Comprehension
The Indian Contract Act is a classical model of contract law that covers various codes that govern general contracts as well as specific contracts. Contract of Bailment, one such type of contract under the Indian law of contract, talks about the delivery of goods from one person to another for a purpose. Under this contract, the bailee is given a right to lien. Right to lien is defined under Section 171 of the Indian Contract Act, 1872, which talks about the general right to lien of bankers, wharfingers, factors, attorneys of high courts and policy brokers.
Generally, two parties are involved. The banker who lends money to the borrower or the customer, who then provides a security in exchange for the loan. Both parties are entitled to some of the rights that are associated with the securities that were provided. It is a possessory right which allows the bank to have temporary possession of the goods until 17 * PG the customer’s outstanding debt is paid. The banker the right to act as the trustee of the property as long as they are acting within their powers as the custodian and do not sell the property without giving notice to the customer. The landmark judgment of Syndicate Bank v. Vijay Kumar and Others dealt with the issue of whether or not a banker’s right to lien and set off was a general and customary right guaranteed to them. In furtherance of Halsbury’s laws of England, this judgment recognised the banker’s right to general lien was a right guaranteed by the law and not the contract.
(Extracted with edits from “Critical Analysis of Bankers Right of General Lien” by Alisha Khalid Bhendwade, IJLRA, Vol. II, 2024)
Question: 1

Who among the following can exercise right to General Lien in the absence of any provision in the contract?
i. Factors
ii. Brokers
iii. Wharfingers
iv. Attorneys

Updated On: Jan 13, 2026
  • iv
  • iv and ii
  • i and iii
  • All of them
Show Solution

The Correct Option is C

Solution and Explanation

The query concerns which groups can claim a General Lien when a contract lacks specific terms. Indian Contract Act (1872) Section 171 grants this right to bankers, wharfingers, factors, high court attorneys, and policy brokers. Analyzing the options:
  • Factors (i): Yes, they possess the general lien right.
  • Brokers (ii): Generally excluded, but policy brokers are an exception.
  • Wharfingers (iii): Yes, they have the general lien right.
  • Attorneys (iv): Limited to high court attorneys.
Consequently, based on Section 171, factors and wharfingers can exercise the general right to lien without explicit contractual provisions. The correct answer is i and iii.
Was this answer helpful?
0
Question: 2

The Bailee’s right to retain the goods until he receives due remuneration for the services, he has rendered in respect of them is known as:

Updated On: Jan 13, 2026
  • Particular Lien
  • General Lien
  • Particular Retention
  • General Retention
Show Solution

The Correct Option is A

Solution and Explanation

The correct answer to the question "The Bailee’s right to retain the goods until he receives due remuneration for the services, he has rendered in respect of them is known as:" is "Particular Lien".

A lien's principle originates from The Indian Contract Act, 1872. This Act covers bailment contracts, focusing on goods handling obligations. A bailee possesses a lien, which can be either general or particular.

A "Particular Lien" allows a bailee to keep goods until payment is received for services rendered on those *specific* goods. This applies when the bailee performed a service and is owed compensation for it.

Conversely, a "General Lien" enables entities (e.g., banks, wharfingers, attorneys) to retain property until any debt or balance is settled, irrespective of the goods' service. Section 171 of the Indian Contract Act acknowledges this right, a possessory right banks use until debts are cleared, as seen in Syndicate Bank v. Vijay Kumar.

Differentiating these liens is vital in legal studies, determining property rights based on service agreements or financial settlements.

Was this answer helpful?
0
Question: 3

With respect to bailment, a Banker:

Updated On: Jan 13, 2026
  • Has a right to a particular lien on fixed deposits
  • Has a right to a general lien on fixed deposits
  • Has a right to a general lien on savings account
  • Has no right to a lien on a savings account or fixed deposits
Show Solution

The Correct Option is D

Solution and Explanation

In Indian contract law (Indian Contract Act of 1872), understanding a banker's right to lien is vital in bailment. Bailment is when goods are temporarily transferred from the owner (bailor) to another (bailee). Section 171 outlines when a general lien applies:

  • A banker can use a general lien to hold goods or securities until a debt is repaid.
  • This lien does NOT apply to savings accounts or fixed deposits.
  • The lien applies to belongings held temporarily, not to funds or fixed deposits, which represent a debt the bank owes to the account holder.

The legal case Syndicate Bank v. Vijay Kumar supports banks' general lien over certain securities. However, fixed deposits and savings accounts are excluded, hence:

The correct answer is:
Has no right to a lien on a savings account or fixed deposits

Was this answer helpful?
0
Question: 4

Which one of the following is not an essential characteristic of Bailment?

