State Bank Of India v. Radheshyam Spinning Mill Pvt. Ltd.
2019-11-13
A.J.SHASTRI, VIKRAM NATH
body2019
DigiLaw.ai
JUDGMENT : VIKRAM NATH, J. The Commercial Branch of State Bank of India, Rajkot, has preferred this Letters Patent Appeal assailing the correctness of the judgment and order dated 26.11.2018 passed by the learned Single Judge in Special Civil Application No.13890 of 2017 whereby the said petition has been allowed and the Bank is directed to release the title deeds and also issue no dues certificate to the writ petitioners (respondents herein). The operative portion of the judgment as contained in paragraphs 59 and 60 thereof is reproduced below: “59. For the foregoing reasons, this writ-application is allowed. The respondent Bank is directed to release the title-deeds of the immovable properties of the writ-applicant nos.2 and 3 being Sub-Plot No.D/30.2, R.S. No.429, 432-434, 445 and 654p, Plot No.D/30p F.P. No.121p, T.P.S. 02 Sheet No.176 Indraprastha Nagar, Indraprastha Main Road, Rajkot and also issue no due certificate to the petitioners in the interest of justice. 60. The respondent Bank shall also take the necessary steps to release its charge from the record of the Registrar of Companies within a period of 30 days from the date of receipt of the writ of the order.” 2. M/s Radheshyam Spinning Mills Pvt. Ltd., a company incorporated under the provisions of the Companies Act, 1956 along with Shri Ramniklal Chakubhai Bhalara and Smt. Rasilaben Ramniklal Bhalara, who had created equitable mortgage of the immovable properties as guarantors in favour of the State Bank of India (Commercial Branch) in Rajkot, filed Special Civil Application No.13890 of 2017 praying for the following reliefs:- "(a) Your Lordships be pleased to issue a writ of mandamus, order or any appropriate direction to direct the respondent to release the title deeds of the immovable property of the Petitioner No.2 & 3 being Sub Plot No.D/30.2, R.S. No.429, 432-434, 445 and 654p, Plot No.D/30p F.P. No.121p, T.P.S. 02 Sheet No.176 Indraprastha Nagar, Indraprastha Main Road, Rajkot and also issue to the petitioners in the interest of justice. (b) Your Lordships be pleased to issue a writ of mandamus, order or any appropriate direction to direct the Respondent to take all necessary steps to release its charge from the record of the Registrar of Companies within a fixed time frame of 30 days in interest of justice.
(b) Your Lordships be pleased to issue a writ of mandamus, order or any appropriate direction to direct the Respondent to take all necessary steps to release its charge from the record of the Registrar of Companies within a fixed time frame of 30 days in interest of justice. (c) Your Lordships be pleased to direct the respondent to handover the title deeds with respect to Sub Plot No.D/30.2, R.S. No.429, 432-434, 445 and 654p, Plot No.D/30p F.P. No.121p, T.P.S. 02 Sheet No.176 Indraprastha Nagar, Indraprastha Main Road, Rajkot to the petitioner or Cooperative Bank of Rajkot subject to final outcome of the petition pending admission, hearing and final disposal of this petition. (d)Your Lordships be pleased to pass such other and further orders, which may be deemed fit in the interest of justice.” 3. According to the writ petitioners, they were not satisfied with the services provided by the State Bank of India and even the terms of the loan facilities were getting onerous, they decided to deal with the Cooperative Bank of Rajkot which agreed to provide them loan facilities. On 4.8.2016, the Co-operative Bank of Rajkot by way of RTGS, credited the entire outstanding amount of the writ petitioners in the account of the respondent State Bank of India (appellant herein) and thus completely satisfied the loan taken by M/s Radheshyam Spinning Mills Pvt. Ltd. from the State Bank of India, Commercial Branch, Rajkot. On 9.8.2016, the Co-operative Bank of Rajkot in writing requested the State Bank of India, Commercial Branch, Rajkot, to issue a no dues certificate and also to hand over the property files of the writ petitioners as it had taken over the loan account from the State Bank of India by clearing all the outstanding amount to it. On 20.8.2016, the State Bank of India, Commercial Branch, Rajkot, issued the no dues certificate to the writ petitioners. However, the State Bank of India, Commercial Branch, Rajkot, vide letter dated 6.9.2016 declined to return the title deeds invoking power under section 171 of the Indian Contract Act, 1872 (hereinafter referred to as “the 1872 Act”) claiming its right of general lien to hold on the title deeds as the liabilities of another company namely, M/s Radheshyam Fibres Pvt. Ltd. were not liquidated.
The contents of the letter dated 6.9.2016 are reproduced below to accurately understand the reason for not releasing the title deeds: “Please refer to our various letters vide no.161, 333 and 338 dated 21.06.2016, 02.08.2016 & 03.08.2016 respectively sent by Registered post with AD, duly acknowledged by you. We have categorically mentioned about our inability to release the collateral property in the name of Shri Ramnikbhai Chakubhai Bhalara and Smt Rasilaben Ramnikbhai Bhalara mortgaged to M/s Radheshyam Spinning Mill Pvt. Ltd. since taken-over by The Co-Operative Bank of Rajkot Limited. 2. In this matter we have to further advise that even after liquidating all the dues of M/s Radheshyam Spinning Mill Pvt. Ltd. to Bank, we will not release collateral property in the name of Shri Ramnikbhai Chakubhai Bhalara and Smt Rasilaben Ramnikbhai Bhalara as appropriate authority has opined as under:- “Bank may claim its Right of General Lien to hold the title deeds till the liabilities of M/s Radheshyam Fibres Pvt. Ltd. is liquidated.” 3.Collateral property in name of Shri Ramnikbhai Chakubhai Bhalara and Smt Rasilaben Ramnikbhai Bhalara is not released in view of Shri Ramnikbhai Chakubhai Bhalara being associated with M/s Radheshyam Fibres Pvt. Ltd.(NPA account with us) as Director-cum-Guarantor. Bank has already initiated legal action before DRT-II, Ahmedabad for recovery of its dues against Directors, Guarantors and Mortgagors of M/s Radheshyam Fibres Pvt. Ltd. 4. As the property of Shri Ramnikbhai Chakubhai Bhalara and Smt Rasilaben Ramnikbhai Bhalara will not be released, we advise you to make suitable correction in release deed as advised earlier vide our e-mail dated 03.09.2016.” 4. The writ petitioners thereupon through their counsel gave a legal notice dated 14.9.2016 addressed to the Assistant General Manager, State Bank of India, Commercial Branch, Rajkot, giving the bank one more chance to return the title deeds which, according to them, they were legally entitled, within 7 days of the receipt of the said notice failing which, appropriate legal action, both civil and criminal, would be initiated as may be advised.
