MANU/DE/1740/2024

Equivalent/Neutral Citation: 2024:DHC :1859

IN THE HIGH COURT OF DELHI

W.P. (C) 6390/2023, CM Appls. 25177/2023 and 55883/2023
Decided On: 29.02.2024
Indus Sor Urja Private Limited Vs. Indian Bank
Hon'ble Judges/Coram:
Mini Pushkarna, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Rajiv Nayar, Sr. Adv., Karan Luthra, Devika Mohan,
Naman Gowda and Anjali Tiwari, Advocates
For Respondents/Defendant: Rajesh Kr. Gautam, Anant Gautam, Dinesh Sharma,
Shivanni Sagar and R.P. Daida, Advocates
JUDGMENT
Mini Pushkarna, J.
Introduction:
1 . The present petition has been filed seeking direction against the respondent to
forthwith release the original title documents of the property bearing No. D-17,
Pushpanjali Farms, Bijwasan, New Delhi, admeasuring 3.8125 acres ("subject
property"), to the petitioner in terms of the 'No Dues Certificate' dated 01st November,
2022. Since the respondent-bank has withheld the original title deeds of the aforesaid
mortgaged property, despite the entire loan having been repaid by the petitioner and
the respondent-bank itself having issued a 'No Dues Certificate' dated 01st November,
2022, the present petition has been filed.
Brief Facts:
2. Brief facts of the case are as follows:
2.1. The petitioner and respondent executed a Medium Term Loan Agreement dated
15th December, 2017, under which, the petitioner was granted a Term Loan of Rs.
23.19 Crores under Loan Account No. 6594178528.
2.2. The petitioner mortgaged the subject property as a security towards the Term
Loan. A charge was also registered by the Registrar of Companies on 15th December,
2017.
2.3. The respondent issued a provisional No Objection Certificate ("NOC") to the
petitioner stating that an amount of Rs. 16,13,96,925/- was outstanding against the
petitioner's Loan Account.
2.4. On the basis of the provisional NOC, a company by the name of Morgan Habitat
Private Limited entered into a Share Purchase Agreement dated 28th October, 2022 with
the original shareholders of the petitioner company, thereby acquiring the entire 100%
17-05-2025 (Page 1 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS
shareholding in the petitioner company.
2.5. Subsequently, the petitioner paid the entire outstanding amount along with further
accrued interest, totalling to Rs. 16,21,04,883/-. Thus, the respondent-bank issued a
'No Dues Certificate' dated 01st November, 2022, thereby confirming that no dues were
pending in the Loan Account of the petitioner. It was further confirmed by the
respondent- bank that it had no objection in releasing of charge on the subject property
and handing over the original title documents.
2.6. After receipt of the aforesaid 'No Dues Certificate', the petitioner filed the same
with the Registrar of Companies, which recorded the satisfaction of charge of the
respondent-bank.
2.7. On 01st November, 2022, the name of Morgan Habitat Private Limited and its
nominee shareholder, Mr. Ambar Maheshwari was recorded in the share certificates of
the petitioner-company.
2.8. Subsequently, the petitioner made various representations dated 16th March, 2023,
28th March, 2023 and 05th April, 2023 to the respondent seeking release of the original
title deeds of the subject property. However, there was no response by the respondent-
bank. Thus, being aggrieved of withholding of the original title deeds by the
respondent-bank, the petitioner has filed the present writ petition. Submissions on
behalf of the petitioner:
3. On behalf of the petitioner, it is contended as follows:
3.1. Once the entire loan stands repaid and the Loan Account is closed, the action of
withholding the security is without any authority of law.
3.2. There is no banker-customer relationship between the petitioner and the
respondent after the issuance of the 'No Dues Certificate' and the entire loan availed by
the petitioner stands discharged.
3.3. Section 171 of the Indian Contract Act, 1872 ("Contract Act") cannot be invoked
for outstanding loan obligations of the guarantor or other separate legal entities. The
said Section is applicable only qua the petitioner's dues towards the respondent.
3.4. Reliance by respondent on Clause 22 of the Loan Agreement dated 15th December,
2017 is misconceived as the same is applicable to only 'Borrower's accounts' and
'Borrower's liabilities to the Bank'. Petitioner is the only Borrower under the Loan
Agreement. Thus, contention of the respondent that respondent has outstanding dues
against Aman Hospitality Private Limited, a group concern of the petitioner, is totally
misplaced.
