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Banker’s Lien

Another important feature of the relationship between the banker and the customer is that a banker may in the absence of a contract to the contrary, retain as a security for the general balance of account any goods or securities bailed to him. There are two types of Lien Rights :

  1. Particular Lien
  2. General Lien

Particular Lien

This is a right available to one person to retain the goods or articles of other for not performing obligation attached to that property. In this type of lien a person can retain particular property which some obligation is attached. Particular lien is available only against those goods or articles on which some skill or labor have been expended.

Examples: Tailor, watch repairer, Gold smith etc. can enjoy particular lien.

General Lien

Section 171 of Indian Contract Act says that Bankers, Warfingers , attorneys of High Court and Policy Brokers can exercise right of general lien over the articles or securities deposited with them.

Example: If two securities are given to banker but a loan is taken against one of them he ( banker ) may retain both the securities until his claim is satisfied.

Essential Features of the Banker’s General Lien

  1. Banker should have received items of the customer in his capacity as banker.
  2. Banker’s Lien equals to implied pledge.
  3. Banker can exercise this right only when they are deposited with the Customer’s name .
  4. Bankers can also exercise this right even after closing the account.
  5. There should not be any contract to the contrary to exercise this lien.

Limitations on Banker’s Lien

  1. Banker cannot exercise lien right over securities and other items deposited for custody.
  2. He has no right to exercise this lien over the negotiable instruments entrusted him for special purpose.
  3. Banker has no lien on bonds and coupons deposited for collection.
  4. No lien for the amount not due.
  5. Banker has no lien on the securities left with him inadvertently (unknowingly).
  6. No lien on money deposited for special purpose.
  7. No lien in respect of trust Account.
  8. No lien on securities left with the banker after the repayment of loan.

Case law: Wilkivision Vs. London and Country Bank.

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