Prayer: Writ petition is filed under Article 226 of Constitution of India for the issuance of a Wit of Mandamus,to direct the 3rd respondent to permit the petitioner to operate the Savings Bank No. 10948453813 maintained with the 4th respondent.
O R D E R
1. The petitioner superannuated from service on 31.03.2011 from the post of Maternity Nurse from the Government Hospital. The petitioner is getting pension of Rs.10,850.00 p.m. and is maintaining savings account with the State Bank of India, Vaniyambadi Branch. The account number of the petitioner is 10948453813.
2. The petitioner tried to withdraw the amount from her savings bank account through ATM, when she was instructed to approach the branch office, though balance outstanding in her name was Rs.7,53,730.90/- (Rupees Seven Lakhs Fifty Three Thousand Seven Hundred Thirty and Paise Ninety only).
3. On enquiry by petitioner, it was revealed that the account had been attached by the Branch Manager of State Bank of India, Ambur Branch, Ambur, for non payment of loan by her son.
4. The submission of the petitioner is that except for being a guarantor, she had no role to play with the loan transaction between the Bank and her son. It is submitted that the loan was obtained by mortgaging assets, therefore, respondent Bank has no authority to withhold the account in absence of any default.
5. The loan is secured by way of equitable mortgage of immovable property, therefore, respondents could proceed against the mortgaged property in the manner known to law.
6. It is also submitted that attachment by way of lien was ordered without issuing any notice to the petitioner.
7. The petitioner issued a legal notice on 11.07.2011, but inspite of that, the respondents have not lifted the lien, thereby preventing the petitioner to operate the bank account. As the loan, being secured loan, the respondents can move against the security.
8. The action of the respondents is challenged on the ground that action of the respondents in withholding the account of guarantor, is unjust and opposed to the settled principles of law.
9. That there was no obligation on the part of respondents to repay the loan advanced to her son, as it was secured by mortgage.
10. That the action of the respondents is violative of principles of natural justice, as no notice was issued before attaching the account of petitioner.
11. The petitioner, therefore, prays for issuance of a writ in the nature of Mandamus, directing the respondents to permit the petitioner to operate the savings bank account, as the petitioner has no other source of livelihood, except pension, which is being deposited in this account.
12. The writ petition is opposed on the ground of maintainability, on the ground that the petitioner is guilty of suppressing the vital material facts.
13. The stand in the counter is that son of the petitioner, R.Vinod Kumar, is carrying on the business in the name and style of M/s. Sri Amman Blue Metals and had availed credit facilities aggregating to Rs.17,00,000/- (Rupees Seventeen Lakhs only), i.e. cash credit limit of Rs.7,00,000/- (Rupees Seven Lakhs only) and Term Loan of Rs.10,00,000/- (Rupees Ten Lakhs only) by way of Letter of Arrangement dated 24.06.2008 from the Ambur Branch.
14. The petitioner guaranteed the repayment of aforesaid credit facilities by way of guarantee deed dated 24.06.2008. She also created equitable mortgage by deposit of title deeds of her property situated at Plot Nos. 10 & 12, Lakshmi Nagar, Sanankuppam Village, Vaniyambadi Taluk, Vellore District.
15. There was default in repayment of credit facilities, therefore, notice was issued under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) for recovery by enforcement of mortgage security. Instead of complying with the notice, the petitioner and her son filed application under Section 17 of the Act before the Debts Recovery Tribunal III, Chennai, against possession notice dated 02.05.2011.
16. It was due to pendency of the proceedings before the Debts Recovery Tribunal III, Chennai, that the respondents could not proceed with the sale of mortgaged assets. The petition filed by the petitioner stands dismissed being barred by limitation. The contention of the learned counsel for the respondents was that these material facts were concealed by petitioner, while filing writ petition.
17. It is the submission of respondents that the respondents bonafide exercised their legitimate right of general lien and lien under Section 171 of the Indian Contract Act, 1872, by making entry on 22.06.2011.
18. The entry was also made in the pass book. The credit balance of petitioner on the date of entry of hold was Rs.2,48,376/- (Rupees Two Lakhs Forty Eight Thousand Three Hundred Seventy Six only).
19. It is also submission of the respondents that the petitioner's liability of discharge of loan is co-extensive with the principal borrower, being guarantor. The submission is also that it is open to the creditor to proceed against Principal debtor, mortgaged securities or against guarantor. The petitioner has tried to complicate the proceedings of disposal of the mortgage property for recovery of the amount.
20. The learned counsel for the respondents contends that right of Bank to enforce lien is legally enforceable under general lien and under Section 171 of the Contract Act.
