ICICI Home Finance Company Ltd vs Mr. Sanjay Hari Nagpal

Ashok Menon, Chairperson

This is an appeal filed by ICICI Home Finance Company Ltd. the creditor, impugning an Order dated 16.01.2017 of the DRT-I Mumbai in I.A. No. 590/2016 in S.A. No. 43/2016.

The respondent is the borrower. The aforesaid application was filed by the mortgagor Respondent herein, seeking a direction against the Appellant Company to hand over the original title deeds of his property deposited in connection with the equitable mortgage. He states that the loan was already settled under an OTS proposal submitted by him and accepted by the Appellant, closing the loan transaction.

In the Securitization Application, he had deposited the amount as directed by Tribunal and the Appellant was directed not to take possession of the secured assets. Even though the matter was referred to Lok Adalat twice, it could not be settled. However, the Respondent persistently followed up on the matter and submitted a concrete proposal under the OTS scheme. The Appellant had agreed to release the charge / lien over the residential flat which was offered as security, and issue a "No Dues Certificate" confirming the receipt of entire dues on recording "full satisfaction". The civil case which was filed by the Appellant in the Dindosi Court and any other proceeding pending under the SARFAESI Act was agreed to be withdrawn by the Appellant. It was agreed that on a deposit of an amount of Rs.23 lacs offered for settlement, the title deeds deposited would be released. Vide an Email dated 21.07.2016 the Appellant was requested to release the title deeds. However, the Appellant did not pay any heed to it despite confirmation regarding receipt of the amount due. Under such circumstances, Respondent was forced to apply to the Tribunal for direction against the Appellant.

The Appellant filed a Reply opposing the demand of the Respondent to get back the title deeds even though it was admitted that the subject loan was completely settled. It was contended that the Respondent owed the Appellant a sum of Rs.1.50 lacs towards credit card dues. In the letter accepting the OTS proposal, it was made clear that the property would remain charged for any other dues on loan / card transactions payable by Respondent to the Appellant and unless the Respondent clears the said dues also, he is not liable to get back his title deeds.

After considering the rival contentions, records available and the pleadings, the Ld. Presiding Officer of the Tribunal observed that the amount claimed by the Finance Company was barred by limitation and that it has not initiated any legal action for the recovery of the alleged credit card dues, to date. Under circumstances, Ld. Presiding Officer found that the objection raised by the Appellant is not sustainable, and hence, allowed the I.A. directing the Appellant Finance Company to hand over the title deeds along with a "No Dues Certificate" to the Applicant within two weeks from the date of order.

Heard both sides. Records perused.

The only point that arises for consideration in this appeal is whether the Appellant is entitled to retain the title deeds of the Respondent for an alleged credit card dues, exercising Banker's General Lien u/s 171 of Indian Contract Act, 1872 ?

The Point:

Sec. 171 of the Indian Contract Act, 1872 reads thus-

“General lien of bankers, factors, wharfingers, attorneys and policy-brokers.-Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them unless there is an express contract to that effect."

Mr. Nachiket Ratnaparkhi, the Ld counsel appearing for the Appellant strenuously submits that even though the subject loan for which the equitable mortgage was created was discharged in full, there is a specific agreement between the creditor and the borrower which enables the creditor to retain the deeds in case any other amount is outstanding to be paid by the borrower. Mr. Ratnaparkhi draws the attention of the Tribunal to the letter dated 24.06.2016 sent by Finance Company to the Respondent wherein the Finance Company has agreed to settle the dues at Rs.23 lacs and has stated that the settlement amount shall be paid by Respondent on or before 30. 06.2016. There are certain terms detailed in the letter and 4th terms read thus:

“Outstanding dues on the other loans/cards: in case, you have taken any other loan/stood guarantor for any loan or card product from the Bank which has outstanding dues, then the Bank will be within its rights to withhold the “No Dues Pending Certificate” and related documents for the said loan/card product, till such time all pending dues are paid by the customer to the Bank”.

Mr. Ratnaparkhi submits that even if the due under credit card transaction is barred by limitation, it is only the right to file a suit that is barred, and that debt is not extinguished and therefore, the Appellant was within its right to retain the title deeds till the other dues or the amount payable by the Respondent is discharged in full.

Mr. Ratnaparkhi relies on the decision of the Hon’ble Apex Court in Syndicate Bank v/s Vijay Kumar and others (1992) 2 SCC 330 wherein it was observed that the Banker's lien is not a bar to attachment of any deposit of a customer in the bank which is payable at a future date and that it is a special contract, independent of the obligations arising out of specific contracts between the parties and even if specific obligation comes to an end with discharge, by the general lien, if any, created in favour of the bank the customer continues.

