Indian Contract Act, 1872

Where the contract between a borrower and his bank specifically showed that a property was given as security only for a particular transaction, the bank could not hold it as security for repayment of another loan by invoking the power of general lien under Section 171 of the Indian Contract Act, 1872 – Nand Kumar Adil Vs. State Bank of India – Chhattisgarh High Court

A Division Bench of the Hon’ble High Court of Chhattisgarh held that:
(i) The Bank had lent money to the Borrower for specific purpose and specific amount, it cannot be disputed that the property in question was bailed out to the Bank by the Borrower at any point of time.
(ii) Where the contract between a borrower and his bank specifically showed that the property was given as security only for a particular transaction, the bank could not hold it as security for repayment of another loan.
(iii) The Bank has a statutory right of lien in absence of contract to the contrary, retain as a security for general balance of account, any goods bailed to them.
(iv) Deposit of title deeds by way of mortgage was for specific purpose to cover an advance for specific term loan and when the Borrower has deposited the title deeds for a specific transaction of loan, the Bank cannot be allowed to contend that they are entitled to hold the title deeds of the Borrower for other loan amounts.
(v) The Bank cannot claim title deeds of the Borrower by invoking the power of general lien under Section 171 of the Indian Contract Act, 1872. The Bank is absolutely unjustified in exercising the general power of lien over the properties of the Borrower under Section 171 of the Contract Act.
(iv) Bank has no general power of lien to retain the title deeds of the Borrower for non-payment of other dues which the Borrower had allegedly taken.

Where the contract between a borrower and his bank specifically showed that a property was given as security only for a particular transaction, the bank could not hold it as security for repayment of another loan by invoking the power of general lien under Section 171 of the Indian Contract Act, 1872 – Nand Kumar Adil Vs. State Bank of India – Chhattisgarh High Court Read Post »

Intimation of invocation pledge of shares received by way of a text message from NSDL and notice giving 7 days to the plaintiff to clear the outstanding dues would constitute reasonable notice under Section 176 of the Indian Contracts Act, 1872 – Amit Jain Vs. Canara Bank & Ors – Delhi High Court

In this case, it has been contended on behalf of the plaintiff that the defendant bank has failed to give reasonable notice to the plaintiff for the sale of the pledged shares, as required under Section 176 of the Indian Contracts Act, 1872. There is no denying the fact that in terms of Section 176 of the Indian Contracts Act, 1872, a pawnee is required to give reasonable notice of sale to the pawnor before selling the pledged goods.

Hon’ble High Court held that the intimation of invocation was duly received by the plaintiff by way of a text message on 6th September, 2022 and this was, in fact challenged by the plaintiff by way of a writ petition. It was only thereafter that the notice dated 15th September, 2022 was issued by the defendant bank giving seven days to the plaintiff to clear the outstanding dues, failing which the defendant bank would sell the pledged shares. Therefore, the notice dated 15th September, 2022 would have to be read along with the intimation of invocation sent on 6th September, 2022 and in my view, this would constitute reasonable notice under Section 176 of the Indian Contracts Act, 1872.

Intimation of invocation pledge of shares received by way of a text message from NSDL and notice giving 7 days to the plaintiff to clear the outstanding dues would constitute reasonable notice under Section 176 of the Indian Contracts Act, 1872 – Amit Jain Vs. Canara Bank & Ors – Delhi High Court Read Post »

High Court ought not to have granted further extension de hors the sanctioned OTS Scheme while exercising the powers under Article 226 of the Constitution of India – State Bank of India Vs. Arvindra Electronics Pvt. Ltd. – Supreme Court

It is an admitted position that the borrower did not make the payment due and payable under the sanctioned OTS Scheme on or before the date mentioned in the sanctioned letter. The prayer of the borrower for extension of nine months came to be rejected as far as back on 16.05.2018 and the borrower was directed to make the payment of Rs.2.52 crores by 21.05.2018, the borrower failed to make the payment. Even otherwise as rightly submitted on behalf of the Bank directing the Bank to reschedule the payment under OTS would tantamount to modification of the contract which can be done by mutual consent under Section 62 of the Indian Contract Act. By the impugned judgment and order rescheduling the payment under the OTS Scheme and granting extension of time would tantamount to rewriting the contract which is not permissible while exercising the powers under Article 226 of the Constitution of India. Therefore, borrowers were bound to make the payment as per the sanctioned OTS Scheme. Therefore, the High Court ought not to have granted further extension de hors the sanctioned OTS Scheme while exercising the powers under Article 226 of the Constitution of India.

High Court ought not to have granted further extension de hors the sanctioned OTS Scheme while exercising the powers under Article 226 of the Constitution of India – State Bank of India Vs. Arvindra Electronics Pvt. Ltd. – Supreme Court Read Post »

Under Section 176 of the Contract Act, the pawnor, if not otherwise liable for the debt as a borrower or as a guarantor or otherwise, does not merely from the act of making a pledge, become liable to the creditor/pawnee, for anything more than the value of the goods pledged – Ajoy Khanderia Vs. Barclays Bank & Anr. – Delhi High Court

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Under Section 176 of the Contract Act, the pawnor, if not otherwise liable for the debt as a borrower or as a guarantor or otherwise, does not merely from the act of making a pledge, become liable to the creditor/pawnee, for anything more than the value of the goods pledged – Ajoy Khanderia Vs. Barclays Bank & Anr. – Delhi High Court Read Post »

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