Discuss the special Features of a Banker’s Right of General Lien
Posted by Ripon Abu Hasnat on Sunday, December 6, 2015 | 0 comments
i) The banker possesses the right of general lien on all the goods and securities entrusted to him capacity as a banker and in the absence of a contract inconsistent with the right of line. Thus he cannot exercise his right of general lien if -
a) the goods and securities have been entrusted to the banker as a trustee or an agent of the customer, and
b) a contract-express or implied-exists between the customer and the banker which is inconsistent with the banker’s right of general lien. In other words, if the goods or securities are entrusted for some specific purpose, the banker cannot have a lien over them. These exceptional cases are discussed later on.
a) the goods and securities have been entrusted to the banker as a trustee or an agent of the customer, and
b) a contract-express or implied-exists between the customer and the banker which is inconsistent with the banker’s right of general lien. In other words, if the goods or securities are entrusted for some specific purpose, the banker cannot have a lien over them. These exceptional cases are discussed later on.
iii) The right of lien is conferred upon the banker by the Indian Contract Act. No separate agreement of contract is, therefore, necessary for this purpose. However, to be on the safe side, the banker takes a letter of lien from the customer mentioning that the goods are entrusted to the banker as security for a loan-existing or future-taken from the banker and that the latter can exercise his right of lien over them. The banker is also authorized to sell the goods in case of default on the part of the customer. The latter thus spells out the object of entrusting the goods to the banker so that the same may not be denied by the customer later on.
iv) The tight of lien can be exercised on goods or other securities standing in the name of the burrower only and not jointly with others. For example, in case the securities are held in the joint names of two or more persons the banker cannot exercise his right of general lien in respect of a debt due from a single person.
v) The banker can exercise his right of lien on the securities remaining in his possession after the loan, for which they were lodged, is repaid by the customer, if no contract to the contrary exists. In such cases it is an implied presumption that the customer has re-offered the same securities as a cover for any other advance outstanding on that date or taken subsequently. The banker is also entitled to exercise the right of general lien in respect of the customer’s obligation as a surety and to retain the security offered by him for a loan obtained by him for his personal use and which has been repaid.
In Stephen, Manager North Malabar Gramin Bank V. Chandra Mohan and State of Kerala, the loan agreement authorized the bank to treat the ornaments not only as a security for that loan transaction, but also for any other transactions or liability existing or to be incurred in future. As the liability of he surety is joint and several with that of the principal debtor, such liability also came within the ambit of the above provision of the agreement.
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