JUDGMENT '
Both these suits arise out of identical facts and same question of law is involved, therefore I propose to dispose them of by a common judgment. Fancy Investments Limited, filed Suit No. 766/1977 in respect of their 42,200 shares of Commerce Bank Ltd. Which they bad surrendered to the Commerce Bank in terms of Bank (Nationalization) Act, 1974. Suit No. 767/1977 has been filed by Fancy Foundation in respect of 22,002 shares of Commerce Bank Ltd. Which they had surrendered to Commerce Bank, as stated above. The plaintiffs were the registered share-holders of Commerce Bank Ltd. Holding the aforestated shares. On 1st January, 1974, by Banks (Nationalization) Act, 1974, all Pakistani banks were nationalised and their ownership, management and control transferred to and vested in the Federal Government. The Act provided that all shares held by persons in capital of a bank which was nationalised were to be transferred to and vested in the Federal Government with effect from 1-1-1974. The registered share-holders of Nationalised Banks were to receive compensation from the Federal Government in the form of Bonds of the Federal Government which were made negotiable. On or about 8-10-1974 the plaintiff received a printed letter/circular from the Commerce Bank requesting surrender of shares in the form prescribed under the rules to enable the said bank to make payment of Federal Government compensation bonds. The plaintiffs surrendered the aforestated shares to Commerce Bank Ltd. In terms of Banks (Nationalization) Act, 1974, along with all relevant and required applications and forms for exchange with compensation bonds. Commerce Bank issued receipt in favour of the plaintiffs acknowledging the receipt of the shares for exchange with compensation bonds.
However the defendant No. 1 in which the Commerce Bank had merged did not pay any compensation bond to the plaintiffs. The plaintiffs therefore served notices on the defendant No. 1 without any result. As the shares deposited with defendant No. I were pledged with defendant No 3 the plaintiffs demanded that the compensation bond may be issued and delivered to the defendant No. 3 in lieu of the receipts issued by Commerce Bank. The plaintiffs in Suit No. 766/1977 have averred that they are entitled to compensation bonds worth Rs. 2,11,000 and interest amounting to Rs. 84,000, whereas the plaintiffs in Suit No. 767/ 1977 have likewise claimed that they are entitled to compensation bonds worth Rs. 1,15,010, and interest amounting to Rs. 46,000. The plaintiffs have therefore prayed that the defendants Nos. I and 2 be directed to deliver the compensation bonds to the plaintiffs and in the alternative the aforestated value as determined under the Banks Nationalization Payment of Compensation Rules, 1974, with interest should be paid to them.
2. The defendant No. 1 in their written statement have stated that the State Bank of Pakistan through Public Debt Office, Karachi had issued the compensation bonds in pursuance to rule 6 of Banks Nationalization Payment of Compensation Rules and forwarded to the defendant No. 1 for delivery to the plaintiffs. But later Board of Industrial Management by its letter dated 13-2-1974 instructed to withhold delivery of compensation bonds to the plaintiffs. The defendants have further pleaded that the plaintiffs and their family concerns and their directors and partners are heavily indebted to the defendant No. I particulars of the debts running in lacs of rupees has been stated. It was therefore pleaded that the defendant No. 1 have a lien over the said compensation bonds and are entitled to retain the same. The defendant No. 1 have admitted that the said shares were deposited in terms of Banks (Nationalization) Act, 1974, for exchange with compensation bonds. The defendant No. 2 has also filed its written statement in which it is stated that the plaintiffs had purchased 1,50,000 shares of the former Commerce Bank Ltd. Out of the funds of Metropolitan Steel Corporation in the name of the Directors of the plaintiffs. However when distinctive numbers of 1,50,000 shares were supplied it was decided to release compensation bonds relating to the other shares and instructions were accordingly given to the defendant No. 1. On the basis of these pleadings the following issues were framed:
(1) Whether the defendant No. 1 bas a lien on the compensation bonds in question as stated in paras. 3 and 4 of its written statement
(2) What should the decree be ?
