SBI ordered to pay ₹5,000 per day for losing borrower’s original property documents

The Petitioner deposited the original title documents relating to two properties with the Respondent-Bank in 1979 as security for loan facilities.

The loans were fully repaid on 28 August 2003, and the Bank subsequently issued a No Dues/No Claims Certificate dated 27 July 2023.

However, the Bank failed to return the original title documents and, by letters dated 5 and 7 December 2023 and 15 March 2024, admitted that the documents could not be traced.

The Petitioner lodged a police complaint, published a notice concerning the loss, and approached the Banking Ombudsman, whose advisory directed payment of ₹1 lakh; the amount was deposited by the Bank despite the Petitioner’s refusal to accept it.

The Bank obtained or supplied certain true copies and undertook steps including lodging an FIR, publishing newspaper notices, and assisting in reconstruction of the title records.

The Petitioner sought compensation for the loss and continuing prejudice caused by the absence of the original title documents, relying on the Reserve Bank of India Circular dated 13 September 2023.

1. Whether the Bank was liable for the loss of the original title documents deposited with it as security, notwithstanding the Petitioner’s delay in seeking their return after repayment of the loans?

2. Whether the Petitioner was entitled to directions requiring the Bank to obtain certified or duplicate copies and reconstruct the title records, including necessary endorsements and supporting documents?

3. Whether the RBI Circular dated 13 September 2023 entitled the Petitioner to compensation at ₹5,000 per day, and whether such compensation could be claimed from the date of repayment in 2003 or only from 1 December 2023?

4. Whether the ₹1 lakh paid pursuant to the Banking Ombudsman’s advisory exhausted the Petitioner’s remedy or barred the present writ petition?

The Court applied the RBI Circular dated 13 September 2023 on “Responsible Lending Conduct—Release of Movable/Immovable Property Documents on Repayment/Settlement of Personal Loans.”

Clauses 2 and 3 require regulated entities to release original property documents within 30 days of full repayment and provide the borrower an option regarding the place of collection.

Clause 6 requires compensation at ₹5,000 per day where delay attributable to the regulated entity occurs beyond the prescribed period, while Clause 7 requires the entity, in cases of loss or damage, to assist in obtaining duplicate or certified copies and bear the associated costs, in addition to paying compensation.

Clause 8 preserves the borrower’s right to seek other compensation under applicable law, and Clause 9 makes the Directions applicable where release of the documents falls due on or after 1 December 2023.

Independently of the Circular, the Court held that a bank entrusted with original title documents has the obligation to preserve, identify, retrieve and return them upon discharge of the secured liability; that obligation cannot be shifted to the borrower because the borrower did not immediately demand their return.

The Bank admitted that the original documents, which had remained in its custody, were untraceable, establishing its failure to preserve and return them after the loans were discharged.

The Court rejected the Bank’s argument that the Petitioner’s delay or the shifting of branch premises absolved it of liability, holding that internal movement of records and changes in personnel were matters within the Bank’s exclusive administrative control.

The FIR, newspaper advertisements and procurement of copies mitigated the consequences of the loss but did not eliminate the Bank’s primary default; accordingly, the Bank was directed to complete reconstruction of the title records and provide all reasonably necessary endorsements, affidavits, indemnities and supporting documents.

The Court accepted that the RBI Circular could not operate retrospectively from the date of repayment in 2003, because Clause 9 expressly limited its applicability to cases where release fell due on or after 1 December 2023.

Nevertheless, as the documents remained lost and the prejudice continued, the prescribed compensation of ₹5,000 per day was payable from 1 December 2023 until completion of the reconstruction exercise.

The Ombudsman’s advisory did not bar the writ petition because the Ombudsman proceedings and the Court’s remedial jurisdiction operated in different fields, and Clause 8 of the Circular preserved other remedies.

The ₹1 lakh already deposited was therefore directed to be adjusted against the compensation payable.

The Bank was held liable for the loss of the original title documents and directed to pay compensation at ₹5,000 per day from 1 December 2023, subject to adjustment of the ₹1 lakh already deposited pursuant to the Banking Ombudsman’s advisory.

The compensation was to continue until the Bank supplied certified copies for both properties and reconstructed the title records with all necessary endorsements, affidavits, indemnities and other supporting documents reasonably required to establish the Petitioner’s title.

The Petitioner was directed to address the relevant income-tax, stamp-duty and registration authorities concerning the reconstructed documents, and the entire exercise was ordered to be completed within 12 weeks.