Lien for a time barred loan
Riya Sharma
(Querist) 09 November 2013
This query is : Resolved
Hello,
I need expert opinion regarding time barred claim.
We took an educational loan in 2007. Till 2009, we paid all the EMIs regularly. Later the bank misplaced/mishandled the loan details and refused to accept the EMI. By mistake they saved it as a Housing Loan instead of Educational Loan. Even after repeatedly asking for the EMI details, they didn't give us any details of outstanding loan amount. Therefore we stopped paying installments. There was no notice sent by the bank till 3 years.
After 3 years, in 2013, they called my father and asked for the payment. My father knew about the Time Barred limitation and hence he didn't give any acknowledgement to the bank. My father asked them to send a legal notice but the bank manger didn't send us any notice (as he knows that they can't get the claim legally after 3 years).
One month back, some amount was debited to the account for Income Tax rebate. The Bank is not allowing us to take the money from the account anymore saying that it is a "Freeze Account" in lien of the unpaid educational loan. The amount is shown as a ledger transaction not available for withdrawal. The available balance is shown as negative amount.
Is it legal for the bank to lien a account for a Time Barred loan? What can we do to withdraw the money from this account? Please advice us regarding this.
Thanking you in anticipation.
Best Regards,
Priya.
Rajat Bindal 09917149977
(Expert) 09 November 2013
Very interesting.
1. Every time when you inquired the bank about EMI, you had in fact acknowledged the debt and the period of limitation of 3 years starts from last such inquiry.
2. The period of limitation starts from date of default. So on every such defaulted instalment, a fresh cause of action arises and survives for 3 years.
3. The law of limitation closes the doors of court for recovery but it do not forbid the creditor from recovering its money otherwise.
So bank can very well hold and recover the amount as they did in present case.
However, there is one hope, you can file a suit saying that in case of accounts the bank is trustee of the deposit and it cannot hold the amount against this trust.
All the best.
BAALASUBRAMANNYAMM
(Expert) 09 November 2013
Kindly go through the order, if it useful to know the situation of your case.
Banks cannot invoke powers to create general lien to freeze a savings bank account and recover outstanding dues from an account holder without prior intimation to the customer, the Maharashtra state consumer commission held last week.
Invoking the provision for creating lien or freezing a savings bank account has to be with prior intimation to the complainant as opportunity of natural justice, the commission noted, reversing the Mumbai suburban district consumer forum’s ruling.
The district forum had rejected Chandivali resident Arti Krishnan’s complaint against HDFC Bank, stating that the bank was empowered to create lien on her savings bank account and was empowered to debit money from the account for settling purported credit card dues.
On April 25, 2006, Krishnan, who had lost her credit card, was issued a new card. There was a dispute about outstanding dues on the previous card and the bank agreed to settle it at Rs29,000, which Krishnan was supposed to pay in instalments.
Accordingly, she paid first instalment of Rs4,000. But even after adjustment of this amount, the bank showed an outstanding sum of Rs50,802. Later, the bank froze her savings account and withdrew a sum of Rs80,488.
HDFC Bank contested the complaint, contending it had the power to create lien in view of proviso to section 171 of the Indian Contracts Act, 1872, and there were terms in the credit card agreement empowering the bank to act without notice.
The bank, however, did not place the copy of the credit card agreement before the state commission.
“In the absence of documentary evidence on record, relying on the provisions will be of no use,” the commission said, and concluded that action such as creating lien, freezing an account and withdrawing money has to be taken with prior intimation to the customer.
It held the bank guilty of deficiency in service after finding that no notice had been issued to the Chandivali resident, and directed the bank to refund a sum of Rs78,640, with annual interest at 9% within two months.
P. Venu 
(Expert) 10 November 2013
May be, the Bank is at fault as to procedure. But having availed of the loan facility, how far is it ethical take advantage of the Limitation Act?
Sudhir Kumar, Advocate
(Expert) 10 November 2013
limitation act only bar civil suit. it is doe snot bar keeping lien on other property in lieu of debt. you may go better for settlement.
V R SHROFF
(Expert) 10 November 2013
settle with bank; It is public money, so loss to gen public ,
As Bank fault is obvious, the bank will take lenient action.
Anirudh
(Expert) 10 November 2013
The three year limitation in terms of Article 26 of Schedule-I of the limitation Act would arise only in the following situation:
"For money payable to the plaintiff for money found to be due from the defendant to the plaintiff on ACCOUNT STATED BETWEEN THEM.
The period begins from the time When the accounts are stated in WRITING signed by the defendant, unless by a simultaneous agreement in writing made payable at a future time, and then when that time arrives.
In the instant case, no such accounts are stated in writing between the defendant and the plaintiff. Therefore the question of limitation period starting and ending does not at all arise.
I am not for a moment, commenting on the authority of the bank about its lien on the savings bank account etc.
R.K Nanda
(Expert) 10 November 2013
settle amicably with bank.
Sudhir Kumar, Advocate
(Expert) 10 November 2013
repeated
http://www.lawyersclubindia.com/experts/Lien-for-a-time-barred-loan-433631.asp#.Un-KjSfQyVE
malipeddi jaggarao
(Expert) 12 November 2013
Though it is repeated query, having availed the education loan for a benevolent purpose you have the responsibility to repay the same. Ofcourse, if any excess interest charged, you can contest. Otherwise bring the deficiencies of the Bank to the higher authorities ask them remission in the interest as had they been acted in time, you would have paid the loan amount and saved the interest. Go for a settlement. Bank will also agree as there are certain omissions and commissions on the part of the bank which go against its own interest. But taking shelter under Limitation Act and avoiding total repayment is not fair. As regards limitation, it is term loan (obviously education loan is term loan) the limitation starts from the date of default of the instalment or acknowledgement in writing whether it is in specific proforma of the bank of not. Even a letter addressed to the Bank, or a signature of credit slip for deposting some amount will be treated as acknowledgement.