Referring to the decision in Surendra s/o Laxman Nikose v/s Chief Manager & Authorized Officer, State Bank of India 2013 (5) Mh.L.J. 283 relied upon Ld. Presiding Officer in the impugned order, Mr. Ratnaparkhi submits that though the Hon'ble Bombay High Court has held that the Bank cannot exercise its right of general lien over the title deeds deposited by the debtor after the entire loan amount was fully repaid, on facts, the above-cited decision could be distinguished from the case in hand. In the cited case, the borrower was an employee of the bank who had availed of a housing loan from the bank and repaid the entire dues. According to the Bank, the employee committed fraud against the employer bank resulting in monetary loss to the bank and the same was sought to be recovered from him by retaining the title deeds deposited while availing of the housing loan. The Hon'ble Bombay High Court held that the claim made by the bank was in its capacity as an employer who had been defrauded by its employee. The title deeds were deposited to safeguard the amount of the housing loan, and that was repaid in full. In such a situation, it is not open for the bank to continue to exercise its general lien over the securities deposited with it, especially when it seeks to recover the amount on the account of fraud committed by the employee based on its right of general lien for the securities with it on the culmination of the banker and customer relationship. In the instant case, the Appellant bank is claiming from the Respondent an amount that is due and payable on Credit Card outstanding from him and the relationship between the Appellant banker and Respondent as the customer has not yet ceased.

Mr. V. N. Ajikumar, the Ld. Counsel appearing for the Respondent points to the aforesaid decision of Surendra (supra) and submits that in the said decision, at para 11, the Hon'ble High Court has observed that the relationship of banker and customer that came into being as a result of the petitioner therein availing the facility of the loan had come to an end when the borrower repaid the entire loan. The relationship between banker and customer could not have been continued when the bank issued the "No Dues Certificate" and realized the entire loan amount and, therefore, no exercising of its right of general lien u/s 171 of the Indian Contract Act was possible.

Mr. Ajikumar, also submits that the Respondent is not aware of any outstanding dues to the Appellant on a credit card as alleged. The Appellant has not produced any documents to prove the existence of such liability. No demand notice whatsoever has been issued by Bank to the Respondent claiming payment of such credit card dues. The existence of another debt is, therefore, not proved by Appellant to exercise its right of general lien u/s 171 of Contract Act. The Appellant could very well have settled of dues of credit card as well together with the OTS proposal, as payment of a large sum was made by Respondent, and paying another Rs1.5 lakhs wouldn't have been a burden upon him. Moreover, even if there are such outstanding dues on a credit card, it is already time-barred by limitation, and to exercise its right of general lien u/s 171 of Act, it must be an existing debt. To support his argument, Mr Ajikumar relies on the decision on Devi Ispat Limited v/s Central Bank of India 2010(3) ICC 123.

Mr. Ajikumar, further submits that even if there existed any difference, as to the calculation of the amount due from the debtor, on acceptance of the OTS proposal it is deemed to have been waived and acquiesced by the creditor. Mr Ajikumar seeks support on a decision of the Hon’ble High Court of Andhra Pradesh in M/s S & S Associates, rep. by its CEO, Hyderabad and Ors. V/s Government of Andhra Pradesh, rep. by its Principal Secretary, Co-operative Department, Hyderabad and Ors 2007(5) ALT 686.

The facts indicate that Respondent paid an amount of Rs.23 lakhs towards the Home Loan dues on 30.06.2016 as agreed, and he was under the impression that he has complied with the directions of the Finance Company as per the letter dated 24.06.2016 accepting the OTS proposal. Despite having complied with the directions regarding payment, his title deeds and "No Dues Pending Certificate" were not issued. It is pertinent to note that the Appellant has not issued any demand notice seeking the repayment of the amount alleged dues on a credit card transaction. The letter dated 24.06.2016 also does not mention any existing card transaction, apart from a recital that the deeds would be retained in case of any outstanding dues remaining to be paid by the Respondent. It is only in the reply in the S.A. filed by the Appellant before the DRT that fact regarding pending dues of Rs.1.50 lacs on card transaction is revealed. It is not understood why the Appellant did not take any steps to get that amount also realized at the time of settlement of the Home Loan. The Respondent has paid a sum of Rs.23 lacs for settlement of the Home Loan, and it would not have been difficult for him to pay Rs.1.50 lacs more in case it was demanded then.

There is not a scintilla of evidence produced by the Appellant before the DRT to establish the existence of credit card dues from the Respondent, and that demand was raised for the payment of the same. Inclusion of a clause in reply dated 24-06-2016 stating that in case, the Respondent has taken any other loan/stood guarantor for any loan or card product from the Bank which has outstanding dues, then the Bank will be within its rights to withhold the "No Dues Pending Certificate" and related documents for the said loan/card product, till such time all pending dues are paid by the customer to the Bank, may not be sufficient because it is not a clause included in a bilateral contract between the Bank and the customer, but in the unilateral letter addressed by the Appellant to the Respondent while accepting the OTS proposal. Even if there were any card dues at the time of settlement of the home loan, without expressly raising demand for the dues on the card transaction, it would be deemed to have been waived and acquiesced by the Appellant. To establish the said transaction was barred by limitation, there is no document available to establish the existence of such dues. The Appellant has to establish that there was in existence a debt on a card transaction and only then could the Appellant exercise its right u/s 171 of the Indian Contract Act.

Under circumstances, I find that no infirmity in the impugned order calling for interference in appeal. Hence, the appeal deserves to be dismissed as it is devoid of any merits with all consequences regarding costs.