P. V. Hariharan v. Indian Overseas Bank & Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY** ## **FRIDAY, THE 09TH DAY OF AUGUST 2019 / 18TH SRAVANA, 1941** ## **WP(C).No.10707 OF 2019(K)** ## **PETITIONER/S:** **P.V.HARIHARAN, AGED 66 YEARS, S/O. LATE SANKUVELAYUDHAN, CINI COTTAGE, KANJIRAKKAD, RAYONPURAM P.O., PERUMBAVOOR-683 543.** **BY ADVS. SRI.VARGHESE C.KURIAKOSE SMT.JISA P.JOSE** ## **RESPONDENT/S:** |**1**|**THE INDIAN OVERSEAS BANK,**| |---|---| ||**HEAD OFFICE, 763, ANNA SALAI,**| ||**CHENNAI-600 002, REP. BY MANAGER.**| |**2**|**THE REGIONAL MANAGER,**| ||**INDIAN OVERSEA BANK,**| ||**REGIONAL OFFICE, M.G.ROAD,**| ||**ERNAKULAM-682 017.**| |**3**|**THE CHIEF MANAGER,**| ||**INDIAN OVERSEA BANK,**| ||**PERUMBAVOOR-683350.**| ## **R1 TO R3 BY ADV. SRI.SUNIL SHANKER, SC** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 30.07.2019, THE COURT ON 09.08.2019 DELIVERED THE FOLLOWING:** W.P.(C) No.10707 of 2019 2 ## **JUDGMENT** This writ petition is filed by the petitioner seeking to issue a writ of mandamus directing respondents 1 to 3 or the concerned among them to forthwith return the original title deed No.3905/1993 of S.R.O., Perumbavoor and ancillary documents deposited by the petitioner in connection with A/c No.006903781300002, which transaction has been closed evident from Ext.P3 copy of relevant page of the Passbook, and for other related reliefs. Brief material facts for the disposal of the writ petition are as follows: 2. Petitioner availed a loan from the Perumbavoor branch of the 1[st] respondent Bank, and though, the amount availed initially was Rs.10 lakhs, later, it was reduced to Rs.7 lakhs, and the loan was secured by equitable mortgage of title deed pertaining to a property having an extent of 3.82 Ares comprised in Survey No.102 of Perumbavoor Village specified above, copy of which is produced as Ext.P1. According to the petitioner, the loan was completely repaid by the petitioner on 21.12.2018, evident from Ext.P3 passbook, and thereafter, petitioner requested the Bank to release the title deed and other connected documents, ## W.P.(C) No.10707 of 2019 3 evident from Ext.P4 communication dated 21.12.2018. The Bank Manager endorsed that the same will be released on getting permission from the 2[nd] respondent, i.e., the Regional Manager of the Bank. Since the document was not released, Ext.P5 request was made by the petitioner before respondents 2 and 3 and the copy of the same was served to the Regional Office, evident from Ext.P6 acknowledgement. However, now Ext.P7 reply is issued by the 3[rd] respondent dated 27.02.2019, undertaking to release the documents on the following four conditions: (1) Clear the overdues in M/s. Bhima Food Products immediately; (2) Clear the overdues in educational loan availed for petitioner's daughter Miss. Reshma Hariharan, as co-obligant; (3) Submit current address of petitioner's daughter; and (4) Arrange for signing revival letters in the educational loan account of petitioner's daughter. 3. It is the case of the petitioner, Ext.P7 is illegal in so far as it imposes conditions for release of the document of a closed loan. That apart, it is stated that, the mortgage extended by the petitioner in W.P.(C) No.10707 of 2019 4 relation to the properties specified above in the loan availed by the petitioner are not extended to the other loans specified above, and therefore, the concept of lien as is provided under the Indian Contract Act, 1872 (for brevity, 'the Act, 1872') will not get attracted, especially due to the fact that, lien as per the Contract Act will not be available in respect of immovable properties. These are the basic background facts projected by the petitioner in this writ petition. 4. A statement is filed for and on behalf of the respondents, _inter alia_ stating and contending that, petitioner is also the guarantor for the cash credit and term loan facilities availed by the proprietary concern (M/s. Bhima Food Products) belonging to his wife Mrs. Jaya Hariharan. The said credit facilities were classified as non-performing asset on 30.09.2017. The amounts due as on 06.07.2019 under the aforesaid cash credit facility is Rs.7,34,400/- and under the term loan facility is Rs.1,60,011/-. Additionally, petitioner is the co-obligant for the educational loan availed by his daughter and the amount due as on 06.07.2019 is Rs.3,42,697/-. Therefore, petitioner is personally liable for the amounts due to the W.P.(C) No.10707 of 2019 5 respondents under the aforesaid credit facilities, on account of the personal guarantee executed in respect of the cash credit and term loan facilities availed by M/s. Bhima Food Products as well as being a co-obligant to the education loan. Therefore, the Bank is entitled to proceed against the assets of the petitioner and personally against him for realization of the amounts due to the Bank. 5. Although the aforesaid credit facilities are not secured by equitable mortgage of the properties specified above, the respondent Bank, in exercise of its right of lien, is entitled to retain the original title deed deposited by the petitioner while creating mortgage for the liquirent loan availed by the petitioner. It was accordingly that Ext.P7 letter was issued to the petitioner requesting the petitioner to clear the liability under the aforesaid credit facilities. According to the respondents, the idea of the petitioner is to obtain the documents and alienate and/or further encumber the property. It is also pointed out that, on verification of the CIBIL report of the petitioner, it is seen that petitioner is availing loans frequently and there is delinquency in repayment. Therefore, the Bank is entitled to avail W.P.