SRI RAMAKRISHNA SHARMA v. STATE BANK OF INDIA — 1997 DIGILAW 224 (ORI)

JUDGMENT : P.K. Misra, J. - The petitioner has filed this writ application for quashing the notice under Annexure-5, whereunder the State Bank of India, Bidyadharpur Agricultural Development Branch, had advertised for auctioning the gold pledged with the Bank as security for loan obtained by the petitioner. The petitioner has further prayed that the scheme relating to Agricultural and Rural Debt Relief Scheme, as published in 1990 may be implemented and the loan incurred by the petitioner may be waived. 2. The facts giving rise to the present writ application are as follows: The petitioner had obtained loan of Rs. 18,000/- from the Bank on 8.3.1989 for establishing a Poultry Farm and had pledged 101.200 grams of gold. The petitioner claims that the Agricultural and Rural Debt Relief Scheme of Orissa (Annexure-2) which came into force in the year 1990 was applicable to his case. As the loan had been obtained for the purpose of agriculture. The petitioner after being aware of the said scheme filed several representations before the bank for waiving the loan but did not receive any reply. The last such representation was made on 8.7.1996. The petitioner further claims that between January, 1994 and January, 1996, the petitioner being pressurised by the bank was compelled to repay a sum of Rs. 16,200/- on several instalments. It is claimed by the petitioner that in spite of such payment made by him and in spite of the fact that he is eligible to the debt relief under Annexure-2, the bank has published the auction notice in newspaper on 17.10.1996 notifying that the gold ornaments belonging to the petitioner would be auctioned on 26.10.1996. In the above back-ground, the petitioner claims that the notice regarding auction of his gold ornaments should be quashed and the bank should be directed to waive the loan of the petitioner. 3. The opposite party in its counter has claimed that the scheme under Annexure-2 is not applicable to the loan incurred by the petitioner inasmuch as the loan exceeded the sum of Rs. 10,000/-. It has been further claimed in the counter that since the petitioner had deliberately defaulted in making any repayment and the total dues are to the tune of more than Rs. 27,000/- which far exceeded the original loan amount, the bank had no other alternative than to notify for auctioning the gold ornaments pledged with it. 10,000/-. It has been further claimed in the counter that since the petitioner had deliberately defaulted in making any repayment and the total dues are to the tune of more than Rs. 27,000/- which far exceeded the original loan amount, the bank had no other alternative than to notify for auctioning the gold ornaments pledged with it. It is contained that as per the terms of agreement with the petitioner and the provisions of the Contract Act, the bank has every right to put the pledged ornaments to auction in order to realise the amount due from the borrower. 4. In Clause-2(d) of the scheme, "borrower" has been defined to mean an individual who has borrowed loan from one or more banks not exceeding Rs. 10,000/- for any activity of agriculture or artisan activity. It has been further indicated in the said clause that a non-wilful defaulter will come within the definition of "borrower". It is not necessary to consider as to whether a loan for poultry farm would come within the meaning of agricultural activity or as to whether the petitioner was a non-defaulter, in view of the condition in the said clause to the effect that loan or loans from one or more banks should not exceed Rs. 10,000/-. Admittedly, the petitioner had borrowed Rs. 18,000/- and as such cannot be covered under this scheme even if it would have been otherwise applicable. In such view of the matter, the main contention of the petitioner that the benefit of the scheme should be made available to him is not sustainable. 5. The petitioner then contended that even though he had taken a loan of Rs. 18,000/- and had repaid a sum of Rs. 16,200/- and as such only Rs. 1,800/- was outstanding, yet the bank was going to auction the ornaments presently valued at Rs. 65,000/-. It is further contended that in any view of the matter, the bank without taking recourse to appropriate legal proceeding in a competent Court of law cannot take unilateral steps to auction the gold ornaments, specially when the petitioner was prepared to repay the loan in suitable instalments. 