Legal Question in Banking Law in India

What is negative lien ? If it contains an undertaking that no charge will be created on this property, can the lender bank attach the property, take possession and auctions the same ?


Asked on 4/18/15, 5:47 am

1 Answer from Attorneys

Fca Prashant Chavan Expert Edge LLP

A lien is a right of a person to retain a property which is in his ownership or possession till such time the debt or other obligation (for which such lien is conferred) is discharged by the other person. A negative lien is a right of a person requiring retention of a property by another person belonging to the latter which is in the latter�s possession or control until certain stated obligation is discharged. Neither a lien nor a negative lien gives the implied right to bring a property to sale, but both confer a right of retention of a property as a result of which the person to whom the property belongs is legally precluded from disposing of the property till discharge of the loan obligation. If the lien has been created on the borrower's property itself, in the event the borrower fails to repay the loan and clear his loan obligation, the lender Bank is entitled to attach that property belonging to the borrower which is under lien, take possession and auction the same.

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Answered on 4/18/15, 6:38 am


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