Paragraphs 7 and 8 of the legal notice are reproduced below: “(7) My clients would have initiated suitable proceedings against the Bank and its responsible officers, both under the Civil law as also under various provisions of the Indian Penal Code, however, in order to give you one more and the last, chance, my clients have instructed me to call upon you, which I hereby do, to return to my clients the documents of title of the property at Sub Plot No.D/30.2,R.S.No.429,432-434,445 and 654p, Plot No.D/30p F.P.No.121p, T.P.S.02 Sheet No.176 Indraprastha Nagar, Indraprastha Main Road, Rajkot within seven days of the receipt hereof by you failing which my clients may initiate such legal actions, both civil as well as criminal, as they may be advised and you shall be solely responsible for the costs and consequences thereof. (8) As this notice has been necessitated by reason of your dishonest, unethical and illegal approach you shall also bear and pay to my clients the costs hereof which also please note.” 5. State Bank of India, Stressed Assets Management Branch, Ahmedabad, through its Deputy General Manager reiterated its stand of exercising its right of general lien as contained in Section 171 of the 1872 Act and further stated that in case any legal action is initiated, the same would be contested at the costs and consequences of the writ petitioners. To record it accurately the reasons given in the reply by Deputy General Manager on 29.9.2016 are reproduced below:- “Please refer to your legal notice dated 14.09.2016 on behalf of your clients (1) M/s Radheshyam Spinning Mills Pvt. Ltd. (2) Shri Ramnikbhai Chakubhai Bhalara (3) Smt Rasilaben Ramnikbhai Bhalara in the captioned matter. In this regard, we have to advise that the account of M/s Radheshyam Fibres Pvt. Ltd. has been transferred to our Stressed Assets Management Branch, Ahmedabad on 08.08.2016 from SBI, Commercial Branch, Rajkot for resolution and recovery of the bank's dues after it had become NPA.
In this regard, we have to advise that the account of M/s Radheshyam Fibres Pvt. Ltd. has been transferred to our Stressed Assets Management Branch, Ahmedabad on 08.08.2016 from SBI, Commercial Branch, Rajkot for resolution and recovery of the bank's dues after it had become NPA. Therefore, we have to advise you as under:- (1)That your Client Shri Ramnikbhai C. Bhalara and Smt Rasilaben Ramnikbhai Bhalara had mortgaged by way of equitable mortgage by deposit of title deeds their leasehold land and building standing thereon on Sub plot No.D/30-2 Revenue Survey No.429, 432, 433, 434, 445 and 654p of Gujarat Housing Plot No.D/30/p F.P No.121p T.P.S.02 sheet No.176 (total built up area 241.90 Sq.Mts.) Indraprastha Nagar, Indraprastha Main Road, Rajkot in order to secure their liability as guarantor to our SBI, Commercial Branch, Rajkot for the Credit Facilities extended to M/s Radheshyam Spinning Mills P. Ltd. as already advised to your Client M/s Radheshyam Spinning Mills Pvt. Ltd. by our SBI Commercial Branch, Rajkot vide letter No.SBI/2016-17/446 dated 06.09.2016. (2)That our bank has filed recovery suit before Debt Recovery Tribunal-II, Ahmedabad (OA No.575/2016 SBI Vs Radheshyam Fibres P. Ltd & others) in which your Client Shri Ramniklal C Bhalala is also impleaded as defendant No.2 in his capacity as Director and personal guarantor of the advances to defendant No.1 company for recovery of the bank's dues amounting to Rs.43,38,65,688.07 (Rupees Forty Three Crores Thirty eight Lacs Sixty Five Thousand Six Hundred and Eighty Eight and Seven Paisa only) as on the date of filing suit. (3)Since our bank is not fully secured for recovery of the bank's dues from M/s Radheshyam Fibres P. Ltd & others in the pending recovery Suit before Hon'ble DRTII Ahmedabad, therefore, it is decided by our bank to exercise its right of general lien as contained in section 171 of the Indian Contract Act, 1872 and not release the title deeds in respect of the said property and also seek attachment before judgment in the pending Suit for recovery of the bank's dues in respect of share of Shri Ramniklal C. Bhalala in the said jointly owned immovable property.
(4) In view of the aforesaid facts and circumstances of the case, the facts as stated in para 5 of the legal notice dated 14.09.2016 are denied and in case any legal action is initiated against our bank in this regard, the same shall be contested at the costs and consequences of your clients, which, please note and advise to your clients accordingly.” 6. Aggrieved by the above, the writ petitioners approached this Court under Article 226 of the Constitution of India by instituting Special Civil Application No.13890 of 2017. 7. It appears that there were no factual disputes and the only legal question involved in the petition was whether the State Bank of India could invoke its right of lien under section 171 of the 1872 Act. The State Bank of India despite service of notice chose not to remain present before the learned Single Judge. The matter was heard exparte and the learned Single Judge came to the conclusion that the State Bank of India, Commercial Branch, Rajkot, had no authority to claim right of lien under section 171 of the 1872 Act. The learned Single Judge in its judgment dated 26.11.2018 dealt with in detail the law on the point and in the facts and circumstances of the case came to the conclusion that the State Bank of India was not justified in retaining the title-deeds of immovable properties of writ petitioner Nos.2 and 3. It accordingly allowed the writ petition and directed the State Bank of India to return the title-deeds. 8. Aggrieved by the above judgment of the learned Single Judge, the present Letters Patent Appeal is before us. 9. We have heard Shri Biju A. Nair, learned counsel for the appellant and Shri Ashok L. Shah, learned counsel representing the respondent Nos.1, 2 and 3. 10. Shri Nair, learned counsel for the appellant has advanced multiple arguments assailing the correctness of the judgment and order of the learned Single Judge. The grounds are set-forth in paragraph 8 on pages O, P, Q and R of the paper book in particular, sub-paragraphs (B) to (H).
