BANK OF INDIA vs Anil Raveendran Sankaram

THIS revision is directed against the order of the State Commission dated 24.07.2013 in Appeal No. 916/2014 whereby the State Commission while agreeing with order of the District Forum on merits, took the view that order to pay compensation and penal cost over and above the refund of bank guarantee with 12% interest was not justified. Thus, the State Commission directed the petitioner Bank to refund the bank guarantee amount of Rs.6000/ - to the respondent complainant with 12% interest thereon

BRIEFLY stated the facts relevant for the disposal of the revision petition are that the respondent filed a consumer complaint in District Forum Alappuzha, Goa, alleging that he is a contractor. The complainant deposited Rs.6000/ - on 19.05.2001 with the opposite party bank as a security for obtaining bank guarantee for Rs.6000/ - for submitting the same with M/s Cochin Port Trust, Ernakulam. The bank guarantee expired on 31.12.2006 without there being any claim to invoke the bank guarantee by the Cochin Port Trust. The respondent/complainant, after the discharge of bank guarantee approached the petitioner bank alongwith original bank guarantee for refund of deposit of Rs.6000/ - with interest accrued thereon. The petitioner opposite party, however, failed to pay that amount which led to filing of the consumer complaint.

THE petitioner opposite party, in its written statement admitted that the complainant had deposited Rs.6000/ - in the petitioner bank against which deposit he had obtained bank guarantee dated 19.05.2001 in favour of M/s Cochin Port Trust, Ernakulam. It is also admitted that the bank guarantee expired on 31.12.2006 and that the complainant after collecting the original bank guarantee from Cochin Port Trust, approached the petitioner Bank for payment of the deposited amount with interest. The petitioner, however, pleaded that the payment was declined because the complainant had availed cash credit limit of Rs.6.00 lakhs from the petitioner bank on 14.05.1997 and he had defaulted in remitting payments due against the cash credit account. The bank had issued a notice under Section 3 of SARFAESI Act on 31.01.2005 calling upon the complainant to pay the outstanding loan amount of Rs.15,12,502.50. Thus, it was pleaded that petitioner opposite party had exercised general lien over the aforesaid deposit of Rs.6000/ - in the name of the complainant. Besides, the said pleas on merits, it was pleaded that the consumer complaint was not maintainable as it was hopelessly barred by limitation and also because of bar under section 34 of SARFAESI Act, 2002. Learned District Forum vide its order dated 22.09.2012 allowed the complaint and directed the petitioner to pay to the complainant the deposited amount of Rs.6000/ - with 12% interest from the date of deposit till the date of repayment besides Rs.2500/ - as compensation for mental agony, pain and harassment etc. The District Forum also imposed punitive cost of Rs.1000/ - on the petitioner and litigation cost of Rs.2000/ -.

BEING aggrieved of the order of the District Forum, the petitioner Bank approached the State Commission in appeal and the State Commission disposed of the appeal as noted above.

LEARNED Vipin Jai, Advocate for the petitioner has contended that the impugned order of the foras below are not sustainable firstly, for the reason that the foras below have failed to decide the issue of limitation and maintainability of the consumer complaint in view of Section 24 (A) of the Consumer Protection Act and Section 34 of SARFAESI Act. On merits also, it is contended that the District Forum as well as the State Commission have totally ignored Section 171 of the Indian Contract Act, 1872 which deals with general lien of bankers, factors, wharfingers, attorneys and policy brokers.

MS . Preetha Anil Ravindran, Advocate for the respondent on the contrary has argued in support of the impugned order and contended that foras below have rightly appreciated the facts. It is further submitted that the revisional jurisdiction of National Commission is limited to the extent of jurisdictional error and material irregularity. Thus, ordinarily, the revisional court is not expected to reappreciate the facts particularly when both the foras below have returned the concurrent findings

WE have considered the rival contentions and perused the record.

THE first question which needs consideration is whether or not the petitioner bank was justified in declining to pay the subject deposit amount to the complainant on the pretext of misusing the banker''s lien over the deposit under section 171 of the Indian Contract Act?

IN order to find answer to the above question, it is necessary to have a look on the legal notice dated 20.10.2009 issued by the complainant to the petitioner Bank and the response of the bank dated 22.10.2009. Copies of the legal notice and the reply of the bank are on the record. On perusal of the aforesaid documents, it is clear that vide notice dated 20.10.2009, the complainant reminded the bank about his deposit of Rs.6000/ - for obtaining bank guarantee on 19.05.2001 and failure of the bank to pay the amount of deposit with interest despite of the fact that the bank guarantee had expired without there being any claim to invoke the bank guarantee on the part of Cochin Port Trust. On perusal of the reply of the bank dated 22.10.2009, we find that the petitioner Bank had made it clear that the respondent complainant was a defaulter to the extent of Rs.15,12,502/ - against his cash credit account for which legal action had been initiated and it was made clear that in view of the banker''s policy the bank was entitled to adjust the amount of deposit in interest against cash credit / loan account of the complainant. Thus, it is clear that the petitioner bank declined to pay the amount of deposit with interest on the plea of having exercised lien over the deposit. Section 171 of the Indian Contract Act deals with such a situation, which reads 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."

ON reading of the above it is clear that unless a contract to the contrary is established by the claimant, the banker''s right to lien will have to be accepted. In the matter of Syndicate Bank Vs. Vijay Kumar and Others, 1992 2 SCC 330, the Hon''ble Supreme Court had an occasion to analyse the above provision. In the said judgment, Hon''ble Supreme Court observed as under: "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: "Extent of lien - 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 busines. 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 banker in reduction of the customer''s debit balance unless otherwise earmarked.

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 lock 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, it was stated as under: (AII ER p.722 -H)

"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."

THE foras below have passed the impugned orders ignoring Section 171 of the Indian Contract Act. Therefore, the impugned order cannot be sustained more particularly in view of law laid down in the matter of Syndicate Bank ( Supra).

IN view of the discussion above, the orders of the foras below cannot be sustained. Revision petition is, therefore, allowed; orders of foras below are set aside and complaint is dismissed.