Lien under Sections 170 and 171 of the Indian Contract Act, 1872: Particular Lien and General Lien, the Banker's Lien, the Four Named Classes, and Lien Compared with Pledge

A lien is the right to retain goods belonging to another until a claim against him is satisfied. It is a purely defensive right and that is its defining limitation: the holder keeps the goods, but he cannot sell them, and if he parts with possession the lien is gone. The Act distinguishes two kinds. A particular lien under Section 170 secures only the charges relating to the very goods retained, and is available to any bailee who has done work on them. A general lien under Section 171 secures the whole account between the parties, and is available only to four named classes of persons and to anyone who has contracted for it.

1. The Two Sections

Sections 170 and 171, Indian Contract Act, 1872

170. 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.

Illustrations. (a) A delivers a rough diamond to B, a jeweller, to be cut and polished, which is accordingly done. B is entitled to retain the stone till he is paid for the services he has rendered. (b) A gives cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as soon as it is finished, and to give a three months' credit for the price. B is not entitled to retain the coat until he is paid.

171. General lien of bankers, factors, wharfingers, attorneys and policy-brokers. Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of 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.

2. Particular Lien: Section 170

The bailee must have rendered a service involving labour or skill. A mere custodian who has done nothing to the goods, such as a warehouseman who has only stored them, has no particular lien under the section, though he may have one by contract or by usage.
The service must be in accordance with the purpose of the bailment. Work done outside the authority conferred gives no lien.
The lien secures only the remuneration for services rendered in respect of those very goods. It does not extend to a general balance due from the same customer on other transactions.
The work must be complete, or at least the remuneration must have become due. A bailee cannot retain goods for work he has not yet finished.
Credit destroys the lien. Illustration (b) makes the point: a bailee who agrees to deliver the goods and to give credit for the price has contracted out of the lien, since the two are inconsistent.
Possession must be lawful and continuous. Parting with possession extinguishes the lien, and it is not revived by getting the goods back.

3. General Lien: Section 171

A general lien secures the general balance of account between the parties and extends to goods that have nothing to do with the debt. Because it is so much stronger, the Act confines it to four classes of persons, and to anyone else only by express contract.

Class	Who they are	Scope of the lien
Bankers	Persons carrying on the business of banking	All securities and goods of the customer coming into the bank's hands in the ordinary course of banking business, for the general balance
Factors	Mercantile agents entrusted with possession of goods for sale	Goods of the principal in their possession as factors, for the general balance of the agency account
Wharfingers	Persons who keep a wharf for the landing and storage of goods	Goods in their custody as wharfingers, for the general balance of wharfage charges
Attorneys of a High Court	Advocates on the rolls of a High Court	Papers and documents of the client that come into their hands professionally, subject to the qualification below
Policy-brokers	Brokers effecting policies of insurance	Policies and documents in their hands, for the general balance of brokerage
Any other person	By express contract only	As the contract provides; there is no general lien at common law for other bailees

⚠ An advocate has no general lien over his client's case papers

Section 171 names attorneys of a High Court, and the provision is frequently cited for the proposition that a lawyer may hold his client's file until his fees are paid. The Supreme Court has held otherwise. Case files entrusted by a client are not goods bailed within the meaning of the section, and an advocate who refuses to return them holds his client's litigation to ransom, which the professional rules do not permit. The advocate's remedy is to sue for his fees. The position should be verified against the current decisions and the Bar Council rules before it is relied on, but the safe working assumption is that no lien over case papers is available.

4. The Banker's Lien

📖 Brandao v. Barnett, (1846) 12 Cl & Fin 787 (HL)

Facts: Exchequer bills belonging to a foreign merchant were deposited with London bankers in the ordinary course of business. The bankers claimed to retain them against a general balance owing on the merchant's account. The question was whether such a lien existed and on what footing.

Held: The House of Lords upheld the lien. Bankers have a general lien on all securities deposited with them as bankers by a customer, unless there is an express contract, or circumstances showing an implied contract, inconsistent with the lien. Lord Campbell added the proposition that has been quoted ever since: the general lien of bankers is part of the law merchant and is to be judicially noticed, so that it need not be proved as a custom in each case.

Ratio: A banker's general lien over securities deposited in the ordinary course of banking is part of the law merchant and exists without proof of usage, subject to any contract inconsistent with it.

📖 Syndicate Bank v. Vijay Kumar, (1992) 2 SCC 330

Facts: A customer had furnished the bank with fixed deposit receipts, duly discharged, in connection with a guarantee the bank had given on his behalf. The customer also owed the bank on other accounts. A decree-holder of the customer sought to attach the deposits, and the bank asserted a lien over them.

Held: The Supreme Court upheld the bank's claim. A banker has a general lien over all forms of securities or negotiable instruments deposited by or on behalf of the customer in the ordinary course of banking business, and the lien attaches to fixed deposit receipts so deposited. The lien arises in the absence of a contract to the contrary, and the bank was entitled to appropriate the proceeds towards the customer's dues in preference to the attaching creditor.

