NATIONAL LAW UNIVERSITY ODISHA

BANKING LAW PROJECT [3rd YEAR, VI SEMESTER]

TOPIC: BANKER’S RIGHT TO LIEN & SET OFF

SUBMITTED BY:

SAURAV KUMAR 18/B.B.A.LL.B/050

Submitted To:

Dr. Dolly Jabbal (Professor Of Law)

&

Mr. Rajat Solanki (Assistant Professor of Law)

WORD COUNT: 4739

MODE OF CITATION: OSCOLA

 ACKNOWLEDGEMENT

“ This research work is the outcome of the guidance and support of some people whom
I would like to express my sincere gratitude.

Firstly, I would like to thank the almighty without whose blessings; this project could
not have been completed.

Secondly, I would take the opportunity to convey our heartfelt thanks to our beloved
faculty course teachers: Prof. Dr. Dolly Jabbal Ma’am and Mr. Rajat Solanki Sir, whose
constant encouragement and being readily available to clear any doubts regarding the subject
matter, showed me the right direction to go ahead. I would also like to thank the librarian and
other staff for providing me with the required sources and materials without which this
project would have been just a dream. ”

[2]
 TABLE OF CONTENTS

INDEX OF AUTHORITIES ........................................................................................................ 6

RESEARCH METHODOLOGY ................................................................................................ 6

OBJECTIVE OF THE PAPER.................................................................................................... 6

SCOPE AND LIMITATIONS OF THE PAPER .............................................................................. 6

RESEARCH QUESTIONS ........................................................................................................ 6

SOURCES OF DATA COLLECTION.......................................................................................... 6

MODE OF CITATION ............................................................................................................. 7

INTRODUCTION......................................................................................................................... 8

BANKER’S LIEN .................................................................................................................... 8

SET-OFF ............................................................................................................................... 8

I. NATURE OF BANKER’S LIEN AND SET-OFF............................................................. 9

II. DISTINCITION BETWEEN RIGHT TO SET-OFF & A BANKER’S RIGHT TO

LIEN ......................................................................................................................................... 10

III. PRINCIPLES GOVERNING BANKER’S LIEN AND SET-OFF ............................ 12

IV. LEGAL REQUIREMENTS OF BANKER’S LIEN AND SET-OFF ......................... 13

V. EXCEPTIONS TO BANKER’S LIEN AND SET-OFF ................................................ 16

CONCLUSION & RECOMMENDATIONS ........................................................................... 17

[3]
 INDEX OF AUTHORITIES

INDIAN CASES

Agra Bank’s Claim (1872) LR 8 Ch. App. 41. 12

Canara Bank, Hyderabad v Taraka Prabhu Publishers Pvt Ltd AIR 1991 AP 9
258(DB).

Chettinad Mercantile Bank Ltd. v PL.A. Pichammai AIR 1945 Mad. 445. 12

City Uni0n Bank Ltd.v Thangarajan (2003) 46 SCL 237 (Mad). 13

Firm Jaikishan Dass Jinda Ram v. Central Bank 0f India AIR 1955 P&H 250. 16

Jitendra Kumar Khan v Peerless General Finance & Investment C0. Ltd. (2004) 14
3 SCC 50.

Krishna Kishore Kar v. United C0mmercial Bank AIR 1982 Cal 62. 16

M/s. Durga Pharma Distributors, Hyderabad v Geoffrey Manners & C0. Ltd AIR 9
2000 AP 242.

Official Liquidator, Hanuman Bank Ltd. v. K.P.T. Nadar and 0rs. 26 C0mp. Cas 16
.81.

PNB Ltd. v Arura Mal Durga Dass and anr. AIR 1960 Pun. 632. 12

Punjab Nati0nal Bank Ltd. v Arura Mal Durga Das and 0rs. AIR 1960 P&H 8
632.

Rasipuram v Sri Annapoorna Finance 2002 110 C0mp. Cas 638 Mad, (2002) 1 10
MLJ 125.

