Abstract
Rising disputes under the Contract law are a significant concern under smooth trade practices. Many times, disputes may arise out of uncertainty about Lien and pledge. The confusions may extend to the scope of ‘General Lien’ and ‘Particular Lien’. The purpose of this article is to illustrate the major differences between general and particular lien. Using the analytical methods, the article highlights the contrasting features of Lien. It compares the scope and extent of it. The article differentiates between both types of liens and their uses. The key difference between the General lies and Particular lien lies in the exercise of retaining good(s) in-lieu of outstanding dues against it/them. The article clarifies the confusion about the scope and extent of Lien.
Keywords: Lien, General Lien, Particular Lien, Section 170, Section 171, Indian Contract Act (1872)
Introduction
The general definition of Lien states that it is the right of a person to keep possession of a property or good(s) belonging to another person until that person discharges the debt owed by him. In olden times, Lien was practiced as a remedy to gain the dues from the defaulter. Later, it was recognised as a right by common law courts. The developing contract laws in various countries provided ‘lien’ a formal appearance. Indian Contract Act 1872 also recognises lien as a right and remedy. It has broadly classified it into – General and Particular. Lien provides the right to a bailee to retain the good(s) of the bailor, till the time the bailor clears all the dues he owed to the bailee.
Bailee – It is the person with whom some good(s) or property are left, and is responsible for its safe delivery after the fulfillment of an agreement/contract.
Bailor –It is the person who gives the possession of good(s) or property into the hands of the bailor, according to the terms of the agreement/contract.
Importance of Lien
Lien is a person’s right to retain the goods, in lieu of pending dues against him. It provides security to the buyers and protects the interests of lenders, in the situation of non-payment of the due amount by the other person. It allows them to recover the unpaid amount from the bailor. At times it could also be used as a tool for negotiation for businesses. The importance of lien could be understood from the following examples-
Case I: A person gives his car to the mechanic for repairing it. He agreed to pay a sum of money to the mechanic against the services provided by the mechanic and his labour. The mechanic then fixes the car in due time and asks the owner to collect his car after the scheduled payment. But the owner refuses to pay the amount due to him. So, the question arises- How will the mechanic recover his dues from the car-owner? The answer is- ‘Lien,’ i.e. the mechanic has the right to retain the car until all the dues owed by the car owner are paid to him.
Case II: A person took a home loan from a banker. It was considered in the contract that the payment should be made in 50 equal installments of X amount of money. But the house owner defaulted in payment(s). Again, the question arises- How will the banker recover his dues from the house owner? The answer is- ‘Lien,’ i.e. the banker has the right to retain the possession of the house until the dues are satisfied to him.
Now, when we are equipped with the knowledge of the basic concepts of lien & its importance, along with the understanding of Who is the bailee? And Who is the bailor? We must discuss the difference between ‘lien & pledge’ and ‘Particular lien & General lien’.
Note- The judgement of Diplock in Tappenden vs. Artus, highlights the nature of lien.
Particular Lien
In the particular lien, a person exercises his right to possession of good(s) belonging to another person until that person pays the charges due in respect to the good(s). A particular lien is only available against the good(s) in respect to which the bailee has used his skills and labours, provided that the consideration of the amount to be paid was done in advance.
Section 170 of Indian Contract Act, 1872
Bailee’s particular lien—Where the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them.
The major constituents for the test to determine the right of ‘Particular lien’ to the bailee are –
- Services given the bailee.
- Labour/skills involved
- Considerations
If the bailee proves all the three pre-requisites, he can exercise his right to ‘Particular lien’.
Illustrations
i. A delivers his car to the mechanic to repair it, which is done accordingly. The mechanic is entitled to retain the car till he is paid for his labour and skills. (Hatton vs. Car Maintenance company ltd.)
ii. In the same situation, let’s say the mechanic promised A to deliver his repaired car in the next 15 days. Unfortunately, he fails to deliver the car in due time and does it on the 20th day from receiving the car. In this scenario, the mechanic cannot exercise his right to ‘particular lien’ because he failed to exercise the contract in time. Thus, the mechanic is not entitled to retain A’s car. (Similar to the case of -Re Southern Livestocks producers ltd.)
