* HIGH COURT OF DELHI AT NEW DELHI
+ IA NO. 8092/2001 in CS (OS) No.1731/2001
Date of decision : August 10, 2009
# SMT. SADHNA GUPTA & ORS. ..... PLAINTIFFS
! Through : Mr. V.B. Andley, Sr. Advocate
with Mr. Rajinder Mathur, Adv.
Versus
$ SH. R.C. GUPTA & ORS. .....DEFENDANTS
^ Through : Mr. S.L. Gupta, Advocate for
defendant No. 5.
%
CORAM:
HON'BLE MS. JUSTICE ARUNA SURESH
(1) Whether reporters of local paper may be
allowed to see the judgment?
(2) To be referred to the reporter or not? Yes
(3) Whether the judgment should be reported
in the Digest ? Yes
ORDER
ARUNA SURESH, J.
1. Vide this order, I shall dispose of an application filed
by the plaintiffs under Order 39 Rule 1 and 2 read
with Section 151 CPC seeking temporary injunction
against defendant No.5 i.e. State Bank of India from
attaching before judgment or creating third party
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 1 of 23
right or interest in the suit property No. 221, Okhla
Industrial Estate, Phase-III, New Delhi.
2. Plaintiff No.1 has claimed herself to be one of the
members of the HUF defendant No.2 M/s. R.C.
Gupta and Brothers. Defendant No.1 is the Karta of
the said HUF whereas defendants No. 3 and 4 are
also members of the HUF.
3. Case of the plaintiffs in brief is that, property in suit
was allotted to defendant No.2 HUF by the Delhi
Government. Defendant No.1 obtained permission
from the Director of Industries for mortgaging the
property in view of clause (a) and (b) of the lease
deed. Defendant No.2 R.C. Gupta and Brothers HUF
availed certain financial loan/credit facilities for
working capital of defendant No.2 from defendant
No.5. At the time of raising the loan, the title deeds
of the suit property were deposited with the bank
for purposes of creating a mortgage on the said
property to secure the repayment of the loan
amount.
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 2 of 23
4. Some disputes arose on the issue of repayment of
loan. The bank filed OA No. 652/1996 before the
Debt Recovery Tribunal (DRT) against defendant
No.2 for recovery of the amount of
Rs.46,78,768.08paise. In view of Reserve Bank of
India‟s policy dated 27.7.2000 defendant No.1
settled the dispute with the bank and defendant
No.2 through defendant No.1 agreed to pay a sum
of Rs.36,23,125.27paise on the condition that on
receipt of the said amount, the bank would release
all the title deeds. Defendant No.2 accordingly
deposited the amount but, bank refused to return
the title deeds of the property in suit claiming
general lien on the plea that defendant No.1 was
liable to pay the dues of the bank in the account of
M/s Bharat Strips Ltd. and M/s Gwalior Strips Ltd.
Plaintiffs disputed the general lien exercised by the
bank in view of the affidavit filed by defendants
No.1 and 3 in DRT.
5. Plaintiffs have further disputed the authority of the
bank to exercise general lien in respect of the
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 3 of 23
mortgaged property in view of the letter of
Commissioner of Industries dated 27.3.2001 as no
permission to mortgage the said property in respect of
the account of M/s. Bharat Strips Ltd. and M/s Gwalior
Strips Ltd. was obtained from the department. It is
further averred that since property is HUF, defendant
No.5 had no right to claim lien on the said property
against the account of said two companies which are
limited companies having separate entity in the eyes of
law wherein defendant No.1 being the managing
director of the said company is associated in his
individual capacity. Since bank claimed lien on the
property, plaintiffs feared that bank is likely to attach
the suit property before judgment is passed and they
being member of the HUF will suffer irreparable loss
and injury which cannot be compensated in terms of
cost and that under the circumstances balance of
convenience tilts in their favour, this application has
been filed.
