Federal Bank Liable For Illegally Retaining Borrower's Original Title Deeds After Loan Closure: Palakkad Consumer Commission
The District Consumer Disputes Redressal Commission, Palakkad, comprising President Sri Vinay Menon V. and Members Smt. Vidya A. and Sri Krishnankutty N.K., has held Federal Bank liable for deficiency in service for arbitrarily retaining a borrower's original title deeds for more than a year after closure of the secured loan. The Commission observed that the bank failed to justify the prolonged retention of the documents despite admitting that no property had been charged as security for the PMEGP loan, and held that such illegal withholding of title deeds amounted to deficiency in service.
Brief facts of the Case
The complainant, Shabina M.A., had availed a Prathyasa Loan from Federal Bank in 2016 by depositing the original title deeds of her property as collateral. After repaying the loan in 2021, she also availed a PMEGP loan from the bank. The complainant alleged that although loans under the PMEGP scheme did not require mortgage of property, the bank continued to retain her original title deeds even after the earlier loan had been closed, allegedly informing her that the documents were necessary for release of the subsidy. She claimed that the wrongful retention of the title deeds prevented her from using the property for her daughter's marriage and other financial needs. Despite approaching the bank's Head Office and subsequently filing a grievance on the Prime Minister's Grievance Portal, the documents were returned only after the grievance was taken up.
Alleging that the arbitrary and prolonged retention of her original title deeds after closure of the loan amounted to deficiency in service and unfair banking practice, the complainant filed a consumer complaint before the District Consumer Disputes Redressal Commission, Palakkad, seeking compensation for the financial loss, mental agony and hardship suffered, along with litigation costs.
Contentions of the Opposite Party
The Opposite Party (Federal Bank) denied any deficiency in service and contended that the complainant had voluntarily extended the original title deeds as collateral security for the PMEGP loan and that there was no coercion in doing so. They submitted that the title deeds had been returned on 18 July 2024, and not on 10 August 2024 as alleged. The bank further asserted that the real dispute arose from deductions made towards minimum balance charges in the complainant's savings account and that the present complaint was filed merely out of vengeance after the complainant failed to accept the bank's explanation regarding those deductions. The Opposite Parties, therefore, prayed for dismissal of the complaint.
Observation and decision of the commission
The Commission observed that Federal Bank had unlawfully retained the complainant's original title deeds for nearly one year and four months after the relevant loan account had been closed, despite admitting that no property had been charged as security for the PMEGP loan. It held that the bank failed to offer any satisfactory explanation for the prolonged retention of the documents and that such arbitrary conduct amounted to deficiency in service. The Commission further held that a bank cannot withhold a customer's original title deeds without any legal justification after the purpose for which they were deposited has ceased to exist.
Accordingly, the Commission partly allowed the complaint and directed Federal Bank to pay the complainant ₹2,00,000 as compensation for the harassment caused by the illegal retention of the title deeds and ₹50,000 towards litigation costs. It further directed the bank to comply with the order within 45 days, failing which it would be liable to pay a solatium of ₹1,000 per month until payment.
Case Title: Shabina M.A. v. The Manager, Federal Bank, Pudunagaram Branch & Anr.
Case No.: DC/563/CC/425/2024