A lien is the right of a creditor in possession of goods, securities or any other assets belonging to the debtor to retain them until the debt is repaid, provided that there is no contract express or implied, to the contrary. It is a right to retain possession of specific goods or securities or other movables of which the ownership vests in some other person and the possession can be retained till the owner discharges the debt or obligation to the possessor.
It is a legal claim by one person on the property of another as security for payment of a debt. A legal claim or attachment against property as security (right) for payment of an obligation.
There are three important conditions to exercise the right of lien. The are
- The goods for which this right is to be executed has to be possessed by the creditor who exercises it.
- There has to be a lawful debt due to the person in possession of the goods by the owner.
- There should not be any contract to the contract.
John wants to purchase a new house. In order to afford the purchase, he borrows money from ABC Bank. The bank wants to guarantee the repayment of the loan, and it requires John to provide the house as the collateral for the loan.
The bank files the documents with the government agency required to register the lien. Upon the completion of the process, the bank becomes the holder of the collateral provided by John (in this case, John’s house).
If John is unable to meet his financial obligations according to the mortgage agreement with ABC Bank, the bank will take possession of the property and will be able to sell it to satisfy the loan obligation.
The contract between the banker and borrower is a contract between debtor and creditor. The contract implies that the borrower promised to repay the money borrowed by him. Right of set off is the right of the bank to combine the two accounts of the same person where one account which is in credit balance and the other account is in debit balance in order to cover a loan default. The banker can exercise the right of set-off only when the money owed to him is a sum certain, which is due and where there is no agreement, express or implied to the contrary.
A set-off must be in the form of a cross claim for a liquidated amount and it can be pleaded only in respect of a liquidated claim. Both the claim and the set-off must be mutual debts, due from and to the same parties, under the same right A claim by a person in a representative capacity cannot be set off against a personal claim. Even a claim against the estate of a deceased customer cannot be set off against a debt, which was due to the customer from his banker, during the former’s lifetime, whether the accounts are with one or more offices of the banker, it does not materially affect the position in any way.
A bank can only exercise its right of setoff if (a) mutual obligations exist between the bank and the depositor/borrower and (b) the loan is in default or has matured. In this regard the lender must be certain a default has occurred and any applicable grace periods have elapsed before it can set off an obligor’s funds. To complicate matters further, the common law right of setoff may not be available to a lender where the bank holds other collateral that is adequate to provide for repayment of the debt.
I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.
If you are interested in participating in the same, do let me know.
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