RAJ RANI BAHL Vs. UNION BANK OF INDIA

JUDGEMENT

(1.) Brief facts giving rise to this appeal are that M/s. Sympathy Chit Finance Ltd. had Account No.29146 with the Punjabi Bagh Branch of the Union Bank of India, opposite party for short. The Chit Finance Company had three Directors, namely, Mrs. Raj Rani Bahl, Mr. Manoj Bahl and Mrs. Shammi Bahl. Mrs. Raj Rani Bahl also had a personal account in the same branch of the Bank, namely Account No.20817. The Chit Finance Company issued a cheque for Rs.25,000/- in favour of one Rakesh Kumar dated 23.5.1991. The cheque was drawn by Smt. Raj Rani Bahl as Director of the said Company. The payee deposited the cheque with SBI and it was sent for clearance and was returned with the remarks "insufficient Funds". The cheque appears to have been presented again through New Bank of India, when it was cleared, the version of the Union Bank of India is that a personal assurance had been given by Smt. Raj Rani Bahl that the balance amount would be deposited and that the cheque may be cleared and accordingly payment was made. As Raj Rani failed to keep her word, the Union Bank of India debited the entire balance standing to the credit of the personal account of Raj Rani Bahl, namely Rs.23,204.02 and called upon the complainant to provide the balance amount of Rs.1,795.08 by its letter dated August 24,1992. The complainant took exception to the aforesaid debit made in her personal account and also for the demand raised by the Bank. The opposite party contested the complaint. District Forum-II dismissed the complaint on the ground : (i) that the Directors of the Sympathy Chit Finance Private Ltd. were none other than Mrs. Raj Rani Bahl, her son Manoj Bahl and daughter-in-law Shammi Bahl, (ii) the aforesaid private limited Company stood benefited by the payment of the cheque as they were saved from prosecution u/sec.138 of the Negotiable Instruments Act, (iii) that the complainant had filed the complaint only when the Bank asked her to deposit the additional amount after lapse of one year.

(2.) After hearing Mr. Khanna, Advocate for the respondent, and going through the record, we find that none of the grounds mentioned by the District Forum bears close scrutiny. A private limited Company is a juristic person as distinguished from its Directors. The crucial question arising for consideration in this appeal is whether the Bank had a lien or a right of set off against one of the Directors of the Company to adjust the amount standing to the credit of the Director in her personal account.

(3.) Bankers lien is dealt with u/sec.171 of the Contract Act which reads as under : "171. The lien of bankers factors Wharfingers, Attorneys and Policy Brokers-Bankers factors, wharfingers. Attor- neys 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". It will be seen that bankers lien extends to goods bailed with the Bank and money deposited with the Bank does not amount to goods bailed with Bank as the particular currency notes are not retained. On the contrary, such money is utilised by the Bank and the Bank is liable to refund the amount when the depositor wants it. Sec.171 only permits the Bank to retain the goods bailed as security as distinguished from appropriating such goods. There is a well understood distinction between bankers lien and the Bank's right to set off. The right to set off is also known as the right of combination of account. A Bank has a right to set off debt owing to a customer against the debit due from him. The balance standing to the credit of the complainant being not goods bailed, no lien could be claimed by the Bank under Sec.171. The question for decision is whether the Bank had a right to set off against the complainant with regard to an account which was held in a different capacity. In S. N. Gupta's "banking Law in Theory and Practice" 2nd Edition, it has been stated at page 466 as follows : "money standing to the credit of an account maintained by a customer in a fiduciary capacity of which the banker has or deemed to have knowledge cannot be set off against a debt due from the customer in his personal capacity. "