DR RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW

FINAL DRAFT

LAW OF CONTRACTS
ON THE TOPIC:
RIGHT TO LIEN IN THE LIGHT OF RECENT CASES

SUBMITTED TO: SUBMITTED BY:

DR. VISHALAKSHI VESEGNA AYUSH PRATAP SINGH

ASSOCIATE PROFESSOR (LAW) BALLB (HONS.) SEMESTER III

ROLL NO-170101042
RMLNLU, LUCKNOW

ACKNOWLEDGEMENT
“Words can never convey what deeds have done.”

Writing a project on any topic is never a single man’s job. I am overwhelmed in all humbleness
and gratefulness to acknowledge the depth to all those who have helped me to put these ideas,
well above the level of simplicity and into something concrete.

I are very thankful to our Contracts Professor Dr. Vishalakshi Vesegna for her valuable help.
She was always there to show me the right track when I needed her help. With the help of her
valuable suggestions, guidance and encouragement, I am able to complete this project.
I would also like to thank my friends, who often helped and gave me support at critical junctures
during the making to this project.

I hope you will appreciate the hard work that we have put in this project work.
CONTENTS

 DECLARATION
 OBJECTIVITY
 NEED FOR THE STUDY
 STATEMENT OF THE PROBLEM
 LITERATURE RIVIEW
 INTRODUCTION
 TYPES OF LIENS
 PARTICULAR LIENS
 GENERAL LIENS
 BANKERS LIEN
 FACTORS
 WHARFINGERS
 ATTORNEYS OF HIGH COURT
 ADVOCATES
 DIFFERNCES BETWEEN PARTICULAR AND GENRAL LIEN
 FINDERS LIEN
 CONCLUSION
DECLARATION:

I, Ayush Pratap Singh , hereby declare that the project work entitled “Explain right to lien in light
of recent cases ” submitted to the Dr. Ram Manohar Lohiya National Law University, Lucknow is
a record of an original work done by me under the guidance of Dr. Vishalakshi Vesegna, Associate
Professor, Faculty of Law, Dr. Ram Manohar Lohiya National Law University and this project
work is submitted in the partial fulfilment of the requirements for the award of the degree of B.A.
LLB. (hons).

OBJECTIVE:

This project seeks to explore the relevance and enforceability of right to lien in light of recent
cases. Contractual law is governed by the Indian Contract Act, 1872 along with the Specific Relief
Act, 1963. Company law is governed by the Companies Act, 2013 – which is an updated legislation
based upon the Companies Act, 1956.

NEED OF THE STUDY:

Right to lien is highly challenging as a topic because of the misinterpretation and the suits that
follow in the legal field. Therefore, a thorough research is essentially required in this area.

STATEMENT OF PROBLEM:

This project aims to find the answers to the following questions:

1. What is the exact meaning of the right to lien and it types and what are its applications?
2. How right to lien has been interpreted by the courts in the light of the recent cases?

LITERATURE REVIEW:

1. Avtar Singh, Contract and Specific Relief (12th edn, EBC Publishing Ltd 2017).
2. Dinshah Fardunji Mulla, Mulla The Indian Contract Act (13th edn, Lexis Nexis Ltd 2011).
3. PC Markanda The Law of Contract (2nd edn, Wadhwa Nagpur 2008
INTRODUCTION

The right to retain the lawful possession of the property of another until the owner fulfills a legal
duty to the person holding the property, such as the payment of lawful charges for work done on
the property. A mortgage is a common lien.

In its widest meaning this term includes every case in which real or personal property is charged
with the payment of any debt or duty; every such charge being denominated a lien on the property.
In a more limited sense it is defined to be a right of detaining the property of another until some
claim be satisfied.

The right of lien generally arises by operation of law, but in some cases it is created by express
contract.

There are two kinds of lien; particular and general. When a person claims a right to retain property,
in respect of money or labor expended on such particular property, this is a particular lien.

In absence of any contract the contrary is entitled to retain goods , papers and other property
whether movable or immovable of the principal recived by him until the amount due to himself
for commission, disbursement and services in respect of the same has been paid or accounted for
to him .