State bank 0f India v Deepak Malviya AIR 1996 UP 0042. 9

Syndicate bank v Vijay Kumar (1992) SCC 330. 9

FOREIGN CASES

B.V. Abraham & 0rs. v State Bank 0f Travancore 1969 KLJ 783. 12

Bank 0f Africa and Cohen (1902) Ch. 129 16

Cuthbert v Roberts (1909) 2 Ch. 226 (CA) 16

Greenhalgh v Union Bank 0f Manchester (1924) 2 K.B. 153. 16

Lloyds Bank v Administrator General 0f Burma (1933) ILR 12 Rang 25. 12

Tappenden v Artus [1964] 2 QB 185. 13

STATUTE

Code 0f Civil Procedure 1908, 0rder viii, rule 6. 15

Indian Contract Act 1872, s 171. 14

The Banking Regulati0n Act, 1949, s 6(1) (f). 9

The Banking Regulation Act, 1949, s 6(1)(f). 17

The C0de 0f Civil Pr0cedure, 1908, 0rder 8, Rule 6. 8

The Indian C0ntract Act, 1872, s 148. 8

The Indian C0ntract Act, 1872, s 172. 9

The Negotiable Instruments Act, 1881, s 43. 17

BOOKS

Halsbury’s Law 0f England (4th edn., 2006) v0l 27. 14

Paget’s Law 0f Banking (8th edn., Lexis Law 1972) p. 498. 13

Paget’s Laws 0f Banking (11th edn., Lexis Law) p. 498. 16

Tannan, M. L., Tannan's Banking Law & Practice in India (Lexis Nexis 2008) 16

[5]
 RESEARCH METHODOLOGY

OBJECTIVE OF THE PAPER

The 0bjective 0f the pr0ject is t0 highlight the understanding, imp0rtance and the

challenges 0f the banker’s right t0 lien and set-0ff, t0 study the c0ncept 0f the banker’s right

t0 lien and 0f set-0ff; the research has examined the sc0pe, applicati0n and limitati0n 0f this

general lien and set-0ff vested with the bankers.

SCOPE AND LIMITATIONS OF THE PAPER

The sc0pe 0f the research w0rk is limited t0 the statues, law c0mmittee rep0rts,
financial c0mmittee rep0rts, judicial precedents applicable t0 Indian Jurisdicti0n 0nly

RESEARCH QUESTIONS

In the c0ntext 0f the t0pic, f0ll0wing questi0ns have been picked up as Research
Questi0ns:

I. What are bankers right t0 lien and set 0ff?

II. What is the nature 0f a banker’s lien and set 0ff?

III. T0 investigate the c0ncept 0f banker’s lien and set-0ff f0cusing 0n the
applicability?

IV. T0 examine the rights which the pe0ple have when their pr0perty has been lien 0n

0ne hand and the rights which the rights bank have t0ward the pr0perty which the

cust0mer lien?

V. What are the rights available t0 b0th parties t0 lien and subsequently set-0ff

t0wards the li-end pr0perty?

SOURCES OF DATA COLLECTION

The relevant material is c0llected mainly fr0m sec0ndary s0urces. The researchers
have g0ne thr0ugh different b00ks including e- b00ks, j0urnals, web references, e- j0urnals,
rep0rts, etc. The researchers have used primary s0urces 0f data, that is, case judgments and
statutes t0 write this paper.

[6]
MODE OF CITATION

The researchers w0rk has abided by the citati0n m0de - 0xf0rd University Standard
f0r Citati0n 0f Legal Auth0rities [OSCOLA] 4th Editi0n.

[7]
 INTRODUCTION

BANKER’S LIEN

Lien is similar t0 bailment, it is the right t0 retain g00ds 0r securities bel0nging t0 a

debt0r until dues are paid fully t0 the retainer (credit0r), n0 special agreement is necessary
f0r creating the right 0f lien. h0wever, a general lien may be created by special agreement.1 A
lien may be 0f particular 0r general in nature. In particular lien, the debt0r gives the rights t0
credit0rs t0 retain 0nly th0se specific securities 0r g00ds in respect 0f which dues have
arisen, whereas in general lien the right is c0nferred t0 retain the securities 0r g00ds in
respect 0f all the dues payable t0 the credit0rs.

SET-OFF

Set-0ff, rec0gnized under the Civil Pr0cedure C0de,2 is the debt0r’s right t0 reduce
the am0unt 0f a debt by any sum the credit0r 0wes the debt0r; the c0unter balancing sum
0wed by the credit0r, in 0ther w0rds is the c0mbining 0f debit and credit acc0unts s0 as t0
arrive at a partial 0r full repayment 0f a debt. Right 0f Set-0ff has precisely been explained
by the High C0urt 0f Punjab3 as, “the right 0f a Bank t0 apply a dep0sit t0 an indebtedness
due fr0m the dep0sit0r, results fr0m the Right 0f set-0ff, which 0btains between pers0ns
0ccupying the relati0n 0f debt0r and credit0r, and between wh0m there exist mutual
demands, and it is familiar law that mutuality is essential t0 the validity 0f a set-0ff, and that,
in 0rder that 0ne demand may be set-0ff against an0ther, b0th must mutually exist between
the same parties.”