3.5. In support of his contentions the petitioner relies upon the following judgments:
I. Mr. Sunil Versus Union Bank of India, MANU/MH/1882/2022
II. M/s. Sree Vadivambigai Ginning Industries Pvt. Ltd. & Others Versus M/s.
Tamil Nadu Mercantile Bank Limited Through its Manager Chellam Talkies Road,
Pollachi, MANU/TN/0913/2015
Submissions on behalf of the respondent:
4. On behalf of the respondent, the following submissions have been raised:
17-05-2025 (Page 2 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS
4.1. The petitioner-company has sold 100% of its shareholding to M/s. Morgan Habitat
Private Limited under Share Purchase Agreement dated 28th October, 2022, in violation
of the provisions contained in Clause 11, 22 and 30 of the Medium Terms Loan
Agreement dated 15th December, 2017.
4.2. The petitioner-company under Clause 22 of the Loan Agreement has agreed that
the respondent-bank shall have right of general lien or similar right to which the bank
may be entitled by law, in addition to other provisions mentioned in the said Loan
Agreement.
4.3. Mr. Raj Singh Gahlot has stood as a guarantor to the credit facility granted to the
petitioner company, and in the Guarantor's Form dated 15th December, 2017, he has
admitted that he is a personal guarantor in various loan accounts of the group accounts
and companies, being the key promoter of Ambience Group. The shareholding pattern
of the petitioner company, M/s. Ambience Hotels and Resorts Private Limited and M/s.
Aman Hospitality Private Limited indicate that all the companies are closely related to
each other. The loan account of M/s. Aman Hospitality Private Limited with the
respondent-bank, has been declared as Non-Performing Asset ("NPA") Account, where
the outstanding is Rs. 39.82 Crore as on 31st March, 2023. The said NPA Account is
also under investigation by the Central Bureau of Investigation ("CBI"), which is closely
connected to the petitioner company.
4.4. The respondent-bank has received an E-mail dated 28th November, 2023 from the
Enforcement Directorate under the provisions of Prevention of Money Laundering Act,
2002 ("PMLA Act"), seeking information/details of the accounts of the petitioner.
4.5. Having regard to the cross shareholding of the group companies and by lifting the
corporate veil of the group companies, the respondent- bank is entitled to exercise its
right of general lien under Section 171 of the Contract Act, in respect of the amount,
which M/s. Aman Hospitality Private Limited, a group company of the petitioner, is
liable to pay to the respondent-bank.
4.6. In support of its submissions, the respondent has relied upon the judgment in the
case of Syndicate Bank Versus Vijay Kumar and Others, MANU/SC/0196/1992 : (1992)
2 SCC 330.
Analysis and Findings:
5. At the outset, it would be relevant to note the relevant clauses of the Medium Term
Loan Agreement dated 15th December, 2017 between the parties, which are extracted
as under:
"This Medium Term Loan Agreement executed at New Delhi on this 15th day of
December, 2017 between (i)Mr/Ms/Mx......................................-
....................................... Son/Daughter/Wife of residing
at.................................-.........................................................
(ii)Mr/Ms/Mx..................................Son/Daughter/Wife of............
.......................................-..................residing at.....................
.............................................................................................
................................................................................................ (iii)M/s
I n d u s Sor Urja Private Limited......................................carrying on
Business as.....................................................and having its Office at L-1,
Green Park Extension, N e w Delhi-
110016............................................................................................
17-05-2025 (Page 3 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS
 hereinafter called the 'Borrower(s)' which term shall mean and include
his/her/its successors, executors, administrators and assigns, and
Indian bank, a body corporate constituted under the Banking Companies
(Acquisition and Transfer of Undertakings) Act V of 1970, carrying on the
business of banking and having its Corporate Office at 254-260, Avvai
Shanmugam Salai, Royapettah, Chennai 600014 and Head Office at 66, Rajaji
Salai, Chennai 600 001 and among other placed a branch at South Extension
hereinafter called the 'Bank', which term shall mean and include its successors
and assigns:
xxx xxx xxx
1 1 . The Borrower(s) undertakes that the Bank shall be promptly
advised of all changes in their constitution or style. Further, where the
Borrower is a partnership firm and a change occurs in the constitution of the
firm by retirement, expulsion or death of any partner of the firm or otherwise
the outgoing partner or the legal representatives of the deceased partner will not
be discharged in respect of the liability of the firm incurred before its
reconstitution by any subsequent credits to the account or to the accounts of the
reconstituted firm or to any other separate account until the Bank finally agrees
to the reconstituted firm taking over the liability or until the liability is fully paid
off by all the partners of the old firm including the outgoing partners or the legal
representatives of the deceased partner.
