Karnataka State Commission Holds Bank of Baroda Liable For Failing To Return Borrowers' Title Deeds After Loan Settlement

The Karnataka State Consumer Disputes Redressal Commission has held the Bank of Baroda liable for deficiency of service for failing to return the borrowers' original title deeds even six months after the loan settlement. The Commission partly allowed the appeal, modifying the effective date of the penalty in accordance with the applicable RBI circular, and set aside the separate compensation awarded by the District Commission. Brief Facts The respondents (complainants), Mr. Hussain Sharief and Smt. Tasneem Hussain, had availed a housing loan of ₹8,00,000 and two personal loans from the Bank of Baroda (appellants) by creating a mortgage through the deposit of their title deeds. Due to default in payment of EMIs, the loans were classified as Non-Performing Assets (NPA) and recovery proceedings were initiated before the Debt Recovery Tribunal (DRT). The borrowers/respondents later approached the bank for settlement under the Runa Mukthi Yojana (One-Time Settlement scheme), and closure letters were issued in February and May 2023 for the respective loans. Following settlement, the complainants requested the return of their original title deeds, but the bank failed to do so even after six months. Alleging deficiency in service, borrowers/respondents approached the Additional District Consumer Disputes Redressal Commission, Bengaluru. The District Commission found the bank guilty and directed it to return the documents and pay ₹3,000 per day from 31 March 2023 until compliance, ₹50,000 as compensation, and ₹10,000 toward litigation costs. Aggrieved by this order, the bank filed an appeal before the State Commission. Arguments by The Parties The appellant, Bank of Baroda, contended that the delay occurred because the title deeds were in the custody of the DRT, where proceedings under the SARFAESI Act were pending. It argued that there was no deficiency of service since the delay was beyond its control and that the District Commission had wrongly imposed a retrospective penalty from 31 March 2023, even before the RBI circular on returning title deeds came into force on 01 December 2023. The respondents maintained that the bank was duty-bound to return the documents immediately upon loan closure and that the continued failure amounted to clear negligence and deficiency of service. They also emphasized that the bank had not returned the documents despite directions from the District Commission. The counsel for the respondents submitted the complainants were entitled to the immediate return of their mortgaged documents, as the closure letter for the loan had already been issued. It was argued that the bank's failure to return the title deeds amounted to negligence and deficiency of service. The counsel further pointed out that the appellant did not return the documents even after the District Commission had directed them to do so. The complainants maintained that the District Commission had correctly held the bank liable for deficiency of service and had properly imposed the penalty in accordance with the RBI guidelines. Observations by The Commission The Karnataka State Consumer Commission observed that once a loan is fully settled, the borrower is entitled to the prompt return of mortgaged documents. The Commission noted that the bank received the original title deeds from the Debt Recovery Tribunal only on 05 October 2023, and despite this, the bank failed to return them within a reasonable period. The Commission criticized the bank's insistence that the complainants personally visit the branch to collect their documents, calling it “too much on their part.” It further observed that the bank could have deposited the title deeds before the District Commission or State Commission during the proceedings but failed to do so. The Commission also found no negligence or omission on the part of the complainants and held the bank's conduct unreasonable and negligent. While affirming the finding of deficiency of service, the Commission partly allowed the appeal and modified the penalty's effective date. It held that the RBI Circular dated 13.09.2023 (No. DoR.MCS.REC.38/01.01.001/2023-24) — effective from 01.12.2023 — could not be applied retrospectively. Therefore, the penalty of ₹3,000 per day would apply from 01 December 2023 instead of 31 March 2023. The Commission also set aside the separate award of ₹50,000 as compensation, noting that once a daily penalty had been imposed, there was no justification for awarding additional compensation. It, however, upheld the ₹10,000 awarded toward litigation costs and directed the bank to return all original title deeds and pay the penalty amount within four weeks, failing which the penalty would carry interest at 9% per annum from the effective date. Case Title: THE DEPUTY REGIONAL MANAGER, BANK OF BARODA vs HUSSAIN SHARIEF scl29l A1266712024 Click Here To...

Karnataka State Commission Holds Bank of Baroda Liable For Failing To Return Borrowers' Title Deeds After Loan Settlement

Muhammed Razik

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