6. Defendant No.1 in his written statement while
corroborating the claim of the plaintiffs has claimed
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 4 of 23
that he is a coparcener of HUF defendant No.2 and he
has been managing activities of defendant No.2 as
Karta but, has been using the suffix „sole proprietor‟
instead of „Karta‟ while signing all papers/documents
relating to the business and official activities of the
HUF. In all communications to the government
departments including the income tax and wealth tax
departments he has signed as the sole proprietor
though defendant No.2 is an HUF and is the owner of
the property in suit. He has averred that suit property
is not his personal or individual property. He has
denied that he had executed any guarantee in his
personal capacity or as the Karta of the HUF with
regard to the credit accounts of M/s Bharat Strips Ltd.
or Gwalior Strips Ltd. in which he is the managing
director in his individual capacity. Since full and final
settlement amount has been paid by defendant No.2
and the loan account stands fully adjusted, defendant
No.5 is under a legal obligation to release and return
back the title deeds to defendant No.2. The approval
by the Delhi administration to create equitable
mortgage in favour of defendant No.5 was only for
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 5 of 23
raising working capital by defendant No.2 and there is
no approval of the lessor for the bank to exercise its
general lien over the property pertaining to the
accounts of companies run by defendant No.1. In
substance he has admitted the claim of the plaintiffs in
the present application.
7. Similar is the reply of defendant Nos. 2, 3 and 4.
8. Defendant No.5, the State Bank of India (SBI) in its
written statement has refuted the claim of the plaintiffs
supported by defendants No. 1 to 4 and have averred
that the suit property belongs to defendant No.2 in its
individual capacity and is a leasehold property. This
lease deed dated 23.6.1970 was executed by Delhi
Administration in favour of defendant No.1 being the
sole proprietor of M/s. R.C. Gupta and Brothers and he
mortgaged the property by representing it to be the
self acquired property of defendant No.1. The loan was
accordingly sanctioned to defendant No.2. Defendant
No.1 has been signing the documents as proprietor of
defendant No.2 and the bank is entitled to recover the
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 6 of 23
dues in the loan account of M/s. Bharat Strips Ltd. and
M/s. Gwalior Strips Ltd. to whom the loan and credit
facilities were sanctioned and granted by the
defendant bank on the creditworthiness and guarantee
of defendant No.1. DRT is already seized of the matter
as bank has already filed recovery application before
the DRT being OA No.285/2000 against M/s. Bharat
Strips Ltd. and defendant No.1. The DRT has
restrained the defendant No.1 from selling, alienating,
transferring or parting with possession of the suit
property vide its order dated 28.8.2001 and no such
application has been filed by the plaintiffs alleging that
defendant No.1 is not the owner of the property and
that it is an HUF property. Defendants No. 1 to 4 are
running two parallel files and have deceived the
income tax department, wealth tax department as well
as the defendant bank. Therefore, bank has every
right to exercise its general lien over the mortgaged
property and plaintiffs are not entitled to any ad-
interim injunction as prayed.
9. I have heard Mr. V.B. Andley, Sr. Advocate for the
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 7 of 23
plaintiffs, Mr. S.L. Gupta, Advocate for defendant No.5
and have carefully perused the record.
10. The admitted facts are:
i. Property No.221, Okhla Industrial Estate,
Phase-III, New Delhi was allotted in the name of
defendant No.2 M/s. R.C. Gupta and Brothers by Delhi
Administration in the year 1970.
ii. Defendant No. 2 raised loan for working
capital from defendant No.5 SBI against equitable
mortgage of the suit property.
iii. Defendant No.2 could not repay the loan
and therefore SBI filed OA No. 652/1996 before the DRT
for the recovery of due amount.
iv. Defendant No.2 repaid the settled
amount to the defendant bank in view of the policy of the
Reserve Bank of India.
v. The bank has not returned back the title
deeds of the suit property as it has claimed general lien
in view of Section 171 of Indian Contract Act (in short
„Act‟).
vi. Defendant No.1 has been signing all the
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 8 of 23
documents filed before the Wealth Tax Department and
Income Tax Department as sole proprietor of defendant
No.2.
11. Learned counsel for the plaintiffs has argued that
defendant bank cannot claim any lien under Section
171 of the Act as that relates to movable assets and
does not relate to immovable properties mortgaged
with the bank for raising a loan by a party. Since in
this case working capital was raised by defendant No.2
against equitable mortgage of immovable property lien
under Section 171 of the Act is not available to the
bank. It is further argued by learned counsel for the
plaintiffs that since it is a leasehold property without
the permission of the concerned department, the bank
cannot claim any general lien on the suit property with
a view to adjust its claim against the loan account of
M/s. Bharat Strips Ltd. and M/s. Gwalior Strips Ltd.,
companies owned by defendant No.1 in his individual
capacity and not as a Karta of the HUF, whereas the
property in suit is HUF property and necessary
permission was obtained by defendant No.1 for raising
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 9 of 23
working capital from the bank for running its business
by defendant No.2 HUF. Therefore plaintiffs who are
coparceners of the HUF property would suffer
irreparable loss and injury in case the bank is allowed
to attach the suit property before any decree is passed
in favour of the bank for its claim against defendant
No.1.
