NAKULAN Vs. CANARA BANK

JUDGEMENT

(1.) Can the Bank retain the gold ornaments offered as security while availing a loan even after the same is cleared on the premise that the borrower has not discharged his liability in respect of another loan The petitioner availed a personal loan of Rs. 25,000/- from the Canara Bank ('the Bank' for short) on 31.1.2012 agreeing to repay the same with interest in equated monthly installments in a span of three years. The personal loan was availed on the basis of a demand promissory note executed by the petitioner in favour of the Bank and no security of any sort was obtained at the time of the transaction. The petitioner also availed a gold loan of Rs. 85,000/- from the Bank on 11.5.2012 on pledging 46.700 grams of gold and agreeing to clear the same with interest on or before 10.5.2013. The petitioner asserts that he is willing to clear the gold loan in its entirety and that the Bank is bound to release the gold ornaments pledged without retaining it as security for the personal loan. The Writ Petition has been filed seeking the issue of a writ of mandamus directing the Bank to release the gold ornaments pledged on the petitioner clearing only the gold loan.

(2.) The Bank contends that the amounts due in the personal loan and the gold loan are Rs. 31,147/- and Rs. 95,086/- respectively and that the gold ornaments cannot be released without the petitioner discharging the entire liability. The Bank relies on S. 171 of the Indian Contract Act, 1872 ('the Act' for short) to exercise its right of lien and retain as security the gold ornaments pledged for amounts due from the petitioner. The Bank also urges that a writ should not be issued which tends to interfere with its banking operations especially when the motions made by the petitioner to the Banking Ombudsman and Taluk Legal Services Committee are pending.

(3.) I heard Mr. Sasith Panicker, Advocate on behalf of the petitioner and Mr. Hari Narayan. V.B., Advocate on behalf of the Bank.