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2011 (2) TMI 1537 - HC - Indian Laws

Issues Involved:
1. Whether the Appellant-Bank can exercise a general lien on the title deeds deposited by the deceased borrower.
2. Whether the liability of the guarantor stands extinguished upon his death.
3. Whether the Appellant-Bank was justified in retaining the documents under Section 171 of the Indian Contract Act.

Summary:

Issue 1: General Lien on Title Deeds
The Appellant-Bank claimed a general lien on the title deeds deposited by the deceased borrower, N.P.S. Mahendran, as security for loans availed by M/s. Aarthi Bala Tea Plantations and M/s. Sanjay Bala Tea Plantations. The Respondents, after repaying the entire loan, requested the return of the title deeds. The Bank refused, citing outstanding dues from M/s. Somerset Tea Plantation, for which the deceased stood as a guarantor. The Court held that the Bank's claim of general lien u/s 171 of the Indian Contract Act was not justified as the title deeds were deposited for a specific loan and not for any other liabilities.

Issue 2: Liability of Guarantor Post-Death
The Appellant-Bank argued that the liability of the guarantor does not extinguish upon death and can be enforced against the estate inherited by the legal heirs. The Court agreed, stating that u/s 131 of the Contract Act, the liability of the guarantor continues for transactions existing at the time of death. However, the Court emphasized that the specific contract of mortgage for the deceased's loan did not extend to other liabilities.

Issue 3: Justification of Retaining Documents
The Court examined whether the Appellant-Bank was justified in retaining the documents under Section 171 of the Indian Contract Act. It was found that the title deeds were deposited specifically for loans availed by M/s. Aarthi Bala Tea Plantations and M/s. Sanjay Bala Tea Plantations, and not for any other loans. The Court cited that the Bank's general lien does not apply when there is a specific contract to the contrary. The Court also noted that the Bank initially acknowledged the repayment and agreed to return the documents but later refused, which was not appreciable.

Conclusion:
The Court concluded that the Appellant-Bank was not justified in retaining the title deeds and directed the Bank to return the documents to the Respondents within two weeks. The appeal was disposed of with no costs.

 

 

 

 

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