The Andhra Pradesh High Court has upheld a bank’s right to retain gold ornaments pledged against a gold loan where the borrower had separately undertaken that the jewellery could secure other outstanding loans. The Court held that the bank could exercise its general lien under Section 171 of the Indian Contract Act, 1872.
Justice Ravi Cheemalapati delivered the judgment on July 16, 2026, in a writ petition filed by Balagam Sri Vijaya Bhargavi against Union Bank of India authorities.
Background
The petitioner had obtained a gold loan of Rs.2.85 lakh from the bank on December 11, 2023, after pledging 67.1 grams of gold ornaments. She later cleared the entire gold loan amount on August 19, 2024, and the account was closed on August 23, 2024.
However, the bank did not return the jewellery. It stated that the petitioner was also a co-applicant in a housing loan taken along with her husband and that the housing loan had outstanding dues. The bank therefore invoked its general lien over the gold ornaments.
The petitioner argued that the gold loan and housing loan were separate transactions and that repayment of the gold loan required the pledged ornaments to be released.The High Court examined Section 171 of the Indian Contract Act, which permits bankers to retain goods or securities as security for a general balance of account, unless there is a contract to the contrary.
The Court noted that the petitioner was a co-applicant in the housing loan. Therefore, the outstanding housing loan debt could also be treated as a debt owed by her for the purpose of exercising the bank’s general lien.
The crucial issue was whether the petitioner had authorised the bank to retain the gold beyond the specific gold loan.
The Court found the answer in Clause 11 of the Gold Loan Pledge Form dated December 11, 2023. The clause provided that jewellery pledged under the loan could be retained as security for debts owed to the bank, whether borrowed solely or jointly and whether already granted or granted in future.
The Court observed,
“the petitioner herself in specific terms authorized the bank to keep the gold ornaments pledged for availing gold loan as security.”
Justice Ravi Cheemalapati held that the petitioner had specifically authorised the bank to retain the gold ornaments as security for other debts. Since there was no contract preventing the exercise of general lien, the bank was entitled to retain the jewellery under Section 171 of the Indian Contract Act.
The Court distinguished the earlier decisions relied upon by the petitioner, observing that those cases did not involve a similar specific authorisation for retention of the pledged articles.
Accordingly, the Andhra Pradesh High Court dismissed the writ petition and ordered that there would be no order as to costs.
Pending miscellaneous petitions, if any, were also closed.
Case Details
- Case Title: Balagam Sri Vijaya Bhargavi v. The Regional Manager, Regional Officer, Machilipatnam, Union Bank of India & Another
- Case Number: Writ Petition No. 6724 of 2026
- Judge: Justice Ravi Cheemalapati
- Decision Date: July 16, 2026
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