It must be noted that, if the bailee retains the good(s) or property of the bailor in the exercise of his right to ‘Particular lien’; he cannot sue the bailor. But, if he does not retain the good(s) or property, instead, he returns it to the bailor, he may sue the bailor for the non-payment of his considerations. ‘Particular lien’ is commonly exercised by the following –
- Bailee
- Unpaid seller
- Finder of goods
- Pledgee
- Partner
- Agent etc.
General Lien
It is the right of an individual to retain the goods or property of another person until the promise or the liability due on that person is discharged accordingly. It could be regarded as the right against the general balance of the account. In simpler words, it could be understood as – retaining the goods belonging to another person in lieu of delivery of liability on him. Unlike Particular lien, the goods or property retained may or may not have any direct relation to the due liability. The only criteria for a good to qualify for being retained by the bailee are that it must belong to the defaulter. However, it must be noted that the bailee is merely entitled to retain the goods or property and not use or sell it for gaining the dues owed by the owner of that goods or property. ‘General lien’ is commonly used by the following –
- Bankers
- Factors
- Policy brokers
- Wharfingers
- Attorneys etc.
Section 171 of Indian Contract Act, 1872
Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as security for a general balance of the 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.
Illustrations
i. X has two accounts in a bank. One of them is a savings account while the other is a current account. Mr. X has a balance of Rs.10 lakh in his savings account. And he took an overdraft of Rs. 20 lakh from his current account. In order to recover the liability of 20 lakhs from Mr. X, the bank can retain his savings account also in accordance with to exercise of his right to ‘General lien’. However the savings account had no direct relation to the liability from the current account, yet the bank could retain it because both belonged to Mr. X. (Similar case law – Rushforth vs. Hadfield).
ii. A placed an order of the goods, which were meant to reach him through the sea route. The goods were unloaded from the ship and kept under the custody of the port authority. The port authority could retain that good until Mr. A pays all the dues to the port i.e. fee of unloading the goods, fee for the safe custody of goods, etc. However, whatsoever be the reason, the port is not entitled to use or re-sell the goods to recover the amount liability to balance the accounts. (Kalloomal Tapeshwari Prasad and Co. vs. M/s. R.C. & F. ltd.).
Key Differences between General Lien and Particular Lien
|
General Lien (Sec. 171, Indian Contract Act, 1872) |
Particular Lien (Sec. 170, Indian Contract Act, 1872) |
| 1. It is the right to retain the good belonging to another person to recover the due liability on him against the general balance of the account. | 1. It is the right of a bailee to retain the goods or property of the bailor until the payment of the dues is done by the bailor. |
| 2. Any goods or property belonging to the person against whom the liability is due, could be retained | 2. Only the goods or property against which the skill and labour are used, could be retained by the bailee. |
| 3. It is automatic in nature | 3. It is not automatic in nature |
| 4. The person who has retained the goods or property cannot use/sell it to recover the liability amount, whatsoever be the situation.
Case law: Gopal Das vs. ThakurDas |
4. Normally, in Particular lien also, the bailee could not use/sell the property to recover the dues. However, he may be allowed to do so under special circumstances. |
| 5. It is exercised by bankers, policy brokers, wharfingers Attorneys, etc. | 5. It is used by the bailee, pledgee, agent, finder of goods, partner, unpaid seller, etc. |
Conclusion
Lien is the right to retain the possession of goods or property belonging to another person against whom some dues or liability exists. General lien and particular lien are recognised by the common law courts and the Indian Contract Act, 1872. It is an effective tool to secure outstanding debt. Particular lien proves to be an effective tool to recover the dues. A general lien is helpful in recovering the liability amount from the person who owns those goods or properties. If the concept of lien had not been there, then the trade practices would be full of risks. It eases the trade practices by guaranteeing the payment of dues or liabilities. Hence, the concept of lien serves to be a good tool for negotiation in businesses. However, the lien can be subject to various threats and risks, still, it continues to assist the lenders as well as buyers, maintaining a healthy environment for businesses and service providers.
This Article has been written by Gyanendra Akrisht Tripathi, BA. LL.B (Hons) Student at School of Law, CHRIST (Deemed to be) University, Lavasa Campus.
