The loan was repaid in 2003, but the bank lost the ownership documents; Bombay HC orders him to pay Rs 5,000 per day from December 2023 until title records are reconstructed

Your bank loses the original ownership documents it held as collateral for the loan. What happens then? A fresh verdict by the Bombay High Court in this regard has significance.In the case of In Vogue Creations vs State Bank of India, the bank has been ordered to pay compensation. The Bombay High Court has ordered the State Bank of India 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 held with the bank as collateral for credit facilities.

What is the case about?

The loan was taken in 1979 and repaid in full in 2003.In Vogue Creations had purchased Units/Gala Nos. 317 and 318 at Bussa Industrial Facilities Cooperative Society in Prabhadevi, Mumbai. The agreements for the two units were dated December 4, 1973 and August 3, 1978.On July 26, 1979, the company handed over these agreements, along with share certificates, to SBI’s commercial branch at Dadar as collateral for the loan facilities.The company had also entered into a registered lease agreement with the Maharashtra Industrial Development Corporation (MIDC) on March 22, 1979 for a land at W-154, Taloja, Panvel. The lease deed and other documents related to this property were also deposited with SBI as security.The bank disbursed the loan facilities in 1979. In Vogue Creations subsequently settled 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 repaid in full. The bank also confirmed that it had no remaining claim or mortgage on the properties.However, there was a problem: the original title documents were not returned to the company.The SBI later admitted that it could not find the documents. In letters dated December 5 and 7, 2023, the bank informed the Bussa Industrial Premises Cooperative Society and the MIDC that the respective documents could not be traced. He asked the authorities to provide certified or authentic copies.

The arguments of the firm and the SBI

En Vogue Creations published an advertisement in the newspaper about the missing documents and filed a complaint at the Dadar police station. He also addressed the Banking Ombudsman.On November 21, 2024, the Banking Ombudsman recommended the SBI to pay Rs 1 lakh to the company as compensation. Vogue Creations did not accept the amount. However, SBI deposited the money in the company’s account on November 22, 2024.The company continued to press for the documents, especially because it wanted to sell both properties. He argued that the replacement documents provided by SBI were not a complete set and did not resolve certain issues, including those related to stamp duty paid on the properties.Subsequently, SBI lodged an FIR and published notices in two newspapers about the loss of the documents. For Taloja property, MIDC provided authentic copies or photocopies of some documents, which were then handed over to the company by SBI.But In Vogue Creations argued that these measures did not solve the problems created by the loss of the original documents.SBI acknowledged that it could not trace the original documents of any of the properties. However, the bank argued that the company had not requested its return immediately after repaying the loan.According to SBI, the request came more than 15 years later. By then, the branch facilities had already been moved. The bank said it made efforts to locate the documents but was ultimately unsuccessful.SBI also questioned the maintainability of the company’s petition. He noted that In Vogue Creations had already approached the Banking Ombudsman, which had ordered compensation of Rs 1 lakh, and the amount had been deposited.The bank further argued that the RBI Circular dated September 13, 2023 could not be applied retrospectively to a loan that had been repaid in 2003. Therefore, the SBI said, compensation of Rs 5,000 per day under the Circular could not be imposed from 2003 onwards.

Bombay HC rejects SBI’s delay argument

A division bench comprising Acting Chief Justice Ravindra V Ghuge and Justice Gautam A Ankhad passed the order on September 2, 2026. The SBI has been given 12 weeks to complete the exercise.The Bombay High Court did not accept the SBI’s argument that the company’s delay in requesting the documents exempted the bank from its liability.The court relied on the RBI circular dated September 13, 2023 on “Responsible Lending Conduct: Disclosure of Movable/Immovable Property Documents on Repayment/Settlement of Personal Loans”.According to the Circular, regulated entities must deliver original documents for real or personal property within 30 days after a loan account has been repaid or settled in full.The Circular also provides for compensation of Rs 5,000 for each day of delay where the delay is attributable to the regulated entity. If the original documents are lost or damaged, the entity must help the borrower obtain duplicates or certified copies and bear the associated costs.However, there is an important limitation. The circular says its instructions apply when publication of the original documents expires on or after December 1, 2023.Therefore, the High Court agreed with SBI on one point: the Circular could not be applied retrospectively from 2003. But that did not absolve the bank entirely from the predicament.Given the loss of documents admitted by SBI and the continued prejudice suffered by the company, the court held that the fee of Rs 5,000 per day would be applicable from December 1, 2023 onwards.Once the loan had been repaid in full, the court held, SBI had no continuing right or justification to retain the original title documents. A borrower who has paid off the loan has the right to expect that the bank holding valuable real estate securities will hold them and return them once the secured obligation has been discharged.The court directly assigned the bank the responsibility of preserving, identifying, recovering and returning said documents. Internal issues such as change of branch, transfer of records or change of personnel could not be transmitted to the borrower.Accepting SBI’s argument, the court noted, would effectively mean that a bank could avoid liability for lost documents simply because the borrower did not demand their return immediately after repaying the loan.The court also recognized the continuing difficulties caused by the lack of documents. Original title documents form an important part of the chain of title for a property and are typically required when an owner wishes to sell, mortgage, transfer or otherwise deal with the property.The court said the one lakh rupees that SBI had already deposited in the company’s account after the proceedings before the Banking Ombudsman would be adjusted to the compensation payable as per 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 any endorsements, affidavits, indemnities, and other necessary supporting documents.