Consumer panel fines banks for misplacing home loan customers’ property documents

CHENNAI: The joy and relief of paying off a home loan after years of diligently paying EMIs turns into a nightmare for many owners, thanks to some of the banks and financial institutions losing the original documents, which they insist upon at the time of giving the loan.

In addition to the shock of being at the receiving end of such irresponsible behaviour, owners have to go through the ordeal of filing a complaint with the consumer forum and wait to be heard, which can take weeks, and in some cases, even months. Although they are financially compensated, it’s a small and bittersweet victory given the extent of their misery.

VR Nagarajan vs. SBI, Chennai

When VR Nagarajan, a retired manager with State Bank of India (earlier State Bank of Mysore), NSC Bose Road branch, availed a home loan of Rs 2.37 lakh, and also an education loan of Rs 11.22 lakh for his daughter, he never thought the bank would misplace his original documents, put him through further financial misery to meet his daughter’s marriage.

After repayment of the loan, Nagarajan requested the documents but bank officials replied that they had misplaced the original sale deed along with title deed documents. They promised to hand them over to Nagarajan as soon as possible.

With no documents, he had to take more loans at higher interest rates, as Nagarajan was unable to meet his daughter’s marriage expenses. He had no other option but to approach the District Consumer Disputes Redressal Commission.

The commission directed the SBI to pay a compensation of Rs 10 lakh towards deficiency in service, monetary loss incurred for the loss of original documents, mental agony, pain and sufferings and Rs 10,000 towards litigation cost to the complainant. SBI was also directed to issue certified copies of the original documents on their own cost and also execute indemnity bond.

Nagarajan’s case is not an isolated one. The District Consumer Disputes Redressal Commission, Chennai (North) headed by D Gopinath, and members, V Ramamurthy and Kavitha Kannan, had recently passed orders in at least three similar cases, and asked them to pay the compensation to the affected parties.

All these cases were against the banking/ financial institutions holding them liable for deficiency in service for failure to handover the original title deeds/ property documents at the time of closure of loan accounts. In four cases, two victims were former bank employees.

Rajkumar vs. Piramal Capital and Housing Finance

Rajkumar took a housing loan of Rs 35.18 lakh in 2015 from Piramal Capital and Housing Finance earlier known as Dewan Housing Finance Corporation Limited (DHFL) to purchase a property.

Rajkumar prepaid the loan and the bank issued the pay-off statement in March 2023. The bank had informed Rajkumar that there was an unexpected delay in retrieval of the documents at vendor storage and all the original documents would be handed over soon.

But later, he received a letter that it was lost from their custody. Rajkumar states that the loss of the original documents put him at a financial loss as the value of their property will be adversely impacted because of it.

The commission directed Piramal Capital to pay a compensation of Rs 15 lakh towards deficiency in service, monetary loss incurred for the loss of original documents, mental agony, pain and sufferings and Rs 10,000 towards litigation cost. It was also directed to issue certified copies of the originals lost on their own cost and also execute indemnity bond in favour of the complainant within 30 days.

S Sankar vs. Indian Bank, Chennai

S Sankar’s experience was equally harrowing. A senior citizen and a retired employee of the Indian Bank, Sankar had given his original documents as a collateral security while availing a housing loan, and the bank had misplaced it.

He had availed a loan of Rs 13.52 lakh, which was fully closed in March 2023. Later, Sankar had emailed the bank to return the original documents to which the bank failed to respond.

A complaint was filed with the Mylapore police station and till date, the documents have been untraceable. The bank assured that they would return the documents but came up with a compensation of Rs 50,000.

After the closure of the loan, Sankar wanted to sell his house for his daughter’s cancer treatment but because he couldn’t produce the original property document, the market value of the land shot down by 30%.

Sankar also claimed that the stress caused him to have cardiac problems, and that he had to undergo treatment for Rs 11.09 lakh.

Indian Bank was directed to pay a compensation of Rs 5 lakh towards deficiency in service, monetary loss, mental agony, pain and sufferings and Rs 5,000 towards litigation cost to Sankar within two months. The compensation to be paid is excluding the amount of Rs 50,000 paid earlier.

Muthuvel Kannan vs. Bank of Baroda

Muthuvel Kannan, a resident of Anna Nagar, availed a housing loan of Rs 24.50 lakh from Bank of Baroda in 2017, after submitting the original sale deed and construction agreement to bank.

After repayment of the loan, he wrote to the bank requesting the original documents. The bank replied that the documents were not submitted and therefore, not available with the branch.

Moreover, they requested a suitable date for SRO cancellation of the bank’s cheque on property as the loan was closed, and to collect the documents from the bank, along with co-borrower.

Bank of Baroda was directed to pay Rs 25,000 towards deficiency in service, monetary loss incurred for the loss of original document, mental agony, pain and sufferings and Rs 5,000 towards litigation cost.

What RBI rules say

In case of loss/damage to original movable/immovable property documents, either in part or in full, the regulated entities shall assist the borrower in obtaining duplicate/certified copies of the movable/immovable property documents and shall bear the associated costs. Along with that, releasing of original movable/immovable property documents or failing to file charge satisfaction form with relevant registry beyond 30 days after full repayment/settlement of loan, the regulated entities shall communicate to the borrower reasons for such delay. In cases where the delay is attributable, the regulated entities shall compensate the borrower at the rate of Rs 5,000 for each day of delay. However, in such cases, an additional time of 30 days will be available to the regulated entities to complete this procedure and the delayed period penalty will be calculated thereafter (after 60 days). The compensation provided under these directions shall be without prejudice to the rights of a borrower to get any other compensation as per any applicable law.