Facts of the case
- X, a customer, deposited jewels worth ₹50,000 with a bank for safe custody.
- Later, X became a debtor to the bank by availing a loan or overdraft.
Issues in the case
- Whether the bank can exercise a lien over the jewels deposited for safe custody.
- Whether the bank has a right to retain the goods deposited in a non-borrowing capacity when the customer becomes a debtor later.
Principles associated with the case
- Under general law, a bank has a right of general lien over goods or securities belonging to a customer in its possession in the capacity of a creditor.
- However, if the articles are deposited with the bank for safe custody (as a bailee), the bank cannot exercise a lien on them for a loan or liability incurred subsequently.
- A general lien does not apply to items held in trust or for a specific purpose, such as safe custody.
- The relationship in safe custody is one of bailor and bailee, not debtor and creditor.
Judgement
- The banker has no right to exercise lien on the jewels deposited for safe custody.
- Since the jewels were given for a specific purpose (safe custody), the bank holds them in a fiduciary capacity.
- X’s later indebtedness does not convert the bank’s possession of the jewels into a lienable security.
- The jewels must be returned to X or his legal representatives regardless of his debts to the bank.