Xxx xxx xxx
22. The Borrower further agrees that in addition to any general lien or
similar right to which Bank may be entitled by law, the Bank may at
any time and without notice to the Borrower combine or consolidate
all or any of the Borrower's accounts and set off or transfer any sum of
sums standing to the credit of any one or more of such accounts in or
towards satisfaction of any of Borrower's liabilities to the Bank on any
other accounts or in any other respect, whether such liabilities be
actual or contingent, primary or collateral and several or joint.
Xxx xxx xxx
3 0 . The Borrower hereby agrees and consents to the Bank for the
disclosure of all or any such
i. information and data relating to the borrowers
ii. information or data relating to his/her/their obligations in
any credit facility granted/to be granted by the bank and
availed by the borrower and
iii. default if any, committed by the borrower in discharge of
his/her/their obligations
as the Bank may deem appropriate and necessary, to disclose and furnish to
Credit Information Bureau (India) Ltd., and any other agency authorized by
Reserve Bank of India in this behalf.
Xxx xxx xxx"

17-05-2025 (Page 4 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS

 (Emphasis Supplied)
6 . Perusal of the aforesaid terms of the agreement between the parties show that the
petitioner herein has been defined as the 'Borrower' in the said Loan Agreement, which
term shall also include its successors, executors, administrators and assignees.
However, the term 'Borrower' has not been defined to include any group company or
sister concern.
7. Further, Clause 11 of the Loan Agreement stipulates that the bank shall be promptly
advised of all changes in their constitution or style. Thus, there is no provision for
taking any prior permission of the bank with regard to change in the constitution or
style of the petitioner company.
8 . Likewise, perusal of Clause 22 of the Loan Agreement between the parties displays
that the petitioner-company agreed that in addition to any general lien or similar right
to which bank may be entitled by law, the bank may also combine or consolidate all or
any of the Borrower's accounts for the purposes of satisfaction of any of the Borrower's
liabilities to the Bank or any other accounts. Thus, in terms of the aforesaid Clause, the
bank certainly has the right to take necessary steps for the purposes of recovering the
liabilities of the petitioner-company from any other account of the petitioner-company.
However, the said Clause cannot be interpreted to mean that the accounts of any group
company or sister concern could be consolidated or combined by the bank. The
aforesaid Clause certainly gives no authority to the bank to stake a general lien on the
accounts of any other sister concern or the group company of the petitioner.
9 . Similarly, Clause 30 of the aforesaid Loan Agreement enjoins upon the petitioner-
company to disclose all information and data relating to its obligations in any credit
facility granted by the bank and availed by the petitioner-company. The term used in
the said Clause is again 'Borrower', which certainly refers to the petitioner-company and
not to any other sister concern or the group company of the petitioner.
10. The position therefore, is clear that the respondent can exercise its general lien in
terms of Clause 22 of the Loan Agreement and Section 171 of the Contract Act to retain
a security for balance of accounts of the petitioner alone. The lien that the bank can
exercise in terms of Clause 22 of the Loan Agreement and Section 171 of the Contract
Act can be extended only qua the balance payable by the petitioner and cannot be
extended towards the dues of any other entity including any sister concern or group
company of the petitioner.
11. At this stage, it would be relevant to refer to the provisions of Section 171 of the
Contract Act, which reads as under:
"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."
1 2 . Reading of Section 171 of the Contract Act manifests that a statutory right is
conferred on the banks to retain, as a security for a general balance of account, any
goods bailed to the bank. Thus, in terms of Section 171 of the Contract Act, a bank
would have the authority to retain title deeds of a mortgaged property in order to
recover the balance amounts which are recoverable from a Borrower. Therefore, if the
17-05-2025 (Page 5 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS
petitioner-company had any other loan account with the respondent-bank qua which
certain balance amounts were due and payable, then the respondent-bank certainly had
the authority and right to retain the title documents of the mortgaged property in order
to recover its balance amounts recoverable from other loan account of the petitioner-
company.
13. However, such lien of the bank would not extend to the balance amount recoverable
from loan account of a sister concern or a group company, unless there is any contract
to the contrary. Section 171 of the Contract Act does not envisage any general lien on
the mortgaged goods or property of a Borrower for recovering amounts of a loan
account of a sister concern or a group company. Such a general lien would extend only
for the purpose of recovery of loans from a Borrower qua other loan accounts of the
Borrower itself that may exist in the bank.