21. The submission of petitioner, that order was in violation of principles of natural justice, is contested on the ground that the issuance of notice in this case would have been self-destructive, as it could result in petitioner, withdrawing the amount, thereby denying the right of the respondents to enforce lien on the amount outstanding.
22. It is also contended that before attachment, the petitioner withdrew Rs.6,00,000/- (Rupees Six Lakhs only) on 20.06.2011.
23. Learned counsel for the respondents referred to the guarantee agreement, to contend that as per the terms of the guarantee, it was to be treated as independent and distinct from any security that the Bank had taken or may take in any manner whatsoever, and that the liability of the Guarantors was in addition to such security and any loss, impairment, failure, realisation or release of or parting with any security was not to diminish, extinguish or affect the liability of the Guarantors. The Bank was given fullest liberty to call upon the Guarantors to pay the principal sum together with interest, costs, charges, expenses and all other monies payable under all or any of the said facilities without requiring the Bank to realise from the Borrower(s) the amounts due to the Bank and / or enforcing any remedies or securities available to the Bank.
24. The contention of the learned counsel for the respondents, therefore, was that it is not open to the petitioner to claim that in absence of enforcement of security, no action could be taken against petitioner.
25. Learned counsel for the respondents also vehemently contended, that as the Guarantor was to be treated as the Principal debtor, therefore, it could legally exercise the right under the general lien as well as lien under Section 171 of the Contract Act, therefore, no fault can be found with the action of respondents.
26. In support of right of lien of the respondent bank, learned counsel for the respondents placed reliance on the judgment of the Hon'ble Division Bench of this Court in the case of State Bank of India, Kotagiri Branch vs. Chokkalingam and others (C.R.P.(NPD) No. 3019 of 2007, decided on 10.01.2008, wherein it has been laid down as under: 5. The question of bankers lien/general lien fell for consideration before the Supreme Court in Syndicate Bank Vs Vijay Kumar & Ors. reported in AIR 1992 SC 1066. The provision of Section 171 of the Indian Contract Act, 1872 was also noticed in the said case. Taking into consideration Halsbury's Laws of England and provisions of the Contract Act in respect of bankers lien, the following observation was made by the Supreme court :- "6. In Halsbury's Laws of England, Vol. 20, 2nd Edn. p.552, para 695, lien is defined as follows :-
Lien is in its primary sense is a right in one man to retain that which is in his possession belonging to another until certain demands of the person in possession are satisfied. In this primary sense it is given by law and not by contract. In Chalmers on Bills of Exchange, thirteenth Edition page 91 the meaning of "Banker's lien" is given as follows : "A banker's lien on negotiable securities has been judicially defined as "an implied pledge." A banker has, in the absence of agreement to the contrary, a lien on all bills received from a customer in the ordinary course of banking business in respect of any balance that may be due from such customer." In Chitty on Contract, Twenty-sixth Edition, page 389, Paragraph 3032 the Banker's lien is explained as under : "By mercantile custom the banker has a general lien over all forms of commercial paper deposited by or on behalf of a customer in the ordinary course of banking business. The custom does not extent to valuables lodged for the purpose of safe custody and may in any event be displaced by either an express contract or circumstances which show an implied agreement inconsistent with the lien........................ The lien is applicable to negotiable instruments which are remitted to the banker from the customer for the purpose of collection. When collection has been made the process may be used by the banker in reduction of the customer's debit balance unless otherwise earmarked." (Emphasis supplied) In Paget's Law of Banking, Eighth Edition, Page 498, a passage reads as under : "THE BANKER'S LIEN
Apart from any specific security, the banker can look to his general lien as a protection against loss on loan or overdraft or other credit facility. The general lien of bankers is part of law merchant and judicially recognised as such." In Brandao v. Barnett (1846) 12 Cl & Fin 787 it was stated as under : "Bankers most undoubtedly have a general lien on all securities deposited with them as bankers by a customer, unless there be an express contract, or circumstances that show an implied contract, inconsistent with lien." 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. Such a lien is also applicable to negotiable instruments including FDRs which are remitted the Bank by the customer for the purpose of collection. There is no gainsaying that such a lien extends to FDRs also which are deposited by the customer."
6. In view of the finding of the Supreme Court, we are of the view that the bank has a general lien over the securities and other instruments deposited by respondents 1 to 3 in the ordinary course of banking and such general lien being valuable right of the banker, as per Supreme court decision, it cannot be ignored in absence of an agreement to the contrary.