10. Shri Nair, learned counsel for the appellant has advanced multiple arguments assailing the correctness of the judgment and order of the learned Single Judge. The grounds are set-forth in paragraph 8 on pages O, P, Q and R of the paper book in particular, sub-paragraphs (B) to (H). The same are reproduced below: “(B) The Honourable Single judge has erred in allowing the Special Civil Application no.13890/2017 observing that when the borrower deposited the title deeds in order to secure a specific transaction, the bank cannot take a stance that could hold the title deeds for a balance due in a different loan amount. (C) From the wordings of the aforesaid guarantee documents and mortgage documents it is clear that the intention of the Petitioner nos.2 and 3 was not to restrict the scope of the security on the title deeds only for covering the liability of Respondent no.1 alone. On the other hand their intention was to secure all other liabilities of Respondent nos.2 and 3 towards the Appellant including the liabilities in respect of loan given to any other person. (D) The Honourable Single Judge did not examine the liability of the Petitioner nos.2 and 3 in the context of the specific covenants they have made in the guarantee documents and mortgage confirmation letter, which would operate as contract to the contrary under Section 171 of the Indian Contract Act, 1872 and also within the meaning of the judgment of Honourable Apex Court in Syndicate Bank vs. Vijay Kumar & Others. (E) The Honourable Single Judge has erred in not concluding that the specific clauses viz. Clause nos.7, 13 and 15 of the guarantee dated 03-11-2008, would operate as contract to the contrary within the meaning of Section 171 of the Indian Contract Act, 1872. (F) The Honourable Single Judge failed to appreciate that the Petitioners have settled their liabilities only on 04-08-2016, i.e. much after the demand notice was issued by the Appellant bank on 01-07-2016 under SARFAESI Act, 2002 and the suit for recovery was filed by the Appellant before DRT II, Ahmedabad on 26-07-2016 in which the learned Tribunal on 06-09-2016 directed the Petitioners to disclose the details of their properties which they did not comply with and hence they already stepped into the shoes of the principal borrower and dichotomy between the principal borrower and the guarantor no more exists.
(G) The Honourable Single Judge failed to appreciate that the liability of the guarantors is co-extensive with that of the principal borrower and once the loans are recalled the dichotomy between the principal borrower and the guarantor no more subsists and every recourse available to the creditor against the principal borrower would be available against the guarantors also as if they are the principal borrower. (H) The Honourable Single Judge has, therefore, committed serious and palpable errors in directing the appellant to release the title deeds in respect of the said property in dispute in favour of the respondents and to release the charge thereon. Hence, the impugned judgment deserves to be set aside.” 11. The main thrust of the argument of Shri Nair is reliance upon a judgment of the Supreme Court in the case of Syndicate Bank Vs. Vijay Kumar and others reported in AIR 1992 Supreme Court 1066. He has further placed reliance upon four other judgments of different High Courts detailed below: (i) Judgment dated 10.01.2008 delivered in C.R.P.(NPD) No.3019 of 2007 and M.P. No.1 of 2007 by the High Court of Madras in the case of State Bank of India, Kotagiri Branch Vs. Chokkalingam and Ors. (ii) Judgment dated 10.08.2009 delivered in IA No.8092/2001 in CS(OS) No.1731/2001 by the High Court of Delhi in the case of Sadhna Gupta and Ors. Vs. R.C.Gupta and Ors. (iii)Judgment dated 14.10.2015 delivered in W.P. No. 2111(W) of 2014 by the High Court of Calcutta in the case of Nayabuddin Vs. Union of India and Ors. (iv) Judgment dated 18.12.2013 delivered in Writ Petition No.32217/2013(GM-RES) by the High Court of Karnataka at Bangalore in the case of Nagendra Prasad Vs. The Manager, State Bank of Mysore and Ors. 12. On the other hand, Shri Shah, learned counsel appearing for the respondents submitted that the arguments advanced by the learned counsel for the appellant have no legs to stand upon. The learned Single Judge has dealt with each and every aspect of the matter in great detail and does not warrant any interference. The judgments relied upon by the learned counsel for the appellant have no similarity to the facts of the present case. All the judgments are clearly distinguishable. Mr. Shah has further submitted that Section 171 of the 1872 Act refers to the Bank's lien only over any goods bailed to them.
