Facts of the Case
- X, a customer of the bank, deposited jewels worth ₹50,000 solely for safe custody.
- Subsequently, X became a debtor to the bank by availing a loan or incurring a liability.
- The bank now seeks to assert rights over the jewels deposited.
Issues in the Case
- Whether the bank can exercise lien on the jewels kept for safe custody.
- Does the relationship of debtor and creditor override the nature of the original bailment?
- Can the bank retain or sell the jewels to recover the debt?
Principles Associated with It
- Section 171 of the Indian Contract Act, 1872: It provides that bankers have a general lien over goods bailed to them unless there is a contract to the contrary.
- A general lien allows the banker to retain goods for a general balance of account.
- However, goods deposited for a specific purpose (like safe custody) do not attract the right of lien.
- In such cases, the bank is a bailee and must return the goods when demanded.
- Judicial precedent (e.g., Sundaram Finance Ltd. v. State of Kerala) supports the view that articles given only for safekeeping cannot be withheld under banker’s lien.
Judgement / Legal Remedy
- The bank cannot exercise lien over the jewels because they were deposited only for safe custody.
- Such a deposit creates a bailment relationship, not a general deposit or security against a loan.
- The bank must return the jewels upon request by X and cannot adjust them towards any outstanding loan unless there was an express or implied agreement stating otherwise.
