HC: SBI liable for lost title deeds, must pay ₹5K day

The court also ordered SBI to reconstruct the documents, saying the bank cannot shift responsibility to a borrower for not immediately asking for their return

MUMBAI: The State Bank of India (SBI) will have to bear daily compensation liability to compensate for losing a borrower’s original property papers. The Bombay High Court has directed the state-owned lender to pay a Mahim-based firm ₹5,000 per day from December 1, 2023, until it hands over certified copies of title documents that were lost while in its custody.

HC: SBI liable for lost title deeds, must pay ₹5K day

The court also ordered SBI to reconstruct the documents, saying the bank cannot shift responsibility to a borrower for not immediately asking for their return. The order came on a petition filed by M/s In Vogue Creations, a Mahim-based partnership firm that had taken a loan from SBI’s Dadar commercial branch in 1979.

As security for the loan, the firm had submitted the original title deeds of two industrial tenements in Prabhadevi and the lease deed of a plot in Taloja MIDC. The loan was fully repaid in August 2003, but the firm approached the bank 20 years later, in 2023 for the original documents.

Consequently, the bank issued a no-dues certificate in July 2023. However, the original documents were not returned.

SBI argued that the firm had sought the documents more than 15 years after repaying the loan. By then, the branch had shifted and the bank had been unable to trace the papers despite making efforts, its counsel said.

The bank also said it had tried to help the firm reconstruct the documents and had even registered an FIR. It argued that no compensation beyond the ₹1 lakh already paid under the Ombudsman’s order was required.

A division bench of acting chief justice Ravindra Ghuge and justice Gautam Ankhad rejected the bank’s argument, holding that the delay by the firm in seeking the documents did not absolve SBI of its responsibility to preserve them.

“The burden of maintaining a proper system for preservation, identification, retrieval and return of documents is solely on the Respondent (bank),” the bench said.

“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,” it added.

The court noted that original title documents are an important part of the chain of title and are generally required when a property is sold, mortgaged, transferred or otherwise dealt with.

It directed SBI to procure certified copies of the title deeds and hand them over to the firm.

The bench also relied on the RBI circular, which requires banks to release title documents within 30 days of full repayment of a loan and provides for compensation of ₹5,000 per day if the delay is attributable to the bank.

Given the “admitted loss of the documents and the continuing prejudice caused to the Petitioner”, the court directed SBI to pay compensation at the prescribed rate. The compensation will be calculated from December 1, 2023, when the circular came into force, until the certified copies are handed over to the firm.