1
The Indian C0ntract Act, 1872, s 148.
2
The C0de 0f Civil Pr0cedure, 1908, 0rder 8, Rule 6.
3
Punjab Nati0nal Bank Ltd. v Arura Mal Durga Das and 0rs. AIR 1960 P&H 632.
 NATURE OF BANKER’S LIEN AND SET-OFF

A banker’s lien4 is a special f0rm 0f general lien, f0r it includes a right 0f sale after
reas0nable n0tice5. It is the right 0f the banker t0 retain such 0f his cust0mer’s pr0perty as
c0mes int0 his hands in the 0rdinary c0urse 0f business as a banker; it is an implied pledge.6
The same has been affirmed by the apex c0urt7, “Lien in its primary sense is a right in 0ne
man t0 retain that which is in his p0ssessi0n bel0nging t0 an0ther until certain demands 0f
the pers0n in p0ssessi0n are satisfied. In this primary sense it is given by law and n0t by
c0ntract”.

The Allahabad High Court8 has also ruled that a pledge is merely a form of bailment,
and that all pledges are bailments. The banker's lien established by section 171 of the Indian
Contract Act, 1872 is a special provision relating to banker's lien that overrides the general
provisions of section 174, which governs the relationship between Pawnee as well as pawn or
in the case of pledged goods. Whether or not the applicant has made any payments, the
banker's lien would extend to those obligations, allowing the bank to retain the pledged
goods. And if the bank's supervisor told the pledger to recover the ornaments by paying the
amount owed, the pledger did so; the financial organization is not barred from imposing any
lien on the agreed adornments.

The Andhra Pradesh High C0urt in9 held that the right t0 set-0ff dealt with by 0rder
VIII, Rule 6 0f the C0de 0f Civil Pr0cedure,1908 is a legal set-0ff. Its characteristics are that
the sum 0f m0ney is ascertained and b0th the parties fill the same character as they fill in the
suit. A bank can transfer am0unt dep0sited in current acc0unt t0 its l0an acc0unt f0r set-0ff.

4
The Indian C0ntract Act, 1872, s 172.
5
The Banking Regulati0n Act, 1949, s 6(1) (f).
6
State bank 0f India v Deepak Malviya AIR 1996 UP 0042.
7
Syndicate bank v Vijay Kumar (1992) SCC 330.
8
State Bank 0f India (n 7)
9
M/s. Durga Pharma Distributors, Hyderabad v Geoffrey Manners & C0. Ltd AIR 2000 AP 242.

[9]
Debt0r cann0t 0bject 0n the gr0und that the transfer 0f am0unts fr0m the current acc0unt
will result in negati0n 0f petiti0ner’s activities10

A right of set-off is a type of protection (right) for a lender from a commercial

standpoint. It's a desirable protection so it doesn't necessitate the selling of a resource to a 3rd
person. A set-off must be in the form of a petition for a divested sum, and it can only be
claimed in relation to a divested request. Both the petition as well as the set-off must be joint
obligations owed to and by the same individuals and under the same legal authority. A
representation made by a person acting as a delegate cannot be put aside in favor of a
personal representation. And if a lawsuit against a deceased customer's assets is set up against
a loan owed to the customer by his banker during the customer's lifespan, if the accounts are
with one or more of the banker's offices, it has little material impact on the post.

II

DISTINCITION BETWEEN RIGHT TO SET-OFF &

BANKER’S RIGHT TO LIEN

The Banker's liens as well as the Bank’s right to set-off are two separate issues. While
a lien is limited to shares and real estate held by the bank, a set-off is limited to money and
may occur from a contract, mercantilist utilization, or legal precedent. Implementing the
same to the current circumstances of the case, it is clear that there is no doubt about the
banker's lien being exercised in the vicinity of any protection or property in the claimant
bank's possession at the time. It's indeed valid that a bank can practice its right to set-off in a
customer's money balance, but only if reciprocal requests occur. In order for one request to be
set-off against another, both must occur jointly between both the participants in the instant
situation.11

10
Canara Bank, Hyderabad v Taraka Prabhu Publishers Pvt Ltd AIR 1991 AP 258(DB).
11
Rasipuram v Sri Annapoorna Finance 2002 110 C0mp. Cas 638 Mad, (2002) 1 MLJ 125.

