Your bank loses your original property papers that were kept with it as security for loan. What happens then? A new Bombay High Court verdict in this regard holds significance.In the case of In Vogue Creations vs State Bank of India, the bank has been ordered to pay compensation. The State Bank of India has been ordered by the Bombay High Court to pay Rs 5,000 a day to In Vogue Creations after the bank admitted that it could not trace the original title documents of two properties kept with the bank as security for loan facilities.
What the case is about
The loan was taken in 1979 and it was fully repaid in 2003.In Vogue Creations had purchased Units/Gala Nos. 317 and 318 at Bussa Industrial Premises Co-operative Society in Prabhadevi, Mumbai. The agreements for the two units were dated December 4, 1973 and August 3, 1978.On July 26, 1979, the firm handed over these agreements, along with the share certificates, to SBI’s Commercial Branch at Dadar as security for loan facilities.The firm had also entered into a registered lease agreement with the Maharashtra Industrial Development Corporation (MIDC) on March 22, 1979, for a plot at W-154, Taloja, Panvel. The lease deed and other documents relating to this property were also deposited with SBI as security.The bank disbursed the loan facilities in 1979. In Vogue Creations subsequently cleared the entire outstanding amount on August 28, 2003.SBI issued a No Dues/No Claims Certificate on July 27, 2023, confirming that the loan had been fully repaid. The bank also confirmed that it had no remaining claim or mortgage over the properties.There was, however, one problem: the original title documents were not returned to the firm.SBI later admitted that it could not find the papers. In letters dated December 5 and December 7, 2023, the bank informed Bussa Industrial Premises Co-operative Society and MIDC that the respective documents could not be traced. It asked the authorities to provide certified or true copies.
The firm and SBI’s arguments
In Vogue Creations published a newspaper advertisement about the missing documents and lodged a complaint with the Dadar Police Station. It also approached the Banking Ombudsman.On November 21, 2024, the Banking Ombudsman advised SBI to pay Rs 1 lakh to the firm as compensation. In Vogue Creations did not accept the amount. SBI nevertheless deposited the money into the firm’s account on November 22, 2024.The firm continued to press for the documents, particularly because it wanted to sell both properties. It argued that the replacement papers supplied by SBI were not a complete set and did not resolve certain issues, including those relating to stamp duty paid on the properties.SBI subsequently lodged an FIR and published notices in two newspapers about the loss of the documents. For the Taloja property, MIDC supplied true copies or photocopies of some documents, which SBI then handed over to the firm.But In Vogue Creations maintained that these measures did not undo the problems created by losing the original papers.SBI acknowledged that it could not trace the original documents for either property. However, the bank argued that the firm had not asked for their return immediately after repaying the loan.According to SBI, the request came more than 15 years later. By then, the branch premises had been shifted. The bank said it made efforts to locate the documents but was ultimately unsuccessful.SBI also challenged the maintainability of the firm’s petition. It pointed out that In Vogue Creations had already gone to the Banking Ombudsman, which had ordered compensation of Rs 1 lakh, and that the amount had been deposited.The bank further argued that the RBI’s September 13, 2023 Circular could not apply retrospectively to a loan that had been repaid in 2003. Therefore, SBI said, the Rs 5,000-per-day compensation under the Circular could not be imposed from 2003.
Bombay HC rejects SBI’s delay argument
A division bench of Acting Chief Justice Ravindra V Ghuge and Justice Gautam A Ankhad passed the order on September 2, 2026. SBI has been given 12 weeks to complete the exercise.The Bombay High Court did not accept SBI’s contention that the firm’s delay in asking for the documents relieved the bank of its responsibility.The court relied on the RBI’s September 13, 2023 Circular on “Responsible Lending Conduct – Release of Movable/Immovable Property Documents on Repayment/Settlement of Personal Loans.”Under the Circular, regulated entities are required to release original movable or immovable property documents within 30 days after a loan account has been fully repaid or settled.The Circular also provides for compensation of Rs 5,000 for every day of delay where the delay is attributable to the regulated entity. If original documents are lost or damaged, the entity must help the borrower obtain duplicate or certified copies and bear the associated costs.There is an important limitation, however. The Circular says its directions apply where the release of original documents becomes due on or after December 1, 2023.The High Court therefore agreed with SBI on one point: the Circular could not be applied retrospectively from 2003. But that did not let the bank off the hook altogether.Given SBI’s admitted loss of the documents and the continuing prejudice suffered by the firm, the court held that the Rs 5,000-per-day rate would apply from December 1, 2023 onwards.Once the loan had been fully repaid, the court held, SBI had no continuing right or justification to keep the original title documents. A borrower who has cleared the loan is entitled to expect the bank holding valuable property papers to preserve them and return them after the secured liability has been discharged.The court placed the responsibility for preserving, identifying, retrieving and returning such documents squarely on the bank. Internal issues such as shifting a branch, transferring records or changing personnel could not be passed on to the borrower.Accepting SBI’s argument, the court noted, would effectively mean that a bank could avoid responsibility for lost documents simply because the borrower did not immediately demand their return after repaying the loan.The bench also recognised the continuing difficulty caused by the missing papers. Original title documents form an important part of a property’s chain of title and are ordinarily needed when an owner wants to sell, mortgage, transfer or otherwise deal with the property.The court said that the Rs 1 lakh that SBI had already deposited into the firm’s account following proceedings before the Banking Ombudsman would be adjusted against the compensation payable under its order.The compensation will be calculated from December 1, 2023 and will continue until SBI provides certified copies of the missing documents and completes the reconstruction of the title records. This includes the necessary endorsements, affidavits, indemnities and other supporting papers.
