Either return Documents or pay Market Value of Property, SBI Held Liable for losing Documents
The District Consumer Disputes Redressal Commission, Kanchipuram District at Chengalpattu, has held the State Bank of India (SBI) responsible for deficiency in service after the bank lost the original property documents of home loan borrowers.
The Commission observed that SBI failed to follow the Reserve Bank of India (RBI) guidelines on the return of original property documents. The bank also failed to properly assist the borrowers in obtaining certified copies after the original documents were misplaced.
The complainant was filed by Mr. Somasekhar Gangarapu and Mrs. Sai Sireesha Nidiginti. They had taken a home loan of ₹46.35 lakh from SBI in 2012. They deposited the original title documents of their residential property with the bank as security for the loan.
The borrowers fully repaid the home loan on April 16, 2024. After repayment, they asked the bank to return their original property documents. However, SBI informed them that the documents had been misplaced and could not be traced.
The complainants alleged that the bank’s failure to return the original title documents amounted to deficiency in service under Section 2(11) and an unfair trade practice under Section 2(47) of the Consumer Protection Act, 2019.
They also referred to the RBI Circular dated September 13, 2023. They argued that the bank was required to return the original property documents or provide compensation for the loss. The complaint was filed under Section 35 of the Consumer Protection Act, 2019.
What are RBI Guidelines?
Under the Reserve Bank of India (RBI) guidelines, banks must assist you in getting duplicate copies of your lost property documents. The bank must bear all costs, including duplicate registration, notary fees, and legal charges. The bank has a total of 60 days to complete this or pay a penalty.
Banks must return original documents within 30 days of full loan repayment or settlement. If documents are lost, banks get an extra 30 days (a total of 60 days) to help you get certified copies or duplicates. If the bank fails to hand over the original or duplicate documents within 60 days, they must pay a penalty of ₹5,000 per day of delay.
What happened next in case?
Despite repeated follow-ups, emails, and a legal notice, the bank failed to find the original documents. The bank also admitted that the documents had been misplaced.
The complainants said that a prospective buyer refused to purchase their property because the original title documents were not available. They claimed that this caused them financial loss and mental stress.
The complainants first approached the RBI Ombudsman. However, their complaint was closed on jurisdictional grounds. They then approached the District Consumer Disputes Redressal Commission, Kanchipuram District at Chengalpattu.
They sought the return of their original property documents or compensation for the loss. They also demanded compensation for financial loss, mental agony, and litigation expenses.
SBI opposed the complaint. The bank admitted that the original documents had been misplaced while they were in its custody. However, SBI argued that it had taken corrective steps by providing certified copies and initiating other necessary measures in accordance with RBI guidelines.
The Consumer Commission observed that SBI had admitted to losing the borrowers’ original property documents despite the full repayment of the home loan.
The Commission held that the bank failed to comply with the RBI Circular dated September 13, 2023. SBI neither returned the original documents within the prescribed period nor provided adequate assistance to the complainants in obtaining certified copies.
The Commission ruled that the bank’s actions amounted to deficiency in service and required action under Section 39(1)(k) of the Consumer Protection Act, 2019.
The Commission partly allowed the complaint and directed SBI to trace and return the original title documents. If the bank is unable to return the documents, it must pay the present market value of the property and take over the property.
The Commission also directed SBI to pay ₹5,000 per day from June 16, 2024, until the amount is paid, in accordance with the RBI Circular dated September 13, 2023.
In addition, the bank was directed to pay interest at 18% per annum on ₹46.35 lakh from April 16, 2024, until payment. SBI was also ordered to pay ₹25,000 as litigation costs and ₹50 lakh to the Tamil Nadu State Consumer Welfare Fund.
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