Updated On: Jan 13, 2026
  • Physical delivery of goods
  • Delivery of goods for some purpose
  • After the purpose is accomplished, the goods must be returned
  • Goods may be returned to the owner or otherwise disposed of according to the directions of the person delivering them
Show Solution

The Correct Option is A

Solution and Explanation

The statement "Physical delivery of goods" is not an essential characteristic of Bailment. The following points clarify the essential characteristics of Bailment under the Indian Contract Act:

Bailment involves the transfer of goods from one person to another for a specific purpose, with an agreement for their return or other disposal upon completion of that purpose. Key characteristics of Bailment are:

  1. Delivery of Goods for a Purpose: Goods must be delivered for a specific purpose, based on a contract (explicit or implicit). This is fundamental to bailment.
  2. Return of Goods: After the purpose is fulfilled, the goods must be returned to the owner or dealt with as directed. This requires the bailee to care for and then return the goods.
  3. Goods Disposal Following Directions: The bailor's instructions for handling the goods after the purpose is achieved must be followed, including their return or other disposal.
  4. Lack of Necessity for Physical Delivery: Although physical delivery is common, it's not strictly required for a bailment. Symbolic or constructive delivery can also establish a bailment.

Consequently, "Physical delivery of goods" is not essential, as bailment can exist without actual physical transfer.

Was this answer helpful?
0
Question: 5

Which one of the following are bailments?
i. Hiring a Locker facility in a Bank
ii. Taking a Gold loan from the Bank
iii. Hypothecation of the vehicle for loan to the Bank
iv. Giving car for valet parking

Updated On: Jan 13, 2026
  • iv
  • iv and ii
  • i and iii
  • All of them
Show Solution

The Correct Option is B

Solution and Explanation

Bailment is a contract where goods are transferred from one party to another for a specific purpose. The deliverer is the bailor, and the receiver is the bailee. We'll examine scenarios to identify bailments:

  1. Bank Locker: Not a bailment. The bank provides space but doesn't possess the goods; thus, no bailee.
  2. Gold Loan: A bailment. The borrower gives the bank gold as collateral; the bank becomes the bailee.
  3. Vehicle Hypothecation: Not a bailment. The owner retains possession of the vehicle; no transfer occurs.
  4. Valet Parking: A bailment. The car owner gives possession of the car to the valet for a specific purpose.

Therefore, options ii (Gold loan) and iv (Valet parking) are bailments.