The judgments relied upon by the learned counsel for the appellant have no similarity to the facts of the present case. All the judgments are clearly distinguishable. Mr. Shah has further submitted that Section 171 of the 1872 Act refers to the Bank's lien only over any goods bailed to them. The word 'goods' as occurring in Section 171 is defined in Section 2(7) of the Sale of Goods Act, 1930 (hereinafter referred to as “the 1930 Act”) and it does not cover title deeds of immovable property. On the basis of above, he submits that section 171 of the 1872 Act would have no application to the present case and would not benefit the appellant bank in any manner in support of its decision to retain the title deeds. It is also submitted that admittedly there was no charge over the immovable properties of respondent Nos.2 and 3 with respect to the loan advanced in favour of M/s Radheshyam Fibres Pvt. Ltd. Further that respondent No.3 was neither a Director in M/s Radheshyam Fibres Pvt. Ltd. nor a Guarantor for the loan advanced to it. The immovable property over which right of general lien is being claimed is jointly owned by respondent Nos.2 and 3 and, therefore, even if respondent No.2 had signed some document as Director and Guarantor, that would not cover the properties of respondent No.3. In support of all the above submissions, he has placed reliance upon the following judgments: (i) AIR 2000 Supreme Court 2912 in the case of R.D.Saxena Vs. Balaram Prasad Sharma. (ii) AIR 2004 Kant 199 in the case of Vijaya Bank and Anr. Vs. Naveen Mechanised Construction (Private) Limited and Ors. of the High Court of Karnataka at Bangalore. (iii) Judgment dated 29.04.2004 delivered in W.P.(C) No.12790 of 2003 by the High Court of Orissa in the case of Alekha Sahoo Vs. Puri Urban Co-operative Bank Ltd. And Ors. (iv) Judgment dated 24.08.2009 delivered in W.P.No.485 of 2009 by the High Court of Calcutta in the case of Devi Ispat Limited and Ors. Vs. The Central Bank of India and Ors. 13.
Puri Urban Co-operative Bank Ltd. And Ors. (iv) Judgment dated 24.08.2009 delivered in W.P.No.485 of 2009 by the High Court of Calcutta in the case of Devi Ispat Limited and Ors. Vs. The Central Bank of India and Ors. 13. Before proceeding to discuss the arguments of the respective counsels, the provisions of Section 171 of the 1872 Act dealing with “right of general lien of Bankers”, definitions of 'bailment', 'bailor' and 'bailee' given in Section 148 of the 1872 Act and Section 2(7) of the 1930 Act defining the word 'goods' need to be reproduced. Section 171 of the 1872 Act 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 —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.” Section 148 of the 1872 Act reads as under: “148. ‘Bailment’, ‘bailor’ and ‘bailee’ defined.—A ‘bailment’ is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the ‘bailor’. The person to whom they are delivered is called the ‘bailee’.” Sub-Section (7) of Section 2 of the 1930 Act reads as under: “(7) “goods” means every kind of movable property other than actionable-claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.” 14.
The first ground raised in the petition (para 8(B)) is that the learned Single Judge erred in holding that the title-deeds deposited to secure a specific transaction could not be retained to secure the balance due in a different loan amount. In the facts of the present case, the Company M/s Radheshyam Fibres Pvt. Ltd. which is the other Company in whose loan account balance was due, is a totally different entity and was only secured by guarantee of respondent No.2. There was no equitable mortgage created in order to secure the loan advanced to this Company M/s Radheshyam Fibres Pvt. Ltd. Respondent No.3 was neither a Director nor Guarantor and had no concern with the loan advanced to M/s Radheshyam Fibres Pvt. Ltd. In such circumstances, this ground has no merits and is rejected. 15. The grounds (C), (D) and (E) as contained in para 8 are interconnected and, as such, are taken up together. The submission is that the contents of Clauses 7, 13 and 15 of the Guarantee dated 3.11.2008 executed by respondent Nos.2 and 3 while securing the loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd. would expressly cover that the said title-deeds could be used for securing any other loan to another Company also and, therefore, the Bank was right in withholding the title-deeds of the immovable properties of respondent Nos.2 and 3. This argument also has no legs to stand.
This argument also has no legs to stand. Clauses 7, 13 and 15 are reproduced below in order to appreciate its application: Clause No.7 “In order to give effect to the Guarantee herein contained the bank shall be entitled to act as if the Guarantors were principal debtors to the Bank for all payments guaranteed by them as aforesaid to the bank.” Clause No.13 “The Guarantors shall forthwith on demand made by the Bank deposit with the bank such sum or security or further sum or security as the bank may from time to time specify as security for the due fulfillment of their obligations under this Guarantee and any security deposited with the Bank may be sold by the Bank after giving to the Guarantors a reasonable notice of sales and the said sum or the proceeds of sale of the securities may be appropriated by the bank in or towards satisfaction of the said obligations and any liability arising out of non-fulfillment thereof by the Guarantors.” Clause No.15 “The Guarantors hereby agree and confirm that the Bank shall be entitled to adjust, appropriate or set-off all monies held by the bank to the credit of or for the benefit of the Guarantors or any account or otherwise howsoever towards the discharge and satisfaction of the liability of the Guarantors under these presents.” 16. A perusal of Clause 7 clearly mentions the right of the bank to treat the Guarantors as principal debtor for all payments guaranteed by them as 'aforesaid' to the Bank. The word 'aforesaid' clearly relates to the loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd. Nowhere in the said Clause 7 of the Deed of Guarantee is it mentioned that loan advanced to any other Company would also be covered by this Guarantee. Each and every loan advanced to different Companies would be covered by separate Deed of Guarantee and the terms and conditions of that loan agreement. 17. A perusal of Clause 13 also makes it clear that the obligations of the Guarantors provided right to the Bank to recover any amount due for fulfillment of the obligations of the Guarantor “under this Guarantee” and such recovery of any sum could be appropriated by the Bank towards satisfaction of the “said obligations”.
17. A perusal of Clause 13 also makes it clear that the obligations of the Guarantors provided right to the Bank to recover any amount due for fulfillment of the obligations of the Guarantor “under this Guarantee” and such recovery of any sum could be appropriated by the Bank towards satisfaction of the “said obligations”. The obligations would be with respect to the said Guarantee and the loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd. and not for any other Company. 18. Clause 15 refers to the commitment of the Guarantors that they agree and confirm by giving a right to the bank to adjust, appropriate or set off all monies held by the Bank by discharge and satisfaction of the liability under “these presents”. This again would relate to the loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd. and not to any other Company. 19. Thus, in view of the above discussion, we do not find any substance in the above three grounds (C), (D) and (E) which are linked together and they are accordingly rejected. 20. Insofar as the reference to the judgment in the case of Syndicate Bank Vs. Vijay Kumar and others (supra) as referred to in ground (D) is concerned, it was on different facts and the Guarantor of the principal loan had given two fixed deposit receipts to secure the amount. It was not a case where the title-deeds given as security for a loan account were being retained by the Bank claiming its right of general lien with respect to another loan of another Company. Further, the admitted position is that respondent No.3 had no concern with the loan advanced to M/s Radheshyam Fibres Pvt. Ltd. She was neither a Director nor Guarantor for the loan advanced to the said Company. Therefore, the said judgment also will have no application in the present case. 21. The grounds (F) and (G) as contained in para 8 are also interconnected and, as such, are taken up together.