14. Even Clause 22 of the Loan Agreement between the parties does not envisage any
lien for the purposes of recovery of amounts outstanding from the loan accounts of a
sister concern or a group company. Clause 22 of the Loan Agreement only envisages
combining or consolidating all or any of the Borrower's accounts. However, the same
does not refer to the accounts of a sister concern or a group company. The said Clause
of the Loan Agreement only entitles the respondent-bank to combine or consolidate any
of the Borrower's account. The said Clause cannot be invoked for the dues of a third
entity and is restricted to the petitioner's dues, i.e., the Borrower as defined in the
recital of the Loan Agreement.
1 5 . Admittedly, there are no outstanding dues of the petitioner- company. The
respondent-bank has already issued a No Dues Certificate dated 01st November, 2022
confirming that no dues are pending in the loan account of the petitioner. The No Dues
Certificate issued by the respondent-bank reads as under:
"xxx xxx xxx
NO DUES CERTIFICATE FOR TERM LOAN AC NO. 6594178528
With reference your mail dated 28.10.2022, we hereby confirm that there are
no dues pending in the captioned account upon full and final closure of Term
Loan having limit of Rs. 23.19 crore (Account No.6594178528) and receipt of
an amount of Rs. 16,21,04,883/- outstanding in the loan account as on
01.11.2022 being the actual closure of the account as per terms of sanction.
Further we confirm that we have no objection in release of charge on the
property at D 17, Pushpanjali Farms, Bijwasan, New Delhi mortgaged in the
subject loan account, along with charge on the escrow account of the project
maintained with our branch and in handing over of original title documents as
per schedule attached.
We also hereby issue our NOC for filling satisfaction of charge in ROC New
Delhi.
xxx xxx xxx"
16. Thus, it is apparent that the Term Loan, for which the subject property had been
mortgaged, has been closed by repayment of the entire outstanding sum. The
respondent-bank itself has issued a No Dues Certificate dated 01st November, 2022
confirming that the entire loan stands repaid and that it has no objection in release of

17-05-2025 (Page 6 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS

the charge over the subject property. Accordingly, there is no basis in law or in facts for
the respondent-bank to not handover the original title deeds of the mortgaged property
to the petitioner.
1 7 . Once the entire loan stands repaid and the loan account is closed, the security
given in the form of the subject property, has to be released. The respondent-bank
cannot continue to withhold the security. This action of the respondent-bank is without
any authority of law.
1 8 . Thus, High Court of Madras in the case of M/s. Sree Vadivambigai Ginning
Industries Pvt. Ltd. & Others Versus M/s. Tamil Nadu Mercantile Bank Limited Through
its Manager Chellam Talkies Road, Pollachi MANU/TN/0913/2015, has held as follows:
"xxx xxx xxx
22. In the instant case, the 'goods' means only the title deeds which
belong to the customer, viz., plaintiffs, were deposited with the
defendant Bank as security. Therefore, there will be no bailment in case of
title deeds. They have not been given to the Bank as a security for doing or
accomplishing certain things whereas they have been given as a security for the
loan that has been borrowed by the plaintiffs. In other words, if a Bank had
lent money to a particular customer for a specific purpose and specific
amount, the lien of Bank over the money and its customer does not
extend to amounts which have been borrowed by the customer on any
other name or different head. In the present case, as the defendant
Bank had already issued 'No Due Certificate' under Ex. A.1 for the
borrowals which had been repaid by the plaintiffs, the question of
extending the general lien is unacceptable.
23. The other important aspect that has to be seen is, the defendant Bank has
not made it clear whether the documents are retained for general lien or as
collateral security. Once again, if it is general lien, there has to be a
relationship of Banker and customer between the Bank and the person
depositing security, which should be one that has been received by the
Bank in its ordinary course of banking. It can be stated that once the
loan accounts are liquidated and on issuance of 'No Due Certificate',
the relationship of Banker and customer ceases. As a corollary, the
right of 'banker's lien' will come to an end. Therefore, in the absence
of any outstanding for the purpose which the documents were
deposited, the documents cannot be held as general lien. If it is to be
treated as collateral security, then, the intention and offer of the title
deeds for the said purpose have to be established. Though as per Exs.
A.12 and B.2, there was a correspondence with respect to the same, viz.,
collateral security, admittedly, it was not acted upon as the defendant Bank had
not lent the money sought for by the sister concern of the plaintiffs. In such
circumstances, the retention of the documents by the defendant Bank is not
legal.
xxx xxx xxx
2 6 . Considered from the above perspective, I have no hesitation to
conclude that by operation of Section 171 of the Contract Act, unless
there is an intention expressed contrary to the contract, the bank has
a general lien over the securities belonging to the debtor that come
17-05-2025 (Page 7 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS
 into its hands, and if the money is in its hands as the general account,
it has a right to set-off; but when any deposit has been made for a
special purpose, in a given circumstance, unless there is any contract
to the contrary, it cannot be implied that the Bank has a general lien
over the specified security deposit for a specified purpose.