65,000/-. It is further contended that in any view of the matter, the bank without taking recourse to appropriate legal proceeding in a competent Court of law cannot take unilateral steps to auction the gold ornaments, specially when the petitioner was prepared to repay the loan in suitable instalments. Such a contention of the petitioner is untenable on the face of it in view of the contract between the petitioner and the bank, and more so, in view of the provisions contained in the Indian Contract Act authorising a pownee to sell the pledged materials to realise the dues. The bank has filed a copy of the accounts which indicates that by 3.11.1996 the total amount due from the petitioner was Rs. 27,565.77 paise. The correctness of such account as furnished in Annexure-1 has not been challenged before us and, at any rate, this is not the forum where such question can be raised. Having regard to the facts and circumstances of the case, we cannot uphold the contention of the petitioner that the bank should not have notified for auctioning the pledged ornaments. 6. The petitioner has submitted that he is willing to clear up the entire dues within a period of one month and the pledged ornaments may be returned to him after clears up the entire dues. While entertaining the writ application, this Court had passed an order on 25.10.1996 permitting the bank to go ahead with the auction but not to take a fail decision relating to gold ornaments of the petitioner as indicated in serial No. 2 of Annexure-5 without the leave of the Court. It is not disputed at the Bar that the gold ornaments as indicated in serial No. 2 of Annexure-5 of the petition have not been auctioned. In such view of the matter, since the gold ornaments of the petitioner are yet to be sold, we are inclined to grant an opportunity to the petitioner to clear up the dues so that the gold ornaments belonging to him can be returned. 7. In such view of the matter, since the gold ornaments of the petitioner are yet to be sold, we are inclined to grant an opportunity to the petitioner to clear up the dues so that the gold ornaments belonging to him can be returned. 7. It is, however, contended by the learned counsel for the bank that even if the petitioner is given a further opportunity to clear up the dues, still the bank has a lien over the pledged ornaments for adjustment against any other loan account of the petitioner in the said branch as well as in any other branch of the bank. The learned counsel for the opposite party has relied upon the provisions contained in Section 171 of the Contract Act. Section 171 of the Contract Act reads as follows : "171. General lien on 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." A bare reading of the aforesaid provision indicates that the provision of "general lien of bankers" as contained therein is expressly subject to a contract to the contrary. This section recognises the general principle relating to lien of bankers, etc. widely recognised under the common law. The decision of the Supreme Court reported in Syndicate Bank Vs. Vijay Kumar and others, lucidly illustrates the common law principle regarding general lien of a banker. While there cannot be any quarrel over the proposition elucidated by the Supreme Court, or the principle contained in Section 171 of the Contract Act, one should not lose sight of the fact that in the present case, the gold had been pledged with the bank as a security for debt incurred by the petitioner with the understanding that on repayment of the debt, the gold is to be returned. In fact, the transaction with the bank can be said to be covered under the provisions contained in Section 172 and as such is subject to the subsequent provisions of the Contract Act as contained in Sections 173 and 174 thereof. In fact, the transaction with the bank can be said to be covered under the provisions contained in Section 172 and as such is subject to the subsequent provisions of the Contract Act as contained in Sections 173 and 174 thereof. Section 173 gives right to the pawnee, that is to say, the bank, to retain the articles pledged not only for the payment of the debt, but for the interest on the debt and all necessary expenses incurred by the bank for the preservation of the articles pledged. Similarly, section 174 obliges the pawnee, in the absence" of any contract to the contrary, not to retain the goods pledged for any debt other than the debt for which the goods had been pledged though it raises a presumption about the existence of such a contract in regard to the subsequent advances made by the pawnee. It is not the case of the opposite party in the present writ application that after the gold loan was incurred by the petitioner, subsequent advances had been made by the bank to the petitioner. Therefore, keeping in view the provisions contained in Sections 173 and 174 of the Contract Act, it cannot be said that the bank has a right to retain the goods pledged for any purpose other than the loan. Moreover, Section 176 of the Contract Act which gives the pawnee a right to sell the article pledged contemplates for refund of excess amount to the pawner (debtor) if the proceeds of the sale are more than the amount due. Apart from these