WP/35296/2026 of S.JAGATHESWARAN Vs THE INDIAN OVERSEAS on 26 October 2026

O R D E R

The prayer in the writ petition is for a writ of certiorarified mandamus, to call for the records of the impugned order dated 27.11.2025 which is communicated to the petitioners on 28.07.2026 passed by the second respondent, quash the same and consequently direct the respondents to close the education loan account of the first petitioner viz., A/c.No.0993033951400010, cancel the Memorandum of Deposit and return all original documents of the petitioners, which have been deposited at the time of processing of the educational loan application of the first petitioner viz., Jagatheswaran, vide sanction letter dated 24.02.2014.

2. The brief facts leading to the filing of the writ petition are that, on 22.01.2014, the second respondent bank, namely Indian Overseas Bank, sanctioned an education loan of Rs.12,70,000/- in favour of the first petitioner, S.Jagatheswaran. The second petitioner, who is the father of the first petitioner, is the co-obligant / co-borrower in respect of the said loan. As security, the registered sale deeds bearing Document No.4191 of 2008, dated 15.12.2008, and Document No.1239 of 1996, dated 24.06.1996, the power of attorney deed bearing Document No.584 of 2008, Patta No.549, the encumbrance certificate and other documents relating to the property offered as collateral security were deposited with the respondent bank. Of the total sanctioned amount, only a sum of Rs.10,16,000/- was disbursed to the petitioners during the period from 2014 to 2016.

3. The first petitioner has completed the medical course. On 30.06.2025, the petitioners repaid the entire outstanding loan amount of Rs.28,52,200/-. However, even after the said payment, the respondent bank did not process and cancel the memorandum of deposit of title deeds relating to the petitioners’ property. The title deeds have also not been returned. On 18.11.2025, the first petitioner submitted a representation to the respondents by email. In response, a reply email dated 18.12.2025 was received, stating that the dues payable on the first petitioner’s loan account amounted to Rs. 24,22,530.67. It was further stated that another education loan had been obtained in respect of the second petitioner’s daughter for Rs.4,03,139.64, and that unless that loan was also closed, the documents could not be returned.

4. Under these circumstances, the petitioners initially filed W.P.No.49941 of 2025. By an order dated 17.06.2026, the respondent bank was directed to consider the first petitioner’s representation dated 18.11.2025, after affording an opportunity of hearing. Thereafter, the impugned order was passed, requiring the petitioners to pay a sum of Rs.1,40,504.67 towards their education loan and to deposit a further sum of Rs.4,35,699.64 towards the loan obtained by the second petitioner for his daughter, who is the sister of the first petitioner. Aggrieved by the same, the petitioners have filed the present writ petition.

5. The petitioners’ challenge the respondent bank’s demand on the ground that it is unjustly demanding further amount after the entire outstanding balance, as indicated to them, was deposited and the loan was closed. With reference to the second education loan, they contend that there is no connection between the two loans and no contract permitting the retention of the present collateral security in respect of the other education loan. The other education loan will be duly closed.

6. The writ petition is resisted by the respondent bank through a detailed counter affidavit. It is stated that, in respect of the first petitioner’s education loan, the second petitioner is a co-applicant /co-obligant and is treated as a borrower. On 30.06.2025, the first petitioner remitted a sum of Rs.28,52,000/- into his own savings bank account and promised to remit the entire dues on both loan accounts shortly. However, he did not do so.

Thereafter, on 31.10.2025, the petitioners visited the respondent bank, withdrew a sum of Rs.25,51,000/- and remitted the same into the first petitioner’s education loan account. After crediting the said amount, a balance of Rs.1,00,456.67 remained as on 31.10.2025. The petitioners have not paid the balance till date, and, as on 31.08.2026, the total outstanding balance is Rs.1,43,612.67.

7. Apart from this, the second petitioner obtained another education loan for his daughter, Sivaranjani. The said loan account has become a Non- Performing Asset (NPA), and the total amount outstanding as on date is Rs.4,44,028.64. The second petitioner is also the co-obligant in the said loan account. Therefore, the respondent bank contends that it is entitled to exercise its right of general lien under Section 171 of the Contract Act, 1872. The respondent bank accordingly contends that, unless the petitioners settle both amounts, the Memorandum of Deposit of Title Deeds cannot be closed and the documents cannot be returned to the petitioners.