12. He has further urged that in view of the admitted
documents on the record prima facie a case is made
out in favour of the plaintiffs and against defendant
No.5. Under the circumstances, the balance of
convenience tilts in favour of the plaintiffs and
therefore, plaintiffs are entitled to the injunction as
prayed.
13. Learned counsel for defendant No.5 submits that
bank has a general lien over the property which is self-
acquired property of defendant No.1 for adjustment of
loan accounts of M/s. Bharat Strips Ltd. and M/s.
Gwalior Strips Ltd. opened by defendant No.1. DRT in
another OA No. 285/2000 filed by the bank has already
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 10 of 23
issued an injunction against defendants no. 1 and 2 not
to dispose of or alienate or part with the suit property
or create any third party interest in the same. He
submits that under the circumstances, plaintiffs are not
entitled to injunction as prayed and therefore,
application deserves dismissal.
14. Ex.-P21 is letter dated 8.5.2001 addressed by SBI to
defendant No.2. Vide this letter while informing
defendant No.2 that subject to clearing of the pay-
orders mentioned in the letter, the bank‟s dues in the
loan account of M/s. R.C. Gupta and Brothers subject
matter of recovery suit No.652/1996 pending before
the DRT stands satisfied. Defendant No.2 was further
informed:
“The above compromise amount
of Rs.37.60lacs plus interest has been
accepted by the bank on express
condition that the Bank will continue
to exercise its general lien on the
property bearing No.221 Okhla Ind.
Estate, New Delhi in other loan
accounts of M/s. Bharat Strips Ltd. &
M/s Gwalior Strips Ltd. and title deeds
of the said property will not be
released due to above reason.”
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 11 of 23
15. Thus, defendant bank refused to return back the
title deeds as it claimed general lien on the suit
property in loan accounts of M/s. Bharat Strips Ltd. and
M/s. Gwalior Strips Ltd. owned by defendant No.1.
16. In OA No. 652/1996 defendant No.1 had filed
applications seeking return of the title deeds of the
property in suit pursuant to the compromise having
been entered into between the parties. The said
applications were dismissed by DRT vide its order
dated 11.5.2001 and 8.10.2001 respectively with the
observations, „whether bank had a lien of the suit
property or not can only be decided in the other case
OA No.285/2000‟. This OA filed by the bank pertained
to the recovery of the amount due from M/s. Bharat
Strips Ltd. and Gwalior Strips Ltd.
17. Balance sheets filed by defendant No.2 with the
bank in view of the lien agreement were signed by
defendant No.1 for and on behalf of defendant No.2 as
sole proprietor. It is pertinent that the promissory note
and DP note dated 25.3.1991 executed for and on
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 12 of 23
behalf of the defendant No.2 at the time of obtaining
the loan, agreement for cash credit dated 25.3.1991,
hypothecation agreement dated 25.3.1991, general
undertaking executed in favour of the bank, the letter
dated 25.3.1991 annexed to hypothecation agreement,
the credit account of interest and revival letter form
are all signed by defendant No.1 as sole proprietor of
defendant No.2. Vide letter dated 12.11.1982
defendant No.1 as proprietor of defendant No.2
expressed his desire to furnish collateral security of his
building in place of the personal securities of his
brothers. Defendant No.1 has been signing various
correspondences like letters dated 3.1.1983,
15.2.1983, 25.3.1991 etc. all addressed to the bank
manager as sole proprietor of defendant No.2.
18. Letter dated 18.2.1987 has been signed by Vinod
Gupta, defendant No.3, as general attorney of
defendant No.1, proprietor R.C. Gupta. Defendant No.1
deposited the title deeds of the suit property with the
bank on 17.12.1982 as sole proprietor of defendant
No.2. In the letter dated 15.2.1983 signed by him as
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 13 of 23
sole proprietor of defendant No.2, defendant No.1
informed the bank:-
“The said property is self
acquired and as such no one has any
interest in the said property. The said
property is under my sole
occupation.”
