01. Banker's Lien: A banker has the right of general lien in respect of the dues to him by the customer. Lien is the right to retain property belonging to another until a debt due from the latter is paid. In other words, it is the right of the creditor to retain the goods and securities in his possession, belonging to the debtor, until his debt due is paid. Lien, however, does not give right to sell unless such right is expressly conferred by statue or by custom or usage. The right of lien may ba (a) particular or (b) General.
02. Right of Appropriation: In case of several debts outstanding by the debtor(customer) to the bank, question arises as to which of the debts is to be discharged when payment is made by the debtor and the amount is not sufficient to discharge all the debts.
03. Banker's Right of Set-Off: A banker has the right to set-off. This right entitles him to adjust a debt balance in some account of a customer against any credit balance in his other account(s). Accounts of a customer can be combined/set-off subject to the following conditions, namely (a) If the different accounts are held by the same parties in the same right, debit balance in his own account can not be adjusted with the credit balance of trust account in his own name (b) The debt must have become actually due. The right can not be exercised against further or contingent debt and (c) There is no express or implied agreement to the contrary.
04. Banker's Right of Automatic Set-Off: A banker has th automatic right of set-off in the following circumstances
(a) On death, insanity or insolvency of the customer
(b) On the insolvency of partner of a firm or on the winding up of a company.
(c) On receipt of a Garnishee Order. The banker on receipt of a garnishee order can exercise the right of set-off and surrender only the surplus to the judgement creditor
(d) On receiving notice of assignment of a customer's credit balance and
(e) On receiving notice of second mortgage over the security charged to the bank.
Although the banker has the statutory right of set-off, yet by way of caution he obtains from the customer a letter of set-off duly signed in the presence of a witness to protect the banker from any possible futur objection to the exercise of his ritht of set-off.
05. Right to Charge Interest and Commission: A banker has an implied right on the customer to charges for various services rendered to them. Such charges are known as bank charges/commission. These are required to be reasonable.
A general lien is also called a banker's lien.A general lien is defined in Sec. 171 of Indian Contract Act. A banker'lien is more than a general lien and is called an 'Implied Pledge'In other words, a banker's geenral lien empowers a banker not only to retain securities, but also sell them without the intervention of a Court.
ReplyDeleteHowever, a banker can exercise the general lien subject to fulfillment of certain conditions. These are as follows:
1. The securities should have come into his possession in the ordinary course of business as a banker.
2.There should not be any agreement between the customer and the banker inconsistent with the banker's lien.
3. The securities should have come into his possession lawfully.
4. The securites should not have been entrusted with the banker for a specific purpose.
Subject to the above conditions, a banker can exercise his lien over the securities entrusted to him by the customer in the ordinary course of business.
M.J. SUBRAMANYAM, XCHANING