provisions limiting the rights of a pawnee, Section 177 of the Act clearly gives a right to the defaulting pawner to redeem the goods pledged at any time before the actual sale takes place subject, of course, to the condition that the defaulting pawner is obliged to clear up the dues as well as to pay any expenses which have arisen on account of his default. Since such specific provisions are there in the Contract Act relating to the rights and obligations of pawner and pawnee, the opposite party cannot fall back upon the general provision relating to lien of bankers, etc. as contained in Section 171 of the Contract Act. Since such specific provisions are there in the Contract Act relating to the rights and obligations of pawner and pawnee, the opposite party cannot fall back upon the general provision relating to lien of bankers, etc. as contained in Section 171 of the Contract Act. Thus, in the absence of any specific contract entitling the opposite party to retain the articles pledged for any other loan and in view of the specific provision contained in Section 177, we are not in a position to accept the submission made on behalf of the opposite party that the gold ornaments pledged may be permitted to be kept by the bank for any other loan of the petitioner in the said branch or in any other branch of the bank. The decision of the Supreme Court reported in Syndicate Bank Vs. Vijay Kumar and others, relied upon by the learned counsel for the opposite party is clearly distinguishable, as in the said case there was specific clause entitling the bank to retain the security for any other dues from the judgment debtor, as evident from the facts indicated in paragraph-5 of the aforesaid Supreme Court decision. 8. The decision reported in Syndicate Bank Vs. Vijay Kumar and others, has been distinguished by a learned Single Judge of the Bombay High Court in the decision reported in Jaika Automobiles Pvt. Ltd. Nagpur and another Vs. State of Maharashtra and another, cited by the learned counsel for the petitioner. The principle laid down in the aforesaid decision of the Bombay High Court is also not strictly applicable to the facts of the present case. However, it is not necessary to delve further into the matter, as according to us, the principle of law decided in the Supreme Court decision is not applicable to the present case in view of the specific provisions contained in Section 177 of the Contract Act. 9. The learned counsel for the opposite party has also placed reliance upon the decision of the Supreme Court reported in Punjab National Bank and others Vs. Surendra Prasad Sinha. In the said case, even though the debt was barred by limitation, the bank adjusted the amount from the security deposited by the Guarantor towards the time-barred debt and a complaint case was filed by the guarantor alleging commission of offence of criminal breach of trust by the bank. Surendra Prasad Sinha. In the said case, even though the debt was barred by limitation, the bank adjusted the amount from the security deposited by the Guarantor towards the time-barred debt and a complaint case was filed by the guarantor alleging commission of offence of criminal breach of trust by the bank. The said complaint case was quashed by the Supreme Court in appeal by holding that the bank had right to adjust the amount from the security furnished by the guarantor. The facts of the said case are completely different and we do not see how the principle laid down in the said decision applies to the facts of the present case. 10. For the aforesaid reasons, we are of the view that an opportunity should be given to the petitioner to clear up the entire dues and take return of the gold pledged with the bank. Since the bank had to advertise for auction due to default of the petitioner and had to defend this action which could have been avoided if the petitioner instead of approaching this Court would have cleared the dues before the stipulated date of auction, we are of the opinion that the petitioner should reimburse the expense incurred by the bank for the purpose. Accordingly, we allow this writ application with a direction to the extent that the petitioner shall be permitted to clear up the entire dues along with uptodate interest and a further sum of Rs. 500/- towards the proportionate expenditure incurred for issuing the advertisement and towards the legal expenditure within a period of one month from today and upon such payment of the entire dues including interest and the consolidated sum of Rs. 500/- as directed above, the opposite party is directed to return the gold to the petitioner soon thereafter without any unnecessary delay. If the amount indicated above is not paid within the stipulated period, the opposite party would be free to sell the gold ornaments by issuing proper notice. Susanta Chatterji, J. 11. I agree.