As per decision of Ethical Standard Board (ESB) of ICAI, A chartered accountant cannot exercise lien over the client documents/records for non-payment of his fees. In this regards section 170 of the Indian Contract Act, 1872 reads as under: "Bailee's particular lien - Where the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed, he has, in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them.
(A) A delivers a rough diamond to B, a jeweller, to be cut and polished, which is accordingly done. B is entitled to retain the stone till he is paid for the services he has rendered.
(B) A gives cloth to B, a tailor, to make into a coat, B promises A to deliver the coat as soon as it is finished, and to give a three months' credit for the price, B is not entitled to retain the coat until he is paid." [Emphasis supplied]
The above view is based on the general principles of law under which any person having lawful possession of someone else's property may retain the property for non-payment of his dues. As section 170 uses the words 'goods' and not the word 'property' and as client's books of account and papers are not 'goods', lien under section 170, will not be available to lawyers/CAs/CWAs/CSs.
Therefore, withholding books and papers of the client for unpaid fees appears to be not legally tenable and even amounts to professional misconduct.