7. We, accordingly, set aside the impugned order dated 10th Sept., 2007, passed by DRAT as also the order dated 17th Jan., 2007, passed by DRT, Coimbatore. But this order will not stand in the way of respondents 1 to 3 to pay back the dues to the bank and, thereafter, to request the bank to release the documents. The civil revision petition is allowed. Consequently, connected miscellaneous petition is closed. But there shall be no order as to costs.
27. Learned counsel for the respondents also placed reliance on the judgment of this Court in the case of Canara Bank vs. N.Palani and another, 1999 (95) Comp. Cas. 457 Mad., holding therein that fixed deposit receipts cannot be exempted under Section 60(1)(kb) of the Code of Civil Procedure, as it will not be money payable under policy of insurance to be covered under the Code of Civil Procedure, to revert the contention of the learned counsel for the petitioner, that pension amount cannot be attached in totality.
28. Reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Union of India vs. Jyoti Chit Fund and Finance, AIR 1976 SC 1163, laying down as under:
We may state without fear of contradiction that provident fund amounts, pensions and other compulsory deposits covered by the provisions we have referred to, retain their character until they reach the hands of the employee. The reality of the protection is refunded to illusory formality if we accept the interpretation sought. We take a contrary view, which means that attachment is possible and lawful only after such amounts are received by the employee. If doubts may possibly be entertained on this question, the decision in Radha Kissen's case erases them. Indeed, our case is a fortiori one, on the facts. A bare reading of Radha Kissen makes the proposition fool-proof that so long as the amounts are provident fund dues then, till they are actually paid to the Government Servant, who is entitled to it on retirement or otherwise, the nature of the dues is also authority for the benign view that the government is a trustee for those sum and has an interest in maintaining the objection in court to attachment.
29. The learned counsel for the respondents also placed reliance on the judgment of the Hon'ble Supreme Court in the case of Syndicate Bank vs. Vijay Kumar and others, AIR 1992 SC 1066, wherein it has been laid down as under: 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.
3. Shri P.P. Rao, learned Counsel appearing on behalf of the appellant Bank submitted that the letters executed on 17.9.80 by the Judgment-debtor at the time of deposit of the FDRs, clearly gave the authority to the Bank to retain the deposits so long as any amount on any account is due from the Judgment-debtor and therefore the Banker has a lien or a right to set off in respect of the deposits in as much as on the relevant date there was a larger liability due to the Bank. It is also his contention that on account of discharge of the Bank guarantee,the appellant Bank had a right to set off the amount in deposits against the liability of the Judgment-debtor due to the Bank. He also canvassed that the Banker's lien is legally recognised and it is of great importance to the entire Banking community and such a lien cannot be interfered with unless the liability in respect of which the lien is created, is fully discharged.
4. To appreciate these contentions it becomes necessary to refer to some of the relevant documents and then examine the meaning and scope of the expressions Banker's lien and Bank guarantee in the light of some settled principles.
5. The two FDRs were duly discharged by signing on the reverse of each of them by the Judgment-debtor and were handed over along with two covering letters on the Bank's usual printed forms on 17.9.80 at the time of obtaining the guarantee. The relevant clause of the letter reads as under:
The Bank is at liberty to adjust from the proceeds covered by the aforesaid Deposit. Receipt/Certificate or from proceeds of other receipts/Certificates issued in renewal thereof at any time without any reference to us, to the said loan/OD account.We agree that the above deposit and renewals shall ramain with the Bank so long as any amount on any account is due to the Bank from us or the said M/s. Jullundur Body Builders singly or jointly with others.
To the same effect is the other letter. The above recital in the letter clearly go to show that a general lien is created in favour of the appellant Bank in respect of those two FDRs, The Bank is given the authority to retain the FDRs so long as any amount on any account is due from the Judgment-debtor. Thus the appellant Bank had a right to set off in respect of these FDRs if there was a liability of the Judgment-debtor due to the Bank. In this context it is useful to refer to some passages in the text-books on the scope and meaning of the expression banker's lien.
