Legal Question in Banking Law in India

fund based facility to the Borrower. Against the Borrower's outstanding loans, the Bank has marked lien over the fixed deposit of Borrower. Meanwhile IT Department has issued notice under Section 226(3) to the Bank directing the Bank to remit the FD proceeds towards satisfaction of IT dues against the Borrower / Assessee. The Bank's contention is that it hsa the first right to adjust the FD proceeds against its loan account outstandings and any surplus credit balance in the Borrowers accounts only would be remitted. Please advise whether the IT Authorities have priority of charge ahead of Banks right of Lien? What are implications if despite notice by IT Authirities the Bank refuses to remit the proceeds claiming its right to adjust the dues against outstanding dues?


Asked on 2/22/11, 9:07 pm

1 Answer from Attorneys
J. Radhakrishnan independent Practice

If the Bank has marked a lien on FDs. of the customer for loans extended to its customer, it should reply to the I.T.Department in the form of an affidavitt claiming its charge/lien on the deposits. In the face of the Bank's prior charge over the deposits, I.T. cannot claim priority. The Bank is well within its rights to assert its prior/subsisting lien/charge over the deposits for outstandings due to it. Such objection by bank is legal and recognized by courts.

Read more
Answered on 2/23/11, 7:25 pm


Related Questions & Answers

More Banking Law questions and answers in India