid the entire loan amount hence the documents cannot be retained by the Bank particularly in terms of Clause-8 (c) of the Loan Agreement dated 23-12-2017. Once the loan has been discharged by the petitioners, the documents of title of property deposited with the Bank for securing the said loan are mandatorily required to be returned to them. The provision of Section 171 of the Contract Act on which reliance has been placed by the Bank is not applicable since financial assistance to M/s Chemitx (India) Indore is duly secured by various mortgages. The general lien of Bank does not extend to the document handover by the petitioners to the Bank for specified purposes. Moreover, petitioner No.2 is neither the borrower nor the guarantor to the loan advanced to M/s Chemitx (India) 4 Indore whose account has in any case not been declared N.P.A. There is no identity of the borrowers of both the accounts hence action of the Bank is illegal. The provisions of Section 148 of the Contract Act also strengthens the case of the petitioners. Reliance has been placed on the decision of Hon'ble Apex Court in the case of Anumati Vs. Punjab National Bank, AIR 2005 SC 29, State Bank of India Vs. Javed Akhtar Hussain, AIR 1993 Bombay and Vijay Kumar Vs. Jalander Body Builder, AIR 1981 Delhi, 126.

05. Reply has been filed by the respondents Bank and the learned counsel for the Bank submits that petitioner No.1 has been sanctioned a cash credit loan limit of Rs. 1.30 crore in the name of his Proprietor Firm i.e M/s Chemitx (India) Indore which is guaranteed by petitioner No.2 and for that purpose she has executed a Guarantee Agreement dated 17-08-2017 wherein as per Clause -3 she has agreed that she would also be the principal debtor jointly with the borrower i.e. petitioner No.1. Thus, for the said C.C. loan also the petitioners are joint principal debtors. The original title deed of the property deposited by the petitioners are security with the Bank by virtue of Section 58 (f) of Transfer of Property Act. The loan amount of M/s Chemitx (India) 5 Indore has turned bad hence the Bank is entitled for retaining the title deeds of the property deposited by the petitioners for securing the home loan by virtue of Section 171 of the Contract Act. Reliance has been placed on the decision of Hon'ble Apex Court in Syndicate Bank Vs. Vijay Kumar AIR 1992 SC 1066, of the Delhi High Court in Smt Sadhana Gupta and others Vs. R.C. Gupta and others 2009 (112) DRJ 376, of the Calcutta High Court in Nayabudin Vs. Union of India and others, AIR 2016 Calcutta 172 and of Madras High Court in Writ Petition No. 16812 of 2018, C.R. Ramachary and another Vs. Indian Overseas Bank and others decided on 31-10-2018.

06. Petitioners have filed rejoinder to the reply filed by the respondents submitting that in the facts of the present case Section171 of the Contract Act is not applicable and that the loan account of M/s Chemitx (India) Indore is very much secured. Additional reply has been filed by the respondents to the rejoinder of the petitioners.

07. I have heard the learned counsel for the parties and have perused the record.

08. For appreciating the contention of the petitioners that petitioner No.2, even assuming to be guarantor as per Guarantee Agreement dated 6 17-08-2017 entered into between M/s Chemitx (India) Indore and the respondents cannot step into the shoes of borrower, it would be appropriate to reproduce Clause No.3 of the said Agreement which is as under :-

"3. The bank shall have the fullest liberty without affecting this Guarantee to vary the amounts of the individual limits of / under the said facilities or fresh or additional limits thereunder subject to the aggregate thereof not exceeding the principal sum and / or to postpone, enforce or forbear for any time to enforce any remedies or any of them against any securities or parting losing with any security or promising to give time to or not to sue or making any composition with the borrower (s) or of any other forbearance, act or omission or any other indulgence on the part of the bank or by any other matters or things whatsoever which under the law relating to sureties would but for this provision have the effect of so releasing the Guarantors. That as though between the Guarantors, it is expressly agreed that the guarantors would be the principal debtors jointly with the borrower

(s) and accordingly, the Guarantors shall not be entitled to and also hereby waive all the 7 rights conferred on the Guarantors under Sections 131, 133, 134, 135, 139, 140 and 141 of the Indian Contract Act, 1872."

