Madras High Court
Mr.A.Michael Raj vs The Chairman & Managing Director on 8 February, 2021
W.P.No.7190 of 2017
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 08.02.2021
CORAM:
THE HONOURABLE MR. JUSTICE ABDUL QUDDHOSE
W.P.No.7190 of 2017
Mr.A.Michael Raj ... Petitioner
Vs.
1.The Chairman & Managing Director,
Central Bank of India,
Chander Mukhi, Nariman Point,
Mumbai – 400 021.
2.The Central Bank of India,
Rep by its Chief Manager,
Tirupur Branch,
No.2, Court Street,
Tirupur – 641 601. ... Respondents
PRAYER: Writ Petition filed under Article 226 of the Constitution of India,
for issuance of a Writ of Mandamus, to direct the 2nd respondent to return back
the Property Document pertaining to Plot No.3, Comprised in S.F.No.342/2 and
S.F.No.344, to an extent of 1100 Sq.ft., Mannari Village, Tirupur Taluk,
registered as Document No.1796 of 1996 on the file of Tirupur Joint II
Registrar Office.
For Petitioner : Mr.K.Chozhan
For Respondents : Mr.L.Ganesh for R1 & R2
Standing Counsel
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W.P.No.7190 of 2017
ORDER
This writ petition has been filed for a mandamus seeking for a direction
to the second respondent to return back the property document pertaining to
Plot No.3, comprised in S.F.No.342/2 and S.F.No.344, to an extent of 1100
sq.ft., Mannari Village, Tiruppur Taluk, registered as Document No.1796 of
1996 on the file of Tirupur Joint II Sub-Registrar Office.
2.The case of the petitioner is that the petitioner stood as a guarantor for
a loan availed by a person named Mr.James Aruldass who was running a
proprietorship unit in the name and style of M/s.Frankly Garments and a sum of
Rs.2 lakhs was granted as loan by the second respondent to said James
Aruldass on 29.07.2010. According to the petitioner, his property which is
mentioned supra was given as collateral security for the loan availed by
Mr.James Aruldass, proprietor of M/s.Frankly Garments.
3.It is the case of the petitioner that the loan availed by Mr.James
Aruldass, proprietor of M/s.Frankly Garments was discharged on 30.12.2013.
According to the petitioner, even though the borrower discharged the loan, the
respondents refused to return back the title deeds of the petitioner which were
given as a security to the respondents in respect of the loan availed by
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W.P.No.7190 of 2017
Mr.James Aruldass, proprietor of M/s.Frankly Garments. The petitioner has
given representations to the respondents seeking for return of title deeds
pursuant to the discharge of the loan. Since the respondents failed to return the
title deeds, the petitioner has filed this writ petition.
4.A counter affidavit has been filed by the respondents before this Court
wherein they have stated that the petitioner is conscious of the fact that the
second respondent bank has not returned the title deed to him, since the
petitioner also stood as a personal guarantor for the loan liability of another
borrower Mrs.S.Mariammal and Mr.S.Rajagopal. According to them, the
petitioner had executed a guarantee agreement on 13.03.2009 in favour of the
second respondent to secure the loan amount of Rs.13.50 lakhs together with
costs and interest, charges and expenses thereon availed by the borrowers,
Mrs.S.Mariammal and Mr.S.Rajagopal.
5.It is the contention of the respondents that the second respondent has
got a general lien under Section 171 of the Indian Contract Act over the subject
property belonging to the petitioner, since the borrowers in respect of the other
loan transaction namely Mrs.S.Mariammal and Mr.S.Rajagopal have failed to
discharge the loan amount.
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W.P.No.7190 of 2017
6.It is also the contention of the respondents that the petitioner has not
questioned the return of the title deeds immediately on the discharge of the loan
amount in respect of the loan availed by M/s.Frankly Garments in the year
2013. According to them, the petitioner had kept quite for more than 4 years
from 2013 and filed this writ petition only in the year 2017 by making false
allegations.
7.Heard Mr.K.Chozhan, learned counsel for the petitioner and
Mr.M.L.Ganesh, learned counsel for the respondents 1 and 2.
8.The learned counsel for the petitioner drew the attention of this Court
to Section 171 of the Indian Contract Act and would submit that it was held by
the Division Bench decision of this Court in the case of M.Shanthi vs. Bank of
Baroda, Namakkal Branch reported in 2017 2 Writ LR 584 and would submit
that the bank cannot exercise general lien in respect of a guarantors property.
He would submit that in respect of the loan availed by Mrs.S.Mariammal and
Mr.S.Rajagopal, the petitioner stood only as a guarantor and therefore, Section
171 of the Indian Contract Act does not get attracted.