Indisputably, there is no contract offering to take the title deeds
deposited by the plaintiffs as security to the loan availed by the sister
concern of the plaintiffs. Therefore, it is not open to the Bank to claim
general lien over the title deeds deposited by the plaintiffs. The
express contract was for discharge of the loan availed for plaintiffs
against which a 'No Due Certificate' has also been issued. In such
circumstances, the action of the defendant Bank in refusing to release
the title deeds is clearly illegal. Therefore, this point is answered in favour
of the plaintiffs.
xxx xxx xxx"
(Emphasis Supplied)
19. Similarly, High Court of Bombay in the case of Mr. Sunil Versus Union Bank of India
MANU/MH/1882/2022 has held as follows:
"xxx xxx xxx
11. Section 171 of the said Act expresses the "common law principle that if a
man has an article delivered to him, on the improvement of which he has to
bestow trouble and express, he has right to retain each until his demand is
paid". In its primary or legal sense, "lien" means "a right of common
law in a person to retain that which is rightfully and continuously in
their possession belonging to another until the present and accrued
claims (of the person in possession) are satisfied". Thus, from the
expression "bankers lien" it is cleared that Bank overall forms of
security that are deposited by the borrower in the ordinary course of
business, there has to be a relationship of banker and customer
between them. In Brandao v. Barnett, it was stated as under (All ER page
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".
It was held 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 the reduction of customer's debit balance. Lien
contemplated under section 171 of the said Act relates to goods bailed
to bank. Strictly, it is confined to securities and properties in the
custody of a banker. Section 171 of the said Act expresses 'goods
bailed to them'. The provision, therefore, indicates that the right to
retain goods bailed is based on contract and retaining the same in
absence of contract is not permissible. A Division Bench of this Court
in the case of Surendra s/o Laxman Nikose v. Chief Manager and
17-05-2025 (Page 8 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS
 Authorised Officer, State Bank of India, Nagpur,
MANU/MH/1328/2013 : (2013) 5 Mah LJ 283 held that Bank cannot
exercise its right of general lien over the Title Deeds deposited by the
petitioner after the entire loan amount was fully repaid by the
petitioner..........
xxx xxx xxx
18. In view of observation of the Hon'ble Apex Court in the case of Zonal
Manager, Central Bank of India v. Devi Ispat Limited (supra) relied upon by the
petitioner it was held that Central Bank of India being a nationalised bank was
amenable to writ jurisdiction. In the present case also respondent-Union Bank of
India is a nationalised bank and, therefore, is amenable to writ jurisdiction.
According to the Bank another loan account is yet to be cleared by the
petitioner and, therefore, it's security documents were not returned.
On the basis of the same the bank sought to exercise its right under
section 171 of the said Act and not remitted the said documents to the
respondent. Admittedly, said documents were kept with the bank as a
security towards the loan amount which is obtained by the petitioner
in his individual capacity for purchase of the flat. The said amount is
duly paid and, therefore, bank was not justified in retaining the said
documents by exercising right of lien on the said documents.
Admittedly, bank has right to recover the loan amount regarding the
loan advanced to the Company wherein the petitioner and other
Directors are borrowers and guarantors. Bank is at liberty to recover
the said loan amount and also at liberty to take the legal recourse but
merely because another loan account is there, wherein the petitioner
and other Directors are borrowers, bank has no right to retain the said
documents by exercising the right of lien.
xxx xxx xxx"
(Emphasis Supplied)
2 0 . Likewise, Division Bench of Punjab and Haryana High Court in the case of The
Punjab National Bank, Ltd. Versus Arura Mal Durga Das and Others
MANU/PH/0102/1960, has held that a banker has a right to have a charge on all the
monies of a borrower towards his liabilities, but the same must belong to one payer, in
the same capacity, i.e., as a borrower. It has been held that bank does not have a right
to combine the account of a third party to set off the liability against another.
Elucidating the concept of general lien of a bank, it has further been held that bank has
no right of lien on the personal account of a partner towards the liability of his firm.
