Raj Kumar & Anr vs Syndicate Bank
2016 Latest Caselaw 732 Del

                *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

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

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.

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

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

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

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.

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

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.

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

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,

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.

(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

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.

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)