Before: 
Hon'ble Mr.Justice V.Balakrishna Eradi, President, Hon'ble Mr.Justice S.S.Chadha, Member, Dr.(Mrs.)R.Thamarajakshi, Member, Mr.S.P.Bagla, Member, Hon'ble Mr.Justice C.L.Choudhry, Member

S.S.CHADHA, J. Member

This Revision Petition has arisen out of the Order dated 6th December, 1995 passed by the Andhra Pradesh State Commission at Hyderabad dismissing the appeal against the order dated 15-12-94 passed by the District Forum, Eluru in C.D.No.33/94 directing the first Opposite Party - Union Bank of India to pay to the Complainant the balance of the amount due and payable under the FDR dated 21-5-92 after deducting a sum of Rs. 2,000/- borrowed by the complainant from the first Opposite Party on 21-5-92 together with interest accrued thereon within one month from the date of the receipt of the order. Both the District Forum as well as the State Commission declined to uphold the lien under section 171 of the Contract Act claimed by the Bank.

The facts are not in dispute and may be noticed. The complainant deposited an amount of Rs. 14,175/- with the Union Bank of India- Opposite Party (for short called Bank) on 21-5-92 in a fixed deposit and obtained a Fixed Deposit Receipt on 21-5-92 with a maturity value of Rs. 28,649.10 due to mature on 21st November, 1997. The Complainant took a loan of Rs. 2,000/- from the Bank on 21-5-92 by pledging the said Fixed Deposit Receipt as security. The Complainant had originally deposited a sum of Rs. 7,000/- on 20-11-85 and obtained a Fixed Deposit Receipt with maturity value of Rs. 14,171.50, then due to mature on 20-5-92. The Complainant had borrowed a sum of Rs. 6,000/- on 29-7-87 by pledging the said Fixed Deposit Receipt dated 20-11-85 as security and paid an amount of Rs. 2200/- on 5-1-89 towards the said loan. The complainant took another loan of Rs. 3,000/- on 28-6-91. The complainant discharged the second loan of Rs. 3,000/- by paying Rs. 3,240/- on 1-2-92 but did not discharge the first loan of Rs. 6,000/-. When the Fixed Deposit Receipt matured on 20th May, 1992, the Bank allowed the encashment of the Fixed Deposit Receipt but without recovering the first loan amount of Rs. 6,000/- borrowed by the Complainant on 29-7-87 against the security of the Fixed Deposit Receipt. The Bank discovered its mistake in encashing the first Fixed Deposit Receipt without collecting the balance due under the first loan of Rs. 6,000/- borrowed by the Complainant on 29-7-87 and therefore, declined to prematurely encash the second Fixed Deposit Receipt of Rs. 14,175/- taken on 21st May 1992, without discharge of the said loan of Rs. 6,000/- secured by first F.D.R. The complainant alleged deficiency in service on the part of the Bank and filed the complaint. The District Forum as well as the State Commission came to the conclusion that the original F.D.R. dated 20-11-85 for Rs. 7,000/- matured on 20th of May, 1992 and was encashed for the matured value of Rs. 14,171.50 and that admittedly the Bank made the payment without collecting the balance of the amount due and payable by the complainant towards the first loan of Rs. 6,000/- borrowed by the complainant on 29-7-87. The Fora also found that a fresh Fixed Deposit Receipt for Rs. 14,175/- was also taken on 21st May, 1992 and that the demand made by the complainant was with regard to the FDR dated 21-5-92 and that if any amount was payable by the complainant by the date of return of the first Fixed Deposit Receipt to the complainant, the said amount is deemed to have been discharged by the Complainant and that in any event the Fixed Deposit Receipt dated 21-5-92 is a separate transaction. The District Forum directed the Bank to pay the entire balance amount due and payable under the second F.D.R. dated 21-5-92 after deducting the loan amount of Rs. 2,000/- and payable by the complainant together with interest thereon till the date of payment and this order was upheld by the State Commission.

The case came up for hearing before this Commission on 28th November, 1996. Shri A.K.Mala, Advocate appeared for the Bank but there was no appearance on behalf of the Respondent -Complainant. The counsel for the Revision Petitioner was directed to produce before this Commission photo copies of the two Fixed Deposit Receipts in question as well as the copies of the written version filed by the Bank before the District Forum. This has been done. We have gone through the records with the help of the counsel for the Revision Petitioner. The Deposit Reinvestment Certificate No.1243302/1417 dated 20-11-1985 having a face value of Rs. 7,000/- and due and maturing on 20th May 1992, with a maturity value of Rs. 14,171.50 is the First Deposit Receipt taken by the Complainant. The endorsement on the back of this F.D.R. is only signatures of the Complainant. The Complainant paid a sum of Rs. 3.50 in cash on 21-5-92 and took the deposit Reinvestment Certificate No.5818155/5724 dated 21-5-92 having a face value of Rs. 14,175/- and due and maturing on 20-11-97 with the maturity value of Rs. 28,649.10. The District Forum as well as the State Commission are right to holding that the second Fixed Deposit Receipt is a separate transaction. It is not in dispute that the complainant received the first loan of Rs. 6,000/- on 29-7-87 against the security of the first Fixed Deposit Receipt dated 20-11-85 and that the loan amount was not recovered at the time of encashment of the first Fixed Deposit Receipt.

