Syndicate Bank v Vijay Kumar

• The judgment-debtor firm enjoyed credit facilities with the appellant bank. In execution of a decree against it, the firm was required to give a bank guarantee. The bank issued the guarantee after the firm deposited two discharged FDRs, with covering letters stating that the deposits would remain with the bank so long as any amount on any account was due to it. The guarantee was later discharged, and the decree-holder obtained an order attaching part of the deposit. The bank objected.

1. Whether the bank had a general lien over the FDRs after the guarantee was discharged, and whether the decree-holder could attach them.

• The covering letters, and the mercantile custom recognised in S.171 of the Contract Act, gave the bank a general lien over the FDRs for any amount due on any account, and the lien did not end with the discharge of the guarantee. A banker's lien is more than a right of retention; it is an implied pledge. The existence of the lien does not bar attachment, but only the surplus left after the bank's dues are satisfied can be attached. The matter was sent back to decide whether any surplus existed.

A banker's general lien, recognised by mercantile custom and S.171 of the Contract Act, and here also by the covering letters, extends to securities in its hands for any amount due on any account. The lien is an implied pledge, not a mere right of retention. It does not bar attachment, but only the surplus left after the bank's dues are met can be attached.