However, a bank does have the right of lien to hold monies of one firm with partners to
another firm, with the same partners. Thus, it has been held as follows:
"xxx xxx xxx
The rule of English law that the Bank has a lien or more appropriately, a right to
set-off against all moneys of his customers in his hands has been accepted as
the rule in India. According to this rule when moneys are held by the
Bank in one account and the depositor owes the Bank on another
account, the Banker by virtue of his lien has a charge on all moneys of
the depositor in his hands and is at liberty to transfer the moneys to
whatever account, the banker may like with a view to set off or
17-05-2025 (Page 9 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS
 liquidate the debts,-vide Llyods Bank Ltd. v. Administrator-General of Burma
[ MANU/RA/0212/1933 : A.I.R. 1934 Rangoon 66]and Devendrakumar
Lalchandji v. Gulabsingh Nekhesingh [MANU/NA/0161/1945 : A.I.R. 1946 Nag.
114].
In order to create Banker's lien on several accounts it is necessary
that they must belong to the payer in one and in the same capacity.
Where the person has two accounts, one a trustee account and
another private account at a Bank, deposits in the two accounts
cannot be set off, the one against the other [see Lloyds Bank Ltd. v.
Administrator General of Burma [ MANU/RA/0212/1933 : A.I.R. 1934 Rangoon
66] ].
Bankers have a right to combine one or more accounts of the same
customer. But it cannot combine the account belonging to another or
to himself alone with another account which is the joint account with
another and third person,-vide Radha Raman Choudhry and another v. Chota
Nagpur Banking Association Ltd [ MANU/BH/0080/1944 : A.I.R. 1944 Pat. 368]
and Punjab National Bank Ltd. v. Satyapal Virmani [ MANU/PH/0044/1956 :
A.I.R. 1956 Pun. 118].
Similarly, the Banks have no lien on the deposit of a partner, on his
separate account, for a balance due to the Bank from the firm.
Therefore, the banker is entitled to combine all accounts kept in the
same right by the customer. It does not matter whether the accounts
are current or deposit or whether they are in the same or different
branches [Garnett v. MKewan [ [(1872, L.R. 8 Ex 10.]] ]. It is of essence to
the validity of a banker's lien, that there should be a mutuality of,
claim between the Bank and the depositor. In order that it should be
permissible to set off one demand against another both must mutually
exist between the same parties..........
xxx xxx xxx"
(Emphasis Supplied)
2 1 . The fact that the guarantor in the loan of the petitioner-company, is also a
guarantor qua loans of other companies in the group concern, would not confer any
authority on the respondent-bank to claim lien on the title documents of the subject
property for securing the loan accounts of the other companies in the group concern.
Thus, High Court of Karnataka in the case of Vijaya Bank, Rep. by its Deputy General
Manager and Another Versus Naveen Merchanised Construction (P) Ltd. and Others
MANU/KA/0749/2003 has held as follows:
"xxx xxx xxx
13. The decision relied upon by the learned Counsel appearing for the appellant-
Bank in Syndicate Bank v. Vijay Kumar (MANU/SC/0196/1992 : (1992) 2 SCC
330 : AIR 1992 SC 1066) would not be helpful to him in the present case as in
the said case the letters were executed in favour of the Bank specifically to
enable the Bank to retain the securities with the Bank so long as any amount on
any account is due to the Bank from the borrower. In the present case, it is
not the case of the appellant- Bank that the petitioners have
subsequently borrowed any amount and that the security is withheld
17-05-2025 (Page 10 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS
 for any amount due from the petitioners and wherefore in the absence
of any specific authorisation or lien conferred upon the appellant-Bank
to retain the security towards the discharge of any debt in respect of
other Companies, the Bank is not at all justified in retaining the
security as Section 171 of the Contract Act would only enable the
Bank to retain the security for repayment of debt borrowed by the
same person. In the present case as no amount is due to be paid by
the petitioners, the contention that the Director of the first petitioner-
Company as also the guarantor for the transaction is also a Director in
MFEL against which recovery proceeding has been initiated in the Debt
Recovery Tribunal. That would not be a justifiable ground to withhold
securities in the absence of any express clause in the Contract entered
into by the petitioners and the Bank.
xxx xxx xxx"
(Emphasis Supplied)
22. Holding that the bank had no authority to hold documents of a mortgaged property,
to secure the loan transaction pertaining to a company in which the borrower had stood
as a guarantor, Division Bench of Madras High Court in its judgment in the case of State
Bank of India Versus Jayanthi and Others MANU/TN/2511/2011, held as follows:
"xxx xxx xxx
12. As noticed above, Section 171 of the Act states that the bankers like the
Appellant-Bank, in the absence of a contract to the contrary, retain as security
for a general balance account, any goods bailed to them. Therefore, what is
required to be seen in the instant case is whether there is any contract to the
contrary, which prevents the Bank from exercising their general lien and as to
whether any goods have been bailed to them. It cannot be disputed that the
property in question was not bailed to the Appellant-Bank by the
deceased borrower at any point of time. Further, it is an undisputed
fact that the property in question was offered by (late) N.P.S.