Issue No. l:
3. In para. 3 of the written statement the defendant No. 1 has stated that the plaintiffs and their directors, partners and other family members and allied concerns are heavily indebted to the defendant No. 1 as borrowers or guarantors. Particulars of such indebtedness has been given in detail in the same para. And on the basis of these facts in para. 4 it has been averred that the defendant No. 1 have a lien on the said compensation bonds and are entitled to retain the same. In a nutshell the defence of the defendant No. 1 is that as the plaintiffs are indebted to them they are entitled to exercise lien over the compensation bond. Before considering whether in these circumstances lien can be exercised certain facts admitted by defendant No. 1 may also be mentioned here. The defendant No. 1 have admitted that the shares were delivered to Commerce Bank Ltd. For obtaining compensation bonds from the Government in terms of Banks (Nationalization) Act, 1974. The defendant No. 1 had also issued receipts acknowledging receipt of the shares from the plaintiffs for exchange with compensation bond. It is thus an admitted position that the shares were deposited and delivered to Commerce Bank for exchange with compensation bond. The entire exercise was in terms and provisions of Banks (Nationalization) Act, 1974, which provided a procedure for payment of compensation bond through the banks. The plaintiffs have not led any evidence but the defendant No. 1 have examined one of its Officers who has produced the statement of account of Hand Tools Ltd. And Fancy Investments Ltd. To show that they are indebted to the defendant No. 1. He has, however, admitted that the shares were delivered for specific purpose for exchange with compensation bond and that the shares were not pledged with the United Bank. It has also been stated in the cross-examination that United Bank Ltd., the defendant No. 1 came into possession of the shares which are subject-matter of both the suits for the first time when these shares were lodged for exchange with the compensation bond. He further admitted that the compensation bonds were to be issued by the Federal Government and defendant No. 1 were acting as agent of the State Bank of Pakistan who were acting on behalf of the Federal Government. He also confirmed that embargo placed by Board of Industrial Management has been lifted. The entire documentary and oral evidence of the defendant No. 1 is that (1) the shares are not pledged with defendants No. 1, (2) they were delivered to defendant No. 1 for the specific purpose to exchange for the compensation bond and (31 in taking possession of the compensation bonds the defendant No. 1 were acting as agent of the Federal Government. In view of these facts it has to be seen whether the defendant No. 1 could claim lien over the compensation bond.
4. In this regard first reference has to be made to section 171 of the Contract Act which provides that in the absence of a contract to the contrary, bankers may retain as a security for a general balance of account any goods bailed to them. Admittedly, section 171 is not exhaustive as held in PLD 1957 Kar. 760. The banker's lien is subject to any contract to the contrary. Bankers has a general lien on all securities that may be deposited with him by a customer. A banker thus acquires a lien over pledged good for the recovery of his dues and has a right after notice to the debtor to sell those goods to reimburse himself. Therefore right of lien arise only in respect of such properties which come to his hands in his capacity a bankers and in the course of banking business. In Paget's Law of Banking, VIIIth Edo., at page 499 relying on Re Bowes, Earl of Strethmore v. Vane ((1886) 33 Ch. D 586), following observation has been made: "The nature of the securities subject to lien is further deducible from the condition that they must come to the bankers hand in this capacity as bankers, in the course of banking business. It is a part of a bankers business to advance money and any class of property may by proper means be made the subject of security."
Lord Chorley in Law of Banking, VIth Edn. At page 292, observed:- "the bankers lien is a general lien existing by mercantile custom, -and is binding upon the customer whether he knows of it or not. Furthermore, although a lien normally confers only a right to retain possession, a banker's lien is exceptional and carries with it the valuable right of sale and recoupment. It has indeed been neatly defined as an `implied pledge'. The most difficult question which arises is as to the types of property over which the banker is entitled to claim a lien. The principle of the lien being that of an implied pledge, it can attach only to such property as customer by implication agrees that .It shall."
5. For determining the nature of bankers lien all the authors and authorities have heavily relied on Brandao v. Barnett ((1846) 12 Cl. & Fin. 787). The following passage has been quoted with approval and has been followed till today: "Bankers most undoubtedly have a general lien on all securities deposited with them as bankers by a customer, unless there be an express contract, or circumstances that show an implied contract inconsistent with lien."
6. In the case of Farooq v. Eastern Banking Corporation Ltd. Karachi (PLD 1980 Kar. 115), the claim of a banker for lien under section 171 of the Contract Act was repelled on the ground that the bank had not proved that there was any general balance outstanding against the customer in his account and secondly that no goods were pledged to the banker over which he could exercise lien.
7. Mr. J. H. Rahimatullah, the learned counsel for the plaintiffs relying upon para. 78 of Halsbury's Laws of England, Volume 3, IVth Edn. Has contended that the defendant No. 1 did not obtain the possession of the shares as a banker and as the said shares had been given for a specific purpose it was the intention to exclude the lien. The learned counsel further contended that the shares were not deposited in the accounts mentioned by the defendant No. 1 but they were deposited separately and under the receipts they were accepted for a specific purpose. The determination of question whether a particular security in a bankers possession was delivered to him for the purpose of being dealt with by him as a banker depends partly on the facts and partly on the general usage of the bankers and the customer who owns the security. In the present case the evidence is very clear on the point and there is no dispute between the parties that the security came into the hands of the defendant No. 1 not in the normal course of their banking business but by virtue of operation of the Banks (Nationalisation) Act, 1974, whereby compensation bond was to be paid in lieu of the. Shares by the Government through defendant No. 1. The defendant No. 1 was not to pay any compensation bond but it was merely an intermediary for collecting the shares and delivering the compensation bond which was received from the State Bank. Under section 171, the bankers lien may be excluded by express contract or by implied contract. It has therefore to be seen whether the deposit of shares in the hands of defendant No. 1 in any manner excluded the lien claimed by defendant No. 1. In Paget's Law of Banking, VIIIth Edn. At page 506 it has been observed as follows: "As between the bankers and his own customer, the lien may be excluded by express contract or by circumstances which show an implied contract inconsistent with lien. Goods merely deposited for safe custody would clearly be exempt from lien, but they could be utilised as security by the customer's giving a written memorandum of charge, evidencing the banker's change of position with regard to them. Nowadays some banks include in their memoranda of charge provision giving them a charge over securities deposited for safe custody."