Therefore, the said judgment also will have no application in the present case. 21. The grounds (F) and (G) as contained in para 8 are also interconnected and, as such, are taken up together. There is no issue that the status of Guarantors would be that of Principal Borrower once the loan was recalled and proceedings under the SARFAESI Act were initiated with respect to loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd. but that would not give any right to the Bank to hold on to the title-deeds once the loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd. was fully liquidated and a no dues certificate was issued by alleging that there was an outstanding in a loan account of another and different Company with which respondent No.3 had no concern. Once the loan of M/s Radheshyam Spinning Mills Pvt. Ltd. stood satisfied and a no dues certificate issued by the bank, the Bank was not justified in withholding the title-deeds. 22. Insofar as the ground (H) as contained in para 8 is concerned, in view of the discussion made above, we are of the firm view that the learned Single Judge rightly allowed the petition and directed for release of the documents. 23. Now coming to the case law relied upon by Shri Nair, learned counsel for the appellant Bank, the judgment of the Supreme Court in the case of Syndicate Bank Vs. Vijay Kumar and others (supra) has already been discussed above to have no application in the facts of the present case and, as such, is of no assistance to the appellant bank. (A) In the case of Nagendra Prasad Vs. The Manager, State Bank of Mysore and Ors. (supra), the petitioner therein Nagendra Prasad was a Guarantor in respect of loan advanced by the State Bank of Mysore in favour of one Shri V.S. Krishna Murthy and his wife Smt. M.K. Geetha. Later on, the petitioner Nagendra Prasad is said to have purchased the property in question and in respect of the said property purchased, the State Bank of Mysore had advanced loan and in that process, the title-deeds had been deposited with the State Bank of Mysore. The petitioner Nagendra Prasad having discharged his loan for purchase of the said property requested for return of the title-deeds.
The petitioner Nagendra Prasad having discharged his loan for purchase of the said property requested for return of the title-deeds. The Bank retained the title-deeds claiming right of general lien as the loan advanced to Shri V.S. Krishna Murthy and his wife Smt. M.K. Geetha had not been discharged. In such circumstances, the Karnataka High Court held that till such time the recovery suit of the Bank against Shri V.S. Krishna Murthy and his wife Smt. M.K. Geetha in which Recovery Officer was already proceeding with the sale of property, the title-deeds would be returned only after the said loan is satisfied from the proceeds of the same. The said judgment cannot be relied upon as it does not deal with any part of Section 171 of the 1872 Act and it is only on the facts of the said case that the order was passed. (B) In the case of Nayabuddin Vs. Union of India and Ors. (supra), the appellant Nayabuddin had deposited the title-deeds in order to secure a home loan taken from the Bank. However, title-deeds were retained by the Bank claiming right of general lien under section 171 of the 1872 Act so as to secure the cash credit limit taken by the brother of Nayabuddin. The defense taken by the Bank is that even the home loan account had not been fully discharged, as such, it had a right to retain the title-deeds. This case also thus does not have any similarity with the facts of the present case. (C) In the case of Sadhna Gupta and Ors. Vs. R.C.Gupta and Ors. (supra), there was an issue as to whether defendant No.1 (R.C.Gupta) was the sole owner of the property which was an HUF property or that the plaintiffs (Sadhna Gupta and Others) also had share in the said property. The loan had been taken by the HUF R.C. Gupta and Brothers and R.C. Gupta, defendant No.1 had been signing all the papers with the Bank and had deposited the title-deeds giving an impression to be the sole owner. The plaintiff Sadhna Gupta and Others claiming to be members of M/s R.C. Gupta and Brothers HUF claimed for release of the title deeds.
The plaintiff Sadhna Gupta and Others claiming to be members of M/s R.C. Gupta and Brothers HUF claimed for release of the title deeds. The application for interim relief was rejected by the Delhi High Court and one of the reasons was that there was a dispute as to whether the property solely belonged to R.C. Gupta who had so represented or that the HUF had other members. Thus, this case also will have no application to the facts of the present case and is of no assistance to the appellant Bank. (D) In the case of State Bank of India, Kotagiri Branch Vs. Chokkalingam and Ors.(supra), separate loans were taken by some borrowers and merely because one loan against which the title-deeds had been deposited stood liquidated, the request for return of title-deeds was declined as there was outstanding against the other loans of the same borrowers even though other loans were not secured by deposit of title-deeds. This case thus also has no similarity to the facts of the present case. 24. We now deal with the arguments of Shri A.L. Shah, learned counsel for the respondents. 25. In the given facts of the present case, where the respondent Nos.2 and 3 had created an equitable mortgage by deposit of titledeeds of the immovable property held by them, to secure the loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd., the Bank would have a lien to retain the said title-deeds till such time the loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd. was not liquidated. This lien is by express contract wherein respondent Nos.2 and 3 created mortgage in favour of the Bank. There can be no denial that the Bank had a right to retain the title-deeds so long as the loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd. was not satisfied and discharged. However, once the loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd. stood discharged and the appellant Bank having admitted the said discharge by issuing a no dues certificate, whether holding on to the title-deeds could be said to be justified on the ground that there was outstanding in the loan account of another company M/s Radheshyam Fibres Pvt. Ltd. in which only respondent No.2 was a Director and Guarantor but had not executed any equitable mortgage in favour of the appellant Bank.
