S 171 Contract Act – Bank Can’t Retain Title Documents after Repayment of Loan Citing Pendency of another Loan
Case: Mr. Sunil v Union Bank of India
Coram: Justice AS Chandurkar and Urmila Joshi Phalke
Case No.: Writ Petition No.32 Of 2022
Court Observation: “…the material on record shows that the petitioner has cleared the entire dues in respect of loan which was obtained by him in his individual capacity to purchase the flat. The said loan transaction came to an end, therefore, the relationship of the banker and customer between the petitioner and the respondent in respect of the concerned loan account came to an end as he has repaid the amount. The relationship of banker and customer could not have been continued when the petitioner has repaid the amount on 31/05/2021 as the entire loan account is satisfied. The said transaction has been completed and there is no further relationship between the petitioner and the Bank as a banker and customer. In such circumstances, the contention of the respondent-Bank that it was exercising the right of general lien under Section 171 of the said Act is not sustainable”
“Act of the bank is not justifiable. Hence, for the reasons recorded we have no hesitation to hold that the respondent-Bank has no right of general lien over the Title Deeds deposited by the petitioner after the entire loan amount was fully satisfied by the petitioner,”
“In such circumstances, the contention of the respondent-Bank that it was exercising the right of general lien under Section 171 of the said Act is not sustainable,”
“Admittedly, there was a relationship between the petitioner and the respondent as banker and customer. It is further clear from the pleadings that the Title Deed of the property in question was handed over to the respondent-Bank as a security. Admittedly, said loan amount is repaid by the petitioner. Though the respondent-Bank has submitted that there is another loan account against the petitioner and Bank has already moved an application to the Debt Recovery Tribunal for obtaining necessary orders, Bank is at liberty to move against the petitioner and other Directors to recover the said loan amount. Admittedly, said security was given against the loan amount which was already satisfied by the petitioner. In such a situation, it is not open for the respondent- Bank to continue to exercise its general lien for the security deposited with it especially when the entire amount was repaid. Such a general lien is not being exercised for a general balance of account as required under Section 171 of the said Act. Moreover, it would not be open for the Bank to exercise its right of general lien for the securities on the pretext of the banker and customer relationship. It cannot exercise such general lien under Section 171 of the said Act thus, there is no justification on the part of the respondent-Bank to retain the said documents by relying upon the provisions of Section 171 of the said Act”
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Keywords
S 171 Contract Act, Repayment of Loan
