Kerala High Court

Kerala High Court: In a Writ Petition filed before the Court seeking Mandamus commanding State Bank of India (‘the bank’) to release the security documents, including the original title deed including other related reliefs, the Single Judge bench of Shaji P. Chaly, J., held that the bank was not entitled to retain the security documents related to a mortgaged property if the entire loan amounts are paid to the satisfaction of the Bank.

In the instant matter, the petitioner availed housing loans of Rs 16 lakhs from the bank by mortgaging the title deeds of his property. The petitioner’s wife invested her share of cash in his business with the pre-condition of assigning 1/4th share in the mortgaged property in her favour. The said loan was subsequently closed by the petitioner on 7-4-2022 with closure report dated 12-4-2022 after repayment of the loan, but the bank refused to release security documents including original title deed. The bank through letter dated 21-7-2022 communicated the intention to initiate legal action against the petitioner claiming his account being classified as fraud consequent to the alienation of the property without bank’s permission.

To elucidate the real implication of a mortgage, the Court perused Sections 58, 60-A, 83 and 91 of the Transfer of Property Act, 1882 and concluded that mere alienation of the property during the subsistence of the mortgage does not entitle the bank to withhold the security documents after the interest of the bank is protected by closing the loan account.

The Court further observed that “the bank is not entitled to adjudicate an issue with respect to the fraud allegedly committed; and merely because the bank initiates any action, the bank is not entitled to detain the title documents and other security documents submitted by the petitioner before the bank”. The Court explained that the sole purpose of the mortgage was to secure the loans, which was paid off by the petitioner, and if the bank suffered any loss due to alienation of property, the matter has to be adjudicated by the competent Court of law and not the bank. The Court held the unilateral action of the bank withholding security documents of the said property illegal and arbitrary.

The Court allowed the instant Writ Petition and directed the bank to release the title deed and other security documents furnished by the petitioner on the said loan accounts at the earliest.

[Vinu Madhavan v. State Bank of India, 2023 SCC OnLine Ker 1608, decided on 17-03-2023]

Advocates who appeared in this case :

Counsel for Appellant: Advocate R. Muraleekrishnan, Advocate V.S. Nowshad, Advocate T.M. Reshmy, Advocate Sithara. S, Advocate Binu K.B.

Counsel for Respondent: Standing Counsel Sri. M. Jithesh Menon;

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