Loan write-off does not extinguish the creditor's right to recover dues.

JUDGMENT

Dated this the 11^th day of December, 2025

1. Petitioners are husband and wife. They filed this Writ Petition seeking a declaration that the first respondent Bank has no authority to retain the original documents of the petitioners after the closure of a loan account and further seeking a direction to the respondents to release the title deeds of the petitioners immediately.

2. According to the petitioners, the loan was closed on

30.06.2025, and a closure certificate was issued by the Bank as per Ext.P2. Thereafter, Ext.P3 registered letter was also sent directing the 1^st petitioner to approach the A.G.M. of the Bank to obtain the title deeds.

3. The Bank has filed a Counter Affidavit as well as an Additional Counter Affidavit opposing the prayers in the Writ Petition, contending that Exts.P2 and P3 were issued by mistake; that in fact the loan was written off in the accounts of the Bank as stated therein but the title deeds could not be released as the loan liability is not settled by the petitioners. The petitioners have filed a Reply Affidavit also, controverting the contentions in the Counter Affidavit.

4. I heard Sri. V. Sethunath, the learned Counsel for the petitioners, and Sri. Jawahar Jose, the learned Standing Counsel for the respondent Bank.

5. The contention of the learned Counsel for the petitioners is that the documents produced by the Bank are contradictory. Even before this Court, the Bank has not produced any document to show that the liability outstanding is Rs.38,97,877/- as on 11.08.2025, as claimed in the Counter Affidavit. The Bank is relying on Ext.R1f Policy Circular, which came into effect from 16.01.2025. It could not be said that the loan was written off in the year 2023 as per the said Circular. Even as per the account statement produced by the Bank, the outstanding amount is only Rs.12,82,235/-, which was written off by the Bank. If the Bank had initiated SARFAESI proceedings, the account would have been NPA. The Ext.R1h account statement would show that charging of interest is there in the account up to

27.02.2025.

6. On the other hand, the learned Standing Counsel for the Respondent Bank contended that immediately on realizing the mistake in issuing Exts.P2 and P3, the Bank has issued Ext.R1a Letter dated 12.08.2025 to the petitioners withdrawing Exts.P2 and P3 letters. Even though the petitioners received the said letter as per Ext.R1b and R1(c), the petitioners have deliberately suppressed the same in the Reply affidavit filed by them. The learned Counsel relied on the decision of the Hon’ble Supreme Court inSalim Akbarali Nanji v. Union of India and Others [ (2006) 5 SCC 302 ] to substantiate the point that the writing off of debt is only an internal accounting procedure to clean up the balance sheet and it does not affect the right of the creditor to proceed against the borrower to realize the dues. The learned Counsel further cited the decisions of the Hon’ble Supreme Court inCoromandel Fertilizers Ltd. v. Union of India [1984 (Supp) SCC 457],Chandigarh Administration and Another v. Jagjit Singh and Another [(1995) 1 SCC 745] and Union of India and Another v. International Trading Co. and Another [(2003) 5 SCC 437] to substantiate the point that when a mistake is committed by one of the parties, the other party cannot claim benefit of the mistake by claiming any right over the same.

7. I have considered the rival contentions.

8. It is revealed from the records that the Bank had initiated SARFAESI proceedings against the petitioners for realisation of the loan amount. The petitioners have not disclosed the initiation of SARFAESI proceedings in the Writ Petition. In the Writ Petition, the statement is that the loan was ulti