(C) No.10707 of 2019 6 the general lien as prescribed under Sec.171 of the Indian Contract Act, 1872. 6. I have heard Sri. Varghese C. Kuriakose, learned counsel for the petitioner and Sri. Sunil Shankar, learned Standing Counsel appearing for the respondents, and perused the pleadings and the documents on record. 7. The question emerges for consideration is, whether the respondents are entitled to get the benefit of Sec.171 of the Indian Contract Act, 1872 dealing with general lien of bankers, factors, wharfingers, attorneys and policy-brokers, which read thus: _“_ _**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.”_ 8. According to the petitioner, general lien is available only against goods that are bailed to the Bank and deposit of title deed will not enable the Bank to apply Sec.171 of Act, 1872, since it is relating to an immovable property. In that regard, learned counsel for the petitioner has invited my attention to the judgment of the Madras High Court in ' _**State Bank of**_ W.P.(C) No.10707 of 2019 7 _**India and Another v. Jayanthi and Others**_ ' [AIR 2011 Mad. 179 : 2011 KHC 2612], wherein the question considered was, whether a specific contract/agreement between deceased borrower and bank, by which borrower offered property in question to secure only a particular transaction, and that the deposit of title deeds by which the mortgage was created by the deceased borrower was for a specific purpose to cover an advance for a specific loan, the lien under Sec.171 of Act, 1872 can be applied. In my considered opinion, the facts and circumstances in the aforesaid case are entirely different from the facts and circumstances available in the case on hand. Paragraphs 14 to 16 are relevant to the context, which read thus: _“_ _**14** . In the instant case, the borrower, (late) N.P.S. Mahendran, has admittedly deposited the title deeds of the property to secure a loan transaction availed in respect of two Plantation Companies. This fact has not disputed by the appellant Bank. Therefore, we have no hesitation to hold that this contract / mortgage, had been created by the deceased borrower for a specific purpose and for a specific loan and the contract was self contained and the terms and conditions were binding upon both the borrower as well as the bank. In other words, the deposit of title deeds by which the mortgage was created by the deceased borrower was for a specific purpose to cover an advance for a specific loan. When such is the situation, the borrower having deposited the documents in order to secure a specific transaction, the bank cannot contend that they could hold the documents for a balance due in a different loan account where the said N.P.S. Mahendran is not a borrower. Further, the_ W.P.(C) No.10707 of 2019 8 _language of S.171 of the Act, is explicit to the fact that the bankers are entitled to retain as a security for a “general balance account”. Admittedly, it is not the case of the appellant Bank that the amount, which is now said to be due on account of the borrowings of M/s. Somerset Tea Plantation, is a general balance account of the deceased borrower N.P.S. Mahendran._ _**15** . In the case of Syndicate Bank v. Vijaya Kumar, referred supra and relied on by the learned senior counsel for the appellant Bank, it is to be noted that the borrower therein issued a letter in favour of the bank stating that the bank is at liberty to adjust from the Fixed Deposit receipts without any reference to the loan and he agreed that the Fixed Deposit receipts shall remain in the bank so long as any amount on any account is due to the bank from them either singly or jointly or with others. Thus, the Hon'ble Supreme Court, while interpreting such a letter covering the transaction executed by the borrower therein, rendered a finding that the bank is entitled to general lien over the Fixed Deposit receipts given by the borrower therein._ _**16** . As noticed above, the facts of the present case are couched differently. There was a specific contract / agreement between the deceased borrower and the bank, by which the borrower offered the property in question to secure only a particular transaction. Therefore, this agreement / mortgage has to be construed as a “Contract to the Contrary” and therefore, we have no hesitation to hold that the bank cannot claim these documents by invoking the power of general lien under S.171 of the Indian Contract Act, 1872.”