19. In a letter received by the bank on 8.8.1985 signed
by defendant No.1 as proprietor of defendant No.2, he
communicated his intention of creating an equitable
mortgage over the suit property as security for the
amount due to the bank from defendant No.2. In this
letter also he has stated:
“The said property belongs to
me/us absolutely and no one else has
any interest therein. The said
property is under my/our occupation.”
20. Perpetual lease executed by Delhi Administration in
favour of defendant No.2 does not describe defendant
No.2 as an HUF. This document is also signed by
general attorney of defendant No.1, the sole proprietor
of defendant No.2. In the civil suit (No. 88 of 2001)
inter se the parties, apparently decree was obtained
collusively to show that the property was an HUF
property.
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 14 of 23
21. In OA No.652/1996 in para (J) defendant bank had
averred:
“The Applicant Bank also has the
charge over the property mortgaged
for recovery of its dues in the
loan/credit facilities granted to M/s
Bharat Strips Limited and M/s. Gwalior
Strips Limited, the sister concerns of
the Respondent No.1.”
22. Respondent No.1 in the said OA is none else but
defendant No.1 in this case. Defendant No.1 had filed
a suit against the bank in the civil court for perpetual
injunction. In this suit plaintiff in its opening paragraph
has pleaded that he is the sole proprietor of M/s. R.C.
Gupta & Brothers and is carrying on his business at
221, Okhla Industrial Area New Delhi. It is only in the
wealth tax and income tax returns that defendant No.2
has been described as HUF barring one order dated
28.1.1984 wherein defendant No.1 has been shown as
proprietor of defendant No.2. When all the documents
read together they prima facie clearly reflect that
defendant No.1 R.C. Gupta is the proprietor of M/s. R.C.
Gupta and Brothers; defendant No.2. Also that the suit
property was leased out to defendant No.1 as sole
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 15 of 23
proprietor of M/s. R.C. Gupta and Brothers; defendant
No.2.
23. Plaintiffs have also disputed the right of the
defendant to claim lien on the suit property under
Section 171 of the Act on the plea that Section 171
specifically speaks of movable assets mortgaged with
the bank and does not give any right to the bank to
claim lien on immovable properties mortgaged with it.
Section 171 of the Act reads:
“S. 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, 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.”
24. Thus, Section 171 creates a general as
distinguished from a particular lien of bankers. This
section, however, limits the right to a general lien, i.e.,
a right of the bankers to retain goods in their
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 16 of 23
possession as a security for a general balance of
account to them. This general lien can be excluded by
special agreement whether expressed or implied from
the circumstances but such agreement must be clearly
in consistent with the existence of general lien. When
a person has a number of accounts kept in the books of
the bank, the customer cannot take the plea in the
absence of any special contract to say that securities
which he deposited are only applicable to one
particular account and not subject to a general lien. In
other words Section 171 is clear and categoric that
unless a contract to the contrary is established by the
plaintiff the bank‟s right of lien has to be accepted.
25. As per mercantile customs recognised by the
judiciary, the banker has a general lien over all forms
of deposits or securities made on behalf of the
borrower in the ordinary course of banking business.
The documents on the record placed by the bank as
well as by the plaintiffs clearly create a general lien of
the defendant bank on the title deeds deposited by
defendant No.1 in his individual capacity as sole
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 17 of 23
proprietor of defendant No.2 for the loans raised by
him. Syndicate Bank v. Vijay Kumar and Others –
AIR 1992 SC 1066 is referred to.
26. Learned counsel for the plaintiffs has placed
reliance on Tilendra nath Mahanta v. United Bank
of India and others – AIR 2002 Gauhati 1 to
support his submissions. Therein it was observed that
banker‟s lien can properly arise only over things which
belong to customers but which are held by the bank as
security. There is no bailment in case of fixed deposits
or separate accounts as fixed deposits are basically
loans in the hands of bankers. This judgment is of no
help to the plaintiffs in the facts and circumstances of
this case.
