Kerala High Court Slaps Costs On Bank For Withholding Title Deeds After Loan Closure | Declares Retention Unlawful
Isabella Mariam
The High Court of Kerala Single Bench of Justice Bechu Kurian Thomas disposed of a writ petition seeking return of original title deeds, a declaration against unlawful retention, and compensation for delayed release. The Court declared that the second respondent bank had no authority to retain the petitioners’ title deeds following closure of the loan account. It declined the direction to release the documents due to their non-availability and rejected the compensation claim under Article 226. The Court imposed costs on the bank for misdirecting judicial proceedings and wasting court time.
The petitioners approached the High Court seeking a direction for return of original title deeds and a declaration that the bank unlawfully retained the documents after loan closure. Additionally, compensation of ₹10,00,000 was claimed for the bank’s alleged illegal retention of the documents for over nine years after the housing loan was closed.
The first petitioner, along with her late husband, had obtained a housing loan from the second respondent bank in 2009. The second and third petitioners, their children, were guarantors to the said loan. Upon the death of the first petitioner’s husband in 2011, the petitioners—confirmed legal heirs by a 2013 certificate—requested closure of the loan account. The bank issued a letter dated 16 July 2015 acknowledging receipt of four title deeds as collateral: two exchange deeds (Nos. 1924/1992 and 2039/1992), a release deed (No.1350/1975), and a sale deed (No.3625/1971), all registered at the Aluva Sub Registry Office.
On 4 August 2015, the petitioners sought to close the loan by paying ₹58,01,320. The bank credited the cheque and closed the loan account on 5 August 2015. A request to return the title deeds followed, supported by account statements. Despite several follow-ups, the original documents were not returned. The petitioners alleged unlawful retention post-closure and arbitrary action by the bank, prompting the present writ petition.
In response, the second respondent’s Chief Manager filed a counter affidavit contending the writ was not maintainable and claimed that the title deeds had been deposited not only for the housing loan but also for a cash credit facility availed by M/s Parackel Cartel. Though the credit facility was closed and the relevant documents returned, the second respondent stated the documents in question could not be traced. It was disclosed that the branch had relocated in July 2023, during which many closed files were discarded. The bank claimed no documents were intentionally withheld and implied that the title deeds might have been transferred to HDB Financial Services, which took over the loan in 2015.
Given this suggestion, the petitioners impleaded HDB Financial Services as an additional respondent. In its affidavit, the fourth respondent clarified that the mortgage for their loan was backed by a different set of properties, not the ones previously mortgaged with the second respondent. Thus, HDB denied possession of the disputed title deeds.
The petitioners maintained that the second respondent was the last institution in possession of the original deeds and bore the responsibility for their return. Exhibit-P4, dated 16 July 2015, evidenced that the documents were with the bank as of that date. No documentation indicated they had been returned or transferred.
The Court recorded that the second respondent admitted in its affidavit that, despite exhaustive search efforts, the documents were untraceable. While asserting that the bank held no dues from the petitioners, it claimed the deeds were not retained unlawfully. Nonetheless, the bank failed to demonstrate lawful disposal or explain the documents' current location.
The petitioners relied on an RBI Circular dated 13 September 2023 mandating compensation of ₹5,000 per day for delay in release of original title deeds post-loan closure. While arguing the bank was liable under this directive, the petitioners sought compensation of ₹10,00,000, alleging a nine-year delay.
The Court recorded, “Petitioners have been attempting to obtain their original four title deeds over which equitable mortgage by deposit of title deeds was created with the second respondent. Exhibit-P4 acknowledged the existence of those title deeds with the second respondent as on 16.07.2015.”
It stated, “There is no document evidencing return of the title deeds. Hence, the second respondent is bound to answer the whereabouts of the title deeds.”
Addressing the claim that the fourth respondent might have obtained the documents, the Court noted, “A vain attempt was made to convey that the home loan having been taken over by the fourth respondent, even the title deeds would have been handed over to the said respondent... in their affidavit they have asserted that the loan availed from the fourth respondent was covered by mortgage of some other properties.” It concluded, “Therefore, the responsibility for return of the documents of title of the petitioners vests with the second respondent.”
Regarding the bank’s inability to locate the deeds, the Court observed, “It is quite evident that the documents of title of the petitioners have been lost from the second respondent.” It held, “Since the documents have not been traced, and the obligation is upon the second respondent to return the title deeds, it is necessary that they return the documents or initiate appropriate proceedings to enable the petitioners to obtain a certified copy of the documents as a replacement.”
Referring to RBI’s circular, the Court noted, “In case of delay in releasing original documents of title, the bank shall compensate the borrower at the rate of Rs.5,000/- for each day of delay.” The Court added, “The compensation provided as per the said direction shall be without prejudice to the right of the borrower to get any other compensation as per the applicable law.”
On the issue of compensation through writ jurisdiction, the Court held, “The public law remedy under Article 226 of the Constitution of India cannot be resorted to by the petitioners for claiming compensation in a matter of this nature, as the petitioners have efficacious remedy before other forums.” It clarified, “This is not a case of violation of any fundamental right of the petitioners for exercising the power to grant compensation under Article 226.”
The Court further recorded, “Considering the conduct of the second respondent and the tone and tenor of the affidavit filed, coupled with the stance adopted, this Court is of the view that, respondents 1 to 3 are bound to pay costs, for the judicial time wasted by them while trying to divert their burden to another establishment.”
The Court issued the following directions:
“There will be a declaration that the second respondent has no authority to retain the original title deeds of the petitioner after closure of a loan account.”
“The direction to release the title documents belonging to the petitioners is declined due to non-availability of the documents.”
“The claim for compensation raised in this writ petition is declined reserving the right of the petitioners to approach appropriate other forum.”
“An amount of Rs.50,000/- is imposed as costs on the second respondent of which Rs.25,000/- shall be paid to the petitioners and the balance Rs.25,000/- shall be paid to the Kerala Legal Services Authority. The costs shall be paid within 15 days from the date of receipt of a copy of this judgment. It is clarified that, these costs shall not be set off against the compensation, if any, claimed by the petitioner.”
“Writ petition is disposed of as above.”
Advocates Representing the Parties
For the Petitioners: Praveen K. Joy, Advocate
For the Respondents: Sunil Shankar A, Vidya Gangadharan , P. Poulochan Antony, Sreejith K.
Case Title: Sheela Francis Parakkal and Others v. The Authorised Officer and Others
Neutral Citation: 2025:KER:31505
Case Number: W.P.(C) No. 11247 of 2024
Bench: Justice Bechu Kurian Thomas
[Read/Download order]
