For liability incurred by wife, bank cannot exercise general lien over husband’s property, in absence of expresss/implied consent

Kerala High Court: As a member of the respondent cooperative bank, the petitioner had availed a loan after mortgaging a piece of property and later cleared the same. The bank however, refused to return the title deeds of the property on the premise that the petitioner’s wife had also secured a loan and the petitioner’s title deed was deemed to have been kept as security for the realisaton of the said debt too i. e. it had exercised its general lien. The petitioner was aggrieved by the fact that he was neither a guarantor nor had he offered his property as security. The Court held the Bank’s action illegal and arbitrary.

The Court while explaining the term said that a lien is the creditor’s right to retain the debtor’s asset, movable or immovable until the debt is repaid. If the asset is retained till the debt for which the asset is offered as security is repaid, it is a particular lien. On the other hand, if the asset is retained till any other unconnected debt is repaid, it is a general lien. As the general lien is mostly exercised by the bankers, it is also called the banker’s lien. With either a particular lien or a general one, there shall be no contract, express or implied, to the contrary. Even with general lien, the owner of the asset has to be contractually connected to the debt in the capacity of either a borrower or a guarantor.

In an elaborate and exhaustive judgment relying on various case laws and commentaries, the Bench of Dama Seshadri Naidu, J. differentiated between the French concept of coverture recognised under the English Law with that of the Indian context and observed that  “…the coverture covers, rather subsumes the proprietary rights of a wife under those of her husband. The converse cannot be said…in India, from either perspective, wife and husband are two independent legal entities capable of contracting on their own. One does not bind the other, especially by implication, vis-à-vis a transaction involving a third party. In India, law has been consistent when dealing with the property rights of, or contracts involving, either of the spouses. The law equates the wife with the husband; it puts them on the same pedestal. Both of them can independently acquire and hold the property in their own names. One can, therefore, contract with third persons independently of the other.”

The Court held that “the question of the husband’s implicitly incurring a liability on the contract entered into by his wife with a third party, in the absence the husband’s express or implied consent thereto, does not arise. Had it been a case of contract between wife and husband, given the statutory obligation of spousal maintenance, the parameters, of course, would have differed.”

The  Court categorically observed that “Unless a person is a party to a loan transaction in whichever capacity, the question of the Bank’s exercising the general lien vis-à-vis the property of that person—even if he or she were the spouse of the contracting party—does not arise. Put differently, it falls foul of the contractual obligations of the banker and customer.” Directing the Bank to return the title deeds, the Court held the Bank’s action of retaining or withholding the petitioner’s title deeds even after his clearing the loan per se illegal and arbitrary. [Lonanakutty Antony v. Joint Registrar of Cooperative Societies, 2016 SCC OnLine Ker 481, decided on March 8, 2016]

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