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Informist, Thursday, Jan. 9, 2025

NEW DELHI – Setting aside the Central Bank of India's decision to put on hold a bank account of a partnership firm as one of its partners had owed dues from another account belonging to her proprietorship, the Delhi High Court said banks can exercise lien only where there is mutuality of obligation between the two accounts. Being a banker, it certainly has access to the details of all its accounts, but that would not mean that it can freeze somebody's account in such an arbitrary and whimsical manner, while acting itself as a judge, that too in its own cause, said the court.

"...the present petition is hereby allowed and, consequently, respondent-bank is directed to lift on hold from current account No.3688550290 maintained by partnership firm M/s Imperial Finance Company at Saraswati Bal Mandir, Uttam Nagar Branch, New Delhi immediately," said the court. Money due to the bank by proprietorship Next World Technologies cannot be recovered from the account of the partnership firm, even if such sole proprietor is one of the partners in such a firm, said the court.

Mukesh Kumar Bansal and his wife Jyoti Bansal had a partnership firm Imperial Finance Co. and had a single current account in Uttam Nagar branch of Central Bank of India. Jyoti Bansal was also the sole proprietor of Next World Technologies, and maintained a separate account in Central Bank of India's Parliament Street Branch. The bank put on hold the account of the partnership firm Imperial Finance Co. as Jyoti Bansal owed them INR 8 million from the Next World Technologies' account.

The high court said that it really does not matter whether the petitioner, Mukesh Kumar Bansal, had been operating both the accounts and a certain amount was transferred from one account to the other. The bank could have only exercised some lien over the goods pledged by the sole proprietorship concern, but in the garb of set off, it had no business to touch the account of an altogether different entity, on its own, said the court. Moreover, the bank has already moved the Debt Recovery Tribunal against Jyoti Bansal and there is a judicial order, restraining the sole proprietorship concern from alienating or transferring hypothecated assets, the court added.

The court said that a bank has multiple roles to play. It is, at times, debtor, bailee, agent, assignee and trustee too, said the court. Thus, any account-holder, invariably, banks on its bank, considerably, said the court. Such trust and faith cannot be shattered by a bank in a monopolistic and exploitative style, the court added.

Justice Manoj Jain said that the bank had muddled up in applying the principle of set off as enumerated under Section 171 of the Indian Contract Act, 1872. Lien is a right of a banker, by which it can retain any security coming to its possession for the purpose of any loan due by customer, said the court. "Here, there was nothing offered as security by the partnership firm. Thus, there being no mutuality of obligation, which is an essential element in the right to set off, such right was not exercisable," said Justice Jain.

On Thursday, shares of Central Bank of India ended 2% lower at INR 51.65 on the National Stock Exchange.  End

Reported by Surya Tripathi

Edited by Ashish Shirke

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