Bank liable for lost title deeds

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It is a usual practice that banks retain the title deed as security for loans advanced. There are quite a few instances when years later, after the loan is fully repaid, the bank finds itself unable to return the title deeds as these have been lost. The consumer is, thus, left without the title deeds to establish his ownership rights. Here is a case of Leenata Dhamankar, who successfully fought against the negligence of the mighty State Bank of India (SBI).

Dhamankar had taken a housing loan in 2000 for purchasing two flats in a society in Chembur, Mumbai. The title documents were deposited with SBI as collateral security, and had to be returned upon repayment of the loan. Considering the value of the flat, Dhamankar was also sanctioned an education loan in 2003 against the same title documents.

In 2005, due to compelling financial conditions, Dhamankar sought the bank's permission to sell both flats, and instead buy a new one in Thane, whose title documents would be deposited as security for the loans. After the bank gave its approval, all formalities were complied with in February 2006. However, the bank then stipulated she should obtain a Life Insurance Corporation of India (LIC) policy of Rs 6 lakh in the name of her daughter, Rachana, and assign it to the bank as additional security. Dhamankar also complied with this demand.

The equated monthly instalment (EMI) of Rs 10,200 was deducted from her monthly salary towards the loan amount. Suddenly, in 2008, the bank informed Dhamankar she would have to pay an additional Rs 1.25 lakh due to a shortfall in repayment of the loan. She was also told the file in respect of her loan had been sent to the bank's Stressed Assets Resolution Centre branch. A year later, the bank extended the EMI period to July 2010 for clearing the education loan.

After making all payments and clearing the entire loan amount, Dhamankar sought a release of the title documents entrusted. She was told the documents were at the bank's Retail Assets Central Processing Centre office at Bandra but when she went there, she was asked to collect them from the SAARC branch. The SAARC branch returned the LIC policy but could not find the title documents. After considerable correspondence and several follow-up visits to all the three branches, the bank obtained certified copies of the title deeds from the sub-registrar's office, which were incomplete.

In the absence of the title documents, Dhamankar was unable to sell her flat so that she could relocate to her native place. Aggrieved, she filed a complaint before the Maharashtra State Commission, seeking compensation for the harassment. She sought return of the original title deed, or alternatively a compensation of Rs 93 lakh for the loss due to inability to sell the flat.

The bank contested the complaint, contending it was time-barred. It also stated the loss of the original title deeds would not cause any loss, as certified copies issued by the sub-registrar were available.

The Commission agreed with Advocate Ashutosh Marathe who appeared for Dhamankar, that the complaint was filed in time, as limitation would have to be computed from the date when the bank admitted its inability to trace the title deeds and admitted the documents had been lost by it. The Commission found the correspondence with several prospective purchasers showed they were unwilling to purchase the flat in the absence of the original title documents. The Commission observed the loss of such important documents constitutes negligence, entitling Dhamankar to make a claim for deficiency in service. Though certified copies are valid, the consumer fora have a duty to do justice by awarding appropriate damages to compensate the consumer and at the same time bring about a qualitative change in the attitude of the service provider.

Accordingly, by order dated February 2, 2016, delivered by Usha Thakare for the Bench along with Dhanraj Khamatkar, the State Commission held the bank liable to pay compensation of Rs 3 lakh, along with 12 per cent interest from the date of filing the complaint till payment. Dhamankar was also awarded Rs 1 lakh for mental agony and harassment and Rs 50,000 towards litigation cost. The bank was directed to comply with the order within 45 days.
The author is a consumer activist