The Andhra Pradesh High Court has allowed a bank to retain 67.1 grams of gold ornaments pledged against a gold loan to recover outstanding dues under another loan, in which the petitioner was also a co-applicant along with main borrower. 

In doing so, the Court dismissed a writ petition seeking return of the pledged ornaments.

The Court reached this conclusion after examining the scope of Section 171 of the Indian Contract Act, 1872, which permits a bank to exercise general lien over goods and securities bailed to it, in the absence of a contract to the contrary.

A Single Judge Bench of Justice Ravi Cheemalapati found that the petitioner had herself agreed to this arrangement under a Gold Loan Pledge Form.

The Court observed:

“Through the above clause, as rightly contended by the learned Standing Counsel for the Bank, the petitioner had agreed to keep the gold ornaments as security for due discharge of all the debts due to the bank, either already granted or to be granted, borrowed either solely or jointly. Therefore, not only there is absence of any express contract to the contrary but the petitioner herself in specific terms authorized the bank to keep the gold ornaments pledged for availing gold loan as security for due discharge of the loans that are already granted and that may be granted in future.

In view of the above, since the petitioner is the co-applicant of the housing loan availed by her husband and she specifically authorized the bank to keep the gold ornaments as security for discharge of all the debts borrowed either solely or along with other persons, the bank is right in retaining the gold ornaments by exercising general lien under Section 171 of the Indian Contract Act.”

The dispute arose from a gold loan of Rs. 2.85 lakh availed by the petitioner from Union Bank of India, against gold ornaments weighing 67.1 grams. She was also a co-applicant in a housing loan availed by her husband.

The gold loan account was subsequently declared as Non-Performing Asset (NPA). The petitioner paid the entire gold loan amount, following which the account was closed.

However, the bank did not return the pledged ornaments and informed the petitioner that it had exercised its general lien over them towards the outstanding dues in the housing loan account.

Aggrieved, the petitioner approached the High Court contending that the housing loan and gold loan were independent transactions governed by separate contracts. She argued that the bank could not retain the ornaments after repayment of the gold loan, particularly without notice or specific authorisation to use them towards her husband's loan dues. 

Relying on Section 171 of the Indian Contract Act, she argued that the housing-loan mortgage was a “contract to the contrary” excluding general lien. She also contended that such lien could apply only to the dues of the same borrower and not another customer's account.

The bank, on the other hand, contended that it was entitled to exercise general lien under Section 171. It relied on Clause 11 of the Gold Loan Pledge Form, under which the petitioner had agreed that the pledged ornaments could be retained as security for all debts due to the bank, whether borrowed solely or jointly and whether already granted or granted in future.

Considering the rival submissions, the Court examined Clause 11 and found that it specifically authorised the bank to retain the ornaments as security for debts already granted or that may be granted in future. The Court thus observed:

“Therefore, not only there is absence of any express contract to the contrary but the petitioner herself in specific terms authorized the bank to keep the gold ornaments pledged for availing gold loan as security for due discharge of the loans that are already granted and that may be granted in future.”

The Court found the action of the Union Bank of India in retaining the ornaments justified, holding that it was entitled to exercise general lien under Section 171.

Finding no merit in the writ petition, the Court consequently dismissed it.

Case Title: Balagam Sri Vijaya Bhargavi v. Regional Manager, Union Bank of India & Anr.

Case No.: W.P. No. 6724 of 2026

Counsel for the Petitioner: Ati Naga Surya Venkatesh

Counsel for the Respondent: V. Dyumani

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