SYNDICATE BANK Vs. VIJAY KUMAR

JUDGEMENT

(1.) The question involved in this appeal is; what is the meaning of "Banker's lien" in the legal terminology and how it is understood and exercised in the banking system. The appellant is Syndicate Bank. The firm by the name of M/ s. Jullundur Body Builders, respondent No. 2 (hereinafter referred to. as "judgment-debtor") have been enjoying various types of credit facilities from the appellant-Bank for the last so many years. They were also enjoying overdraft facility with a limit of Rupees 1,00,000/-. Respondent 1 (hereinafter referred to as "decreeholder") obtained a decree against the judgment-debtor for Rs. 1,04,441.35 p. with future interest 9%. In the course of the execution proceedings the judgment-debtor agreed to pay the decretal amount in the instalments of Rupees 5,000 per month. To ensure compliance with the undertaking, the judgment-debtor was required by the executing Court to furnish a Bank guarantee for a sum of Rs. 90,000/- in favour of High Court of Delhi. On 10-9-80 the judgment-debtor requested the appellant-Bank to furnish a Bank guarantee for a sum of Rs. 90,000/- in favour of Registrar of High Court of Delhi. The Bank agreed to furnish the Bank guarantee on the condition that the judgment debtor should deposit the entire sum of Rs. 90,000/ - as security for the guarantee with the Bank. On 17-9-80 respondent No. 3, partner of the judgment-debtor firm deposited by way of two Fixed Deposits Receipts ("FDRs" for short) of Rs. 65,000/- and Rs. 25,000 /-respectively after duly discharging them by signing on the reverse of each FDR. The FDRs were to mature on 17-12-83 and 1-7-85 respectively. The two covering letters were also executed on the Bank's usual printed forms on 17-9-80. As per the recital in the said letters the judgment-debtor agreed that the deposits and renewals shall remain with the Bank so long as any amount on any account is due to the Banle from them i.e. M/s. Jullundur Body Builders. Thereafter the Bank issued a guarantee for a sum of Rs. 90,000/ - in favour of Registrar of the High Court. On 27-10-80 a Division Bench of the High Court discharged the Bank guarantee by an order passed in an appeal preferred by the judgment-debtor. Thus on that date the Bank guarantee stood discharged and the original Bank guarantee was returned to the appellant-Bank. The decree holder made an interlocutory application in the pending execution petition for attachment of a sum of Rs. 3 5,000 /-out of Rs. 90,000 / -deposited as security for the Bank guarantee on the ground that the same belongs to the Judgment-debtor and therefore is liable to be attached. A learned single Judge of the High Court made an order of attachment on 21-11-80.The counsel for decree-holder addressed a letter to the appellant-Bank that the said attachment has been made in execution of the decree. On 4 -2-81 the appellant-Bank appeared before the Court and raised objection against the attachment. On 5-3-81 the High Court passed an order rejecting the objection and directed the appellant-Bank to deposit a sum of Rs. 35,000/ - in the Court. Against the said order, the appellant-Bank has filed the present appeal.

(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 Banker s 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 on17-9-80 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 inasmuch 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 theliability in respect of which the lien is created, is fully discharged.