09. In the aforesaid clause it has been specifically stated that though as between the guarantors and borrowers, the guarantors are sureties but as between the Bank and guarantors, the guarantors would be the principal debtors jointly with the borrowers. The guarantor in the said Guarantee Agreement is Smt Babita Neema i.e. Petitioner No.2 hence in terms of the aforesaid clause she would also be deemed to be a principal debtor jointly with the borrower as stated in the said Agreement i.e. Pankaj Neema petitioner No.1. The contention of petitioners that petitioner No.2 cannot be termed to be a borrower in the agreement executed between M/s Chemitx ( India) Indore and the Bank hence cannot be accepted.

10. Clause 8 (c) of the Agreement letter (Home Top UP Loan) dated 23-12-2017 is as under :-

8. Security :

Cases where existing mortgage is not extended - The title deeds deposited with the Bank as security for the home Loan will 8 continue to be deposited with the Bank till liquidation of loan under this letter. Your liability to the Bank under this loan facility should be fully extinguished prior to closure of Home Loan availed by you from the Bank."

11. Clause No.8 of the Guarantee Agreement dated 17-08-2017 executed between M/s Chemitx (India) Indore and the Bank is as under :-

"8. That the Bank shall be entitled to adjust, appropriate or set-off or exercise lien of or on all monies, securities, goods, instruments held to the credit or for the benefit of the Guarantors on any account or coming into the control or possession of the Bank in any of its branches whether for any specified purpose or otherwise with or without any particular mandate and whether singly or jointly, towards the discharge and satisfaction of the liability of the Guarantors hereunder."

12. Section 171 of the Contract Act, 1872 reads as under :-

"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 9 retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect."

13. Section 171 of the Contract Act confers power to retain as a security for a general balance of account any goods paid to, interalia, bankers. The same is subject to absence of a contract to the contrary. Thus, general power of retention has been provided subject to a contract to the contrary. Clause 8 (c) of the Agreement letter dated 23-12-2017 cannot be said to be such a contract to the contrary. No other document has been pointed out which may contain such a contract. On the other hand Clause-8 of the Guarantee Agreement dated 17-08-2017 confers specific power upon the Bank to exercise lien on "goods" held to the credit or for the benefit of the guarantors on any account whether for any specified purposes or otherwise with or without any particular mandate towards discharge and satisfaction of the liability of the guarantors. The said clause reinforces the general lien of the Bank to retain as security for general balance of account any goods pledged to them. As per Section 58

(f) of Transfer of Property Act title deeds are goods. Thus title deeds deposited by the petitioners with the Bank at the time of creation of the home loan would be goods within the meaning of Section 171 of the 10 Contract Act and the Bank has a right to retain them as security for general balance of account.

14. In Syndicate Bank (supra) it was held in Paragraph-6 as under :-

"6. In Halsbury's Laws of England, Vol.20, 2nd Edn.p.552, para 695, lien is defined as follows:

Lien is 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, Thirteenth Edition Page 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 contrary, a lien on all bills received from a customer in the ordinary course of banking business in respect of any 11 balance that may be due from such customer."

In Chitty on Contract, Twenty-sixth Edition, Page 389, Paragraph 3032 the Banker's lien is explained as under:

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 oridinary course of banking business. The custom does not extend to valuables lodged for the purpose of safe custody and may in any event be displaced by either an express contract or cirumstances which show an implied agreement inconsistent with the lien.... The lien is applicable to negotiable instruments which are remitted to the banker from the customer for the purpose of collection. When collection has been made the proceeds may be used by the banker in reduction of the customer's debit balance unless otherwise earmarked.

(emphasis supplied) In Paget's Law of Banking, Eighth Edition, Page 498 a passage reads as under;

THE BANKER'S LIEN Apart from any specific security, the banker can lock to his general lien as a protection against loss on loan or overdraft or other credit facility. The general lien of bankers is part of law merchant and judicially recognised as such. In Brandao v. Barnett, (1846)12 Cl. and Fin.787 it was staled as under:

Bankers most undoubtedly have a general lien on all securities deposited with them as bankers by a customer, unless there be an express contract, or circumstances that show an implied contract, inconsistent with lien. 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 absence of an 13 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. Such a lien is also applicable to negotiable instruments including FDRs which are remitted to the Bank by the customer for the purpose of collection. There is no gainsaying that such a lien extends to FDRs also which arc deposited by the customer."