6. In Halsbury's Laws of England, Vol.20, 2nd Edn.p.552, para 695, lien is defined as follows:
Lien is in its primary sense is a right in one man to retain that which is in his possession belonging to another until certain demands of the person in possession are satisfied. In this primary sense it is given by law and not by contract. In Chalmers on Bills of Exchange, Thirteenth Edition Page 91 the meaning of Banker's lien is given as follows:
A banker's lien on negotiable securities has been judicially defined as an implied pledge.A banker has, in the absence of agreement to the contrary, a lien on all bills received from a customer in the ordinary course of banking business in respect of any balance that may be due from such customer. In Chitty on Contract, Twenty-sixth Edition, Page 389, Paragraph 3032 the Banker's lien is explained as under:
By mercantile custom the banker has a general lien over all forms of commercial paper deposited by or on behalf of a customer in the oridinary course of banking business. The custom does not extend to valuables lodged for the purpose of safe custody and may in any event be displaced by either an express contract or cirumstances which show an implied agreement inconsistent with the lien.... The lien is applicable to negotiable instruments which are remitted to the banker from the customer for the purpose of collection. When collection has been made the proceeds may be used by the banker in reduction of the customer's debit balance unless otherwise earmarked. (emphasis supplied)
In Paget's Law of Banking, Eighth Edition, Page 498 a passage reads as under;
THE BANKER'S LIEN
Apart from any specific security, the banker can lock to his general lien as a protection against loss on loan or overdraft or other credit facility. The general lien of bankers is part of law merchant and judicially recognised as such. In Brandao v. Barnett, (1846)12 Cl. and Fin.787 it was staled as under:
Bankers most undoubtedly have a general lien on all securities deposited with them as bankers by a customer, unless there be an express contract, or circumstances that show an implied contract, inconsistent with lien. 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. 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. There is no gainsaying that such a lien extends to FDRs also which arc deposited by the customer.
7. Applying these principles to the case before us we are of the view that undoubtedly the appellant Bank has a lien over the two FDRs. In any event the two letters executed by the Judgment-debtor or 17.9.80 created a general lien in favour of the appellant Bank over the two FDRs. Even otherwise having regard to the mercantile custom as judicially recognised the Ranker 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. The recital in the two letters clearly creates a general lien without giving any room whatsoever for any controversy.
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.
30. Learned counsel for the petitioner on the other hand placed reliance on the judgment of the Hon'ble Division Bench of this Court in the case of State Bank of India vs. Jayanthi, Aarthi Lakshmi and Sanjai Balaji, AIR 2011 Mad. 179. (The operation of this judgment has been stayed by the Hon'ble Supreme Court in SLP (Civil) No. 11603 of 2011), therefore, it cannot advance the case of petitioner.
31. Learned counsel for the petitioner also placed reliance on the judgment of the Hon'ble Gauhati High Court in the case of Tilendra Nath Mahanta vs. United Bank of India and others, AIR 2002 Gauhati 1, to contend that savings bank account, could not be attached, in exercise of lien under Section 171 of the Contract Act, therefore, the writ deserves to succeed.
32. The Hon'ble Gauhati High Court was pleased to lay down as under:
S.148 of Contract Act deals with Bailment. Bailment is established only when there is 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 disposed according to the direction of the person who delivers the goods. It is the duty of the bailee to deal with the goods according to the direction of the bailer. Under Section 171 of the Act, Bankers lien can properly arise only over thing which belongs to customer but which are held by the Bank as security. There will be no bailment in case of fixed deposits or separate accounts. It has not been given to the Bank as security for doing / accomplishing certain things. Fixed deposits are basically a loan in the hands of bankers. Where an amount is deposited with the Bank in a separate account which has no connection or relation with the loans in suit in a different account, in the absence of a specific contract, the amount in the other account cannot be adjusted in the claim against the suit. The lien of a bank over the money of its customer does not extend to amounts which have been handed over or accepted by the Bank for a specified purpose by the customers.
33. On consideration, I find no force in this writ petition. The judgment of the Hon'ble Gauhati High Court, being contrary to the judgment of the Hon'ble Supreme Court laying down that the Bank has general lien of all the deposit, in addition to lien under Section 171 of the Contract Act, therefore, this judgment cannot be said to lay down good law.
34. Once it is not disputed that the petitioner is the guarantor of the loan and in terms of the guarantee deed, it could be treated as the principal debtor, it was open to the Bank to exercise banker's general lien to attach the amount outstanding.
35. There is no force in the contention of the learned counsel for the petitioner that the Bank had acted illegally, nor the contention of the petitioner, that she was entitled to show cause notice, can be accepted, as the very object of lien would stand defeated, in case any notice was given.
36. Even otherwise, that the notice was issued to the petitioner under SARFAESI Act, the petitioner chose to challenge the notice of the Bank, to restrain the Bank from recovering the amount by sale of mortgaged property.
37. It may also be noticed here that in this case, the petitioner also failed to disclose that the petitioner had also approached the Debts Recovery Tribunal, to challenge the action of respondent Bank in taking steps to take possession and sell the mortgage property. The petitioner, therefore, cannot be said to have come to the Court with clean hand. This itself disentitles the petitioner to discretionary relief in exercise of extra ordinary equitable writ jurisdiction.
38. Consequently, finding no merit in this writ petition, it is ordered to dismissed, but with no orders as to costs. Connected miscellaneous petition is closed.