Mahendran to cover his liability in respect of the loans, which he had
borrowed in the accounts of M/s. Sanjay Bala Tea Plantation and M/s.
Aarthi Bala Tea Plantation and his self-acquired properties were
mortgaged to secure this specific loan transaction. No document has
been placed before us to show that the borrower had given any
authorisation to the Bank to hold the documents of the mortgaged
property, given to secure the loan transaction for M/s. Sanjay Bala Tea
Plantation and M/s. Aarti Bala Tea Plantation, for the purpose of any
other loan availed in any other branch by M/s. Somerset Tea
Plantation in which (late) N.P.S. Mahendran, stood as a Guarantor.
Thus, the issue boils down to the question as to whether there is any
contract to the contrary, which prevents the Appellant-Bank from
exercising its general lien under Section 171 of the Act.
xxx xxx xxx
14. In the instant case, the borrower, (late) N.P.S. Mahendran, has
admittedly deposited the Title Deeds of the property to secure a loan
transaction availed in respect of two Plantation Companies. This fact
has not disputed by the Appellant-Bank. Therefore, we have no
17-05-2025 (Page 11 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS
 hesitation to hold that this contract/mortgage, had been created by
the deceased borrower for a specific purpose and for a specific loan
and the contract was self-contained and the terms and conditions
were binding upon both the borrower as well as the Bank. In other
words, the deposit of Title Deeds by which the mortgage was created
by the deceased borrower was for a specific purpose to cover an
advance for a specific loan. When such is the situation, the borrower
having deposited the documents in order to secure a specific
transaction, the Bank cannot contend that they could hold the
documents for a balance due in a different loan account where the
said N.P.S. Mahendran is not a borrower. Further, the language of
Section 171 of the Act, is explicit to the fact that the bankers are
entitled to retain as a security for a 'general balance account".
Admittedly, it is not the case of the Appellant-Bank that the amount,
which is now said to be due on account of the borrowings of M/s.
Somerset Tea Plantation, is a general balance account of the deceased
borrower N.P.S. Mahendran.
15. In the case of Syndicate Bank v. Vijaya Kumar, referred supra and relied on
by the learned Senior Counsel for the Appellant-Bank, it is to be noted that the
borrower therein issued a letter in favour of the Bank stating that the Bank is at
liberty to adjust from the Fixed Deposit receipts without any reference to the
loan and he agreed that the Fixed Deposit receipts shall remain in the Bank so
long as any amount on any account is due to the Bank from them either singly
or jointly or with others. Thus, the Hon'ble Supreme Court, while interpreting
such a letter covering the transaction executed by the borrower therein,
rendered a finding that the Bank is entitled to a general lien over the Fixed
Deposit receipts given by the borrower therein.
16. As noticed above, the facts of the present case are couched differently.
There was a specific contract/agreement between the deceased borrower and
the Bank, by which the borrower offered the property in question to secure only
a particular transaction. Therefore, this agreement/mortgage has to be
construed as a "Contract to the Contrary" and therefore, we have no hesitation
to hold that the Bank cannot claim these documents by invoking the power of
general lien under Section 171 of the Indian Contract Act, 1872.
xxx xxx xxx"
(Emphasis Supplied)
23. Reliance by the respondent on the case of Syndicate Bank Versus Vijay Kumar and
Others MANU/SC/0196/1992 : (1992) 2 SCC 330 is totally misplaced. The respondent
has relied upon paragraphs 6, 7 and 8 of the aforesaid judgment, which read as under:
"xxx xxx xxx
6 . 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
17-05-2025 (Page 12 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS
 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.
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 September 17, 1980 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.
