Document Fragment View

Matching Fragments

"171. General lien of bankers, factors wharfingers, attorneys and policy-brokers. --Bankeres, 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."

It could very well be seen from the aforesaid provision that Bankers have general lien in the absence of contract to the contrary to retain security for general balance of accounts or any goods bailed to the Bank. Apart from that, there is also evolution of doctrine of "set off" under which the Bank has a right of "set off". Therefore, action of the plaintiff Bank in transferring the fixed deposit receipt amounts by liquidating for appropriation of the Bank's dues in the current account of the defendants would not be said to be unauthorised, unjustified or illegal. In a Division Bench decision rendered in Punjab National Bank Ltd. v. Satyapal Virmani, AIR 1956 Punjab 118 the principles of Banker's lien under Section 171 of the Contract Act are very well highlighted. It is held that on the facts and circumstances of the case the Bank could claim a general lien on the surplus amount left with it and could retain it for payment of other debts due from the same party in the absence of any contract to the contrary. Section 171 of the Contract Act provides for a general banker's lien. According to the law merchant, the banker can look to his general lien as a protection against loss on account, or loss on loan or verdraft. And money has been held to be a species of goods over which lien may be exercised. Where a banker has advance money to another, he has, obviously a lien on all securities which come into his hands for the amount of his general balance, unless there is an express contract or circumstances to the contrary, which is not the factual scenario in the present case.

29. There is a very interesting judgment of the Calcutta High Court in the case of Krishna Kishore Kar v. United Commercial Bank, AIR 1982 Calcutta 62 wherein, it is held that in the absence of contract to the contrary, banker's lien under Section 171 could be exercised. In case of separate accounts in the Bank, adjustment can be made by the Bank under Banker's lien. The plaintiff having cash credit account and other account all proceeds of fixed deposits duly credited in cash credit account, it was held that relying on the provisions of Section 171 of the Contract Act the balance can be adjusted by appropriating the amount lying in the separate account in exercise of general lien by the Bank.

30. In Canara Bank v. Taraka Prabhu Publishers Pvt. Ltd., AIR 1991 Andh Pra 258 the Division Bench has upheld the doctrine of "set off" over and above the general right of Banker's lien. In that case, the suit was filed for the recovery of loan by the Bank and the Bank had transferred the amount deposited in the current account to its lona account for set-off. It was found that the Bank has right of set-off in terms of contract to recover the debt due to it. It was further observed in the said case that enforcement of doctrine of set-off for the amounts to be realised by the Bank could not be said to be in the ultimate analysis, in public interest an action which is arbitrary or exercise in a malafide manner.

34. The above view has also been affirmed in National Westminster Bank Ltd. v. Halesowen Presswork & Assemblies Ltd., (1972) 1 All ER 641, by the House of Lords in which the principle of set-off has been expounded and upheld in connection with the bank's right to realise their debts from a particular debtor whose money was received by the banker in the course of business as such.

35. In the present case, it is beyond any doubt that the appellants who had enjoyed over draft facilities on the securities of the FDRs, failed to discharge their duties and committed defaults, went on for overdrawals. Therefore, under the terms of loan as well as under the right of "set-off" and also under the general banker's lien, the plaintiff bank was empowered and entitled to transfer and appropriate even by liquidation the FDs towards their over-draft account of the defendants. On all counts it cannot be said even for a moment that the action of the plaintiff-bank in liquidating the FDRs for purpose of appropriation towards bank's dues was, in, any way, unjust, improper or illegal.