Bankers lien

Banker's lien is much more comprehensive than an simple lien it was named implied pledge. Thus if banker's lien is treated as an implied pledge it lets him the right to disposal submit an appropriate notification and you cannot file a claim to seek the right to sell. Bank pledge is the right of the bank to perform a pledge on any property in order to secure the customer's debt .

Juridical definition

Juridical definition of the banker's lien on transferable securities was called as "an implied pledge." In the event of disagreement, the banker reserves the right to pledge on all accounts obtained from the customer in the normal course of banking in relation to the balance which could belong to such a client. In accordance with the mercantile custom, the banker has the general right to pledge deposited by client or on his behalf all the form of commercial papers in the normal procedure of banking business. It is worth adding that this custom do not cover all the valuables which were placed only for the safe custody purpose. The lien applies only in case of documents guaranteeing the payment of a certain sum of money which are passed to the banker from the client in order to collect it. After the assemblage the banker can use the action in order to drive down the customer's debit balance except otherwise indicated .

Scope of lien

A lien is the creditor's right that guarantees him that his claim will be satisfied. It is a form of insurance that guarantees extra fulfillment of the debtor's obligations towards the creditor which granted over an item of property to secure the payment of a debt or performance of some other obligation. The person which uses the pledge is called at the lien holder or lienor and the owner of the real estate that grants the pledge is referred to as lienee. A lien may be established to secure a monetary or non-monetary claim.

The banker may grant an advance to the client and require a lien guarantee from him. It may do so on the basis of a bilateral agreement, although it is not legally required to sign such a contract. However the right to lien may be expressly granted by way of a contract or may be definitely excluded by agreement between the parties or by existence of a contract or circumstances inconsistent with its performance lien's right. If the client has securities that have passed through the banker's hands A practical attempt to pledge the banker is whether they were securities received and operated by the bank in its ordinary course of business no explicit or implied agreement between the client and the bank contradictory with liens .

Special circumstances in which the right to pledge can not be exercised

Nonetheless, in some specifics circumstances there cannot use this right of lien:

1. If assets of exceptional value are deposited in the banker's safe custody.
2. If the demesne or securities were submitted for a specific purpose.
3. In the event that the money is withdraw to cover certain accepted bills payable at the banker.
4. It also does not include ownership titles left negligently in the bank. Likewise, a pledge may not be exercised with respect to documents or valuables left unintentionally to the banker
5. The lien cannot be performed in relation to fiduciary accounts. But the lien can be performed if the bank does not have a cognisance.

In the case of the banker's right to lien, the Law of Limitation is not valid. This Act not effect on possession which the banker has a pledge .

Examples of Bankers lien

1. The most common example of a Bankers lien is when a borrower fails to repay a loan. In this case, the bank can take possession of the collateral used to secure the loan and sell it to recover the loan amount.
2. Another example is when a bank lends money to a business for a specific purpose, such as building a factory. In this case, the bank can take possession of the factory if the business fails to repay the loan.
3. A Bankers lien can also be used when a debt is secured by an asset. For example, if a borrower defaults on a mortgage loan, the bank can take possession of the house and sell it to recover the loan amount.
4. A Bankers lien can also be used when a business has unpaid taxes. In this case, the tax authority can take possession of the business’s assets and sell them in order to recover the unpaid taxes.

Advantages of Bankers lien

A Bankers lien is a form of implied pledge, granting the bank the right to dispose of the collateral in case of a default. It offers several advantages to both the bank and the borrower, including:

• Greater security: A Bankers lien provides the bank with a higher level of security, as it is a more comprehensive form of lien than a simple lien. This means that the bank is less likely to lose money if the borrower defaults on the loan.
• Faster recovery: A Bankers lien allows the bank to recover the loan more quickly than if it were a simple lien. This is because the bank is able to submit an appropriate notification and immediately start the process of selling the collateral to recover the loan.
• Lower costs: A Bankers lien is also less expensive than a simple lien, as the bank does not have to go through the process of filing a claim to seek the right to sell the collateral. This can save money in legal costs, as well as time.

Limitations of Bankers lien

A banker's lien has certain limitations when it comes to the rights of a creditor. These limitations include:

• The lien only applies to specific assets that are held in a bank account, and does not extend to other assets.
• The lien is limited to the amount of money that is currently in the account and does not apply to future deposits or withdrawals.
• The lien does not grant the creditor the ability to seize or liquidate the assets held in the account, as this would require a court order.
• The lien does not provide the creditor with the ability to take legal action against the debtor in the event of a default or non-payment.
• The lien does not provide the creditor with the ability to transfer ownership of the assets held in the account.
• The lien does not provide the creditor with priority over other creditors in the event of a bankruptcy.

Other approaches related to Bankers lien

A Bankers Lien is a much more comprehensive form of lien than a simple lien, and is sometimes referred to as an implied pledge. Other approaches related to Bankers lien include:

• Perfection of the lien, which is the process of making the lien enforceable, by filing documents in the public record.
• Perfection by Possession, which is the process of taking physical possession of the asset that the lien is attached to.
• Perfection by Control, which is the process of taking control of the asset that the lien is attached to, without taking physical possession.
• Perfection by Notice, which is the process of sending a formal notification to the debtor, informing them of the lien.

In summary, Bankers liens are much more comprehensive than simple liens, and can be enforced through a variety of approaches, such as perfection of the lien, possession, control and notice.

Footnotes

Bankers lien — recommended articles

Fixed and floating charge — Mortgage deed — Satisfaction of mortgage — Lien theory — Absolute assignment — Assignment of insurance — Lien theory state — Certificate of satisfaction — Collateral assignment

References

• Ellinger E.P., Lomnicka E., Hare C. (2011) Ellinger's Modern Banking Law (5th ed.), Oxford University Press
• Gulshan S.S. (2009) Business Law, Excel Books, New Delhi
• Marsden M. (1985) The Practice of Banking, Part 1, Bank of Credit and Commerce International, London

Author: Klaudia Dudzik