15. In C.R. Ramachary (supra) Division Bench of Madras High Court held in Paragraph-11 and 12 as under :-

"11. As per Section 171 of the Indian Contract Act, the bank may, in the absence of a contract to the contrary, have lien over the security for a general balance of account. However, no other person shall have a right to retain as security for such balance, unless there is an express contract to that effect. In the case on hand, the bank had created a lien over the petitioner / borrower's property 14 which was mortgaged with bank in respect of the other two loan accounts.

12. In the decisions relied upon by the learned counsel for the petitioners all the properties did not belong did not belong to the borrower. In the present case, the properties belong to the first petitioner / borrower. Therefore, in view of the finding of the Supreme Court, as reproduced above, we are of the view that the respondent bank has a general lien over the securities and other instruments deposited by the petitioner with the bank in the ordinary course of banking and such general lien being a valuable right of the bank as per the decision of the Supreme Court, it cannot be ignored in the absence of an agreement to the contrary. In such case, the respondent bank is well within its rights to retain the documents furnished by way of collateral security in relation to the earlier two loan accounts which were settled, as the third loan was not settled. In such view of the matter, we do not find any merit in the submissions made by the learned counsel for the petitioners."

16. In Smt Sadhna Gupta and others (supra) it was held by the Delhi High Court in Paragraph 24 as under :-

"24. Thus, Section 171 creates a general as distinguished from a particular lien of bankers. This section, however, limits the right to a general lien, i.e., a right of the bankers to retain goods in their possession as a security for a general balance of account to them. This general lien can be excluded by special agreement whether expressed or implied from the circumstances but such agreement must be clearly in consistent with the existence of general lien. When a person has a number of accounts kept in the books of the bank, the customer cannot take the plea in the absence of any special contract to say that securities which he deposited are only applicable to one particular account and not subject to a general lien. In other words Section 171 is clear and categoric that unless a contract to the contrary is established by the plaintiff the bank‟s right of lien has to be accepted. "

17. In the present case, admittedly the title deeds belong to the petitioners. The Bank has a general lien over the said title deeds deposited by the petitioners with them in the ordinary course of Banking and such general lien being a valuable right of the Bank has to be given effect to as there is absence of an agreement to the contrary. The Bank is hence within its rights to retain the title deeds furnished by the petitioners 16 in relation to the home loan advanced to them by the Bank as collateral security for the loan of M/s Chemitx (India) Indore which has not yet been settled.

18. The petitioner No.2 being a borrower of the loan account of M/s Chemitx ( India) Indore as per Clause-8 of the Agreement dated 17-08-2017 and petitioner No.1 being the principal borrower therein, there is complete identity between borrowers of the house loan obtained by the petitioners in the present case and the borrowers of loan advanced by M/s Chemitx (India) Indore. The contention of petitioners that both the accounts are of different persons hence cannot be accepted.

19. In the S.B.I. Vs. Javed Akhtar Hussain (supra) relied upon by the petitioners it was not a case of two different loan accounts but was a case of a fixed deposit with the Bank by the petitioner therein with his wife and the liability under the Guarantee had been discharged by the Court. In Anumati (supra), the dispute was as regards a joint account of the borrowers with the Bank and it was held that they are not automatically authorized to pledge each other's credits. The case of Vijay Kumar (supra) was also in respect of a fixed deposit with the 17 Bank. Thus, the judgments relied by the learned counsel for the petitioners do not help him in any manner.

20. As a result I do not find any merit in the submissions made on behalf of the petitioners. The petition thus being devoid of any merit deserves to be and is hereby dismissed.

(PRANAY VERMA) JUDGE RASHMI RASHMI PRASHANT 2022.06.14 16:58:20 +05'30'

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Madhya Pradesh High Court