8. Mr.M.R.Jothimanian, learned counsel for the petitioners would rely upon the judgment of this Court in S.Balaji v. The Banking Ombudsman and another (2025:MHC:950) and the judgment of the Madurai Bench of this

Court in N.Rajathi v. The Manager, Canara Bank and others (W.P(MD)No.506 of 2014) to contend that the banker’s general lien is not available to the respondent bank, inasmuch as the parties to the two loan transactions are different. The borrower in the present loan is the first petitioner, whereas the borrower in the other loan is his sister. Since the two transactions are different, the banker’s general lien cannot be exercised. As far as the dues under the present loan are concerned, the learned counsel would submit that the petitioner visited the bank and, only upon the instructions of the respondent bank’s officials, deposited the entire sum of Rs.28,52,000/- into the bank. The bank is now wilfully and wantonly giving credit only from a subsequent date and claiming further credit interest accrued in the intervening period. When the petitioners have deposited the entire amount, no further amount can be demanded towards the dues.

9. Learned counsel for the petitioner would rely upon the judgment of the Hon’ble Supreme Court of India in Zonal Manager, Central Bank of India v. Devi Ispat Limited and others ((2010) 11 SCC 186), particularly paragraph No.28, to contend that, when the respondent bank, being an instrumentality of the State, acts contrary to the public interest or acts unfairly, it violates Article 14 of the Constitution of India, in such matters, even where the dispute falls within the contractual realm, a writ petition under Article 226 can be entertained and relief granted to the petitioner. Learned counsel would also reiterate the decision of the Hon’ble Division Bench of this Court in M.Shanti v. Bank of Baroda (2017 SCC OnLine Mad 37703).

10. Per contra, Ms.V.Rajeswari, learned counsel appearing on behalf of the Bank, would submit that the question whether the banker’s general right of lien under the provisions of the Contract Act, 1872 can be exercised in the instant case requires an examination of the loan transactions and a decision thereon. Such an exercise cannot be undertaken in writ jurisdiction, as the matter is purely civil in nature. Learned counsel submits that the Hon’ble Supreme Court of India has considered the entire question relating to the exercise of the banker’s general right of lien in Syndicate Bank v. V.Vijay Kumar ((1992) 2 SCC 330). The law laid down in that regard is that movables entrusted to the bank by way of bailment can be retained in exercise of its general lien when the petitioner owes dues to the bank. Learned counsel would also rely upon the judgment of the Kerala High Court in Rukkiya K.T. and another v. IDBI Bank Limited (2026 SCC OnLine Ker 1191).

11. Learned counsel would submit that, even under this Court's decision in S.Balaji (cited supra), the right is exercisable only if the transactions are different in nature. In the present case, a perusal of the loan documents shows that the property belongs to the second petitioner and that he is the co-obligant in both education loans. Accordingly, the nature of his liability is not different in respect of the two loan accounts. Learned counsel would also rely on the Division Bench judgment of this Court in B. Kamalakannan v. The Managing Director, Canara Bank and others (W.A.No.749 of 2012). She would contend that the bank is entitled to exercise its general lien to withhold the documents in respect of the second education loan obtained by the second petitioner for his daughter, who is the sibling of the first petitioner. She would further contend that, when the principal loan itself remains undischarged, the question of considering the banker’s general lien does not arise at this stage.

12. I have considered the rival submissions made on either side and perused the material records of the case.

13. Firstly, with reference to the balance claimed in respect of the first petitioner’s loan account, it must be seen that the petitioners were left with the challan produced by them and annexed at page No.34 of their typed set of papers. An image of the challan is reproduced below:

14. In order to justify its claim, the respondent bank has produced a copy of the challan annexed at page No.1 of its typed set of papers. An image of that challan is reproduced below:

15. Thus, it can be seen that neither document is a pay-in slip signed by the first or second petitioner. It is the contention of the bank that the petitioners came to the branch and deposited the money into their own savings bank account is not supported by the documentary evidence on record. When this Court directed the learned counsel for the bank to obtain instructions, it was admitted that there was no pay-in slip and that, upon the cash being entrusted to the bank officials, the officials themselves deposited it into the savings bank account. The handwriting found on the challan belongs to the bank officials, and the signature is also theirs. The purpose as mentioned in the challan clearly states that it is for the purpose of clearing the educational loan. That is written by the bank officials themselves.