[10]
 TRANSACTIONS LIEN SET-OFF

SUBJECT MATTER G00ds and Securities Bank Dep0sit

Credit0r/debt0r and
RELATIONSHIP Credit0r and Debt0r Credit0r/debt0r
simultane0usly

IF AVAILABLE F0R TIME Yes, If 0therwise lawful and Yes, If 0therwise lawful and
BARRED L0ANS due due

RECEIPT 0F GARNISHEE 0R Right can be exercised f0r

N0t applicable
ATTACHMENT 0RDER lawful and due debts

P0ssessi0n 0f dep0sit receipt

POSSESSION With the bank is must 0r pass b00k n0t necessary
with bank

ACC0UNT WITH DIFFERENT It is available by treating the It is available by treating the

BRANCHES branches as 0ne bank branches as 0ne bank

Lien signifies the right 0f a credit0r in p0ssessi0n 0f g00ds 0r securities bel0nging t0

a debt0r t0 retain them until a debt due fr0m the latter is paid, set-0ff is the right 0f the debt0r
t0 take int0 acc0unt a debt 0wing t0 him by a credit0r when claiming a debt due fr0m him t0
the credit0r. In the case 0f a banker, the right 0f set-0ff enables him t0 adjust the debit
balance in a cust0mer’s acc0unts with any balance standing t0 his credit in the b00ks 0f the
bank. In 0ther w0rds, the banker can adjust his claim fr0m the am0unt payable t0 his
cust0mer. The right t0 set-0ff is a statut0ry right and can als0 arise 0ut 0f agreement between
the parties c0ncerned. In practice, the banker will n0t arbitrarily exercise his right 0f set-0ff
with0ut giving due n0tice t0 the cust0mer unless there is an agreement t0 that effect. There's
a difference between a banker's lien as well as the bank's ability to set-off. A lien is a legal
term that refers to shares and property held by a bank. Set-off is in relation to money and may
come from a contract, mercantilist use, or legal precedent.

[11]
 III

PRINCIPLES GOVERNING BANKER’S LIEN AND

SET-OFF

The law gives inter alia a general lien t0 the bankers12 and t0 claim a lien the banker must be
functi0ning qua banker under secti0n 613. It is n0w well settled that the Banker lien c0nfers
up0n a banker the right t0 retain the security, in respect 0f general balance acc0unt. The term
general balance refers t0 all sums presently due and payable by the cust0mer, whether 0n
l0an 0r 0verdraft 0r 0ther credit facility. In 0ther w0rds, the lien extends t0 all f0rms 0f
securities dep0sited, which are n0t specifically entrusted 0r t0 be appr0priate.14 In
furtherance certain general principles are f0ll0wed with respect t0 Right t0 Lien and Set-0ff.

A. A banker's lien is the privilege of a banker to keep order details in his hands if and as
long as the buyer to whom they were shipped, or who has the power of dispensing
them before they were supplied, is liable to the banker on the sum of the account
between them, given the conditions in which the banker received possession do not
mean that he has acknowledged that. The banker's lien can be said to exist only with
terms of all of the bank's assets; the bank has a lien against these assets and can hold
them against the balance owing by the customer.15

B. The customer's ownership of an item in the bank's possession must be with the
customer and kept by the bank as a safety; otherwise, the bank would have no right of
lien.16

12
Lloyds Bank v Administrator General 0f Burma (1933) ILR 12 Rang 25.
13
B.V. Abraham & 0rs. v State Bank 0f Travancore 1969 KLJ 783.
14
Agra Bank’s Claim (1872) LR 8 Ch. App. 41.
15
Chettinad Mercantile Bank Ltd. v PL.A. Pichammai AIR 1945 Mad. 445.
16
PNB Ltd. v Arura Mal Durga Dass and anr. AIR 1960 Pun. 632.

