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Issues: (i) whether the bank had a general lien over the fixed deposit receipts furnished by the customer as security for issuance of the bank guarantee; (ii) whether the attachment of the deposits and the direction to the bank to deposit Rs. 35,000 could be sustained despite the bank's lien.
Issue (i): whether the bank had a general lien over the fixed deposit receipts furnished by the customer as security for issuance of the bank guarantee.
Analysis: A banker has a recognized general lien over securities and negotiable instruments received in the ordinary course of banking business, unless displaced by an express or implied contract. The covering letters executed at the time of deposit expressly authorized the bank to retain the deposits and renewals so long as any amount remained due to the bank. The fact that the deposits were also linked to the bank guarantee did not restrict the lien to a mere particular lien, and the endorsement referring to the guarantee did not negate the broader contractual and mercantile right of retention and set-off.
Conclusion: The bank had a general lien over the fixed deposit receipts, and that lien continued notwithstanding discharge of the bank guarantee.
Issue (ii): whether the attachment of the deposits and the direction to the bank to deposit Rs. 35,000 could be sustained despite the bank's lien.
Analysis: Money in a deposit account may be attachable in execution, but the court must take account of the bank's lien and the bank's right to adjust the deposits against the customer's liabilities. Since the bank was entitled to retain the deposits toward its dues, only any surplus remaining after adjustment could be treated as the judgment-debtor's attachable property. The direction requiring the bank to deposit Rs. 35,000 ignored this position and proceeded without first determining whether any balance actually remained in favour of the debtor.
Conclusion: The attachment order and the direction to deposit Rs. 35,000 could not be sustained as made.
Final Conclusion: The bank's lien prevailed over the attached fixed deposits, and the matter was left for reconsideration only to the limited extent of determining whether any surplus, if at all, remained attachable after adjustment of the bank's dues.
Ratio Decidendi: Where deposits are placed with a bank under an express arrangement preserving the bank's right to retain them so long as any amount is due, the bank's general lien and right of set-off subsist independently of the fate of the related guarantee, and execution attachment can operate only on any surplus remaining after such adjustment.
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