Banking · Banker's General Lien
Listed transferable shares worth Rs. 40,00,000/- were deposited as general security against an Overdraft (Account Y). Which statement accurately describes the bank's position regarding these shares upon receiving a Garnishee Order (GO)?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank must sell the shares immediately and transfer the proceeds to the court to satisfy the Garnishee Order.
- 2The bank's General Lien under Section 171 of the Indian Contract Act, 1872, continues to operate on the shares, allowing the bank to retain them to recover the remaining OD debit without interference from the GO.✓
- 3The shares are automatically freed from the charge since the GO has attached the deposit accounts.
- 4The Garnishee Order takes precedence, and the bank must hold the shares for the Court, losing its Banker's Lien right on them.
Correct answer
The bank's General Lien under Section 171 of the Indian Contract Act, 1872, continues to operate on the shares, allowing the bank to retain them to recover the remaining OD debit without interference from the GO.
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