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W.P.No.7190 of 2017
9.Per contra, Mr.L.Ganesh, learned counsel for the respondents would
submit that the bankers right to recover the money would be lost if they are not
allowed to exercise general lien as per the provisions of Section 171 of the
Indian Contract Act. He would rely upon the Division Bench decision of this
Court, in the case of C.R.Ramachary and Ors vs. Indian Overseas Bank and
Ors. reported in Manu/TN/7441/2018 and would submit that as per the said
decision, the bank can exercise lien under Section 171 of the Indian Contract
Act. The learned Standing Counsel for the respondents also referred to Section
25(aa) of Recovery of Debts and Bankruptcy Act, 1993 and would submit that
the bank has a right to take possession of the property over which security
interest is created or any other property of the defendant and appointing a
receiver for such property and to sell the same. According to him, since the
property which was offered as a security by Mrs.S.Mariammal and
Mr.S.Rajagopal in respect of other loan was insufficient, the respondent bank is
entitled to exercise lien over the property owned by the petitioner which was
given as a security for the loan availed by Mr.James Aruldass, proprietor of
M/s.Frankly Garments as the petitioner is the guarantor to the loan available by
Mrs.S.Mariammal and Mr.S.Rajagopal.
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W.P.No.7190 of 2017
Discussion:
10.Section 171 of the Indian Contract Act, reads as follows:
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 retain, as a security for such balance, goods bailed to
them, unless there is an express contract to that effect.
11. The learned Standing Counsel for the respondents also referred to
Section 19 (3-A) of the Recovery of Debts and Bankruptcy Act, 1993 which
reads as follows:
“(3A) Every applicant in the application filed under
sub-section (1) or sub-section (2) for recovery of debt,
shall-
(a) state particulars of the debt secured by security
interest over properties or assets belonging to any of the
defendants and the estimated value of such securities;
(b) if the estimated value of securities is not
sufficient to satisfy the debt claimed, state particulars of any
other properties or assets owned by any of the defendants, if
any; and
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W.P.No.7190 of 2017
(c) if the estimated value of such other assets is not
sufficient to recover the debt, seek an order directing the
defendant to disclose to the Tribunal particulars of other
properties or assets owned by the defendants.”
12. A Division Bench judgment relied upon by the learned counsel for
the petitioner in the case of M.Shanthi vs. Bank of Baroda, Namakkal Branch
reported in 2017 2 Writ LR 584 is also a case where a guarantor to another loan
transaction was denied return of his title deeds despite the fact that he
discharged the loan account where he was a borrower. The Division Bench had
given due consideration to various authorities including the judgment of a
Division Bench of this Court in the case of State Bank of India vs. Jeyanthi
and others reported in 2011 2 CTC 465 where it was held that the respondent
bank cannot exercise right of lien to secure any other liabilities of the
mortgagor by retaining the documents of the mortgagor or guarantor, which
were deposited with an intention to secure a particular loan transaction.
Paragraph 30 of the aforesaid decision reads as follows:
30.Hence this Court is of the firm view that the
respondent bank cannot exercise right of lien to secure any other
liabilities of the mortgagor by retaining the documents of the
mortgagor or guarantor, which are deposited with an intention to
secure a particular loan transaction. Lien is primarily considered
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W.P.No.7190 of 2017
as a right to retain security. It is doubtful, whether in exercise of
such right to retain the title deeds the mortgagee can bring the
property for sale for recovery of some debt which is due from the
mortgagor, in connection with a different transaction, which is not
covered by the mortgage.
13.As seen from the aforesaid decisions, consistently various High
Courts, all over India have held that a bank cannot exercise right of lien to
secure any other liability of the mortgagor by retaining the documents of the
mortgagor or guarantor, which were deposited with an intention to secure a
particular loan transaction. In the case on hand, admittedly the petitioner had
deposited his title deeds only to secure the loan availed by Mr.James Aruldass,
proprietor of M/s.Frankly Garments and he did not deposit the title deeds to
secure the loan of Mrs.S.Mariammal and Mr.S.Rajagopal. Therefore, this
Court is of the considered view that the Division Bench decision relied upon by
the learned counsel for the petitioner in the case of M.Shanthi vs. Bank of
Baroda, Namakkal Branch reported in 2017 2 Writ LR 584 is squarely
applicable to the facts of the instant case.
14.Even in the decision relied upon by the learned counsel for the
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W.P.No.7190 of 2017
respondents in the case of C.R.Ramachary and Ors vs. Indian Overseas Bank
and Ors. reported in Manu/TN/7441/2018, the Division Bench has only
followed the decision of State Bank of India vs. Jeyanthi and others which
has been followed by the Division Bench of this Court in the case of
M.Shanthi vs. Bank of Baroda, Namakkal Branch reported in 2017 2 Writ
LR 584. In the case of C.R.Ramachary and Ors vs. Indian Overseas Bank and
Ors. reported in Manu/TN/7441/2018, the facts are distinguishable to the case
on hand. In that case, admittedly, the petitioner had obtained 3 separate loans
from the respondent bank and two of the loan accounts were settled. However,
the third loan account was not settled. The Respondents bank refused to return
the documents on the ground that the petitioner therein had obtained another
loan and he did not repay the said loan and committed default. The bank had
exercised its lien over the properties mortgaged by the first petitioner therein.