_ 9. ' _**Saxena v. Balram Prasad**_ ' [2000 (7) SCC 264 : 2000 KHC 650] was a case considered by the apex court in respect of lien under Sec.171 of Act, 1872 _vis-a-vis_ the files entrusted to a lawyer by a client and the advocate's lien on the same, wherein the apex court has W.P.(C) No.10707 of 2019 9 held that, as there is no scope for converting the case files into money, nor can they be sold to any third party, and so Sec.171 has no application. In my considered opinion, there also, the facts and circumstances of the case, and the legal principles laid down are entirely different. 10. So also, learned counsel has invited my attention to the judgment of the apex court in ' _**Rasiklal Kantilal & Co. (M/s.) v. Board of Trustee of**_ _**Port of Bombay and Others**_ ' [2017 (11) SCC 1], wherein the question considered was bailment under Sec.148 and the analogy drawn by learned counsel for the petitioner is to impress upon this Court that lien applies to only goods which are movable in nature for the purpose of bailment. I do not think the facts and circumstances involved in that case has any co-relation to the facts and circumstances of this case. 11. On the other hand, learned Standing Counsel appearing for the respondents submitted that, Sec.171 of Act, 1872 has two parts and in the first part, it recognizes that bankers, factors, wharfingers, attorneys of a High Court and policy-brokers have a right of general lien over goods coming into their possession in the usual course of their business for 10 W.P.(C) No.10707 of 2019 amounts outstanding to them, and the said right of general lien exists in favour of those five categories of persons unless there is an express contract to the contrary entered into between the bailor and those five categories of bailee. The second part of Sec.171 of the Contract Act provides that, apart from the five categories of persons named therein, any other bailee may have the right of general lien once such right is conferred upon the bailee by an express contract to such effect. 12. In that regard, learned Standing Counsel has invited my attention to the judgment of the High Court of Calcutta in W.P. No.2111(W) of 2014 dated 14.10.2015 in ' _**Nayabuddin v. Union of India and Others**_ ' [AIR 2016 Cal. 172], and invited my attention to paragraphs 14 and 21, and submits that, similar is the factual situations involved in the case on hand. So also, my attention is invited to the judgment of the High Court of Madras in W.P.No.4865 of 2016 dated 19.03.2019 in ' _**A.A. Associates and Others v. Indian Overseas Bank and**_ _**Others**_ ' [MANU/TN/1181/2019] and the facts thereunder are discernible from paragraphs 2 and 7, which read thus: W.P.(C) No.10707 of 2019 11 _“_ _**2** . The proprietrix of the first petitioner firm is the wife of the second petitioner. The first petitioner firm availed a sum of Rs.20,00,000/as loan from the third respondent and the second petitioner, being the guarantor, executed a Memorandum of Deposit of Title Deed dated 22.08.2013 in favour of the respondents, which was registered as document No.4795 of 2013 in the office of the District Registrar, Thanjavur, and handed over the original title deeds to the respondents 2 and 3. The said loan was repaid to the third respondent, for which, endorsement has been made by the third respondent. Having closed the loan account, the petitioners approached the respondent with a request to return the original title deeds. However, respondents 2 and 3 have not returned the original title deeds. A representation dated 14.12.2015 given in this regard to the respondents also failed to evoke any response. Hence, the petitioners are before this Court seeking for the relief cited supra._ _**7** . From the submissions made by the respondents/Bank, it is seen that besides the loan that was discharged, there are several other loans taken by the petitioner and her husband undertaking to discharge the same in their capacity as Borrower/co-borrower, guarantor/surety as the case may be, and also had defaulted in repaying the loans. It is further pointed out that the petitioner deliberately repaid the loan to which the security given is a prime property. The petitioners said to have entered into an agreement of sale also to dispose of the property. The list of loan facilities availed by the petitioners and defaulted as mentioned in the counter affidavit are not specifically denied by them. As all the accounts of the petitioners are declared as NPAs, the writ is filed to preclude the Bank from taking any enforcement measures.”_ **==> picture [396 x 12] intentionally omitted <==** submitted that, the apex court had occasion to consider this issue in ' _**Syndicate Bank v. Vijay Kumar**_ ' [AIR 1992 SC 1066], wherein the scope and meaning of the W.P.(C) No.10707 of 2019 12 expression 'the Banker's Lien' was discussed. Paragraph 6 is relevant to the context, which read thus: _**“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 extend 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 proceeds may be used by the_ W.P.(C) No.10707 of 2019 13 _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 and 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 to 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.”