In addition of the above right retained lord Ellenbrough in houghnot vs matthew1 described the
expended lien to be right in one man to retain that which is in his possession belonging to other
until certain demands of the person who is in possession are satisfied.

The legal right of a creditor to sell the collateral property of a debtor who fails to meet the
obligations of a loan contract. A lien exists, for example, when an individual takes out an
automobile loan. The lien holder is the bank that grants the loan, and the lien is released when the
loan is paid in full. Another type of lien is a mechanic's lien, which can be attached to real property
if the property owner fails to pay a contractor for services rendered. If the debtor never pays, the
property can be auctioned off to pay the lien holder.

1
(1803)3bos p485,494
TYPES OF LIENS

PARTICULAR LIENS OR SPECIAL LIENS

Bailee’s particular lien.—Where the bailee has, in accordance with the purpose of the
bailment, rendered any service involving the exercise of labour or skill in respect of the goods
bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he
receives due remuneration for the services he has rendered in respect of them.

As per section 170 of the Indian Contract Ac, 1872, the particular lien is defined as a right of a
person to retain particular goods bailed to him/her as security, for non-payment of dues.

In conformity to the objective of bailment, when bailee has employed skill or labor and improved
the goods bailed to him/her. He/she is entitled to consideration for his service, and if bailor denies
paying the amount, then he/she can retain the goods, against remuneration.

In such a case, the bailee has right of the particular lien until he/she receives compensation for the
services rendered, provided the services are provided in full within the stipulated time. Moreover,
the bailee has no right to sue the bailor.

On the other hand, if the bailee delivers the property belonging to bailor without any consideration
for the services provided, he/she can sue the bailor, and the particular lien can be waived.

Hutton vs car maintenance co.2

In order to exercise a lien over a car taken in for repair, the fact that labour had been expended in
maintaining the article was not enough to give rise to a lien for charges. What was required was
improvement in the condition of the article.
Sargant J said: that there could be no lien over a motor car ‘by virtue of the arrangement under

2
[1915] 1 Ch 621
which the owner was to be at liberty to take the car away, and did take the car away, as and when
she pleased. The existence of a lien seems to me to be inconsistent with an arrangement under
which the article is from time to time entirely out of the possession and control of the contractor’.

In case chand mal v ganda singh3 and kalloomal tapeshwariprasad&co. v R.C.&f.ltd4 the bailee
claimed lien for storage of sugar , it was held that such custody not being a service invoving the
exercise of labour or skill within the meaning of section 170 the bailee was not entitled to lien.

On the same reason , a person to whom cattle are given for grazing does not have the right of lien
on the for his charges vothoba laxman kalar v maroti ukandsa kalar5

In case legg v evans6 it was held that lien is a personal right which continues only so long as the
possessor holds the goods.

GENERAL LIEN
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, any
goods bailed to them; but no other persons have a right to retain, as a security for such
balance, goods bailed to them, unless there is an express contract to that effect

General Lien means the right of an individual to retain or detain as security any movable property,
which belongs to someone else, against a general balance of the account, until the liability of the
holder is discharged. It is described under section 171 of the Indian Contract Act, 1872.

A person can waive the right of lien through a contract. It is commonly available to bankers,
factors, wharfingers, high-court attorneys, etc. who keep the goods bailed to them, during the
course of their profession and does not require any contract to that effect. Unless there is an express
contract in this regard, no other person can retain the property of another as the security of the
balance due to them.

3
AIR(1987)2SCC330
4
AIR1990ALL214
5
AIR1940NAG273
6
(1840)151ER311
In general lien, the property on which lien is exercised can only be retained, but cannot be sold for
any payment lawfully due to him.

BANKERS LIEN

A bankers’ lien on negotiable securities has been judicially defined as ‘an implied pledge’. A
banker has, in the absence of agreement to the contrary ,a lien on all bills received from a customer
in the ordinary course of banking business in respect of any balance that may be due from such
customer." it should be noted that the lien extends only to negotiable instruments which are
remitted to the banker from the customer for the purpose of collection .When collection has been
made the process may be used by the banker in reduction of the customer’s debit balance unless
otherwise earmarked.

