When a person takes a loan from a bank, he is required to furnish collateral security to secure against default in repayment. One of the commonest forms of security is the depositing of property title deeds. What happens if the bank loses the title deed and is unable to return it after the loan is repaid?
Case Study: Ebrahimkutty had taken a loan from Mayyanad Regional Co-operative Bank against mortgage of his property in Mayyanadu village of Kerala by depositing the original title deed. On repayment of the loan in 1999, the bank failed to return the deed. The bank later verbally informed him that the original deed could not be found and attempts were being made to trace it. The bank advanced further loans to Ebrahimkutty against the same title deed. These loans too were repaid in due course. The last loan was finally closed on September 8, 2012, but the bank still could not find the title deed.
The bank then informed Ebrahimkutty that the original deed was misplaced while shifted its building premises. Aggrieved, Ebrahimkutty filed a complaint before the Kerala State Commission. He claimed that his property was worth Rs 75 lakhs, but he could not sell it as the bank had lost the original document. He sought a compensation of Rs 25 lakhs.
The state commission directed the bank to return the original deed and also pay compensation of Rs 10 lakhs within one month, or along with 12% interest, if delayed. In case of failure, to return the title deed the bank was ordered to issue a written certificate about the loss.
The bank appealed against this order. It contended that the loss of the deed was communicated way back in 1999, but the complaint was filed 12 years later, so it ought to have been dismissed. It also argued that Ebrahimkutty had not been able to show that he had suffered any damage due to the loss of the title deed. Ebrahimkutty argued that the bank had merely admitted that the deed had been misplaced, but had never admitted that it had been lost.
The National Commission observed that if a document is misplaced, there is a possibility that it could be recovered at a later stage. If it is lost, the question of recovery does not arise. The Commission noted that even in the affidavit filed by the bank, it had denied that the original title deed was lost, and had asserted that an assurance had been given that it would be returned as soon as it was traced. So the Commission held the complaint to be within limitation. The Commission also observed that the loss of the title deed would affect the value of the property, so Ebrahimkutty would be entitled to be compensated.
Accordingly, by its order of February 20 delivered by Dr B C Gupta for the Bench along with Dr S M Kantikar, the National Commission held the bank guilty of deficiency in service. However, the compensation of Rs.10 lakhs which had been awarded by the state commission was considered to be quite high, so the National Commission modified the order and reduced the compensation to Rs 5 lakhs, to be paid within four weeks, or along with 12% interest in case of delay.
Credits ET Realty