Karnataka State Commission: Bank Of Baroda Held Liable For Failing To Return Borrowers' Title Deeds After Loan Settlement
Pranav B Prem
The Karnataka State Consumer Disputes Redressal Commission (Principal Bench), Bengaluru, comprising Justice T.G. Shyamashankare Gowda (President) and Ms. Diwashree M. (Lady Member), has held the Bank of Baroda liable for deficiency in service for its failure to return the borrowers’ original title deeds even six months after the closure of their loans. While affirming the finding of deficiency of service, the Commission partly allowed the bank’s appeal, modifying the effective date of penalty as per the applicable RBI Circular, and setting aside the separate award of compensation granted by the District Commission.
The case arose from a complaint filed by Mr. Hussain Sharief and Smt. Tasneem Hussain, who had availed a housing loan of ₹8,00,000 and two personal loans from the Bank of Baroda by creating a mortgage through the deposit of their title deeds. Upon default in repayment, the loans were classified as Non-Performing Assets (NPA), and proceedings were initiated before the Debt Recovery Tribunal (DRT) under the SARFAESI Act. Subsequently, the borrowers sought settlement under the Runa Mukthi Yojana (One-Time Settlement Scheme), and closure letters were issued in February and May 2023 for the respective loans. Despite settlement, the borrowers alleged that the bank failed to return their original documents even after six months, leading them to file a complaint before the IV Additional District Consumer Disputes Redressal Commission, Bengaluru.
The District Commission, after considering the evidence, found the bank guilty of deficiency in service. It directed the bank to return all the original title deeds within 45 days and imposed a penalty of ₹3,000 per day from 31 March 2023 until compliance. Additionally, the bank was directed to pay ₹50,000 as compensation for mental agony and ₹10,000 towards litigation costs. Aggrieved by the order, the bank approached the State Commission by filing an appeal.
The appellant bank contended that the delay in returning the documents occurred because the title deeds were in the custody of the Debt Recovery Tribunal, where proceedings under the SARFAESI Act were pending. The counsel argued that there was no deficiency in service as the delay was beyond the bank’s control. It was further contended that the District Commission erred in imposing a retrospective penalty from 31 March 2023, even though the relevant RBI Circular prescribing timelines for the return of title deeds came into force only from 01 December 2023.
On the other hand, the respondents maintained that the bank was duty-bound to return the mortgaged documents immediately after the loan closure. Their counsel submitted that the bank’s continued failure, despite repeated requests and directions from the District Commission, clearly amounted to negligence and deficiency in service. It was argued that once the closure letter had been issued, the borrowers were entitled to receive their title deeds without delay, and the District Commission had rightly imposed the penalty following the RBI guidelines.
The State Commission noted that it was undisputed that the complainants had fully discharged their loan obligations under the settlement scheme and were thus entitled to the return of their mortgaged title deeds. The bench observed that the bank had received the original documents from the Debt Recovery Tribunal only on 05 October 2023 but failed to return them promptly thereafter. It criticized the bank’s insistence that the complainants personally visit the branch to collect the documents, observing that such a stance was “too much on their part.” The Commission further remarked that the bank could have deposited the documents before the District Commission or the State Commission during the proceedings, but failed to do so, demonstrating negligence and unreasonable conduct.
The Commission held that once a borrower has settled the dues and received a closure letter, the bank is expected to act diligently in returning the property documents. It emphasized that the borrowers could not be blamed for not visiting the branch when the litigation was already pending, and the onus was on the bank to ensure compliance with its obligations.
While affirming the finding of deficiency in service, the Commission partly allowed the appeal and modified the effective date of the penalty. Referring to the RBI Circular dated 13.09.2023 (No. DoR.MCS.REC.38/01.01.001/2023-24), which came into effect on 01 December 2023, the bench held that the District Commission had erred in applying it retrospectively. Therefore, the penalty of ₹3,000 per day would be applicable from 01 December 2023 instead of 31 March 2023.
Additionally, the State Commission observed that once a daily penalty had been imposed for non-compliance, there was no justification for awarding a separate compensation amount. Consequently, it set aside the ₹50,000 compensation while upholding the ₹10,000 litigation cost. The Commission directed the bank to return all original title deeds and pay the applicable penalty amount within four weeks from the date of the order, failing which the penalty would carry interest at 9% per annum from the effective date. Ultimately, the appeal was allowed in part, modifying only the date of penalty and setting aside the separate award of compensation, while confirming the findings of deficiency in service recorded against the Bank of Baroda.
Cause Title: The Deputy Regional Manager, Bank Of Baroda Vs Hussain Sharief
Case No: SC/29/ A/2667/2024
Coram: Justice T.G. Shyamashankare Gowda (President), Ms. Diwashree M. (Lady Member)
