A.S Chandurkar, J.:— Heard Mr. P.S Tiwari learned Counsel for the petitioner and Mr. S.N Kumar learned Counsel for the respondent.
2. Rule. Rule is made returnable forthwith and heard by consent of the parties.
3. The short question that arises for consideration in the present writ petition is whether a Banker has general lien over documents of security under section 171 of the Indian Contract Act, 1872 after the customer has fully repaid the amount of loan?
4. The aforesaid question arises on the following facts:—
5. The petitioner was in the employment in the respondent-Bank on the post of the Senior Assistant. During his course of employment, he had obtained a housing loan for a sum of Rs. 6.56 lakhs. As a security for the said loan, the petitioner on 23-11-2001 had deposited title deeds of Plot No. 605, House No. 650 that was owned by him. During the course of employment, disciplinary proceedings were held against the petitioner on account of the alleged fraud committed by him. The petitioner was, ultimately, dismissed from service on 26-5-2010. On 21-7-2012, a notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act) was issued by the respondent - Bank to the petitioner. Thereafter, on 5-11-2012, possession notice under section 13(4) of the said Act was issued by the respondent - Bank. The petitioner challenged the aforesaid action under SRFAESI Act, by preferring an application under section 17(1) before the Debt Recovery Tribunal, Nagpur. The petitioner in said proceedings repaid the entire outstanding amount and on 5-12-2012 a “No Due Certificate” came to be issued to him by the respondent - Bank. The proceedings before the Debt Recovery Tribunal, Nagpur also came to be disposed of on 6-12-2012 as having become infructuous. The petitioner thereafter on 10-12-2012 sought return of the original documents of title that were deposited by him towards loan amount with the respondent-Bank. The Bank on 18-12-2012 informed the petitioner that it had filed a Civil Suit against the petitioner for recovery of an amount of Rs. 2.57 crores with interest being an amount involved in the fraud committed by the petitioner when he was in service with the Bank. The Bank, therefore, exercised its right of general lien over the documents of title and, therefore, refused to return the same. In that view of the matter, the petitioner has filed the present writ petition seeking a writ of mandamus against the respondent - Bank and has sought release of all the documents of title that have been retained by the respondent-Bank.
6. Shri P.S Tiwari, learned Counsel for the petitioner has submitted that the documents of title had been furnished as security towards loan accounts. The said loan accounts had been liquidated and the Bank had issued ‘No Due Certificate’ on 5-12-2012. According to the learned Counsel, it was not open for the Bank after liquidation of the accounts to retain the documents of title. Relying upon the decision of the Hon'ble Apex Court in the case of Zonal Manager, Central Bank of India v. Devi Ispat Ltd., 2010 AIR SCW 5935, it was urged that the respondent Bank had no legal right to retain said documents of title.
7. Per contra, Shri S.N Kumar with Shri S. Lawatawar appearing for the respondent-Bank hasrelied upon the provisions of section 171 of the Indian Contract Act, 1872 (hereinafter referred to as the said Act) to justify the action of the Bank of retaining the documents of title. It was submitted that though the petitioner had cleared the amount of loan that he had availed, during his course of employment, the petitioner had committed a fraud thereby causing financial loss to the respondent-Bank. For this purpose, the petitioner had been dismissed from service and the Bank had also filed Special Civil Suit No. 281 of 2011 against the petitioner for recovery of a sum of Rs. 4,33,13,777.49 with interest being the amount of loss suffered by it due to the fraud committed by the petitioner. It was submitted that there was no contract executed by the petitioner with the Bank for not retaining the title deeds and hence, the Bank was justified in exercising its right of general lien over the said documents. The learned Counsel, therefore, sought dismissal of the said writ petition.
8. From the material on record, the following facts are not in dispute.
(i) the fact that the petitioner had availed of housing loan by depositing documents of title with the respondent-Bank;
(ii) liquidation of aforesaid loan accounts in proceedings before the Debt Recovery Tribuna,;
(iii) issuance of “No Dues Certificate” on 5-12-2012 by the bank.
It is further admitted position that the petitioner has been dismissed from service on 26-5-2010 with regard to which proceedings before the Central Industrial Tribunal, Nagpur are pending. Similarly, it is not in dispute that the respondent-Bank has filed Special Civil Suit No. 281/2011 for recovery of amount of Rs. 4,33,13,777.49 and said civil suit is also pending.
9. The provisions of section 171 of the said Act read 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 retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect”.
The Hon'ble Apex Court in the case of Syndicate Bank v. Vijay Kumar, (1992) 2 SCC 330 while considering the meaning of the expression “Bankers lien” in legal terminology and the manner in which the same is understood and exercised in the banking system observed thus in para 6:—
“6. 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 recognized 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. 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” (Portion underlined to show emphasis)
It is thus, clear that the expression “Banker's lien” is exercised by the Bank over all forms of securities that are deposited by the customer in the ordinary course of business. It is thus, clear that there has to be a relationship of Banker and customer between the Bank and the person depositing such security. The said security should be one that has been received by the Bank in its ordinary course of banking. As a corollary, it can be thus, stated that when the relationship of Banker and customer ceases, the right of “banker's lien” will come to an end. Said lien is exercised for the purposes of securing the amount advanced and on same being realized, such right to exercise a general lien would come to an end.
10. Section 171 of the said Act employs the expression “goods bailed to them”. The word “bailment” has been defined in section 148 of the said Act to mean 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 directions of the person delivering them. Section 160 of the said Act stipulates that it is the duty of the bailee to return the goods bailed, without demand, or the purpose for which they were bailed having been accomplished. Similarly, under section 172 of the said Act, pledge has been defined as bailment of goods as security for payment of a debt or performance of a promise. Under section 174 of the said Act, the pawnee cannot in absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debt or promise over which they are pledged.
