Bank Cannot Hold Back Property Documents

Bank cannot hold back property documentsafter housing loan is repaid: Bombay high court-Times of India 23.08.2013
MUMBAI: A bank cannot hold on to property documents after a person has paid off his housing loan, the Bombay high court ruled on Thursday.

A division bench of Justices B P Dharmadhikari and A S Chandurkar directed the State Bank of India to return title documents to Nagpur resident Surendra Nikose. The bank had refused to return the documents to Nikose, a former employee; as he had allegedly committed financial irregularities and they had filed a recovery claim against him.

"The resort to provisions (of law) for withholding title deeds especially when the relationship of banker and customer has come to an end on clearing the loan account is not legally justifiable," the judges said, adding, "Permitting a banker to extend its right of general lien even after clearance of the debt would result in negating the effects of the words 'as a security for a general balance of account'. In any event, exercise of such general lien after termination of the relationship of banker and customer does not arise at all."

A lien is a security interest over a property.

Nikose, who was sacked in 2010, had taken a loan of Rs6.56 lakh in 2001 and deposited the title documents as security. He paid off the loan and obtained a 'no due certificate' from the bank in 2012. But the bank refused to return his title documents as they had filed a case to recover Rs4.33 crore from him.

The court said the relationship of banker and customer was independent of the relationship of employer and employee. "The recovery sought to be made by the bank was as an employer who had been defrauded by its employee," the judges said.

"The bank cannot exercise such general lien as an employer against an employee, especially when the employee who had borrowed the amounts had repaid it."

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