Kerala High Court: Bank Cannot Retain Original Title Deeds After Closure Of Loan Account

The Court disposed of a Writ Petition, which sought a direction to release the title deeds and a declaration that the South Indian Bank (Bank) had no authority to retain petitioners' original title deeds, despite closure of the loan account. The Court imposed costs of Rs. 50,000 on the Bank.

A Single Bench of Justice Bechu Kurian Thomas held, “Taking into consideration the non availability of the original four documents of title of the petitioners, a direction to release the title documents, as prayed cannot be issued. A direction incapable of compliance cannot be issued under Article 226 of the Constitution. Notwithstanding the above, it has to be declared that the second respondent has no authority to retain the original title deeds of the petitioner after closure of a loan account.”

Advocate Praveen K. Joy appeared for the Petitioners, while Advocate Sunil Shankar A represented the Respondents.

Brief Facts

The Petitioners had availed a loan from the Bank in 2009. The husband of the first Petitioner expired in 2011. In 2015, the Bank issued a letter acknowledging the deposit of four title deeds by the Petitioners as security for the housing loan availed from them.

Subsequently, the Petitioners requested the Bank to close the loan account and release the collateral securities. According to the Petitioners, the Bank closed the loan account after crediting their cheque. The statement of accounts was produced as proof of closure. However, despite the closure, the title deeds relating to the property mortgaged, were not returned. The Petitioners contended that the Bank’s refusal to release the original title deeds was illegal and the unilateral action of the Bank in withholding the security documents, after closure is arbitrary.

Court’s Reasoning

The High Court noted, “Petitioners have been attempting to obtain their original four title deeds over which equitable mortgage by deposit of title deeds was created with the second respondent. Exhibit-P4 acknowledged the existence of those title deeds with the second respondent as on 16.07.2015. There is no document evidencing return of the title deeds. Hence, the second respondent is bound to answer the whereabouts of the title deeds.”

The Bench found it "quite evident that the documents of title of the petitioners have been lost from the second respondent". It was deemed "necessary that they return the documents or initiate appropriate proceedings to enable the petitioners to obtain a certified copy of the documents as a replacement for the original title deeds".

The Bench referred to the Reserve Bank of India’s Circular which "specifically mentioned that, in case of delay in releasing original documents of title, the bank shall compensate the borrower at the rate of Rs.5,000/- for each day of delay". The Court noted that "the Reserve Bank's Circular applies in all its rigour to the second respondent".

Consequently, the Court ordered, “However, considering the conduct of the second respondent and the tone and tenor of the affidavit filed, coupled with the stance adopted, this Court is of the view that, respondents 1 to 3 are bound to pay costs, for the judicial time wasted by them while trying to divert their burden to another establishment, who had to be subsequently impleaded and be called upon to attend this Court. In the result:

i. There will be a declaration that the second respondent has no authority to retain the original title deeds of the petitioner after closure of a loan account.

ii. The direction to release the title documents belonging to the petitioners is declined due to non-availability of the documents.

iii. The claim for compensation raised in this writ petition is declined reserving the right of the petitioners to approach appropriate other forum.

iv. An amount of Rs.50,000/- is imposed as costs on the second respondent of which Rs.25,000/- shall be paid to the petitioners and the balance Rs.25,000/- shall be paid to the Kerala Legal Services Authority. The costs shall be paid within 15 days from the date of receipt of a copy of this judgment. It is clarified that, these costs shall not be set off against the compensation, if any, claimed by the petitioner.”

Accordingly, the High Court disposed of the Petition.

Cause Title: Sheela Francis Parakkal & Ors. v. The Authorised Officer South Indian Bank & Ors. (Neutral Citation: 2025:KER:31505)

Appearance:

Petitioners: Advocate Praveen K. Joy

Respondents: Advocates Sunil Shankar A, Vidya Gangadharan, P.Paulochan Antony and Sreejith K.

Click here to read/download the Judgment