Ratio: A banker's general lien under Section 171 extends to securities and deposit receipts placed with the bank in the ordinary course of banking, and entitles the bank to retain and appropriate them against the general balance.

4.1 Limits on the banker's lien

The goods or securities must come into the bank's hands in the ordinary course of banking business, and in the capacity of banker. Articles left for safe custody in a locker, or securities deposited for a specific purpose, are outside the lien.
A contract to the contrary excludes it, whether express or implied from the circumstances of the deposit.
Securities deposited for a specific purpose cannot be held for the general balance, since the purpose is inconsistent with a general lien.
The debt must be due and payable, and a lien does not attach in respect of a contingent or future liability unless the contract so provides.
Goods held as trustee or for a third party are not subject to the lien, the customer not being the beneficial owner.

Retention for particular charges, for the general balance, or with a power of sale

5. Particular and General Lien Compared

Point of difference	Particular lien, Section 170	General lien, Section 171
What it secures	Only the charges relating to the very goods retained	The general balance of account between the parties
Who may claim it	Any bailee who has rendered a service involving labour or skill	Bankers, factors, wharfingers, attorneys of a High Court, policy-brokers, and others by express contract
Connection between debt and goods	Essential; the debt must relate to those goods	None required; any goods bailed in the relevant capacity may be retained
Basis	Statutory, in the absence of a contract to the contrary	Statutory for the named classes, and contractual for everyone else
How it is lost	By parting with possession, by giving credit, or by a contract to the contrary	By parting with possession, by a contract to the contrary, or by the goods being held for a specific purpose
Typical claimant	A repairer, a tailor, a jeweller, a carrier who has carried the goods	A bank retaining securities against an overdraft

6. Lien and Pledge Compared

Point of difference	Lien	Pledge, Sections 172 to 181
Nature of the right	A right to retain only	A right to retain and, on default and notice, to sell
How it arises	By operation of law under Sections 170 and 171, or by contract	By a contract of bailment of goods as security for a debt or performance
Possession	Arises from possession already lawfully obtained for another purpose	Possession is delivered for the purpose of securing the debt
Power of sale	None. The holder cannot sell to satisfy his claim	Section 176 permits sale after notice, in addition to a suit
Interest in the goods	No proprietary interest; merely a right of retention	A special property in the goods, which the pawnee holds as security
Transferability	Not transferable	The pawnee's special property may be transferred, subject to the pawnor's right of redemption
Redemption	The goods are released on payment	Section 177 gives the pawnor a right to redeem before the actual sale

7. How a Lien Is Lost

Parting with possession. A lien is a possessory right and cannot survive its loss. Delivery of the goods to the owner, or to anyone on his behalf, extinguishes it, and it does not revive if the goods come back.
Waiver, express or implied, including taking other security inconsistent with the lien.
Giving credit for the charges, which is inconsistent with a right to retain until payment, as Illustration (b) to Section 170 shows.
A contract to the contrary, which both sections expressly preserve.
Payment or tender of the amount secured.
Unlawful possession, since the lien attaches only to goods lawfully in the holder's hands in the relevant capacity.

8. The Position Stated Shortly

A lien is a right to retain goods until a claim is satisfied, and carries no power of sale.
Section 170 gives a particular lien to a bailee who has rendered a service involving labour or skill on the goods, for the charges relating to those goods.
The particular lien is lost by giving credit, by parting with possession, or by a contract to the contrary.
Section 171 gives a general lien for the general balance of account to bankers, factors, wharfingers, attorneys of a High Court and policy-brokers, and to others only by express contract.
Brandao v. Barnett: the banker's general lien is part of the law merchant and requires no proof of usage.
Syndicate Bank v. Vijay Kumar: the lien extends to securities and deposit receipts placed with the bank in the ordinary course of banking.
The banker's lien does not attach to goods deposited for safe custody or for a specific purpose, or where there is a contract to the contrary.
An advocate has no general lien over his client's case papers, notwithstanding the reference to attorneys in Section 171.
A lien permits retention only; a pledge permits sale after notice under Section 176 and gives the pawnee a special property in the goods.
A lien is lost by parting with possession, waiver, giving credit, a contrary contract, or payment.

9. Related Topics and Provisions

Topic or provision	Connection
Bailment under Sections 148 to 169	The relationship from which the lien arises
Pledge under Sections 172 to 181	Bailment as security, and the power of sale
Finder of Goods under Section 71	The finder's lien under Section 168
Rights of the Surety under Sections 140 to 147	Securities held by a creditor, and the surety's claim to them
Sections 170 and 171, Indian Contract Act	Particular and general lien
Section 168, Indian Contract Act	The finder's right to retain
Section 176, Indian Contract Act	The pawnee's power of sale, which a lienholder lacks
Section 221, Indian Contract Act	The agent's lien on the principal's property