It is admitted fact that the properties mortgaged were jointly owned by respondent Nos.2 and 3. Further, respondent No.3 was neither a Guarantor or Director in respect of the other company M/s Radheshyam Fibres Pvt. Ltd. She had no concern whatsoever with the other Company. There was no consent by respondent No.3 for creating any kind of charge or lien over her property. 26. A close reading of Section 171 makes it amply clear that the Bank would be entitled to retain as a security any goods bailed to it for a general balance of account. Now this general balance of account has to be with respect to the person who had bailed any goods to it. The word 'goods' is not defined in the 1872 Act, however, it is defined in Section 2(7) of the 1930 Act. We have already reproduced the definition. A plain reading of Section 2(7) of the 1930 Act makes it very clear that the reference to the word 'goods' is only and only in regard to movable properties or assets and not anything immovable. The word 'goods' otherwise also as defined in various dictionaries does not cover immovable properties. Some of the definitions in standard dictionaries are reproduced below:- Oxford Advanced Learner's Dictionary defines 'goods' as under:- “things that are produced to be sold.” Cambridge Academic Content Dictionary defines 'goods' as under: “items for sale, or possessions that can be moved.” Chambers 21st Century Dictionary defines 'goods' as under:- “articles for sale, merchandise”. Black's Law Dictionary, 9th Edition, defines 'goods' as follows :- “Tangible or movable personal property other than money esp., articles of trade or items of merchandise.” 27. 'Bailment', 'bailor' and 'bailee' are defined under section 148 of the 1872 Act. 'Bailment' means delivery of goods by one person to another for some purpose and upon a contract that the same would be returned upon the purpose being accomplished or may be otherwise dealt with as per the contract or the directions of the 'bailor'. What is noticed is that 'goods' as also 'bailment' both are in context of only movable articles and not anything immovable. 28. Section 171 of 1872 Act gives the right to a Bank of general lien only with respect to goods bailed to it and that too for a general balance of account.
What is noticed is that 'goods' as also 'bailment' both are in context of only movable articles and not anything immovable. 28. Section 171 of 1872 Act gives the right to a Bank of general lien only with respect to goods bailed to it and that too for a general balance of account. Admittedly, there was no general balance of account insofar as respondent No.3 is concerned, as she had no concern at all with M/s Radheshyam Fibres Pvt. Ltd. 29. Further, in the present case, we do not find any such bailment of goods nor was there any balance left insofar as the loan account of M/s Radheshyam Spinning Mills Pvt. Ltd. is concerned. Thus, in our considered opinion, the Bank was not right in claiming right of general lien under section 171 of the 1872 Act insofar as the holding on to the title-deeds is concerned once the loan account of M/s Radheshyam Spinning Mills Pvt. Ltd. stood liquidated. 30. The Bank could have taken a stand that under general law, it could have exercised its right of general lien which by judicial pronouncements has been extended in some of the cases of the superior Courts in India but in the facts and circumstances of the present case, as discussed above and as may be demonstrated hereinafter, the appellant Bank did not have even that right available to it under the general law. 31. The immovable property with respect to which equitable mortgage has been created by deposit of title-deeds to secure the loan advanced to M/s Radheshyam Spinning Mills Pvt. Ltd. was jointly owned by respondent Nos. 2 and 3. Respondent No.3 admittedly had not stood Guarantor for the loan advanced to M/s Radheshyam Fibres Pvt. Ltd. nor was a Director in this Company. She had no concern at all with this Company. Only respondent No.2 was Guarantor for the loan advanced to M/s Radheshyam Fibres Pvt. Ltd. in whose general balance of account an amount was outstanding, however, no mortgage was created by respondent No.2. The property being jointly held, and respondent No.3 being not a Guarantor, no claim could be raised with respect to the property of respondent No.3 even if it is assumed for the sake of argument that under the general law, the Bank would have a general lien over the title-deeds deposited by respondent No.2 of the properties owned by him.
The property being jointly held, and respondent No.3 being not a Guarantor, no claim could be raised with respect to the property of respondent No.3 even if it is assumed for the sake of argument that under the general law, the Bank would have a general lien over the title-deeds deposited by respondent No.2 of the properties owned by him. Moreover, there was no equitable mortgage created by respondent No.2 by deposit of title-deeds with or without the consent of respondent No.3. Thus, the Bank was not right under any circumstances to hold on to the title-deeds even under the general law. 32. The law on the above points has been discussed threadbare by the learned Single Judge by referring to plethora of decisions not only of the Supreme Court but also of different High Courts which we are refraining from repeating in order to avoid unnecessary burden to our judgment. 33. However, we may refer to four judgments relied upon by learned counsel for the respondents, Mr. Shah. (A) In the case of R.D.Saxena Vs. Balaram Prasad Sharma (supra), the Supreme Court in paragraph 8 clearly holds that the word 'goods' mentioned in Section 171 is to be understood in the sense in which that word is defined in the 1930 Act. We may profitably quote paragraph 8 thereof as under:- “8. Files containing copies of the records (perhaps some original documents also) cannot be equated with the “goods” referred to in the section. The advocate keeping the files cannot amount to “goods bailed”. The word “bailment” is defined in Section 148 of the Contract Act as the delivery of goods by one person to another for some purpose, upon a contract that they shall be returned or otherwise disposed of according to the directions of the person delivering them, when the purpose is accomplished. In the case of litigation papers in the hands of the advocate there is neither delivery of goods nor any contract that they shall be returned or otherwise disposed of. That apart, the word “goods” mentioned in Section 171 is to be understood in the sense in which that word is defined in the Sale of Goods Act. It must be remembered that Chapter-VII of the Contract Act, comprising sections 76 to 123, had been wholly replaced by the Sales of Goods Act, 1930.