The question is whether the banker's right of lien is barred by the law of limitation as also whether the Bank could exercise its lien against the second Fixed Deposit Receipt. The Banker's lien is statutorily provided in Section 171 of the Indian Contract Act, 1872 where a Bank has advanced money to a constituent, he has lien on all securities which come into his hands for the amount of his general balance, unless there is an express or implied contract to the contrary. Banker's lien has been succinctly defined in Halsbury's laws of England, Fourth Edition - Reissue, Para 191 reading as follows:

"The general lien of bankers is part of the law merchant as judicially recognised; it connotes the right of a banker to retain the subject matter of the lien until an indebtedness of the customer is paid or discharged. It attaches to all securities deposited with a banker as a banker by a customer, or by a third party on a customer's account, to instruments paid in for collection, and to money held to the account of a customer, unless there is an express or implied contract between the banker and the customer which is inconsistent with the lien. In the case of money, the banker's right is often a right of set-off; it arises only in relation to the customer's money and does not apply to money paid in under a mistake of fact. Where there is a contract inconsistent with the lien, it determines when the relationship of banker and customer ends, as on the liquidation of a company which is a customer. The lien is not limited to fully negotiable securities, but has been held to cover share certificates, an order to pay a particular person a sum of money and an insurance policy."

The general lien over all forms of securities deposited by the customers has been judicially recognised and affirmed by the Supreme Court in a catena of cases (see Syndicate bank Vs. Vijay Kumar (1992) SCC 330). Lien is a right of defence and not right of action and therefore, there is no question of bar of limitation coming to the field of exercise of lien. Lien in its primary sense is a right in the Banker to retain that which is in his possession belonging to another until certain demands of the person in possession are satisfied. A lien is a right of defence, not a right of action, and consequently can be claimed in respect of a time barred debt. Where a customer deposited its security with a Bank, the Bank is given a general lien over all the securities, except in cases where the deposit was for a larger purpose or where there was an agreement or contract in consistent with the lien. The banker's lien give the Bank a right on all the moneys of the constituent in its hand so that they may be transferred to whatever account the Bank chooses, to set-off or liquidate the debt.

In "Ramdhari Singh's" case, 1913 Indian cases - 716 the Calcutta High Court had occasion to consider the question whether a time barred debt could be claimed by way of equitable set off. It was contended that the claim was barred by limitation and could not be claimed by set-off, as it was not legally recoverable. The Division Bench held that the amount paid can be claimed as a time barred debt may be claimed by way of equitable set-off. In Devendrakumar Lalchandji Vs. Gulabsingh Nekhesingh, AIR (33) 1946 Nagpur 114, it was held that where a person claims lien by way of defence, there is no bar of limitation. It was held by the Nagpur High Court that in the absence of specific provision on the subject, when moneys are held by the Bank in one account and the payer in respect of these moneys owes to the Bank on another account the banker's lien gives the bank a charge on all the moneys of the payer in its hands, so that they may be transferred to whatever account the Bank choose, to set-off or liquidate the debt. There is no deficiency in service, in our view, on the part of the Bank in declining to make the payment of the second Fixed Deposit Receipt without the discharge of the liabilities by the complainant of the loan of Rs. 6,000/-. The question of limitation does not arise when the Bank exercises a set-off or lien for adjusting loan amount out of any amount due and payable by the Bank to its customer. The Fora below found that the complainant had not paid the amount due under the first loan of Rs. 6,000/- borrowed on 29-7-1987 and the amount with interest was due and that was the basis of the Bank declining to prematurely encash the Fixed Deposit Receipt. If the Complainant was disputing the amount, then the complainant should have been left to the remedy of a suit for the recovery of the amount questioning the exercise of lien by the Bank or the right to claim adjustment or set-off. The orders of the State Commission as well as the District Forum suffer from serious irregularities and illegalities in the exercise of jurisdiction and are entitled to be set aside. The complainant is left to seek his remedy in a civil suit, if he so chooses. The Revision Petition is allowed. The impugned orders of the State Commission as well as the District Forum are set aside and the complaint is dismissed leaving the parties to bear their own costs throughout.