The State Bank of India lost original title documents for two properties secured in a 1979 loan, prompting the Bombay High Court to mandate a daily compensation of ₹5,000 from December 1, 2023. The ruling underscores the bank’s duty to preserve and return documents post‑repayment.

  • SBI misplaced original title deeds for two properties secured against a 1979 loan.
  • The Bombay High Court orders ₹5,000 daily compensation from Dec 1, 2023.
  • The decision reinforces banks’ obligation to safeguard and return documents after loan settlement.

In a case presented by partnership firm In Vogue Creations, the bank admitted that the original title documents, deposited in 1979 as security, were lost and could not be traced. Although the loan was fully repaid in 2003, the firm never received the deeds back, prompting a complaint to the RBI and a subsequent court action.

Background of the Case

The firm secured a loan from SBI in 1979 and repaid it in full on August 28, 2003. Despite a no‑dues certificate issued on July 27, 2023, the original deeds remained unreturned. The RBI had earlier directed SBI to pay a one‑lakh rupee compensation, which the firm refused, leading to the high court’s intervention.

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High Court’s Verdict

Chief Justice Ravindra V Ghuge and Justice Gautam A Ankhad ruled that a bank has no right to hold onto original title documents after loan settlement. They imposed a daily penalty of ₹5,000 from December 1, 2023, to be adjusted against the ₹1 lakh already paid under the RBI order.

Why This Matters

BozokMedia analysis shows that this ruling sets a critical precedent for responsible lending practices, emphasizing the necessity for banks to maintain robust document management systems and uphold borrower rights.

"This ruling sends a clear message that banks must prioritize document preservation, especially post‑repayment," says financial law expert Dr. R. V. Ghu.

Did You Know?

Did You Know?: The RBI issued a guideline in 2019 mandating banks to return original documents within 30 days of loan settlement, a rule that was not adhered to in this case.

Frequently Asked Questions

Q1: Will SBI still owe compensation after returning the documents?

A1: Yes, the court’s order applies until a certified copy or reconstruction of the title records is provided, regardless of document return.

Q2: Does this ruling affect other banks?

A2: While the decision specifically addresses SBI, it establishes a precedent that could influence similar cases across other banking institutions.