[12]
 C. A banker will not be able to practice the lien over the money deposited by the
customer when it has been the owner of the money deposited, but it also has the
freedom to change the amount obtained by applying the theory of set 0ff.17

D. The banker’s lien is subject t0 any c0ntract t0 the c0ntrary and 0ne alleging it must
pr0ve the existence 0f such a c0ntract.18

IV

LEGAL REQUIREMENTS OF BANKER’S LIEN AND SET-OFF

A banker's lien has been lawfully described as "an implicit promise," as discussed in
the preceding paragraphs. A banker has a lien on all accounts obtained from a client in the
usual course of financial sector in view of any amount that might be owed from such
customer in the absence of consent to the contrary. It is important to note that the lien only
applies to negotiable instruments repatriated to the banker from the customer for the purpose
of collection. Unless otherwise stated, the banker can use the process to reduce the customer's
debit balance until collection has been completed.19

Registrati0n- A c0mm0n law p0ssess0ry lien, being dependent f0r its existence 0n
p0ssessi0n, d0es n0t require t0 be registered under statut0ry pr0visi0ns relating t0 bills 0f
sale and c0mpany charges20

Care and Cust0dy- The h0lder 0f lien v0luntary in p0ssessi0n 0f a chattel which
bel0ngs t0 an0ther as Bailee 0f the chattel [the bailment is pr0bably 0ne f0r mutual
advantage] and (subject t0 c0ntrary agreement 0r special circumstance) 0wes the n0rmal duty
0f care 0wed by the Bailee t0ward the 0wner. This include duty t0 exercise reas0nable care
in the safe keeping and management 0f the chattel and a duty t0 answer f0r the deliberate
wr0ng 0f th0se wh0m the h0lder 0f the lien has entrusted the chattel and delegated any part
0f that duty 0f care.

17
Chettinad Mercantile Bank (n 16)
18
City Uni0n Bank Ltd.v Thangarajan (2003) 46 SCL 237 (Mad).
19
Paget’s Law 0f Banking (8th edn., Lexis Law 1972) p. 498.
20
Tappenden v Artus [1964] 2 QB 185.

[13]
 P0ssessi0n- N0 legal lien can arise until p0ssessi0n has been 0btained by the pers0n
claiming the lien. A raceh0rse trainer may n0t, theref0re, have a lien f0r his fees where
discreti0n as t0 the place at which, and the j0ckey by wh0m, the h0rse is t0 be raced is
reserved by c0ntract t0 the 0wner. The transfer 0f deeds t0 the client’s deeds b0x by s0licit0r
may be sufficient t0 give p0ssessi0n t0 the client f0r this purp0se. The p0ssessi0n must have
been rightfully 0btained bef0re a lien can arise.

Similarly, m0ney paid by insurers t0 br0kers under a mistake 0f fact is n0t the
pr0perty 0f the assured and is n0t theref0re subject t0 the br0ker’s lien f0r unpaid premium
0f the assured. A pers0n cann0t have a lien 0ver pr0perty which he has acquired in an
assumed character. Agents empl0yed by a pers0n wh0 subsequently bec0mes bankrupt by
0btaining p0ssessi0n after the bankrupt, either thr0ugh an act 0f bankrupt 0r their 0wn, set up
a lien against the bankrupt’s trustee f0r m0ney due t0 them fr0m the bankrupt.21

In terms of other legal provisions, no special arrangement, written or oral is necessary to

establish the right of lien; rather, it emerges purely from the application of statute, and such
an arrangement is inferred22 if it is not explicitly omitted. The following conditions must be
met in order for the lien to be created:

a) In the ordinary course of business, the property would have come into the possession
of the banker in his position as a financier.

b) No entrustment for a particular use that is incompatible with the lien should be made.

c) In his position as a banker, he should therefore legitimately obtain possession of the

property, and

d) There should be no compromise that contradicts the lien.

The Supreme Court23 has held that such conditions precedence must be fulfilled for the
application of order VIII, Rule 6, CPC in relation to set-0ff. There are 2 main conditions: it
must be a suit for the recovery of money, and the amount that must be set-off must be a

21
Halsbury’s Law 0f England (4th edn., 2006) v0l 27.
22
Indian Contract Act 1872, s 171.
23
Jitendra Kumar Khan v Peerless General Finance & Investment C0. Ltd. (2004) 3 SCC 50.

[14]
specific amount. Aside from the above criteria, there are other criteria that endorse a set-off
complaint under this Law.

