CANARA BANK vs S. BAVASHA

THE Opposite Party appeals.

THE facts relevant for disposing of this appeal are as follows:THE Complainant raised a loan from the Opposite Party by pledging his gold jewel on 8.6.92. On 27.11.92 he repaid the principal amount along with interest. He delivered the jewel loan card to the Opposite Party and demanded his gold jewel. THE opposite party collected from him the jewel loan card and the receipt for payment of the loan amount for the purpose of return of jewel but later declined to return the jewel. When the complainant issued a lawyer''s notice for the return of the jewel he was replied that it can be returned only when the amount due by the two partnership firms in which the complainant is a member is cleared. It was contended by the Opposite Party Bank that it had a general lien on the gold jewel of the complainant. Aggrieved by this course of action of the bank the complainant approached the District Forum for an order to pay a compensation of Rs. 5,000/- for the mental agony and humiliation suffered, to pay interest on Rs. 20,000/- from 1.12.92 till the date of realisation and to return the gold jewel to him. The District Forum after hearing both the parties allowed the complaint partly by order dated 11.3.94 directing the opposite party to pay a sum of Rs. 5,000/- as compensation for the mental agony. There is no appeal by the complainant. The appeal is preferred only by the Opposite Party.

The Opposite Party is aggrieved by the finding given by the District Forum that the bank has no general lien on the jewel pledged by the complainant. We shall examine this point.

THE loan raised by the complainant is an agricultural loan. It is for a specific purpose and he has pledged on that occasion the jewel belonging to a woman, presumably his wife. He has entirely repaid the amount of the loan. THE normal course for the bank is to return the jewel. THE bank refused to do that on the ground that he has got a general lien on the pledged jewel. He relies for that purpose on a clause of the loan application which is abstracted below:- "You are entitled to hold this security as security for any other liability/ies payable by me/us in respect of any advance/financial assistance granted/ to be granted hereafter and owing and that may be owing hereafter to the Bank at any office of the Bank of any account what soever whether solely or jointly with others and whether as principal debtor or surety." It is true that if this clause is to be given effect to, the bank would be entitled to withhold the jewel. THE question is whether this clause can be upheld. It finds a place on a printed application for loan on pledge of jewel. THE application is in English and in Hindi, both languages generally not known by the people in Karaikal where the loan was granted. Even admitting that the person who borrowed the money is conversant with English he cannot understand the highly technical language in which the clause is couched. Even otherwise we find that this clause is exorbitant. No reasonable person will give free consent for such a clause. Taking an article pledged for a specific loan as a security for all liabilities past and future is an extraordinary course. Had the complainant known the implication of the clause he would have gone simply to some other bank where he has no other debt for his agricultural loan on pledge. THE understanding of the clause will scare away all prospective borrowers of money and affect adversely the business of the bank. Even in its own interest, the bank ought not have brought in such a clause. On the other side, the Agricultural jewel loan carries interest at 10% p.a. whereas the other loans carry interest varying from 13 to 18%. It is because there is a pledge that the bank gives a lower rate of interest and when the bank levies a higher rate of interest in respect of other loans it is unjust to take the pledged article for those loans whose high rate of interest is justified only by the risk involved. Reducing the risk and at the same time levying a higher rate of interest would amount to enrichment without any cause by the bank. The clause cannot, therefore, be given effect and has to be considered as non-existent. We, therefore find that the District Forum rightly declined to give effect to this clause.

WE have also to point out that the bank acted in a high handed manner in collecting the loan card and the receipt and keeping them even while they were not prepared to return the jewel.- The learned Counsel for the bank contended that as per Section 171 of the Indian Contract Act the bank has a right to retain, as a security for a general balance of account any goods in their possession. That Section reads as follows:- "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 right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect."

We are of the opinion that this Section would not apply to the facts of this case. There is here no general balance of account. The complainant has got only one loan from the bank in his name, namely, the agricultural jewel loan referred to above for which he pledged his jewel. The two other loans are ordinary loans by a partnership firm of which the complainant is a member. Therefore, even though the complainant was some liabilities in respect of those loans; his liability has to be determined, computed, should have become due and intimated to the complainant; those loans cannot be brought straight a way in the balance of account of the complainant. In fact it is stated that the bank has filed a suit for the recovery of those loans from the partnership firm. A decree enforceable against the complainant should be obtained before bringing the debts in the general balance of account for which the privilege of Section 171 could be claimed, if it is otherwise available. Secondly Section 171 will not apply to pledges. The general lien in favour of bankers, as well as the particular lien by any bailee, is for the remuneration for the service rendered. There is no room for such remuneration in the case of pledge in respect of which general interest is provided. In fact pledge is distinguished from bail in Section 172, and the bailee is then called as "pawnee ". Section 174 proceeds as follows:- "The pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise other than the debtor 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. "

In the present case, the loans by the partnership firm are not subsequent advances made by the pawnee on the pledged article. Therefore, the bank cannot retain the goods pledged for the agricultural loan for the other debts.

IN the result, the appeal is dismissed. Parties residing at Karaikal, far away from Pondicherry, the costs to be paid by the Appellant to the Respondent is fixed at Rs. 1,000/- (Rupees one thousand only). Appeal dismissed.