_ 14. Learned Standing Counsel has invited my **==> picture [431 x 11] intentionally omitted <==** ' _**Lonankutty Antony v. Joint Registrar of Co-operative**_ W.P.(C) No.10707 of 2019 14 _**Societies, Ernakulam and Others**_ ' [2016 (2) KHC 505 : 2016 (2) KLT 281], wherein it is held that, unless a person is a party to a loan transaction in whichever capacity, the question of the Bank's exercising the general lien _vis-a-vis_ the property of that person even if he or she were the spouse of the contracting party does not arise, and it falls foul of the contractual obligations of the banker and customer, and therefore, it was held that the action of retaining or withholding the petitioner's title deeds even after clearing the loan is _per se_ illegal and arbitrary. Paragraph 28 of the said judgment is relevant to the context, which read thus: _“_ _**28** . Unless a person is a party to a loan transaction in whichever capacity, the question of the Bank's exercising the general lien vis-avis the property of that person - even if he or she were the spouse of the contracting party - does not arise. Put differently, it falls foul of the contractual obligations of the banker and customer.”_ 15. Therefore, the sum and substance of the contention advanced by the learned Standing Counsel for the respondents is that, apart from the liability of the petitioner personally, petitioner has extended personal guarantee against cash credit and term loan facilities availed by an establishment belonging to his wife as well as a co-obligant to the educational loan. W.P.(C) No.10707 of 2019 15 These aspects are not disputed by the petitioner. Evidently, substantial amounts are due from that accounts and, therefore, having extended personal guarantee and is a co-obligant against the facilities availed by the wife and daughter of the petitioner, I am of the considered view, the general lien as is provided under Sec.171 of the Indian Contract Act, 1872 clearly applies to the fact and circumstances of the case. Even though learned counsel for the petitioner has advanced a contention that Sec.171 of Act, 1872 will not apply to immovable properties, I am of the view, the Bank has exercised its general lien as per Sec.171 against the title deed deposited by the petitioner against the loan availed by him, and since the petitioner is still indebted to the Bank on account of other transactions, Bank is entitled as of right to exercise the general lien under Sec.171 of Act, 1872. So also, it is clear from the judgments cited by learned Standing Counsel for the respondents that the title deed of an immovable property is not excluded from the general lien, clearly evident from the principles of law laid down by the apex court as is discussed above. W.P.(C) No.10707 of 2019 16 16. Moreover, 'general lien' is defined in the Black's Law Dictionary, Ninth Edition as follows: “A possessory lien by which the lienholder may retain any of the debtor's goods in the lienholder's possession until any debt due from the debtor, whether in connection with the retained goods or otherwise, has been paid. 'Lien' is defined thereunder to mean; “A legal right or interest that a creditor has in another's property , until a debt or duty that it secures is satisfied, and typically, the creditor does not take possession of the property on which the lien has been obtained”. 'Banker's lien' is defined thereunder to mean; “the right of a bank to satisfy a customer's matured debt by seizing the customer's money or property in the bank's possession”. Therefore, in my considered opinion, a title deed available with the bank is a 'goods bailed' to the bank for the purpose of Sec.171 of Act, 1872. 17. Having evaluated the facts and legal circumstances discussed above, I do not think petitioner has made out any case of arbitrariness, illegality or unfairness on the part of the respondents to secure any reliefs as are sought for in the writ petition, and also due to the reason that, it is W.P.(C) No.10707 of 2019 17 clearly evident that petitioner has created liability on account of the loan facilities availed by the establishment of his wife and the educational loan secured by his daughter. Resultantly, writ petition fails, accordingly it is dismissed. **Sd/-** ## **SHAJI P.CHALY** **JUDGE** W.P.(C) No.10707 of 2019 18 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE PHOTOSTAT COPY OF THE SALE DEED NO.3905/1993 OF SRO, PERUMBAVOOR.** - **EXHIBIT P2 TRUE PHOTOSTAT COPY OF THE BASIC TAX RECEIPT ISSUED BY VILLAGE OFFICE, PERUMBAVOOR VILLAGE DATED 15.10.2018.** - **EXHIBIT P3 TRUE PHOTOSTAT COPY OF THE PASSBOOK PERTAINING TO THE LOAN ACCOUNT.** - **EXHIBIT P4 TRUE PHOTOSTAT COPY OF THE LETTER DATED 21.12.2018.** - **EXHIBIT P5 TRUE PHOTOSTAT COPY OF THE APPLICATION SEEKING TO RELEASE THE TITLE DEED DATED 23.02.2019.** - **EXHIBIT P6 TRUE PHOTOSTAT COPY OF THE ACKNOWLEDGMENT CARD SIGNED BY THE 2ND RESPONDENT.** - **EXHIBIT P7 TRUE PHOTOSTAT COPY OF THE REPLY GIVEN BY THE 3RD RESPONDENT ON 27.02.2019.** **RESPONDENTS' EXHIBITS: NIL** ## **//TRUE COPY//** **P.S. TO JUDGE** **St/-**