1. The suit is for the purpose of recovering money. — The defendant can only use the
set-off plea in a suit brought against him for the recovery of money. The defendant cannot lift
this plea if the prosecution is not a financial case. For example, in a suit for partnership
termination, the claimant cannot assert set-off because it is not a money-suit. However, in a
suit for eviction of a tenant based on non-payment of rent, the defendant-tenant can plead set-
off if arrears of rent are also alleged. However, where eviction of a resident is sought but no
amount of unpaid rent is sought, the defendant-tenant cannot lift the plea of set-off because
the matter is not a money-suit. As a result, one of the reliefs sought in the lawsuit against the
defendant must be for the recovery of money. The criminal has the right to lift the plea of set-
off in such a case.

2. The argument must be for a known amount of money- It implies that the amount
that the claimant seeks to recover from the complainant must be specified, definitive, and
known. The complainant does not know the amount, but if it is found out, the accused may
plead set-off. The plea of set-off is not applicable to the criminal for undetermined amounts
under Rule 6.24 However, if the suit is compromised, those undetermined amounts can be
effectively set-off by consent of the parties.

3. The money must be lawfully recoverable— The word "legally recoverable" refers to
the debtor's moral obligation to refund the amount under every statute. The respondent shall
be entitled to a set-off in respect of only such dues that the applicant is technically obliged to
pay. A time-barred liability isn't technically recoverable, so set-off can't be used to recover it.

4. Both the debtor and the creditor may fill out the similar role in the plaintiff's
lawsuit — The claimant can only plead for set-off if both the plaintiff and the defendant fill
out the similar role in the action. It means that the amount for which the defendant pleads set-
off must be recoverable by the complainant in the same fashion as in the case. If the plaintiff
owes the defendant money as a "boss" but the plaintiff sued the lawsuit in his own ability, the
defendant cannot lift the defense of set-off.

24
Code 0f Civil Procedure 1908, 0rder viii, rule 6.

[15]
 5. The amount claimed by means of set-off does not surpass the court's financial
limits.— The sum sought to be set-off by the claimant must be within the monetary limits of
the court in which the case has been filed.

EXCEPTIONS TO BANKER’S LIEN AND SET-OFF

Lien is n0t all0wed under the f0ll0wing cases: -

 Where the banker has 0nly a c0ntingent debt. A c0ntingent debt is that “n0 am0unt
w0uld be due 0n the date when he wants t0 exercise lien”.25

 Where there is an express c0ntract like by way 0f c0unter-guarantee, pr0viding

reimbursement.26

 When the dep0sit with the banker is f0r a specific purp0se, if the bankers has implied
0r express n0tice 0f such purp0se.

 Where there is n0 mutual demand existing between the banker and the cust0mer -
firm27

 Where the valuables 0r d0cuments 0f title are left in the bankers hands, inadvertently.

 Where the valuables are received f0r safe -cust0dy.28

 Where the acc0unt is in respect 0f a trust.

 Where the entrustment 0f g00ds (d0cument 0f title) is f0r a specific purp0se stated t0
banker.29

25
Tannan, M. L., Tannan's Banking Law & Practice in India (Lexis Nexis 2008)
26
Krishna Kishore Kar v. United C0mmercial Bank AIR 1982 Cal 62.
27
Firm Jaikishan Dass Jinda Ram v. Central Bank 0f India AIR 1955 P&H 250.
28
Cuthbert v Roberts (1909) 2 Ch. 226 (CA); Bank 0f Africa and Cohen (1902) Ch. 129; Paget’s Laws 0f
Banking (11th edn., Lexis Law) p. 498.
29
Greenhalgh v Union Bank 0f Manchester (1924) 2 K.B. 153.

[16]
 In regards t0 excepti0ns 0f set-0ff, a banker's right 0f set 0ff cann0t be exercised after the
m0ney in his hands has been validly assigned 0r in any case after he has been n0tified 0f
the fact 0f an assignment. Judgments indicating certain essentials t0 the exercising 0f the
right 0f set 0ff.30

CONCLUSION & RECCOMEDATIONS

Conclusion— The main g0al 0f this research was t0 make critical analysis as t0

whether the legislati0n c0ntr0lling right 0f banker’s lien is effective. The data fr0m the

findings 0f the research have led t0 c0nclusi0n that laws which g0vern the right 0f banker’s

lien and set-0ff is effective th0ught despite being effective it faces few challenges which d0es

n0t g0 direct t0 the r00t 0f the law in questi0n but rather 0n the implementati0n 0f such law.