These provisions, therefore, indicate that the right to retain goods bailed is based on a contract and retaining the same in absence of any contract is not permissible. The only right that has been recognized with regard to goods bailed is the right of general lien of a banker to retain as security for a general balance of account any goods bailed to them. It is, therefore, clear that such right of general lien cannot be extended by a Banker for any other purpose after the general balance of account has been cleared by the person bailing the goods. Permitting a Banker to extend its right of general lien even after clearance of the debt would result in negating the effects of the words “as a security for a general balance of account”. In any event, exercise of such general lien after determination of the relationship of Banker and customer does not arise at all.
11. The facts of the present case reveal that on the petitioner repaying the entire amount of loan in proceedings before the Debt Recovery Tribunal, Nagpur, he was issued a “No Dues Certificate” by the respondent-Bank. Thus, the amount advanced by the respondent - Bank and which was due and payable by the petitioner came to be realized. It is, therefore, clear that on such repayment, there being no debt due with the petitioner, the loan transaction came to an end. Therefore, the relationship of Banker and Customer that came into being as a result of the petitioner's availing the facility of loan came to an end when he repaid the entire loan. The relationship of Banker and customer could not have been continued after 5-12-2012 when the respondent-Bank issued “No Dues Certificate” and realized the entire loan amount. The said transaction having been completed, the relationship of Banker and Customer between the parties also came to an end. In such situation, it is difficult to accept the stand of the respondent - Bank that it was exercising its right of general lien under section 171 of the said Act.
12. It is also relevant to consider that there was a relationship of employer and employee between the parties. According to the respondent-Bank, the petitioner who was its employee had committed a fraud resulting in monetary loss to the Bank, and for recovering the said loss, it had filed a civil suit. It is to be seen that the relationship of Banker and Customer was independent of the relationship of employer and employee. The recovery that was sought to be made by the respondent-Bank was in its capacity as an employer who had been defrauded by its employee. This is further clear from the pleadings in aforesaid civil suit. It is not the case of the respondent-Bank that aforesaid lien was being exercised so as to safeguard the amount of loan that remained due and payable. In fact, the bank admits that the loan amount has been fully received along with interest. In such situation, it is not open for the respondent Bank to continue to exercise its general lien for the securities deposited with it especially when it seeks to recover the amount from the petitioner on account of fraud committed by him and on the basis of the employer and employee relationship. It is not in dispute that such a general lien is not being exercised for a general balance of account as required under section 171 of the said Act. Further, it would not be open for a bank to exercise its right of general lien for the securities with it on culmination of the banker and customer relationship. It cannot exercise such general lien under section 171 as an employer against an employee especially when such employee who had borrowed the amounts from the Banker had fully repaid the same. It is thus, clear that there is no legal justification on the part of the respondent-Bank to retain said documents by relying upon the provisions of section 171 of the said Act.
13. In the judgment in the case of Zonal Manager, Central Bank of India (supra) that was relied upon by the learned Counsel for the petitioner, the Hon'ble Apex Court has held that the Central Bank of India being a Nationalized Bank was amenable to writ jurisdiction. In the said case, M/s Devi Ispat Limited has borrowed certain amounts from the Central Bank of India. According to the borrower though it had cleared all dues, its security documents were not being returned. According to the Bank, there was a fraud committed by another firm and the liability of the Bank under a revolving letter of credit was still alive and it was in the process of recovering the said amounts. On that basis, the Bank sought to exercise its right under section 171 of the said Act and refused to return the documents of title to M/s Devi Ispat Limited. The learned Single Judge of the Calcutta High Court held that the amounts borrowed by M/s Devi Ispat having been duly paid, the Bank was not justified in exercising lien on the documents of title. The Division Bench of said High Court dismissed the appeal preferred by the Bank therein which led to the Bank approaching the Hon'ble Apex Court. To an objection raised that the High Court should not have interfered in a matter arising out of contract, the Hon'ble Apex Court held that there being no dispute relating to terms and conditions of a contract, the writ petition was tenable before the High Court. Upholding the judgment of the learned Single Judge as affirmed by the Division Bench, the appeal preferred by the Bank was dismissed holding that a writ of mandamus for return of title deeds had been rightly issued by the High Court. This judgment of the Hon'ble Apex Court is, therefore, rightly relied upon by the learned Counsel for the petitioner for contending that there being no disputed questions, a writ of mandamus could be issued against the Nationalized Bank for seeking return of title deeds especially when the entire loan amount was cleared.
14. Insofar as filing of Special Civil Suit No. 281 of 2011 by the Bank for the recovery of amounts from the petitioner are concerned, it is clear that said civil suit has no bearing on the action of the respondent-Bank of exercising its right of general lien under section 171 of the said Act. It is open for the respondent-Bank to take such steps as are advised to secure its interest in the said civil suit. However, resort to provision of section 171 of the said Act, for withholding the title deeds especially when the relationship of Banker and Customer has come to an end on clearing the loan account is not legally justifiable. We clarify here that we have not gone into the merits of the prayers made in the said civil suit. Hence, for the reasons aforesaid, the question as framed is answered in the negative and we hold that it was not open for the respondent-Bank to have exercised its right of general lien over the title deeds deposited by the petitioner after the entire loan amount was fully repaid by the petitioner. Hence, the writ petition is partly allowed and the respondent-Bank is directed to release the documents of title and other documents within a period of four weeks kept as security in relation to mortgaging of Plot No. 505, City Survey No. 552, Sheet No. 442/19, Khasra No. 86/2, Mouza Benaki, Anand Nagar Nagpur while availing the housing loan. Rule is accordingly partly made absolute. However, in the facts of the case, there will be no order as to costs.
Petition partly allowed.