That apart, the word “goods” mentioned in Section 171 is to be understood in the sense in which that word is defined in the Sale of Goods Act. It must be remembered that Chapter-VII of the Contract Act, comprising sections 76 to 123, had been wholly replaced by the Sales of Goods Act, 1930. The word “goods” is defined in Section 2(7) of the Sales of Goods Act as “every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached, to or forming part of the land which are agreed to be severed before sale or under the contract of sale.” However, in paragraphs 39 and 40, again the Supreme Court referring to 'goods' in Section 171 of the 1872 Act reiterates not only its definition under the 1930 Act but also under general law the definition of 'goods' in different dictionaries including Webster's to record that it deals with movables only. Both the paragraphs 39 and 40 are reproduced below:- “39. Reference to 'goods' in Section 171 of the Contract Act cannot, by any imagination, be stretched to mean the case papers, entitling their retention by the lawyer as his lien for the purposes of realising his fee. Besides the meaning attached to the 'goods' under Section 2(7) of the Sales of Goods Act, under the General Law the 'goods' have been defined in Bailey's Large Dictionary of 1732 as 'merchandise' and by Johnson, who followed as the next lexicographer, it is defined to be movables in a house; personal or immovable estates; wares, freight, merchandise. Webster defines the word 'goods' thus: Goods, noun, plural; (1) movables; household furniture; (2) Personal or movable estate, as horses, cattle, utensils, etc. (3) wares; merchandise; commodities bought and sold by merchants and traders. 40. This Court in Union of India and Anr. v. Delhi Cloth and General Mills Co. Ltd. : 1973 ECR 56 (SC) held that to become 'goods' an article must be something which can ordinarily come to the markets to be bought and sold. In Collector of Central Excise, Calcutta-I v. Eastend Paper Industries Ltd. : 1989 (43) ELT 201 (SC) it was stated that goods are understood to mean as identifiable articles known in the markets as goods and marketed and marketable in the market as such.
In Collector of Central Excise, Calcutta-I v. Eastend Paper Industries Ltd. : 1989 (43) ELT 201 (SC) it was stated that goods are understood to mean as identifiable articles known in the markets as goods and marketed and marketable in the market as such. Where the Act does not define 'goods', the Legislature should be presumed to have used that word in its ordinary dictionary meaning i.e. to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market as such.” (B) In the case of Alekha Sahoo Vs. Puri Urban Co-operative Bank Ltd. And Ors. (supra), the Orissa High Court interpreting Section 171 of the 1872 Act states that only 'goods' bailed could be retained by the bank and a right of general lien could be traced. Paragraphs 8, 9 and 10 thereof are reproduced hereunder: “8. The next question to be decided in this writ petition is whether the Bank could in exercise of its right of general lien under Section 171 of the Indian Contract Act retain the gold ornaments of the petitioner as additional security for the loans granted to Manmohan Sahoo, Proprietor M/s. Bimala Bhandar for whom the petitioner was a guarantor. Section 171 of the Indian Contract Act is quoted herein below :- "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." The aforesaid Section states that bankers 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. The said Section 171 does not extensively deal with the cases in which a banker can retain as security for a general balance of account any goods bailed to it.
The said Section 171 does not extensively deal with the cases in which a banker can retain as security for a general balance of account any goods bailed to it. Section 171 of the Contract Act, however, is a recognition of the right of general lien of bankers under English Mercantile Law and therefore the decision of Court in England as to in which cases such lien can be exercised by bankers and in which cases such lien cannot be exercised by bankers will, equally apply to exercise of lien under Section 171 of the Contract Act. 9. In Wolstenholm v. Sheffield Union Banking Co. Ltd. (1886) 54 L.T. 746, the question that arose for decision was as to whether the Bank can retain a property belonging to a partner to satisfy the general account of his firm and Lord Esher, M. R. held that the Bank cannot exercise such lien over the private property of a partner for satisfying the general balance of account of his firm. To quote Lord Esher, M. R. : "The bank said, 'we shall not account to Wing's trustees for the surplus, although the lease was his private property, because we have a right to keep it to satisfy the general account of his firm'. That was tantamount to saying, 'we are now claiming your surplus to pay the debt of somebody else.' The claim in effect was that, in virtue of the bank's general lien, they were entitled to retain the property of one man to pay the debt of another. That claim was based, not upon agreement, but on a supposed custom that bankers should in such a case have a general lien. There never was or could be a custom, however, by which you could take the property of one man to pay the debt of another. No such proposition was put forward in the cases cited, and no such proposition has ever been laid down in any of the cases respecting a banker's lien." In Cuthbert v. Roberts, Lubbock & Co, (1909) 2 Ch. 226, C.A., the bankers applied to claim the plaintiffs' shares or the proceeds thereof to the liquidation of the debit balance of Chancellor's Current Account and Joyce J. held that the bankers were not entitled to do so. Joyce J. in particular held : "...
226, C.A., the bankers applied to claim the plaintiffs' shares or the proceeds thereof to the liquidation of the debit balance of Chancellor's Current Account and Joyce J. held that the bankers were not entitled to do so. Joyce J. in particular held : "... It is true that the bankers have a general lien on the securities of any customer deposited by him with them otherwise than for a particular purpose, to secure any sum in which the customer may be indebted to the bankers. This, however, is a lien upon the securities of the customer and not upon those of other persons, and the general lien of a banker does not attach even upon money or securities of the customer known to the bankers to be affected by a trust. ..." This view taken by Joyce J. that the lien of the Bank is upon the security of the customers and not upon those of other persons was upheld by Buckley L.J. and Kennedy L.J. and the appeal against the decision of Joyce J. was dismissed. It is thus clear from the aforesaid decision of the Courts of England that under the English Mercantile Law relating to Banker's General Lien the Bank can retain as security for general balance of an account of a customer, goods bailed to them by that customer and not goods bailed to them by some other customer. 10. The contention of Mr. Kanungo is that the petitioner is a guarantor for the loan account of M/s. Bimala Bhandar and is therefore liable for the outstanding balance of M/s. Bimala Bhandar by virtue of the provisions of Section 128 of the Contract Act which provides that the liability of the surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract. But there is no provision in the Contract Act to the effect that the properties of the surety can be retained by the creditor as security for the debts due from the principal debtor to the creditor.
