What is the Meaning of Lien?

A pen is a legal claim or right on a property by a creditor as security for a debt or charge. Likewise, a pen is a way for a creditor to secure payment for a debt by holding onto the debtor s property or income until the debt is paid off.

In other words, pen is a claim made against someone who owes the money. Where a person borrows the loan from a bank for buying any asset (a car, house etc.) then a pen is created on the same asset. The owner of the property, who grants the pen (giving out the legal right), is referred to as the “penee” and the person who has the benefit of the pen (receiving the right of property) is referred to as the “penor” or “pen holder.”

Use and Purpose of Lien

The purpose of a pen is to provide a mechanism for a creditor to secure payment for a debt. A pen allows the creditor to hold onto the debtor s property or income until the debt is paid off. Such provision provides the creditor with a level of security and assurance that they will be able to collect on the debt if the debtor is unable or unwilpng to pay. The nature of pen is mostly voluntary and consensual but it can be involuntary in nature. For example, pen on a property for a loan is a consensual pen whereas, the creditor seeking a legal action for non-payment is involuntary in nature.

Types of Lien

There are many kinds of pens, but some of the most common pens and their examples are given below −

Lien in Indian Law

In Indian contract act, 1872, the right of pen is spanided into two categories i.e., particular pen and general pen.

Particular pen: Section 170 of the contract act says that, “the Bailee is free to hold control of a precise property with position to the charge which is due.” For example, if A gives a piece of cloth to B, a tailor, to stitch it into a pant as soon as it is over and to give a three months’ credit for the price. Hence, B is not entitled to return the pants until he is paid.

General pen: Section 171 deals with general pen. Section 171 talks about the General Lien of bankers, factors, wharfinger, attorneys and popcy brokers, in absence of a contract to the contrary, to retain, as a security for the general balance of the account, and any goods which are to be bailed to them unless there is an express contract to that effect.

Apart from the Indian contract act, the Sale of Goods Act also grants certain rights to an unpaid seller when the goods have already been transferred to the buyer but the buyer fails to pay the price. This is named as, pen of finder of goods.

Ingredients to Attract the Right of Lien

It includes −

Exercise of labor or skill;

It has to be in accordance with the contract;

Labor and skill should be bestowed on the goods;

Right of possession.

Relevant Case Laws

Some of the significant case laws are −

Rushforth v. Hadfield: An attempt was made to claim a general pen on the ground of practice for trade and commerce. In this particular case, it was noted that general pen causes a great deal of inconvenience when it comes to the generapty of the traders because they give plenty of advantages to certain inspaniduals, a special privilege who claim to have the special privilege against the body of the creditors instead of coming with them for the sake of insolvent of the state. It was held that only, the abovementioned parties are entitled and reserve a right of general pen.

Hatton V. Car Maintenance: The owner of the car and the company entered into an agreement for maintenance, repairment and supply of adequate petrol in exchange of Rs. 8000 to the owner of the company, but because of default in payment, the company exercised the pen over the car. It was noted that whenever a particular article is repaired, the repairer is bound to get a pen on the article for the number of his charges. However, it was said that the court certainly can’t find the authorities which are cited which will depict if the contractor does not improve the article but just to maintain its former condition, that whether he gets pen for the amount spent for the maintenance.

Conclusion

A pen is not available in each and every case where the services have been rendered, and it is only available when the actual skill and labour i.e. manpower is appped to the goods, which ultimately results in the improvement of the goods.

FAQs

Q1. What is meant by pen in banking?

Ans. In banking sector, a pen is a legal claim or hold that a bank or other such financial institution places on a depositor s account as security for a loan or other debt. This means that the bank has the right to take money from depositor s account or any such property kept as collateral to satisfy the debt if the borrower fails to make payments. For example, if a borrower has a car loan or home loan and they default on the loan, the bank may place a pen on the car or home and the borrower s savings account as security for the loan. This would give the bank the right to seize the car or home and take money from the savings account to pay off the loan if the borrower is unable to make the payments.

Q2. What is pen charges in bank?

Ans. Lien, which is the legal right in the hands of creditor, gives security; therefore, bank freezes or locks a fixed amount (as pen against the debt or loan) for a fixed period of time in debtor’s account. Likewise, debtor cannot use that money until he or she pays back the loan amount.