Woman’s papers ‘illegally’ retained post loan closure, bank manager to pay Rs 2.5 lakh

A consumer commission in Kerala recently held a manager working in Federal Bank’s Pudunagaram branch liable for deficiency in service after it retained a woman’s property documents for nearly 16 months after the closure of her relevant loan accounts, and directed it to pay Rs 2.5 lakh as compensation.

President Vinay Menon V, along with members Vidya A and Krishnankutty N K, was hearing the complaint filed by Shabina M A, who alleged that the Federal Bank continued to retain her property documents despite there being no requirement to keep them as security.

“After closure of ODCC 12575500472698 on 22/03/2023, the 1st opposite party (OP) (Federal Bank) retained the title deeds for nearly one year and four months. This delay is not explained by the opposite parties. When no explanations are forthcoming as to the retention of title deeds, we can only resort to a presumption that such retention was arbitrary and illegal,” the June 29 order read.

Two loans, documents withheld

It was claimed by Shabina that she availed a Prathyasa loan (a scheme designed to help distressed farmers) from the Federal Bank during 2016 by submitting the original title deeds of her property to the managing director of the said bank. She added that the said loan was closed without any default in 2021.

During 2019, she further availed a Prime Minister’s Employment Generation Programme (PMEGP) loan from Federal Bank. It was alleged that the documents submitted as collateral for the Prathyasa loan were extended as security for these loans as well.

She claimed that although she later learnt that mortgage documents were not required for loans below Rs 10 lakh, bank officials allegedly told her that she would not receive the subsidy under the PMEGP scheme if she took back the title deeds.

The complainant alleged that despite the closure of the relevant loan account, the bank continued to retain the title deeds. She claimed that she needed the property documents for family purposes, including her daughter’s marriage, but was unable to obtain them.

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She claimed that because of this, his daughter lost a good marriage proposal. It was further added that the complainant initiated a complaint to the head office of Federal Bank regarding the illegal actions of the manager of the said branch. However, he added that he did not receive a satisfactory reply.

Subsequently, the complainant approached the Prime Minister’s Grievance Portal by way of a complaint dated June 19, 2024, stating these issues. It was alleged that on receipt of this complaint, the Federal Bank replied that no property is charged against the PMEGP loan.

It was further added that although the loan documents were returned on August 10, 2024, the retention of these security documents for this loan is tantamount to a deficiency in service.

The man filed this complaint seeking compensation of Rs 4 lakhs for loss sustained on account of the sale of a property for a much lesser amount, compensation of Rs 2 lakhs for mental agony and Rs 50,000 towards cost.

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Manager deficient in service

The commission noted that the complainant’s case was that she required the property for sale for her daughter’s wedding during the 2023- 2024 period.

However, it found that she had failed to explain why another property had been sold in 2021 if the marriage was to take place years later.

The consumer body also observed that the complainant had not clarified her claim that the bank’s retention of the title deeds had reduced the value of another property or caused financial loss.

The commission noted that the loan was closed during 2023 and clarified that till closure of the loan account, retention of title deeds was legal.

The commission held that the allegations were merely a figment of the complainant’s imagination and were not supported by the material placed on record.

The commission allowed the complaint in part and found a deficiency in service on the part of the manager of the Federal Bank of the Pudunagaram branch.

The consumer body directed the manager to pay compensation of Rs 2 lakh within 45 days.

The commission found that the complainant is entitled to costs of Rs 50,000.

Federal bank, manager’s defence

The bank and its managing director of the said branch, represented by advocate Ullas Sudhakar, admitted that the woman availed financial assistance under various heads. However, they denied any illegality or deficiency in service.

It was argued that the documents offered as security were returned on July 18, 2024 and August 10, 2024. It was further added that this complaint is only an attempt at vengeance.

It was claimed by the bank that the actual dispute between the complainant and the bank pertained to the amount debited by the bank from the account of the complainant for want of the minimum balance in her account.

It was added that the extension of collateral security for the loan availed by the complainant was never under any compulsion, but the same was deposited by the complainant by way of free will.

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Ultimately, the bank claimed that there is no deficiency in service whatsoever and prayed for the dismissal of the complaint.

Significance of ruling

This ruling highlights that banks cannot continue to retain borrowers’ property documents without a valid reason after the relevant loan account has been closed.

For consumer-related grievances, individuals may contact the consumer helpline in their respective states and union territories (Kerala helpline:1800-425-1550) or call the National Consumer Helpline at 1915 for assistance.