The Bombay High Court has ruled that banks must safely preserve and return original property documents after loan repayment. It ordered SBI to pay a Mumbai firm ₹5,000 per day from December 2023 for misplaced title deeds, rejecting the bank’s defence that branch relocation caused the loss. SBI has 12 weeks to reconstruct the records.

Bombay HC Orders SBI To Pay ₹5,000 Per Day Since 2023 Over Lost Property Deeds |

Mumbai: Banks are legally obligated to safely maintain and return original property documents once a loan is fully repaid, the Bombay High Court ruled, ordering the State Bank of India (SBI) to compensate a Mumbai-based firm Rs 5,000 per day, from December 2023, for misplaced title deeds.

A division bench of Acting Chief Justice Ravindra Ghuge and Justice Gautam Ankhad issued the direction while deciding a petition filed by M/s In Vogue Creations, represented by 78-year-old partner Achala Joshi. The firm had deposited the original title documents for two commercial properties located in Prabhadevi and Taloja with SBI's Dadar branch in 1979 to secure credit facilities.

Although the loan was cleared in August 2003, SBI failed to return the original papers, later stating that the documents could not be traced following a branch relocation. The petitioner claimed compensation of Rs 3.93 crores, as per RBI circular. 

SBI argued that the firm waited nearly 15 years to request the documents and contended that a previous Rs 1 lakh compensation awarded by the Banking Ombudsman was sufficient.

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Rejecting the bank’s defense, the bench emphasized that internal administrative delays or branch shifts do not excuse a failure of custody:

"A borrower who has fully discharged the loan is entitled to proceed on the legitimate assumption that the Bank or a Financial Institution entrusted with the custody of valuable original title documents will maintain proper custody of those documents and return them upon discharge of the secured liability," the court held. "The obligation to preserve title documents and to return them upon discharge of the underlying liability cannot depend upon the borrower reminding the Bank to perform that obligation."

Invoking the Reserve Bank of India's (RBI) September 2023 guidelines on responsible lending, the High Court directed SBI to pay Rs 5,000 per day from December 1, 2023, until complete, legally valid title records and certified copies are provided. The court granted SBI 12 weeks to finish the reconstruction of documents, allowing the bank to adjust the Rs 1 lakh already paid.

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