Bank Has Right Of General Lien Over All Securities Of Customer In Ordinary Course, Unless Agreement Says Otherwise: Rajasthan HC Reiterates
Live LawReferring to the decision of the Supreme Court in Syndicate Bank v Vijay Kumar & Ors., a division bench of Justice Pushpenda Singh Bhati and Justice Munnuri Laxman said," it is clear that it is judicially recognized the valuable right of banks i.e. In doing so the court set aside an order of the single judge directing Canara Bank to return the balance amount to a guarantor which was left after adjusting the loan amount from the money received after auctioning the guarantor's property, instead of allowing the Bank to adjust the balance amount in relation to another loan that had become Non Performing Asset with the same guarantor. The Jodhpur bench of the Rajasthan High Court has reiterated that a bank has the valuable right of general lien over all securities deposited by or on behalf of the customer in the ordinary course of banking business, unless the agreement is contrary to such right. It reiterated that it was judicially recognized that unless the agreement stated otherwise, the banks had general lien over all forms of security deposited by the customer and could use the proceeds towards any balance that might be due form the customer by deducting customer's debt balance. in which it was held that, “the Bank has a general lien over all forms securities or negotiable instrument deposited by or on behalf of customer in the ordinary course of banking business and that the general lien is valuable right of the banker judicially recognized and in the absence of an agreement to the contrary, 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.” In this background, the Court rejected all the arguments raised on behalf of the guarantor for the reason that the Bank had general lien over all forms of security and was entitled to adjust the amount to reduce debt balance of its customers.
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