The Madurai Bench of the Madras High Court has directed the Canara Bank, Kombai branch in Theni district, to release the gold jewellery that were pledged by a woman to get an agricultural loan.
The petitioner, N. Rajathi, said in order to carry out agricultural activities, she pledged gold jewellery in the bank in 2011. She paid the entire loan amount along with interest, following which the Bank Manager released her jewellery. The petitioner also availed herself of three gold loans in April, July and September 2012.
As the gold loan availed in April 2012 had to be redeemed within one year she approached the bank and paid the principal amount along with the interest. However, the bank refused to release the jewellery claiming that the 2011 gold loan account had been mistakenly closed even before all dues were recovered. The petitioner was told that unless the dues under the 2011 gold loan were paid, the jewellery would not be released.
The bank said it was holding the jewellery as a lien for payment of the dues under the 2011 gold loan. The petitioner approached the Banking Ombudsman, which rejected her claim. Therefore, the petitioner moved the court.
Justice K. Kumaresh Babu observed that a lien could be available upon a property which was sought to be redeemed on a balance that was to be recovered from the persons who got the loan on the basis of security.
In this case, the first jewellery loan account had been closed, and the bank had not called upon the petitioner to make the payment on the allegation that the amount had not been paid. Not having taken any action either against the then Manager for committing the mistake or against the petitioner, the bank could not claim that the petitioner had not paid the dues under the first loan.
The court observed that Section 171 of the Contract Act (General lien of bankers) could not be available to the bank in view of the fact that the first jewellery loan had been closed and that no action had been initiated to reopen it. When the bank was not entitled to claim the benefit of Section 171 of the Act, there could be no reason to retain the petitioner’s jewellery, the judge observed.