But there is no provision in the Contract Act to the effect that the properties of the surety can be retained by the creditor as security for the debts due from the principal debtor to the creditor. On the other hand, Courts have taken a view that Bank in exercise of its general lien cannot retain the private property of a partner to satisfy the outstanding balance in the general account of his firm notwithstanding the settled position of law that the partners are jointly and severally liable for the debts of a firm of which they are the partners. The aforesaid decision in Wolstenholm v. Sheffield Union Banking Co. Ltd. (supra) has been followed by a Division Bench of the Punjab High Court in Punjab National Bank Ltd. v. Arura Mal Durga Das and Anr., AIR 1960 Punjab 632, for coming to the conclusion that : "a bank has no lien on a partner's private account for an overdraft on partnership account or vice versa for want of reciprocity." Similarly, in Gurbax Rai and Ors. v. Punjab National Bank (supra) cited by Mr. Patnaik, learned counsel for the petitioner, the Supreme Court has held that goods which are offered by the firm as security for the cash credit facility could not be utilized for adjusting the liability of the partners to the Bank. The relevant portion of the said judgment of the Supreme Court in Gurbax Rai and Ors. v. Punjab National Bank (supra) is quoted herein below : "The question is : Is it open to the Bank which held pledged goods against the cash credit facility to adjust the amount recovered from the pledged goods for wiping out separate dues of the individual partners ? The goods were of the firm. They were not the goods of the partners. The goods were not offered as security for the individual debt of the partners. The goods were pledged against cash credit facility of the firm. Therefore, when the amount on account of the destruction of the pledged goods of the firm was recovered from the insurer, it must be given credit only in the cash credit account and to that extent the liability in the cash credit account would be reduced.
The goods were pledged against cash credit facility of the firm. Therefore, when the amount on account of the destruction of the pledged goods of the firm was recovered from the insurer, it must be given credit only in the cash credit account and to that extent the liability in the cash credit account would be reduced. ....."“ We may also extract paragraph 11 thereof hereunder, where the Orissa High Court holds that only 'goods' bailed could be retained as against general balance in the customer's account who has bailed the 'goods' and not for general balance for some other customer's account: “11. In Syndicate Bank v. Vijay Kumar and Ors. (supra) cited by Mr. Kanungo, the judgment-debtor who owned two Fixed Deposits executed two letters on 17.9.1980 creating a lien in favour of the Bank over the two Fixed Deposit Receipts and on these facts the Supreme Court held that the two letters executed by the judgment-debtor on 17.9.1980 created a lien in favour of the Bank over the two Fixed Deposit Receipts, this is thus a case where the owner of the Fixed Deposit Receipts had expressly agreed that the Bank would have lien over the Fixed Deposit Receipts. In this case, the Supreme Court has not laid down any law that the Bank can exercise its general lien under Section 171 of the Contract Act over the properties of the surety for the liabilities of the principal debtor to the Bank, In S. Vasupataiah v. The Vysya Bank, Kudagenahalli Branch (supra) and in City Union Bank Ltd. v. C. Thangarajan (supra) cited by Mr. Kanungo, the learned single Judges of the Karnataka High Court and the Madras High Court respectively have referred to the aforesaid decision of the Supreme Court in Syndicate Bank v. Vijay Kumar and Ors. (supra) and have held that the Bank can exercise lien over the properties of a guarantor or a co-promisor for recovery of the outstanding dues of the principal debtor or the promisor to the Bank. But as we have discussed above, Courts in England and in India have held that the Bank can exercise general lien over the properties of a customer for the general balance in such customer's account and not for the general balance of some other customer's account.
But as we have discussed above, Courts in England and in India have held that the Bank can exercise general lien over the properties of a customer for the general balance in such customer's account and not for the general balance of some other customer's account. Unless therefore a customer has expressly agreed that his properties can be retained as security for the outstanding balance in the account of some other customer, a Bank cannot exercise lien over the properties of such customer under Section 171 of the Contract Act. In the guarantee agreement executed by the petitioner for the cash credit account of M/s. Bimala Bhandar, a copy of which has been annexed to the counter-affidavit as Annexure- R/2, there is no such provision that the Bank can retain the properties of the petitioner as security for the outstanding balance in the loan account of M/s. Bimala Bhandar. In fact, the Bank has also not relied on any such provision in the guarantee agreement and instead has relied on the bye-laws of the Bank and the general lien of the Bank as provided in Section 171 of the Contract Act. As we have seen, the Bank has no such right under the bye-laws or Section 171 of the Contract Act to retain the gold ornaments of the petitioner as security for the outstanding balance in the loan account of M/s. Bimala Bhandar.” (C) In the case of Vijaya Bank and Anr. Vs. Naveen Mechanised Construction (Private) Limited and Ors.(supra), the Karnataka High Court was also of the same view that retaining of security could be only for repayment of debt borrowed by the same person. The relevant extract is reproduced below: “13. …. 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.
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.” (D) Lastly in the case of Devi Ispat Limited and Ors. Vs. The Central Bank of India and Ors. (supra), the Calcutta High Court followed the judgment in the case of Alekha Sahoo Vs. Puri Urban Co-operative Bank Ltd. And Ors. (supra) already referred to above. 34. Thus, for all the reasons recorded above, we do not find any infirmity in the order of the learned Single Judge directing the appellant Bank to return the title-deeds forthwith and also to discharge the charge recorded in the records of the Registrar of Companies. The appeal lacks merit and is accordingly dismissed. Consequently, Civil Application No.1 of 2019 stands disposed of.