8. The High Court, however, found that the two FDRs were given only by way
of securities for the Bank guarantee and when once the guarantee is
discharged, the amounts covered by the said two FDRs would belong to the
Judgment-debtor since the charge is limited to the amount of the Bank
guarantee. The High Court, in this context relied on the words "Lien to BG
11/80" which are found on the back of each FDR and according to the High
Court in view of this endorsement, the Bank has no right to hold the security in
their own favour after the Bank guarantee has been released and they are
bound to return it to the customer namely the Judgment-debtor when he makes
a demand on the Bank. The High Court also observed that the terms of the
contract namely furnishing FDRs as security for the bank guarantee are
inconsistent with the general lien that the Bank claims and the Bank can claim
only a particular lien for the bank guarantee. It also observed that since the
Bank guarantee has been discharged, the Bank has no right to hold the security
for something more than what was agreed upon. We are unable to agree with
this reasoning. As already noticed, the recital in the covering letters as
extracted above clearly established that a general lien was created in favour of
the Bank on the two FDRs. Merely because the two FDRs were also furnished as
security for the issuance of the bank guarantee, the general lien thus created
cannot come to an end when the Bank guarantee is discharged. The words "Lien
to BG 11/80" do not make any difference.
xxx xxx xxx"
24. The aforesaid judgment in the case of Syndicate Bank (supra) has no application to
the present case. In the said case, a firm by the name of M/s. Jullundur Body Builders,
to secure a bank guarantee issued by Syndicate Bank, had furnished two Fixed Deposit
Receipts ("FDRs") as security with the bank. Subsequently, the bank guarantee was
discharged and the firm sought release of the FDRs. However, Syndicate Bank sought to
retain the two FDRs by exercising its general lien for an overdraft facility, also obtained
by the same firm, i.e., M/s. Jullundur Body Builders. In these facts, wherein the credit
facilities were enjoyed by the same borrower, the Supreme Court held the general lien
of the bank to be applicable.
25. However, facts of the present case are totally different, as admittedly the petitioner-
company has already discharged its liability. Undisputedly, the general lien can be
extended by the respondent-bank only for the dues of the Borrower, i.e., the petitioner-

17-05-2025 (Page 13 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS

company which has furnished the security, and not for the dues of any other entity.
26. The facts of the present case show that the respondent had issued a provisional
NOC dated 12th October, 2022 indicating the amounts to be paid for closure of the loan
and release of the title documents. On the basis of the said provisional NOC, in order to
raise capital to repay the loan, the petitioner entered into a Share Purchase Agreement
dated 28th October, 2022 for transfer of its 100% shareholding. Thus, the petitioner
repaid the entire outstanding loan amount and the respondent-bank issued a No Dues
Certificate dated 01st November, 2022, giving its no objection to release the original
title documents. The shares were transferred on 01st November, 2022 itself by
recording the name of the new shareholder on the Share Certificates. Thus, it cannot be
said that there was any violation of Clause 11 of the Loan Agreement between the
parties which stipulated that 'The Borrower(s) undertakes that the Bank shall be
promptly advised of all changes in their constitution or style'.
27. A bare perusal of Clause 11 of the Loan Agreement shows that no approval as such
is required from the respondent-bank for any change in constitution. There is no
requirement of even prior intimation to the respondent-bank, which is apparent from
the words 'promptly advised', as used in Clause 11. Admittedly, there are no
outstanding dues of the petitioner and on issuance of the No Dues Certificate, the
banker- customer relationship between the petitioner and respondent ceased to exist.
On that account, the situation that emerges is that Clause 11 of the Loan Agreement has
no application.
28. Further, the E-mail dated 28th October, 2023 issued by the Enforcement Directorate
does not confer any right upon the respondent- bank to withhold the title documents.
Even otherwise, said E-mail issued by the Enforcement Directorate is more than one
year after the issuance of 'No Dues Certificate' by the respondent-bank. The said E-mail
only seeks information regarding the two bank accounts of the petitioner with the
respondent-bank. The E-mail does not refer to the title documents of the subject
property or makes any request to the respondent-bank to withhold the same.
Conclusion:
29. Accordingly, it is held that neither Clause 22 of the Loan Agreement nor Section
171 of the Contract Act confers any entitlement upon the respondent-bank to withhold
the title documents of the mortgaged property, once there are no outstanding dues of
the petitioner towards the respondent-bank. There is no basis for the respondent-bank
to not handover the original title documents of the subject property in view of the fact
that entire outstanding sum towards the Term Loan stands paid. There is no other
amount pending against the petitioner qua any other Loan Account of the petitioner with
the respondent-bank.
30. Consequently, the respondent-bank is directed forthwith to release the original title
documents of the subject property to the petitioner in terms of the 'No Dues Certificate'
dated 01st November, 2022.
31. The present petition is allowed in the aforesaid terms.
© Manupatra Information Solutions Pvt. Ltd.

17-05-2025 (Page 14 of 14) www.manupatra.com VIT UNIVERSITY CHENNAI CAMPUS