It has been held in foley v hill7 and official assignee of madras v smith8 that money paid into a bank
to be credited into the current account of the person making the payment does not constitute the
bailment

K.SITA V.CORPORATION BANK9

The short question for decision in this writ petition is whether the respondent-bank, in exercise of
the general right of Banker's lien has right to retain the gold ornaments, which were pledged to it
by the petitioner for raising a particular loan, even after the discharge of the said loan, for the
purpose of recovery of another loan subsequently advanced to the petitioner by the respondent.
For a proper appreciation of the question involved, it is necessary to state briefly the facts of the
case.

It was held that the bankers lien contemplated by section 171 has an overriding effect on the
general provision of section 174 which provides for relationship between the pawnor and the
pawnce in respect of the goods pledge . the bank therefore can retain the pledge ornamnets if the
debtor had not cleared another loan advance to the petitioner.

7
(1840)9ER1002
8
ILR1908Mad68.
9
1999 (3) ALD 377, 1999 (3) ALT 443
SHIVAM CONSTRUCTION CO. V. VIJAY BANK, AHEMDABAD10

In this case the bank had given overdraft facility to a partnership firm and its partners for granting
overdraft facility . the partners and the firms made a default in repayment of of loan inspite of
notices given by the bank . it was held that in such a situation under the terms of the loan as well
as in exercise of the right of set off and also by way of bankers general lien . the bank was entitled
to liquidate the fixed deposit receipts and appropriate that amount towards overdraft account.

Factors lien

Factor's lien is a lien against property held on consignment by a factor, conferring the right to
retain possession of the property until the factor receives full payment from the principal. Factor's
lien is available on:

1) a principal’s goods in Factor's possession,

2) proceeds of such goods and securities taken for the price, for advances, expenses, and
commissions,

3) general balance of principal’s accounts,

4) debts connected with the agency, which the factor has undertaken as surety or for the
accommodation of the principal, and

5) to interest on subsequent advances.

However, factor’s lien does not extend to debts outside the agency.

In case see spalding v ruding11and frith v forbes12 it was held that a factor like a banker will not
have a right of lien on such goods as have come to his possiession for a specific purpose which
impiedly excludes the right of lien.

10
AIR 1997Guj24, (1997) 1 GLR 774
11
(1843)63RR120
12
(1862)135RR217
WHARFINGERS

Wharf means a place contiguous to water used for the purpose of laoding and unloading goods ,
and over which the goods pass in loading and unloading. It is essentiaql to a wharf that goods
should be in transit over it . wharfinger is he that owns or keeps a wharf, or hath the oversight or
the management of it . a wharfinger has general lien on the goods bailed to him until his wharfage
which means charges due for the use of his wharf are paid. The fact that a manufacturer has a
wharf upon which he receives goods brought to him by customers does not entitle him to claim
lien as a wharfinger upon such goods he is not a wharfinger in real sense of the word.

ATTORNEY OF HIGH COURT

An attorney or solicitor who is engaged by a client is entitled to general lien until the fee for his
professional service and other costs incurred by him are paid. The Bombay high court held in a
case that a solicitor who is discharged by his client has a right to hold the papers entrusted to him
subject to lien for costs . but if the attorney himself decides no to act for the client he fortifies his
lien and therefore must handover the papers to the client whether his costs are paid or not.

Bombay high cort held in the case balkesserbai v naranji walji13 that a solicitor who is discharged
by his client has the right to hold the papersentrusted to him subject to his lien for costs.

