Meaning of General Lien
A lien means the right of a person to retain possession of another’s goods until the debt or lawful charges related to them are paid. A General Lien gives the right to retain goods for a general balance of account, not just for a specific debt. It is broader than a Particular Lien, which applies only to specific goods for specific dues. In commercial law, a banker’s general lien is one of the most significant forms of lien, as it provides banks with security for repayment. This right arises by operation of law and allows a banker to retain securities, goods, or money belonging to a customer until all outstanding dues are cleared. It acts as a passive security right, protecting bankers against credit risks.
Legal Provision – Section 171 of the Indian Contract Act, 1872
According to Section 171 of the Indian Contract Act, 1872, bankers, factors, wharfingers, attorneys of High Courts, and policy brokers have the right to exercise a General Lien, unless there is a contract to the contrary. For bankers, this means they can retain any property, securities, or money of a customer in their possession until the general balance of account is satisfied. However, this right does not extend to items held for a specific purpose or in trust (e.g., securities kept for safe custody or items marked “for collection”). The banker’s lien is not a right to sell but to retain, although it may be converted into a pledge with consent. Thus, Section 171 ensures banks have a lawful mechanism to secure outstanding debts from customers.
Scope and Limitation
A banker’s general lien covers all securities and deposits of a customer that come into the bank’s possession in the ordinary course of business. It applies even if the customer owes multiple debts, ensuring the bank can retain assets until all liabilities are settled. However, the lien cannot be exercised when property is held for a special purpose or when there is an express contract excluding the right. For example, money deposited in a trust account, or securities lodged for safekeeping, cannot be retained under lien. Moreover, the banker’s lien ceases when possession is lost. Therefore, while it provides a strong legal safeguard to banks, it is subject to fairness, purpose, and mutual agreement.
Real-Time Example
Suppose Mr. A has a current account and a loan account with XYZ Bank. He deposits certain share certificates and fixed deposits with the bank. Later, he defaults on the loan repayment. In this case, the bank can exercise its general lien under Section 171 to retain A’s share certificates and fixed deposits until the loan is repaid. However, if A had given those certificates specifically for the purpose of selling them on his behalf, the bank cannot claim a lien because they were received for a special purpose. This example shows how the banker’s general lien serves as security for all outstanding debts while respecting specific-purpose agreements.
Easy Mnemonic
Use the mnemonic “B-A-N-K” to remember General Lien of Bankers:
- B – Bankers’ Right under Section 171
- A – All goods and securities in possession can be retained
- N – Not applicable to special-purpose or trust items
- K – Keeps goods until full dues are settled
Think “BANK” — because it reminds you that the banker’s lien allows a bank to retain all customer assets for general debts, but not for special deposits. This simple mnemonic captures the essence of the General Lien of Bankers under Section 171 of the Indian Contract Act, 1872 — a vital security right ensuring repayment protection for banks.
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