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Directs SBI to Pay Compensation for Lost Despite Borrower Delay
In a significant ruling reinforcing the responsibilities of banks as custodians of original property documents, the has directed the (SBI) to pay compensation of ₹5,000 per day from until it provides and reconstructs the title record for two industrial properties. The Division Bench of Acting Chief Justice Ravindra V. Ghuge and Justice Gautam A. Ankhad held that a borrower's delay in demanding the return of does not absolve the bank of its duty to preserve and return them after loan repayment.
Background: The Lost Deeds
The case involved a partnership firm, In Vogue Creations , which had deposited original title documents— including share certificates and a registered lease deed— with SBI’s Dadar branch in as security for credit facilities. The loans were fully repaid by , and the bank issued a in , confirming no outstanding claim. However, the original documents were never returned.
When the firm sought to sell the properties, it discovered the documents were missing. SBI admitted in letters to the and in December 2023 that it could not locate the papers. The bank later lodged an FIR, published newspaper advertisements, and obtained some photocopies from , but the firm argued these were incomplete and did not cover stamp duty records.
After the recommended ₹1 lakh in compensation—which the bank deposited despite the firm’s refusal— In Vogue Creations approached the High Court, seeking compensation under the RBI Circular of on conduct.
Arguments: Whose Responsibility?
Petitioner’s stance: The firm’s counsel, , argued that the loss of original had caused , preventing the sale or effective dealing with the properties. He contended that the RBI Circular mandated compensation of ₹5,000 per day for delay from 2003 , amounting to approximately ₹3.93 crore, and that the bank must furnish legally valid with all necessary endorsements.
Respondent’s defense: SBI, through counsel , admitted the documents were untraceable but argued that the petitioner had waited over 15 years after repayment to demand their return. During this period, the branch had shifted premises, making retrieval impossible. The bank also submitted that the RBI Circular could not apply retrospectively, and that the Ombudsman’s compensation had .
Court’s Analysis: Burden Cannot Be Shifted
The Bench firmly rejected the bank’s argument on delay, observing that the obligation to preserve documents lies solely with the bank. In a key passage, the Court stated:
“The is solely on the Respondent. It cannot be shifted to the borrower merely because the borrower did not immediately seek their return.”
The judges emphasised that a borrower who has repaid the loan is entitled to assume the bank will safeguard the documents. The Court added:
“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.”
Regarding the RBI Circular, the Court accepted the bank’s objection to , limiting compensation to the period from , the date from which the Circular’s obligation arose. It noted that the prescribed rate of ₹5,000 per day served as an “objective and rational measure” of prejudice caused by a regulated entity’s failure. The Court further held that the Ombudsman proceedings did not bar the present petition, as the Circular itself preserved the borrower’s right to seek other compensation.
Key Observations
The Court highlighted the gravity of the bank’s default:
“The original title documents are important in the chain of title and are ordinarily required when the owner seeks to sell, mortgage, transfer or otherwise deal with the property.”
On the Circular’s significance, it stated:
“The has expressly recognized that release of original title documents after repayment of a loan is an important aspect of and has prescribed a where the delay is attributable to the bank.”
Directions and Implications
The Court allowed the petition and directed:
- SBI to pay compensation at ₹5,000 per day from until are provided and the title record is fully reconstructed, with the ₹1 lakh already paid adjusted.
- The bank to bear all costs of obtaining duplicate/ and to provide all necessary endorsements, affidavits, indemnities, and supporting documents required by authorities, the society, or prospective transferees.
- The petitioner to issue notices to income tax, stamp duty, and registration authorities regarding the reconstructed documents.
- The entire exercise to be completed within 12 weeks .
The ruling reinforces that banks cannot escape liability for loss of by citing borrower delay or administrative changes. The compensation prescribed by the RBI Circular, while not retrospective, will run from the date of its operational effect, ensuring that firms and individuals are not left without remedy for the bank’s .
The judgment also clarifies that do not bar further relief under the Circular or through , providing an additional layer of protection for borrowers.
[Gautam A. Ankhad, J.] [Acting Chief Justice]
Parties: Case No: :
