Bombay HC: Bank Must Pay Rs 5,000/Day Over Lost Property Title Deeds

A division bench of Acting Chief Justice Ravindra Ghuge and Justice Gautam Ankhad has held that a bank's duty to safeguard original property title documents does not end when convenient, and continues in full until the documents are actually returned to the borrower. The ruling came on a petition by M/s In Vogue Creations, a Mumbai firm that had deposited original title documents for two commercial properties, in Prabhadevi and Taloja, with the State Bank of India's Dadar branch back in 1979 to secure credit facilities.

Papers lost after loan was repaid

The firm fully repaid its loan in August 2003, but SBI did not return the original documents. The bank later said the papers could not be traced following a branch relocation, and issued a No Dues/No Claims Certificate only in July 2023 — two decades after the loan closed. SBI argued the firm had waited nearly 15 years before asking for its documents back, and that a earlier Rs 1 lakh compensation awarded by the Banking Ombudsman should suffice. The court rejected this defence, holding that a borrower who has fully discharged a loan is entitled to assume the bank will maintain proper custody of title documents and return them without having to be reminded.

Rs 5,000 a day, and 12 weeks to fix it

Invoking the Reserve Bank of India's September 2023 guidelines on responsible lending, the court directed SBI to pay Rs 5,000 per day from December 1, 2023 — the date from which the RBI's compensation framework applies — until it hands over complete, legally valid title records and certified copies to the firm. The bank was given 12 weeks to reconstruct the lost documents, with the Rs 1 lakh it had already paid adjustable against the final amount. The court declined to apply the RBI framework retrospectively to 2003, when the loan was actually repaid.

What this means for housing societies

• Societies and individual flat owners who have pledged original conveyance deeds, agreements, or share certificates with a bank for a loan should obtain written confirmation of safe custody, and should not delay collecting documents once a loan is closed.
• If a bank cannot locate original title papers after full repayment, the RBI's September 2023 compensation framework (Rs 5,000 per day of delay, from the applicable date) can be invoked to press for both the documents and compensation.
• Committees pursuing deemed conveyance or redevelopment should audit whether any original society or member title documents remain deposited with lenders, since missing papers can stall these processes for years.
• A bank's administrative reasons, such as branch relocation or staff turnover, are not a valid excuse for losing custody of title documents — the obligation to preserve and return them is absolute.

The ruling is a reminder that the duty to safeguard original property papers rests squarely with the institution holding them, not the borrower who must chase them down. Housing societies and members with old loans against society or flat documents would do well to verify that their original papers are still traceable, well before they are needed for a sale, redevelopment, or conveyance.