ADVOCATES

The supreme court has laid down in :-

R.D.Saxena vs Balram Prasad Sharma14

13
ILR(1880)4BOM352
14
(2000)7scc264,AIR2000SC2912
Advocates have no right of lien over client’s papers for their unpaid fee . the court said that the
files containing copies of record (perhaps some orginal documents also ) could not be equated with
words goods reffered in section 171. It could not be said that the papers lying with the advocate
were in category of the goods bailed .in the case of litgation pares in the hands of the advocates
there is neither dilevery of goods nor any contract that they shall be returned or otherwise disposed
of . that apart the word goods mentioned in section 171 is to be understood in the sense in which
that word is defined in sales of goods act thus they have to be saleable goods . there is no scope
for converting the case files into money nor they can be sold to aany buyer . hence an advocate
cannot place reliance upon section 171.

DIFFERENCES BETWEEN GENERAL AND PARTICULAR

LIEN
The points given below describe the difference between general lien and particular lien in detail:

General Lien can be described as the right granted to a person to retain the possession of goods
belonging to another person against the general balance of the account. On the contrary, the
particular lien can be understood as the right of an individual to keep specific goods bailed, until
the dues relating to those goods are discharged.
A general lien is available for any goods, in respect of which the claims are not satisfied.
Conversely, the particular lien is available only against the goods in respect of which bailee has
expensed skill and labor.

General Lien is not automatic but is recognized through an agreement, whereas particular lien is
automatic.

The holder of goods has no right to sell the goods to discharge the amount unpaid, in the case of
general lien. On the other hand, in the case of particular lien the bailee can not sell the goods to
realize his/her debts, however, in special conditions, the right is conferred.

General Lien is most commonly exercised by bankers, wharfingers, factors, policy brokers,
attorneys, etc. As against this, the particular lien is employed by a bailee, unpaid seller, finder of
goods, pledgee, partner, agent, etc.

FINDERS LIEN
Right of finder of goods, may sue for specific reward offered.—The finder of goods has no
right to sue the owner for compensation for trouble and expense voluntarily incurred by him
to preserve the goods and to find out the owner; but he may retain the goods against the owner
until he receives such compensation; and where the owner has offered a specific reward for
the return of goods lost, the finder may sue for such reward, and may retain the goods until he
receives it.
The finder of goods has no right to sue the owner for compensation for trouble and expense
voluntarily incurred by him to preserve the goods and to find out the owner, but he may retain the
goods against the owner until he receives such compensation, and where the owner has offered a
specific reward for the return of goods lost, the finder may sue for such reward, and may retain the
goods until he receives it.

According to section 168, a finder of goods has no right to sue the owner for trouble and expenses
voluntarily incurred by him to preserve the goods and to find the owner. He has, however, the right
of particular lien in respect of those goods. He may retain the goods against the owner until he
receives compensation for trouble and expense voluntarily incurred by him to preserve the goods
and to find the owner.

In addition to that, where the owner has offered a specific reward for the return of goods lost the
finder may sue for such reward and also may retain the goods until he receives it.If the goods have
already been found voluntarily, and then the owner of the goods promises to compensate the finder
for his past voluntary services, the contract is binding and the owner is bound to pay the promised
amount.

Early English cases disallowed not only any compensation but also right of lien for expenses. In
case binstead v buck15 . a finder fed a dog for 20 weeks and claimed 20 shillings for the same the
court said he would be guilty of trover if he refused to dilever unless paid for his keeping.

15
(1976)2winBI117
CONCLUSION

When delivery is made by the seller, and acceptance is made by the buyer, the contract of sale is
complete in so far as executing the sale is concerned, but there may be nevertheless, outstanding
rights in either party. The right to enforce payment by the seller, where payment was not a
condition precedent to passing the title, and the right in the buyer to hold the seller for delay in
delivering the goods, where there is no express waiver of damage shown by the buyer, or where
the circumstances of acceptance do not show an intention to waive damages of delay by accepting
the goods. An acceptance under compulsion, would not thereby waive damages suffered because
of delay. Acceptance of the goods does not ordinarily conclude the buyer, as to a warranty made
in reference to the goods, but if by the terms of the contract of sale acceptance is to conclude the
buyer on this point, the contract governs. The contract may also properly provide that notice be
given to the seller of any defects in the goods sold, within a reasonable time and the effect of the
retention of the goods beyond that time, without notice or complaint, would be to deprive the
purchaser of relief.