Lien is a legal claim a creditor has on the assets provided to him as a security by his debtor. It is a security that the creditor can fall back upon in case the debtor fails to repay his debt.
Let’s consider that Mr. Ram has obtained a loan of Rs.50,000/- from Axis Bank against a fixed deposit that he has maintained with that Bank. The Bank will mark a lien on that fixed deposit account and on the fixed deposit receipt. In this transaction, Mr Ram is the lienee and Axis Bank is the lienor or the lien holder. If Mr.Ram fails to repay the loan he has availed, Axis Bank may close the fixed deposit account to adjust the debt and credit Mr. Ram with the remaining amount. Thus, lien gives a legal claim to the creditors.
Lien gives the right to retain but not to sell.
Types of Lien
- Blanket lien : It is a type of lien that gives the lienor the right to acquire any of the lienee’s property till his debts are repaid.
- Deferred lien : It is a lien that can be exercised only after a future date.
I understand that Lien is a legal claim a creditor has on the assets. At the same time, I really wish this blog has been a little elaborated such that a layman like me would have understood more. The point ‘Types of Lien’ could have been more understandable, if an example was quoted.
Lien is a legal claim that a creditor has on the assets of the debtor. But in case the assets are in the form of shares, does the creditor or the bank has the right to sell it in case of bad debts ? When can it sell that is, is there any tenure after which it can sell?