Question

Bankers lien is different from ordinary lien as it is a

• A. General lien
• B. Implied pledge
• C. Both A&B
• D. None of the above

Answer 1

Answer:

C. Both A&B

• Definition: A Banker's Lien is a unique right recognized under Section 171 of the Indian Contract Act, 1872, allowing a bank to retain possession of goods and securities bailed to them as a general security for the balance due to them.
• Ordinary vs. Banker's Lien: An ordinary lien (particular lien) is a right to retain possession of specific goods only until the debt associated with those specific goods is paid. In contrast, a banker's lien is a general lien.
• Implied Pledge: In legal terms, a banker's lien is frequently described as an implied pledge, granting the banker the power to sell the security if the debt remains unpaid after reasonable notice.
• Key Distinctions:
  • Scope: Unlike an ordinary lien which is restricted to specific items, a banker's lien extends to all securities deposited with the bank in the capacity of a banker.
  • Right of Sale: An ordinary lien generally provides only a right to retain possession, whereas a banker's lien includes an inherent right to sell the property to recover the outstanding balance.
• Legal Precedent: The Supreme Court of India and various high courts have established that a banker's lien does not apply to items left with the bank for safe custody or items where the possession is inconsistent with the bank's claim, such as trust funds.