Section 171 Contract Act: General lien of bankers, factors, wharfingers, attorneys and policy-brokers

Section 171 of Indian Contract Act: General lien of bankers, factors, wharfingers, attorneys and policy-brokers

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them;

but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.

Statutory Defined Terms in this Section: (Click any term for official legal definition)

Contract Sec 2(h)

Legal Commentary & Landmark Judgments: Section 171

Bankers, factors, wharfingers, attorneys of a High Court, and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them. Other commercial parties have no right to retain goods bailed to them as a security for such balance, unless there is an express contract to that effect.

Core Legal Standard: This provision establishes the extraordinary mercantile privilege of a general possessory lien, which entitles favored commercial institutions to retain any goods, commercial paper, or securities deposited with them in their professional capacity to secure all outstanding debts owed by the customer, even debts unrelated to the specific transaction under which the goods were deposited.
Negotiable Instrument Classification: In commercial banking jurisprudence affirmed in Syndicate Bank v. Vijay Kumar, a bank's general lien attaches to negotiable instruments, term deposits, and securities standing in the customer's name, functioning as an equitable pledge that enables the bank to apply the proceeds to satisfy defaulted credit facilities across running commercial accounts.

Key Landmark Precedents:

Syndicate Bank v. Vijay Kumar (1992) 2 SCC 330: The Supreme Court held that a banker's lien under Section 171 is judicially recognized and extends to all securities and money deposited by a customer in the ordinary course of banking business, permitting the bank to set off deposits against unpaid loan balances.
Board of Trustees of the Port of Bombay v. Sriyanesh Knitters (1999) 7 SCC 359: The Supreme Court held that wharfingers and port trusts possess a statutory general lien under Section 171, enabling them to detain current cargo consignments for unpaid demurrage on previous consignments.

Legal Commentary:

The banker's general lien under Section 171 does not apply where property or funds are entrusted to the bank for a specific, earmarked purpose (such as money deposited in trust for share subscription, or documents deposited solely for safe custody in a locker).

Section 171: General lien of bankers, factors, wharfingers, attorneys and policy-brokers

Section 171 of Indian Contract Act: General lien of bankers, factors, wharfingers, attorneys and policy-brokers

Legal Commentary & Landmark Judgments: Section 171