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Shaunak Chakraborty   24 May 2024

Query regarding release of property papers by bank

My father has taken two loans from Bank of Maharashtra for his LLP: 1) A term loan against property of 84 lakhs and 2) A Cash Credit loan of 30 lakhs. A mortgage of 84 lakhs has been registered with CERSAI by the bank. If we re-pay the loan of 84 lakhs, does the bank have the right to hold the property papers until the 30 lakhs loan is also re-paid ?


 3 Replies

T. Kalaiselvan, Advocate (Advocate)     25 May 2024

As per law the Bank has no rights to retain the original documents of property submitted for collateral security when that loan has been fully discharged.

But if there is another loan existing then the bank may insist on repayment of the other loan also in order to release the original documents.

Though it is illegal and bank also know that it is not maintainable when the customer approaches court but their behaviour will not change.

However after discharge of loan against property, you can demand release of documents and then decide about further course of action.

Nandini Shaw   25 May 2024

In the scenario described where father has taken 2 loans from Bank of Maharashtra, a term loan against property of 84 lakhs and a cash credit loan of 30 lakhs and a mortgage of 84 lakhs has been registered with CERSAI by the bank, the bank's right to hold property paper until the repayment of both loans depend on the terms outlined in the loan agreement and mortgaged deed. Under the Transfer of property act 1882, Section 58(e) governs mortgages and outlined the rights and obligations of the mortgagor and  mortgagee. Typically when a property is mortgaged to secure multiple loans , the bank may retain possession of the property papers until all outstanding loans are fully repaid.

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (SARFAESI Act) empowers bank to take action if there is a default. In past cases like ICICI bank.Ltd vs. Prakash kaur & Ors. (2018) courts have affirmed that the bank's right to hold onto property papers until all loan linked to the property are paid off, even if taken at different times.

So even a father repay the 84 lakhs term loan, the bank might still hold onto the property papers until the 30 lakhs cash credit loan is also repaid.


Dr. J C Vashista (Advocate )     26 May 2024

The Bank is entitled to retain title documents of mortgaged property till final recovery of both loans.

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