Was this answer helpful?
0

Top Questions on Contract Law

Questions Asked in CLAT PG exam

An unpleasant tussle ensured between the TATA Sons and Cyrus Pallonji Mistry (“CPM”) in October 2016, when Mistry, who was the sixth chairman of Tata Sons, was ousted from the position of Executive Chairman of Tata Sons Limited. CPM took over as the chairman in 2012 after Ratan Tata announced his retirement. Tata Group patriarch Ratan Tata had personally asked Cyrus Mistry to resign as chairman of Tata Sons as the board had lost faith in him, but his refusal led to the removal via majority vote. Cyrus Investments Private limited and Sterling Investment Corporation Private Limited belonged to the Shapoorji Palloni Group in which CPM held a controlling interest (about 2% of the issued share capital of Tata Sons). Seven out of the nine directors of Tata Sons voted for CPM’s replacement after Farida Khambata abstained and Mistry was declared ineligible to vote as he was an interested director. Mistry challenged his removal, accusing the board of mismanagement and of oppressing minority shareholders. however, the National Company Law Tribunal (NCLT) rejected his petition. After this Mistry challenged his removal in National Company Law Appellate Tribunal (NCLAT). In 2018, NCLAT order restored Mistry as the group’s executive chairman. Tata Sons challenged that NCLAT order in Supreme Court. CPM also challenged the order for few more relief. Supreme Court stayed NCLAT’s order reinstating Cyrus Mistry as the executive chairman of Tata Sons and restoring his directorships in the holding company as well as three group companies, with a preliminary observation that the first impression of the order was “not good” and that the tribunal ‘could’ not have given consequential relief that had not been sought in the first place. Ultimately, the Supreme Court decided the case in favour of Tata Sons. One of the issues decided by Supreme Court was that “whether the case was fit to be qualified as a situation of ‘Oppression and Mismanagement’ under Section 241 of the Companies Act, 2013?”. On this issue, the Supreme Court observed that “unless the removal of a person as a chairman of a company is oppressive or mismanaged or done in a prejudicial manner damaging the interests of the company, its members or the public at large, the NCLT cannot interfere with the removal of a person as a Chairman of a Company in a petition under Section 241 of the Companies Act, 2013.” This case highlighted the point that “an executive chairman does not have sovereign authority over the company. In corporate democracy, decision making always remains with the Board as long as they enjoy the pleasure of the shareholders. Likewise, an executive chairman will continue as long as he/she enjoys the pleasure of the Board. An assumption by the executive chairman that he/she would have a free hand in running the affairs of the company is incongruous to corporate governance and corporate democracy. The Tribunal held that the concept of ‘free hand rule’ is antithesis to collective responsibility and collective decision making”.
[Based on Tata Consultancy Services Ltd. v. Cyrus Investment Pvt. Ltd., 2021 SCC 122].
View Solution
Alastair Hudson in his book ‘Securities Law’ First Edition (Sweet & Maxwell), 2008 at page 342, refers to ‘Restricted Offers’ and noticed that there is no contravention of Section 85 of FSMA 2000, if: “(b) the offer is made to or directed at fewer than 100 persons, other than qualified investors, per EEA State”. The purpose underlying that exemption, the author says, is mainly the fact that the offer is not being made to an appreciable section of “the public” such that the policy of the prospectus rules generally is not affected. Further, the author says that “Self-evidently, while an offer to 99 ordinary members of the public would be within the literal terms of the exemption, it would not be the sort of activity anticipated by the legislation. Moreover, if a marketing campaign were arranged such that ordinary members of the people were approached in groups of 99 people at a time in an effort to avoid the prospectus rules, then that would not appear to be within the spirit of the regulations and might be held to contravene the core principle that a regulated person must act with integrity.”
I may, therefore, indicate, subject to what has been stated above, in India that any share or debenture issue beyond forty-nine persons, would be a public issue attracting all the relevant provisions of the SEBI Act, regulations framed thereunder, the Companies Act, pertaining to the public issue. Facts clearly reveal that Saharas have issued securities to the public more than the threshold limit statutorily fixed under the first proviso to Section 67(3) and hence violated the listing provisions which may attract civil and criminal liabilities. Principles of listing, which I may later on discuss, is intended to assist public companies in identifying their obligations and responsibilities, which are continuing in nature, transparent in content and call for high degree of integrity. Obligations are imposed on the issuer on an ongoing basis. Public companies who are legally obliged to list their securities are deemed to accept the continuing obligations, by virtue of their application, prospectus and the subsequent maintenance of listing on a recognized stock exchange. Disclosure is the rule, there is no exception. Misleading public is a serious crime, which may attract civil and criminal liability. Listing of securities depends not upon one’s volition, but on statutory mandate.
[Extract from Sahara India Real Estate Corporation Limited v. Securities and Exchange Board of India (SEBI), Para 89-91, Civil Appeal No. 9833/2011 (SC)]
View Solution
The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words, they do not supplant the law of the land but supplement it. The concept of natural justice has undergone a great deal of change in recent years. In the past, it was thought that it included just two rules namely: (1) no one shall be a judge in his own case (Nemo debet esse judex propria causa) and (2) no decision shall be given against a party without affording him a reasonable hearing (audi alteram partem).
Very soon thereafter a third rule was envisaged and that is that quasi-judicial enquiries must be held in good faith, without bias and not arbitrarily or unreasonably. But in the course of years many more subsidiary rules came to be added to the rules of natural justice. Till very recently it was the opinion of the courts that unless the authority concerned was required by the law under which it functioned to act judicially there was no room for the application of the rules of natural justice. The validity of that limitation is not questioned.
If the purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative enquiries. Often times it is not easy to draw the line that demarcates administrative enquiries from quasi-judicial enquiries. Enquiries which were considered administrative at one time are now being considered as quasi-judicial in character. Arriving at a just decision is the aim of both quasi-judicial enquiries as well as administrative enquiries. An unjust decision in an administrative enquiry may have more far reaching effect than a decision in a quasi-judicial enquiry as observed by this Court in Suresh Koshy George v. University of Kerala [Civil Appeal No. 990/68, decided on 15-07- 1968], the rules of natural justice are not embodied rules. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for that purpose. Whenever a complaint is made before a court that some principle of natural justice had been contravened the court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case.
[Extract from the judgment of the Supreme Court in A.K. Kraipak v. Union of India, (1969) 2 SCC 262, decided on April 29, 1969, hereafter ‘A.K. Kraipak’].
View Solution
The doctrine of promissory estoppel is by now well recognized and well defined by a catena of decisions of this Court. Where the Government makes a promise knowing or intending that it would be acted on by the promise and, in fact, the promise, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promise notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 229 of the Constitution. The rule of promissory estoppel being an equitable doctrine has to be moulded to suit the particular situation. It is not a hard-and-fast rule but an elastic one, the objective of which is to do justice between the parties and to extend an equitable treatment to them. This doctrine is a principle evolved by equity, to avoid injustice and though commonly named promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. For application of the doctrine of promissory estoppel the promise must establish that he suffered in detriment or altered his position by reliance on the promise.
Normally, the doctrine of promissory estoppel is being applied against the Government and defence based on executive necessity would not be accepted by the court. However, if it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the court would not raise an equity in favour of the promise and enforce the promise against the Government. Where public interest warrants, the principles of promissory estoppel cannot be invoked. The Government can change the policy in public interest. However, it is well settled that taking cue from this doctrine, the authority cannot be compelled to do something which is not allowed by law or prohibited by law. There is no promissory estoppel against the settled proposition of law. Doctrine of promissory estoppel cannot be invoked for enforcement of a promise made contrary to law, because none can be compelled to act against the statute. Thus, the Government or public authority cannot be compelled to make a provision which is contrary to law.
[Extract from the judgment of the Supreme Court in Shree Sidhbali Steels Limited v. State of Uttar Pradesh, (2011) 3 SCC 193, decided on January 20, 2011, hereafter ‘Shree Sidhbali Steels’].
View Solution