Bank’s Delay in Returning Original Title Deeds After Loan Closure Is Deficiency in Service
The District Consumer Disputes Redressal Commission, Palakkad, has ruled that a bank’s unexplained delay in returning a borrower’s original property documents after the loan was fully repaid amounts to deficiency in service.
The Commission found that Federal Bank kept the complainant’s original title deeds for nearly one year and four months after the secured loan was closed without giving any valid reason. It observed that once the loan was repaid and the bank itself admitted that no property was charged against the PMEGP loan, there was no justification for keeping the documents. The Commission therefore held that the bank’s action was arbitrary and illegal.
Background of the Case
The complainant had taken a Prathyasa Loan from Federal Bank in 2016 and deposited the original title deeds of her property as security. The loan was fully repaid in 2021. In 2019, she also received financial assistance under the Prime Minister’s Employment Generation Programme (PMEGP), including an overdraft of ₹1 lakh and a term loan of ₹1 lakh. The same property documents were used as security for these loans.
Later, the complainant came to know that loans below ₹10 lakh did not require property documents as security. She alleged that the bank warned her that the PMEGP subsidy might not be released if she took back her title deeds. Even after the earlier loan was closed, the bank continued to keep the documents.
The complainant said she needed the title deeds to arrange funds for her daughter’s marriage and that the delay caused her financial difficulties. She also claimed that her daughter lost a good marriage proposal because of the situation. She first complained to the bank’s Head Office and later filed a complaint on the Prime Minister’s Grievance Portal. The bank informed her on July 16, 2024, that no property was charged against the PMEGP loan account. The title deeds were finally returned in July/August 2024.
Commission’s Findings and Final Order
The Consumer Commission examined the bank’s records and found that the overdraft account secured by the title deeds had already been closed on March 22, 2023. It also noted that the bank admitted that no property had been mortgaged for the PMEGP term loan. Despite this, the bank continued to retain the original title deeds for almost 16 months without offering any explanation.
The Commission rejected the bank’s argument that the complainant had voluntarily allowed the documents to remain as security. It questioned why the bank claimed the property was not charged for the PMEGP loan while still keeping the title deeds. The Commission also noted that important documents were produced by the bank only after it was directed to do so during the proceedings.
Based on these facts, the Commission concluded that the PMEGP loan did not require the property documents as security and that the bank had deliberately delayed returning them. It therefore held the bank guilty of deficiency in service.
However, the Commission rejected the complainant’s claim of ₹4 lakh for the alleged loss suffered from selling another property at a lower price. It observed that the property had been sold in 2021, whereas the complainant claimed it was needed for her daughter’s marriage in 2023–24. The Commission found no connection between the sale of that property and the bank’s delay in returning the title deeds.
The complaint was partly allowed. The Commission directed the Managing Director of Federal Bank to pay ₹2 lakh as compensation for mental agony and inconvenience and ₹50,000 towards litigation costs within 45 days of receiving the order. If the bank fails to make the payment within the prescribed time, it will have to pay an additional solatium of ₹1,000 per month until the amount is paid.
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