Indian Kanoon - Search engine for Indian Law

2. It was contended before us that the appellant Bank has a banker's lien over the amount deposited by the Judgment-debtor who is their client and as Bankers they have a right to hold the security in respect of overdraft amount and therefore the attachment cannot be sustained. A similar contention was raised before the learned Single Judge but the learned Single Judge held that these two FDRs were deposited with the Bank as security for the Bank guarantee and when it was discharged the sum covered by the two FDRs belonged to the Judgment-debtor and the Bank cannot have a general lien on the security given for the Bank guarantee and in such cases it is only a case of particular lien and not a case of general lien and therefore the amounts covered by the two FDRs could be attached.

8. The High Court, however, found that the two FDRs were given only by way of securities for the Bank guarantee and when once the guarantee is discharged, the amounts covered by the said two FDRs would belong to the Judgment-debtor since the charge is limited to the amount of the Bank guarantee. The High Court, in this context relied on the words "Lien to BG 11/80" which are found on the back of each FDR and according to the High Court in view of this endorsement, the Bank has no right to hold the security in their own favour after the Bank guarantee has been released and they are bound to return it to the customer namely the judgment-debtor when he makes a demand on the Bank. The High Court also observed that the terms of the Contract namely furnishing FDRs as security for the bank guarantee are inconsistent with the general lien that the Bank claims and the Bank can claim only a particular lien for the bank guarantee. It also observed that since the Bank guarantee has been discharged, the Bank has no right to hold the security for something more than what was agreed upon. We are unable to agree with this reasoning. As already noticed, the recital in the covering letters as extracted above clearly established that a general lien was created in favour of the Bank on the two FDRs. 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. The words "Lien to BG 11/80" do not make any difference.

11. The Guarantee has been defined in Halsbury's Laws of England Vol.20, Fourth Edn. page 49 para 101 as that'' A guarantee is an accessory contract whereby the promisor undertakes to be answerable to the promisee for the debt, default or miscarriage of another person whose primary liability to the promise must exist or be contemplated.

12. In the banking system it is understood that Bank guarantee has an dual aspect. In the case of a Bank guarantee the banker is the promisor. It is a contract between the Bank and the beneficiary of the guarantee and it is also a security given to the beneficiary by a third party. Now, it is a well-known business transaction in the World of commerce and it has become the backbone of the banking system. Now coming to its enforceability the same depends upon the terms under which the guarantor has bound himself. He cannot be made liable for more than what he has undertaken. Therefore the Bank guarantee, as alredy noticed, is in the nature of a special contract depending upon the happening of a specific event and when once it is discharged the guarantee comes to an end. It has to be borne in mind that the obligations arising under the Bank guarantee arc independent of the obligations arising out of a specific contract between the parties. Therefore the endorsement of the words "Lien to BG 11/80" cannot have a bearing on the. banker's lien on the two FDRs. 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 our view this finding of the High Court is erroneous.