Shri Ganpati Jurists Legal Learning – Bank’s Right to General Lien under Section 171 of the Indian Contract Act
Key Takeaways:
🔹 A bank cannot exercise its general lien under Section 171 of the Indian Contract Act over the property or securities of a guarantor for loans or liabilities owed by the principal debtor, unless there is a specific agreement to that effect.
🔹 The right of lien is a right to retain property until the specific dues linked to that very property are cleared. It cannot be stretched to cover liabilities from other independent transactions.
🔹 Where a mortgage is created over an immovable property (such as deposit of title deeds) for a specific loan, the bank’s right is limited to that particular loan. It cannot use those title deeds to satisfy dues arising from other loans not covered by the same mortgage.
🔹 In the absence of any express clause in the guarantee agreement, and no authority under bank bye-laws or any statutory provision, a bank cannot withhold a guarantor's property or security to satisfy someone else’s debt.
🔹 Retaining such property without legal backing is arbitrary and unlawful, and the bank can be directed to return the property (such as gold or title deeds) immediately.
📘 Legal Insight:
Section 171 of the Indian Contract Act provides general lien rights to bankers, but not absolute powers. Courts have consistently ruled that individual customer consent and specific agreements are required to use lien across different accounts or persons.
📍#LegalAwareness #IndianContractAct #Section171 #BankLien #GuarantorRights #PropertyLawIndia #LawyersBathinda #AdvocatesInBathinda #BathindaAdvocates #LegalRights #BankingLaw #ShriGanpatiJurists #KnowYourLaw #LienLawIndia #LegalLearning