Lord Chorley in Law of Banking at page 292 observed as follows: "It follows from what has been said already that no lien will arise if there is `an express contract, or circumstances which show an implied contract inconsistent with lien'. Thus all cases of deposit for safe custody, even of instruments of negotiable character to which the lien would normally attach are clearly inconsistent with lien. Similarly, where a customer pays money to his banker for the express purpose of enabling the banker to discharge some obligations incurred on his behalf, as for the payment of the price of shares bought for him, the intention is clearly that there should be no lien."
8. From the aforestated observations it is now well settled that where security is delivered to a banker for a specific purpose it is inconsistent with the right of lien and impliedly there is an agreement to the contrary and therefore a banker cannot exercise lien over such property. Before the lien is exercised by a banker he has to establish that he has taken possession of the security as a banker and secondly that there is no contract contrary to the lien. Mr. Mamnoonul Hasan, the learned counsel for the defendants has contended that admittedly the plaintiffs are indebted in Suit No. 766/77 as a debtor and in Suit No. 767/77 as a guarantor. According to the learned counsel it was the duty of the plaintiffs to have pleaded and proved that there was a special contract with the banker which is inconsistent to the right of lien. There is hardly any dispute between the parties over the facts of the case. The plaintiffs have in the plaint stated that the shares were deposited with defendant No. 1 for a specific purpose for obtaining the compensation bond which the defendant No. 1 was to deliver to the plaintiffs as provided by Banking (Nationalization) Act, 1974.
This has been admitted by the defendant No. 1 and it has also .Been admitted that these shares were never pledged. In the face of these pleadings and the admitted position the contention of the learned Advocate for the defendant No. 1 is not tenable.
9. The learned counsel for the defendant No. 1 then contended that as the shares were not deposited under an agreement or pursuant to an agreement but under a statute therefore the provisions of section 171 will not apply. This has reference to the Banks (Nationalization) Act, 1974. As the specific purpose and procedure was provided by the said Act the same would be pressed in service for determining the nature and the purpose for which the shares were deposited with the defendant No. 1. In the result my finding on Issue 1 is in the negative.
Issue No. 2:
10. In Suit No. 766/77 the plaintiffs have claimed the return of compensation bonds of the value of Rs. 2,11,000 and payment of interest of Rs. 84,000 from 1-1-1974 to 20-11-1977, and alternative prayer is for a sum of Rs. 2,11,000 and Rs. 84,000 with further interest at the same rate. In Suit No. 767/77 the plaintiffs have made similar prayer for delivery of compensation bonds of the value of Rs. 1,15,010 and payment of interest amounting to Rs. 46,000 from 1-1-1974 to 20-11-1977 and alternative prayer has been made for a decree of Rs. 1,15,010 and 46,000 with further interest. The value of the compensation bond in both the suits the value as stated above by the plaintiffs and the interest calculated by them have been admitted by defendant No. 1. In view of my finding on Issue No. 1 1 decree the suit No. 766/77 against defendants Nos. 1 and 2 jointly and severally directing the defendants Nos. 1 and 2 to hand over and deliver to the plaintiffs Federal Compensation bond of the value of Rs. 2,11,000 in exchange for 42,200 shares of Commerce Bank received by them. The defendants Nos. 1 and 2 shall further pay interest of 84,000 and shall further pay interest at the rate provided by Banks (Nationalisation) Act, 1974, and rules framed thereunder till payment or delivery of the compensation bond. If the defendants Nos. 1 and 2 fail to deliver the compensation bond and interest as stated above within a period of two months then the defendants Nos. 1 and 2 shall pay to the plaintiff sum of Rs. 2,11,000, and Rs. 84,000. The plaintiffs shall further be entitled to the interest at the rate provided by Banks (Nationalisation) Act, 1974 and rules framed thereunder on Rs.2,11,000 till payment. Likewise in Suit No. 767/77 1 grant a decree to the plaintiffs against the defendants Nos. 1 and 2 jointly and severally directing the defendants Nos. 1 and 2 to hand over and deliver to the plaintiffs, Federal Compensation bond of the value of Rs. 1,15,010 in exchange of 22,002 shares of Commerce Bank deposited with the defendant No. I and the defendants Nos. 1 and 2 pay Rs. 46,000 as interest on the sum of Rs. 1,15,010 at the rate provided by the said Act and the rules till delivery of the compensation bond to the plaintiffs. If the defendants Nos. 1 and 2 fail to deliver the compensation bond as ordered within a period of two months the defendants Nos. I and 2 shall pay to the plaintiff Rs. 1,15,010 and Rs. 46,000 together with interest at the rate mentioned above on the sum of Rs. 1,15,010 from the date of suit till recovery. In both the suits the defendant No. 1 shall bear the costs. The defendants Nos. 1 and 2 are allowed to satisfy the decree within a period of two months.