Court directs State Bank of India to pay Rs. 5,000 per day from December 1, 2023, for failure to return original title deeds post loan repayment and mandates reconstruction of title records.
In a significant judgment dated September 2, 2026, the Bombay High Court, in a writ petition filed by M/s. In Vogue Creations against the State Bank of India (SBI), held that the bank’s failure to return original title documents after full repayment of a loan is a breach of its duty towards the borrower, attracting liability for compensation.
The petitioner had deposited original title deeds of two properties as security for loans taken from SBI in 1979. Although the loans were fully repaid by August 28, 2003, SBI failed to return the title documents. The bank admitted the documents were lost while in its custody, despite several attempts to locate them. The petitioner faced continuous prejudice as the absence of original title deeds impeded their ability to sell or deal with the properties.
The petitioner approached the Banking Ombudsman, which directed SBI to pay Rs. 1 lakh as compensation. However, the petitioner declined to accept this amount and filed the present petition seeking further relief.
The Court emphasized that the bank has an unqualified obligation to preserve and return original title documents upon loan repayment. The delay or failure to do so cannot be excused by the borrower’s failure to demand documents promptly or the bank’s internal administrative changes. The Court underscored that a borrower has the legitimate expectation that the bank will safeguard valuable documents and return them once the secured liability is discharged.
The judgment relied heavily on the Reserve Bank of India’s Circular dated September 13, 2023, which mandates regulated entities to return original movable/immovable property documents within 30 days of loan closure. The Circular also prescribes a compensation of Rs. 5,000 per day for any delay attributable to the bank and requires banks to assist borrowers in obtaining duplicate or certified copies of lost documents.
While the Court held that the Circular applies prospectively from December 1, 2023, it directed SBI to pay compensation at the prescribed rate from that date until the petitioner is furnished with certified copies of all lost documents, along with all necessary endorsements and supporting paperwork to enable clear title and facilitate property transactions. The Rs. 1 lakh already paid by SBI pursuant to the Ombudsman’s order is to be adjusted against this compensation.
Additionally, the Court ordered SBI to complete the reconstruction of the title record within 12 weeks from the date of the order and mandated the petitioner to address relevant statutory authorities for validation of the reconstructed documents.
This ruling reinforces the principle of responsible lending conduct and the fiduciary duty of banks to safeguard customers’ documents, while also providing a clear pathway for compensation and remediation in case of loss or delay.
Bottom Line:
Bank's failure to return original title documents after loan repayment violates the borrower's rights; compensation payable for delay.
Statutory provision(s):
Banking Regulation Act, 1949 (Sections 21, 35A, 56), Reserve Bank of India Act, 1934 (Sections 45JA, 45L), National Housing Bank Act, 1987 (Section 30A), RBI Circular dated 13th September, 2023 on Responsible Lending Conduct
M/s. In Vogue Creations v. State Bank of India, (Bombay)(DB) : Law Finder Doc Id # 2971941
