BRANCH MANAGER, CANARA BANK vs P.SUBBIAN

THE Branch Manager, Canara Bank, Authoor against whom an award has been passed by the District Forum is the appellant. THE complainant P. Subbian (respondent herein) pledged his jewels of 106 grams with the opposite party for the loan received by him. He repaid the principal loan amount with interest. But the opposite party did not return the jewels pledged. On 15.2.95 there was an advertisement in a newspaper for auction of the jewels in respect of another agricultural loan received by the complainant from the opposite party on account of which according to the complainant he suffered mental agony and shock. On these grounds the complaint has been filed for a direction to the opposite party for return of the jewels and also to pay damages of Rs. 10,000/-.

THE opposite party in its counter contended that the complainant borrowed two agricultural loans from the Bank all repayable in instalments. THE complainant did not repay these loan amounts. So the Bank, exercising general lien, retained the jewels of the complainant as security for the said agricultural loans and sold the jewels in public auction on 1.3.95 for Rs. 36,500/- and the amount was credited to the agricultural loan account of the complainant. The District Forum came to the conclusion that the act of the opposite party in selling the jewels in respect of a loan different from the loan for which the jewels were pledged after 5 years is deficiency in service on the part of the opposite party. On this finding the District Forum directed the opposite party to return the jewels and to pay damages of Rs. 1,000/- with costs of Rs. 500/-. Against this order the appeal has been filed.

It is contended that the opposite party was perfectly within its right to retain the jewels after the loan for which the jewels were pledged as security for other loans under the Banker''s right of lien. The opposite party seems to have contended before the District Forum that they have the right to retain and sell the jewels under Section 171 of the Indian Contract Act. This section generally deals with bailment. The relevant section is Section 174 of the Indian Contract Act. It is the common case that it is a case of pledge. What is a pledge, is defined under Section 172 which reads as follows: "172. The bailment of goods as security for payment of a debt or performance of a promise is called "pledge". The bailor is in this case called the "Pawnor". The bailee is called the "Pawnee". Under Section 174, "Pawnee''s" right has been given in the following terms: "174. The Panwnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debt or promise for which they are pledged; but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the Pawnee".

Now, Ex. B-2 is the "Request for loan on the security of Gold Jewellery" which contains the terms of pledge. One of the terms therein is that, "As security for repayment of the outstanding balance of the loan which you may grant to me/us, I/We hereby pledge with you Gold Jewellery as mentioned in the Schedule herein below. You are entitled to hold this security as security for any other liability / ies pay able by me / us in respect of any advance/financial assistance granted/to be granted hereafter and owing and that may be owing thereafter to the Bank at any office of the Bank on any account whatsoever whether solely or jointly with others and whether as Principal debtor or surety."

This would clearly give the Bank full right to have the jewels as security for any other loan / s whether it was received before the pledge or after the pledge. Considering this term in Ex. B-2 alongwith Section 174 of the Indian Contract Act, the opposite party would appear to have been perfectly within their rights in retaining the jewels after the loan for which they were pledged was discharged, as security for other loans and after a considerable period of time selling the jewels to the credit of one of the loans. It may be relevant to note here that the Supreme Court in its judgment in Syndicate Bank v. Vijaykumar & Ors., AIR 1992 SC Page 1066=I (1992) BC 324 (SC), after referring to some passages in some books like Halsbury''s Laws of England, has stated as follows: "7. Applying these principles to the case before us we are of the view that undoubtedly the appellant-Bank has a lien over the two FDRs. In any event the two letters executed by the judgment-debtor on 17.9.80 created a general lien in favour of the appellant-Bank over the two FDRs. Even otherwise having regard to the mercantile custom as judicially recognised the Banker has such a general lien over all forms of deposits or securities made by or on behalf of the customer in the ordinary course of Banking business. The recital in the two letters clearly creates a general lien without giving any room whatsoever for any controversy."

(Underlining ours)

CONSIDERING all these, we are of the view that there was nothing wrong in the Bank retaining the jewels as security for other loans and selling it and crediting the amount realised in respect of one of such loans. Consequently therefore the order of the District Forum to the contrary is not correct. In the result, therefore the appeal is allowed; the order of the District Forum is set aside, and the complaint is dismissed. However, there will be no orders as to costs. Appeal allowed.