Banks acting as custodians of original property documents and assigned insurance policies are liable for deficiency in service if they lose such documents or allow policies to lapse through passive neglect, as this impairs property marketability and security value.

ORDER

Hon’ble Mr. Santanu Saha, Member

This appeal is directed against the Order/Judgement dated 02.08.2022 passed by the Learned District Consumer Disputes Redressal Commission, South 24 Parganas in Complaint Case No. CC/91/2021 whereby the complaint was allowed on contest with costs and the present Appellants/Opposite Parties were directed, inter alia, to pay compensation of Rs.1,00,000/- for mental agony and harassment, litigation cost of Rs.15,000/-, and to return certain original documents, failing which to pay Rs.50,000/- as penalty for loss thereof.

The Appellants, being dissatisfied, have preferred the present appeal.

Genesis of the Case

The Respondents/Complainants had availed of a house building loan of Rs.3,70,000/- from the Appellant Bank under Loan Account No.HBL 1861871889. At the time of sanction of the loan, the Bank obtained, by way of security/collateral, the following documents:

1. Original title deeds of land (2 numbers) with original porchas;

2. Original sanctioned building plan;

3. Original estimate of construction approved by Baruipur Municipality;

4. Original search report/searching certificate;

5. Two LIC policies of the complainants, each valued at approximately Rs.1 lakh.

The loan account was thereafter settled under an NDND One Time Settlement Scheme and payment was made by cheque dated 26.08.2019. A no-dues certificate was issued by the Bank.

On 31.08.2019 the complainants requested return of all securities and documents.

By letter dated 25.09.2019, the Bank issued a no-due certificate in favour of the complainants and noted that the original title deeds and two LIC policy deeds had been returned.

According to the complainants, the remaining original documents were withheld/lost.

It was further alleged that the LIC policies had lapsed due to non-payment of premium while lying assigned in favour of the Bank.

Hence the consumer complaint came to be filed.

Submissions on behalf of the Appellants/Bank

Learned Counsel for the Appellants contended that the complaint was frivolous and filed with an oblique motive. Initially it was pleaded that all documents had been returned, but during final hearing on 21.04.2026, it was candidly conceded that the sanctioned plan, search certificate, porcha and construction estimate were not traceable and lost by the Appellant bank.

It was argued that:

Firstly, certified copies of such documents can always be procured from the concerned authorities such as the Municipality and BLLRO office. Therefore, no real prejudice had been caused.

Secondly, the Bank cannot be saddled with liability regarding lapse of LIC policies since payment of premium is the obligation of the insured/borrower and not of the banker merely because the policy documents were deposited as collateral security.

Thirdly, no evidence was adduced that the complainants paid Rs.10,000/- towards preparation of search report.

Lastly, the compensation awarded was excessive and arbitrary.

Submissions on behalf of the Respondents/Complainants

Learned Counsel for the Respondents supported the impugned Judgement and submitted that:

The Bank’s own letter dated 25.09.2019 proves that only two original title deeds and two LIC policies were returned which definitely imply that the rest were not actually returned.

Loss of original sanctioned plan, porcha, search certificate and construction estimate seriously impairs marketability, title confidence and future transferability of the property. At the time of sale, intending purchasers often insist on original chain and supporting documents. Mere certified copies cannot fully substitute originals.

With regard to the LIC policies, it was submitted that once the policies were assigned to the Bank as collateral security and retained in its custody, the Bank was under a duty of reasonable care to ensure that the security did not become worthless by lapse. At the very least, the Bank ought to have notified the complainants regarding premium defaults or due dates.

It