16. Therefore, the bank’s entire case that the petitioners deposited the money into their savings bank account falls flat. It also does not stand to reason that, if the petitioners brought cash with the understanding that it was to be deposited only into the savings bank account and not into the loan account, there was no necessity for the bank officials to fill in the above challans. The petitioners should have been advised to deposit the amount into their savings bank account. Thus, the documents vindicate the petitioners’ stand that they went to the branch, ascertained the entire outstanding amount due as on that date and paid it in full. Even now, the respondent bank’s case is that the amount so paid was the entire amount outstanding as on 30.06.2025. Therefore, when the entire amount was paid, and the loan stood discharged without any concession whatsoever from the bank, the act of keeping the amount in the savings bank account, at the instance of the respondent bank’s officials themselves, and thereafter obtaining a withdrawal slip only on 31.10.2025 is attributable solely to the bank. The petitioners cannot be faulted for the bank’s actions, undertaken for its own convenience, queries or other circumstances.

17. Thus, the lis in the instant case does not merely determining the nature or quantum of dues in a contractual dispute; this Court has to consider whether the respondent bank acted fairly. It is unfair for the bank officials themselves to deposit the entire amount into the savings bank account and thereafter demand further interest for the ensuing months up to 31.10.2025, when the amount was appropriated towards the loan account. Thus, I hold that the first claim, relating to further dues in respect of the first petitioner’s loan account, is illegal, as the entire loan amount stood discharged as on 30.06.2025.

18. As far as the second question, relating to the exercise of the bank’s general lien is concerned, in S. Balaji (cited supra), I had occasion to consider the issue. The pronouncement of the Hon’ble Supreme Court of India in Syndicate Bank (cited supra) forms the basis. I also considered various pronouncements of this Court and other High Courts. The Division Bench of this Court in M.Shanti (cited supra) had also specifically dealt with the said issue. After considering the various judgments in this regard, it is held that, if both loans are not between the same set of persons, the banker’s right of general lien cannot be exercised. Paragraph 8.11 of the judgment in S.Balaji’s case (cited supra) can usefully be referred to in this regard. Having stated the legal position, the exercise of power under Article 226 of the Constitution of India is also equitable. This Court queried the learned counsel for the petitioners whether the other loan account could also be discharged, since the first petitioner and the first petitioner’s sibling, Sivaranjani, have both become doctors and only a sum of approximately Rs.4 lakhs remains due in that loan account.

19. Learned counsel for the petitioners would submit that they are not seeking any concession and that, if the entire amount is intimated and some time is granted, they will settle the said loan account also; however, reiterating that the respondent bank has no right to insist upon the said payment before cancelling the MOD relating to the present loan and releasing the title deeds.

Learned counsel would rely upon the Education Loan Scheme framed by the RBI, under which no collateral security can be insisted upon for loans up to Rs.4 lakhs.

20. While this Court agrees, in principle, with the learned counsel’s contention that the banker’s right of lien cannot be exercised, given the petitioners’ capacity to pay, the fact that the first petitioner’s sister has also completed her MBBS course and is practising, and that the amount due as on 28.09.2026 is Rs.4,44,028.64, I am of the view that the said amount can be directed to be paid by the second petitioner within a short period.

21. In view thereof, this Writ Petition is disposed of on the following terms:

(i) The loan account of the petitioners relating to the education of the first petitioner is declared to have been closed in full, and no further amount shall be due and payable by the petitioners in that regard;

(ii) The second petitioner shall duly arrange for payment of the aforementioned sum of Rs.4,44,028.64 within a period of eight weeks from today, together with interest accrued until the date of payment;

(iii) Upon such payment, the respondent bank shall cancel the MOD in respect of the collateral security and release the original deeds in favour of the petitioners; and

(iv) No costs. 26.10.2026 (2/2) vji Neutral citation : Yes

To

1. The Indian Overseas Bank, Rep. by its Chief General Manager, Salem Regional Office, No.38, Padma Towers, Opp: Town Railway Station, Agraharam, Salem - 636 001.

2. The Branch Manager, Indian Overseas Bank, Indur Branch, Indur – 636 803, Dharamapuri District.

D.BHARATHA CHAKRAVARTHY, J. vji Pre-Delivery Order made in W.P.No.35296 of 2026 26.10.2026 (2/2)