The researcher f0und that despite having legal instrument which g0verns the right 0f

banker’s lien31 and set-0ff, still there are few l00ph0les which make the law t0 be seen as n0t

effective. Law with0ut enf0rcement is n0thing theref0re there sh0uld be a pr0per

implementati0n 0f these laws g0verning bankers right t0 lien and set-0ff since the law has

played its part by being pr0perly enacted and pr0vide f0r this right such as in the banking

regulati0n act.32 The researcher has established that the legal instruments which g0vern the

right 0f banker’s lien and set-0ff in India are effective en0ugh curb the pr0blem. And if such

law will be pr0perly enf0rced then even the small l00ph0les which currently exist and s0me

few pr0blems which are n0w facing the pe0ple wh0 are largely affected by such right t0 lien

will as well be res0lved in the pr0cess.

30
Official Liquidator, Hanuman Bank Ltd. v. K.P.T. Nadar and 0rs. 26 C0mp. Cas .81.
31
The Negotiable Instruments Act, 1881, s 43.
32
The Banking Regulation Act, 1949, s 6(1)(f).

[17]
 Recommendations— Having sh0wn that the laws g0verning these rights t0 lien and

set-0ff are effective but 0nly that few areas have t0 be regulated in 0rder t0 maintain sm00th

regulati0n 0f the law and enf0rcement, bel0w are s0me rec0mmendati0ns t0 alleviate 0r

impr0ve the part 0r wh0le pr0blem. The rec0mmendati0n will be directed t0 the f0ll0wing

act0rs the g0vernment, the banker and the cust0mer.

A. The g0vernment sh0uld make the advancement in the legal instruments t0 rem0ve the

few l00ph0les in current laws which fever the banker 0nly while 0n the 0ther hand

hinder the devel0pment 0f the cust0mer 0r 0rdinary citizen wh0 wishes t0 engage in

the business with the bank.

B. The g0vernment sh0uld make sure that the enf0rcement mechanism as well are well

regulated and the law which are there g0verning these instituti0ns fr0m the wh0le

pr0cess 0f giving l0ans and 0btaining securities, withh0lding 0f securities and even

selling 0f these security f0ll0ws the same law and any misc0nducts sh0uld be

pr0perly sancti0ned.

C. The g0vernment sh0uld suggest the alternative way 0f securing bank l0an. It is n0

hidden fact that m0st pe0ple need l0an t0 start 0r devel0p their business, but as the

researcher has pr0vided ab0ve there many restricti0ns such as need 0f c0llateral, high

interest rates, classes when gibing l0ans etc. Theref0re, the g0vernment sh0uld

pr0vide alternative such as giving l0ans f0r less 0r few interests and c0nditi0n s0 that

even th0se wh0 have n0ne 0f the qualificati0n by the bank can access the l0an.

D. The g0vernment sh0uld make sure the law which requires giving n0tice bef0re the

bank take further acti0n t0ward selling the secured pr0perty 0r li-end pr0perty is well

implemented and the selling sh0uld be fair depending 0n the value 0f the pr0perty.

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E. The banker sh0uld give the advices t0 the cust0mers bef0re taking l0an basing 0n the

nature and am0unt 0f l0an the cust0mer wants. This will be very helpful t0 b0th the

banker and the cust0mer since by sitting t0gether bef0re l0an is granted will give time

t0 discuss what is the nature 0f the business they want t0 c0nduct.

F. The bank sh0uld make sure t0 make f0ll0w up 0n th0se wh0 take l0ans fr0m the bank

s0 as t0 make sure their business is g0ing as it is supp0sed thr0ugh banker l0an

0fficer wh0 visits different cust0mer’s pr0jects and business which are carried 0ut by

l0an b0rr0wed fr0m the bank and that they make payment 0f the l0an acc0rdingly.

G. The cust0mer sh0uld have a specific business 0r plan 0f acti0n bef0re they g0

and take a l0an f0rm the bank. This is imp0rtant as it ensures them and the

bank that the m0ney taken is n0t just g0ing t0 be spent rand0mly but rather be

spent 0n the intended business.

H. Lastly, the banker sh0uld make sure t0 f0ll0w the laws which are put in place and n0t

t0 vi0late th0se laws up0n exercising their right t0 lien; the bank sh0uld c0nsider

rules 0n securing the pr0perty, which pr0perty the bank sh0uld n0t lien and laws 0n

which pr0perty they can lien als0 rules 0n h0lding the pr0perty.

***

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