cpc

lien u/s 171- indian contract act against dues from customer

Consultant

Hi~

Pls discuss on the following instance:

Suppose, for instance, a borrower availed a Mortgage Loan of Rs. 10 Lakhs for a tenure of 5 years, out of which he has paid his EMIs for the period of 24 months, continuously, and  failed to remit his EMIs on the following 3 months i.e., from July’2009 to September’2009. But again, he started paying from the month of October’2009 to February’2010 without any interruption. Although, he communicated to his Bank Manager that he’d adjust the overdue amount (Apprx. Rs. 85,000) on the successive months, the manager has sent the SARFAESI Notice by declaring his account as NPA.

As per RBI Guidelines, we understand that the account of any concern/individual can be declared as NPA by the banks when NO amount (Interest/Principle) is deposited by the borrower/guarantor in their account for the last 90 days (earlier it was 180 days) and the Overdue should be greater than or equal to Rs. 1 LAKH. But, in this case, the borrower has deposited the EMI amount in his account thru’ Cheque or NEFT regularly, except for the aforesaid period of 3 months, and the Overdue only is less than 1 Lakh.

Moreover, he never effected any Electronic Standing Instruction (SI) or ECS from his SB account. But, the Manager has effected the SI from borrower’s SB account (maintained with the same branch) without the borrower’s consent / knowledge. Later, we understand about the Manager’s intension that he was trying to show the borrower as ‘Defaulter’. While asking about this to the concerned manager, there was a dispute among the borrower and the manager. Also, the Manager added that the borrower’s overdue amount is around Rs. 1.4 Lakhs (with some penal charges) so that he has sent the Notice u/s 13(2); but refused to send the Amortization Schedule of borrower’s Loan A/C though he requested the same, many times. But there's no chance of these much amount to be reflected according to borrower's view.

As per RBI guidelines, we understand that ‘’Banks have a right to exercise lien under section 171 of the Indian Contract Act against the dues from constituents/customers. However, the banks CAN NOT exercise lien over the personal account of a customer on the ground that money was due to the bank in another account where he acts in a different capacity, if there is no agreement to that effect’’

Also, Is that been possible to get Stay/Interim order by filing an appeal u/s 17 with DRT before the possession has been taken by Banks? Else, Can the Borrower/Guarantor pay any partial or part amount ( i.e., 1/4th or 1/3rd of the total amount outstanding) and stop/hold/postpone the action u/s 13(4)?

So, kindly clarify on this matter and let me know how to deal with his case. Thanks!!

 
Reply   
 

you can file an appeal before the DRT praying for the relief, subject to further payment as imposed by DRT - maybe 10% of the outstanding.

 

Regards

 

T SANKARAVEL

 

9841098484

 
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Consultant

IT IS NOT possible to get Stay/Interim order by filing an appeal u/s 17 with DRT before the possession has been taken by Banks? BECAUSE AS PER MARDIA CHEMICAL'S CASE THE RIGHT TO FILE APPEAL u/s 17 ACCRUES ONLY AFTER MEASURES HAVE BEEN TAKEN u/s 13(4). YES,  the Borrower/Guarantor Can pay any partial or part amount ( i.e., 1/4th or 1/3rd of the total amount outstanding) and stop/hold/postpone the action u/s 13(4) BY MAKING SETTLEMENT WITH BANK. In the meantime, file REPRESENTATION u/s 13(3A) raising all GRIEVANCES AGAINST THE BANK. This will BE helpful, if ultimately, YOU ARE COMPELLED TO FILE APPEAL u/s 17 before DRT.

Further, AS PER LATEST SC Judgment (Kaniyalal Lalachand Sachdev V State of Maharashtra: 2011(2) SCC 782; Decided on 07.02.2011) IT IS NOW possible to get Stay/Interim order by filing an appeal u/s 17 with DRT TO RESIST DM/CMM Order u/s 14 for TAKING PHYSICAL possession by Banks.
 
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Lawyer

Hi, 

Answering your second part of the question, i dont think the bank can exercise lien over your other account which you have not secured for the current loan. section 171 of the contract act states that the bankers, in absence of a contract to the contrary, retain as security for general balance account, any goods bailed to them. therefore what is required to be seen is whether there is any contract to the contrary, which prevents the bank from execising their general lien and as to whether any goods have been bailed to them. and even a english case which has been decided by the privy council has held. in George henry chambers vs patrick davidson and others (L.R. 1 PC 296) regarding lien of banks

" But lien is not the result of an express contract, it is given by implication of law. if, therefore, a mercantile relation, which might involve a lien, is created bya written contract, and security given for the result of the dealings in that relation, the express stipulation and agreement of the parties for security exclude lien, and limits their rights bythe extent of the express contract that they have made. Expressum facit cessare taciturn. If a consignee takes an express security, it excludes general lien."

 
Reply   
 

Dear Sir,

 

My name is abraham.  I have a similar situation.  I was holding a credit card with HDFC back which was linked to my saving a/c ABC,

Later I was jobless (2009) hence could not pay the dues. I got the job recently 3 months back and salary account is with HDFC bank.

HDFC bank has taken lien of the account XYZ.  This account is not linked with the credit card.  the amount in the account is on hold now.

Please let me know what my options are.

Do they have the right to hold the amount, although i have the intention to pay back (actuals without interest)

Warm Regards

Abraham.

 
Reply   
 
FIN

@ Abraham/discography,

You may obtain certified copies of CC application and salary a/c opening form(old and new).

The banker has exercised its right to lien and set off. A clause to this effect is usually mentioned in CC application, signed by customer. In your case this clause may/may not be mentioned in CC application. Otherwise also banks claim that this in itself is a law.

It shall be appropriate to close the salary a/c at once and opt for salary by cheque/DD or in other bank a/c e.g. SBI/Axis bank. Usually companies offer choice of more than one bank fore credit of salary. Otherwise bank shall continue to set off the amount equivalent to total dues i.e. principle+ penalties+ interest+ finance charges + taxes.

Your lawyer can set the course for remedy in your case.

You can opt for settlement also with the bank, and bank may agree for principle amount if you negotiate hard.

 
Reply   
 

Thanks a lot for the advise sir,

Unfortunately our company doesnt allow alternate banking facility neither do they give salary in cheques or cash.

I had to settle for 50% of the amount.  10% was principle the remaining was interest.

Sad our legal system has empowered them to an extent that they use arm twisting methods.

 
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Advocate

It is the practice in banking to hold the securities or whatever coming to their hands for setting of the defaulted dues of the borrowers.

By remitting the defaulted portion of the NPA account alone the bank will not re-classify the account as               out-of-NPA and hence can proceed under SARFAESI.  Exemption for less than Rs. one lakh of the dues, is not for the defaulted/out of order portion alone; but the full loan dues must be less than Rs.1 lakh.

 
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Hi. I have contacted DRT in Bangalore in relation to a hold on my savings a/c for cc dues. They say that they help in getting stay orders for issues with home loan dues only. Please advise. I called you yesterday as well.

 
Reply   
 

Hi.

As discussed DRT in Bangalore  is not accepting my case. Will text you my details an wait for your further advice.

Lakhi

 
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