TaxTMI 
TaxTMI 
TaxTMI 
2011 (2) TMI 1537
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....ments under the name of M/s. Aarthi Bala Tea Plantations and M/s. Sanjay Bala Tea Plantations. The deceased availed loan from the Appellant-Bank and deposited the Title Deeds by way of collateral security and also executed various documents in order to secure due payment of loan. After the death of the said N.P.S. Mahendran, the Respondents/Writ Petitioners became liable to pay ` 1,14,86,428.32, which was outstanding in several loan accounts. The 1st Respondent, widow, liquidated the entire outstanding dues lying in the account and the Bank, after acknowledging the same, issued 'No Due' Certificate in her favour. The Respondents, then, requested the Appellant Bank to return the Title Deeds relating to the properties, which were deposited with the Bank by Late N.P.S. Mahendran. Firstly, the Appellant Bank informed the Respondents that after necessary approval from the controlling office, the documents will be returned, but in spite of repeated requests, the documents have not been returned. It appears that one of the Guarantors filed an Application before the Debts Recovery Tribunal, Chennai, seeking for return of documents, which was allowed by the Tribunal by order dated ....
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.... the Writ Petition was allowed and a direction was issued for the return of the title deeds in favour of the Respondents/Writ Petitioners. Hence, this Appeal by the Appellant-Bank. 5. Mr. G. Masilamani, learned Senior Counsel appearing for the Appellant assailed the impugned judgment and order as being contrary to law and is without jurisdiction. Learned Counsel firstly submitted that the learned Judge has committed serious error in holding that the liability of the Guarantor stands extinguished on his death. Learned Senior Counsel further submitted that it is the well settled proposition of law that the Guarantor's liability will be fastened on the estate being inherited by his legal heirs, since the property stood mortgaged in favour of the Appellant-Bank by deposit of Title Deeds by the deceased with an intention to create mortgage. Though the liability in the specific account for which the mortgage was created has been repaid, the Bank is entitled to seek for recovery of the dues in the said account. In this connection, learned Senior Counsel relied upon a decision of the Supreme Court in the case of Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhuwala 2009 (9....
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....ly the deceased Mahendran never intended to create equitable mortgage in respect of the loan given to M/s. Somerset Tea Plantation. Lastly, it was contended that the learned Single Judge rightly allowed the Writ Petition and directed the Appellant-Bank for the return of the documents of title. 7. After considering the rival contentions made by the learned Counsel appearing for the parties, we would like to first quote the conclusion arrived at by the learned Single Judge, as revealed from paragraphs 9 and 10 of the judgment. 9. No doubt, Section 171 of the Indian Contract Act facilitates the Bank to retain the documents as a security for general balance of account, any goods bailed to them. In the case on hand, it is not the case of the Respondent-Bank that either the First Petitioner's husband, Late N.P.S. Mahendran or the First Petitioner herself is due to the Bank for the loan availed by them. In fact, even in the Counter Affidavit, the First Respondent made it very clear that the First Petitioner's husband as well as the First Petitioner had cleared all the dues to the bank and hence, they have issued a letter dated 24.10.2007 confirming the same. But, it is the case....
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....guished on his death so far the liability which existed on the date of the death of the Guarantor. It is well settled that on the death of the Guarantor, the liability exists and such liability can be fastened on the estate of the deceased, being inherited by his legal heirs, and the creditor can recover the dues out of the estate of the deceased. 9. After having decided the above question in favour of the Appellant-Bank, we now move on to consider the more important question in this appeal, viz., as to whether the Appellant-Bank shall be entitled to retain the documents of title in respect of the property which has been inherited by the Respondents claiming a right of general lien under Section 171 of the Indian Contract Act. Before we delve into the factual and legal aspects, it would be necessary to look into Section 171 of the Indian Contract Act, 1872 and for easy reference the same is extracted as 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....
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....olume-II, Page 496 on Bankers' Lien, it is stated as follows: ....The most frequent example of circumstances inconsistent with the general lien is in the case of a deposit expressed to cover an advance for a specified purpose. However, once the original purpose has been fulfilled by repayment of the specified advance, if a customer knowingly permits the banker to retain the security, a general lien may ultimately be implied and its protection then claimed in respect of other advances. 14. In the instant case, the borrower, (late) N.P.S. Mahendran, has admittedly deposited the Title Deeds of the property to secure a loan transaction availed in respect of two Plantation Companies. This fact has not disputed by the Appellant-Bank. Therefore, we have no hesitation to hold that this contract/mortgage, had been created by the deceased borrower for a specific purpose and for a specific loan and the contract was self-contained and the terms and conditions were binding upon both the borrower as well as the Bank. In other words, the deposit of Title Deeds by which the mortgage was created by the deceased borrower was for a specific purpose to cover an advance for a specific loan. When....