‘Banks can keep loan security for other liabilities’

The Kerala High Court has ruled that a bank is entitled to retain security, including gold ornaments deposited for taking a loan, even after clearing the same, if the borrower is yet to repay another loan. Justice V. Chithambaresh ruled that a bank had a general lien over all forms of security, including gold ornaments deposited by the borrower, for the entire outstanding balance amount due to the bank. The court made the ruling while disposing of a writ petition filed by Nakulan of Kollam seeking a directive to Canara Bank to release the gold ornaments pledged as he had already cleared the loan. According to him, when took a personal loan in January 2012 from the bank, no security had been given. The petitioner later took another loan by pledging his gold ornaments. He said that though he repaid the gold loan, the bank was retaining it as security for his personal loan. The bank took the stand that the gold ornaments could be released only after the petitioner cleared his entire liability.