15.The aforesaid case is distinguishable from the case on hand. In the
instant case, the petitioner was only a guarantor to the loan transaction in
respect of the loan availed by Mrs.S.Mariammal and Mr.S.Rajagopal. In fact,
in paragraph 12 of the decision relied upon by the learned counsel for the
respondents in C.R.Ramachary's case, the Division Bench of this Court has
observed that the decision relied upon by the learned counsel for the petitioner
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W.P.No.7190 of 2017
namely (a) State Bank of India vs. Jeyanthi and others reported in 2011 2
CTC 465 2 CTC 465 and (b) M.Shanthi vs. Bank of Baroda, Namakkal
Branch reported in 2017 2 Writ LR 584 are not applicable for the facts of that
case, since the petitioner therein was a borrower for both the loan transactions
but in the present case the petitioner who is a guarantor under both the loan
transactions and his title deeds were deposited as a guarantor only to secure the
loan which was subsequently discharged. Therefore, this Court is of the
considered view that the decision relied upon by the learned Standing Counsel
for the respondents namely C.R.Ramachary's case referred to supra is not
applicable to the case on hand. Insofar as the applicability of section 25(aa) of
the Recovery of Debts and Bankruptcy Act, 1993 which the learned counsel for
the petitioner has relied upon is concerned, the same is also not applicable to
the case on hand, since the said provision came into force only on 01.09.2016
whereas the petitioner has given his property as a security for the loan availed
by Mr.James Aruldasss, proprietor of M/s.Frankly Garments which was
discharged by the borrower on 30.12.2013 much prior to the introduction of
section 25(aa) under the RDB Act, 1993.
16.Admittedly, in the case on hand, the borrower namely Mr.James
Aruldass discharged the loan on 30.12.2013 where the petitioner stood as a
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W.P.No.7190 of 2017
guarantor and had given his property as a collateral security, i.e., prior to the
coming into force of Section 25(aa) of the Recovery of Debts and Bankruptcy
Act, 1993. Section 25(aa) of the Act reads as follows:
(aa) taking possession of property over which security
interest is created or any other property of the defendant and
appointing receiver for such property and to sell the same;
17.Since section 25(aa) of the RDB Act, 1993 came into force only on
01.09.2016, this Court is of the considered view that the same is also not
applicable to the case on hand. Section 19 (3A) of Recovery of debts and
Bankruptcy Act, 1993 also came into force only on 04.11.2016. Therefore, for
the said reasons, this provision also does not aid the respondents. Therefore
there is no necessity for this Court to examine as to whether the respondent
bank can exercise lien under section 25(aa) of the RDB Act, 1993 or under
section 19(3A) of the RDB Act, 1993.
18.For the foregoing reasons, the respondents bank will have to
necessarily return the title deeds of the petitioner in respect of the loan account
of Mr.James Aruldass, proprietor of M/s.Frankly Garments where the petitioner
stood as a guarantor and had deposited his title deeds to secure the said loan.
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W.P.No.7190 of 2017
19. In the result, the second respondent is directed to return back the
property document of the petitioner pertaining to his property situated at Plot
No.3, comprised in S.F.No.342/2 and S.F.No.344, to an extent of 1100 sq.ft.,
Mannari Village, Tiruppur Taluk, registered as Document No.1796 of 1996 on
the file of Tirupur Joint II Sub-Registrar Office within a period of two weeks
from the date of receipt of a copy of this order. However, it is made clear that
the respondent bank is not prevented from recovering its dues against the
borrower as well as the guarantor in respect of the loan availed by
Mrs.S.Mariammal and Mr.S.Rajagopal in accordance with law.
20.With the aforesaid direction, this writ petition is allowed. No costs.
08.02.2021
Index : Yes / No
Internet : Yes / No
Speaking/Non-speaking order
pam
To
1.The Chairman & Managing Director,
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W.P.No.7190 of 2017
Central Bank of India,
Chander Mukhi, Nariman Point,
Mumbai – 400 021.
2.The Chief Manager,
Central Bank of India,
Tirupur Branch,
No.2, Court Street,
Tirupur – 641 601.
ABDUL QUDDHOSE, J.
pam
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W.P.No.7190 of 2017
W.P.No.7190 of 2017
08.02.2021
https://www.mhc.tn.gov.in/judis/