27. In State Bank of Mysore v. Lakshmi
Construction P. Ltd. and Ors. – (2001) 103
Company Cases 258 (Madras), „a general lien‟
appearing in Section 171 has been explained as:
“20. This “general lien” as it is
realized from the section is culled by
way of distinction from the “particularIA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 18 of 23
lien” of an artificer for work done by
him on the goods in question was the
basis for the English law and proved
trade usage of relationship between
bankers and customers. But it is also
made clear that a banker‟s lien, when
it is not excluded by special contract,
express or implied, extends to all bills,
cheques, and money entrusted or
paid to him and all securities
deposited with him, in his character
as a banker. Thus, the statute does
not seem to expressly refer to
banker‟s lien in respect of deposits
but, however, money has been held to
be a species of goods over which, lien
may be exercised. Looking into the
provision of law stated above, there
appears to be no lien or liability
created by defendants Nos. 5 and 6 in
favour of the plaintiff in the instant
case over their money for loan due to
the plaintiff.
“By mercantile custom the
banker has a general lien over all
forms of commercial paper deposited
by or on behalf of a customer in the
ordinary course of banking business.”
is a passage found in Chitty on
Contracts, Vol.II, para. 473 (23rd
edition). At page 474, it is found
further that a banker may not claim
the protection of the lien in respect of
advances made after notice that the
security belongs to or is subject to
some interest of a stranger. Thus,
from the facts of the instant case,
with reference to the contents of
exhibit P-18, by applying the above
legal ratio, it is made clear that the
lien can be created only by prevailing
over the property of the customer
that is defendants Nos. 1 to 4 herein
and not against the deposits made byIA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 19 of 23
defendants Nos. 5 and 6 pursuant to
Section 171 of the Indian Contract
Act.”
28. Thus, it is clear that defendant bank has a general
lien over the papers deposited by defendant No.1 with
the bank at the time of raising loan for and on behalf of
defendant No.2. Title deeds are goods within the
meaning of Section 171 and cannot be considered as
immovable properties. Possession of the property
remained with defendants No. 1 and 2 and it was never
taken over by the bank.
29. In State Bank of India v. Diwanji Buildwell
(India) Pvt. Ltd. and Anr. – (2005) 126 Company
Cases 161 (Delhi) wherein in similar circumstances
an argument was raised by the counsel for the
petitioner that by a letter issued by the bank, a specific
promise was made by the bank to the effect that if the
outstanding amount was paid with interest, the papers
deposited by way of collateral securities would be
returned and since bank had promised to return back
the documents, the title deeds in any event had to be
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 20 of 23
returned and the bank cannot claim any general lien
under Section 171 of the Contract Act, it was observed
that bank had a lien on the title deed and that there
was not just one transaction of loan between petitioner
and the bank but petitioner No.2 was involved in the
transaction with the bank being a partner of the firm.
The Court while coming to this conclusion had referred
to a letter issued by the bank whereby they claimed
general lien on the title deeds against a suit filed by
the bank for liability of the petitioner No.1 in case of
another firm.
30. In this case, I have already referred to the letter of
the bank dated 8.5.2001 wherein defendant bank
claimed general lien on the suit property in other loan
accounts of M/s. Bharat Strips Ltd. and M/s. Gwalior
Strips Ltd. of which defendant No.1 is the managing
director and declined to release the title deeds to
defendant No.2. Bank has claimed its general lien on
the suit property in OA No.652/1996 filed by the bank
against defendant No.2 for the loan accounts of the
said two companies. The DRT also refused to direct the
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 21 of 23
bank to return the title deeds after defendants and the
bank had settled and compromised the claim of the
bank in OA No.652/1996.
31. Hence, in view of my discussion as above, prima
facie plaintiffs have not been able to show that suit
property is an HUF property and that they are the
coparceners of the same. Whereas evidence on record
prima facie indicates that defendant No.1 is the sole
proprietor of defendant No.2 and the sole owner of the
suit property. It is the interest of the bank which is
likely to jeopardise in case the injunction as sought is
granted to the plaintiffs and it is the bank which shall
suffer irreparable loss and injury. Under the
circumstances, balance of convenience heavily tilts in
favour of defendant No.5.
32. Hence, I find no merits in the application. Same is
accordingly dismissed. The observations made as
above are without prejudice to the rights of the parties
on the merits of the case.
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 22 of 23
CS (OS) No.1731/2001
33. Parties shall appear before the regular Bench on
20th August, 2009 for further proceedings.
ARUNA SURESH
(JUDGE)
August 10, 2009
jk
IA NO. 8092/2001 in CS (OS) No. 1731/2001 Page 23 of 23