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Kerala High Court prohibits bank from withholding title deeds

Gourob D ,
  27 March 2023       Share Bookmark

Court :
High Court of Kerala
Brief :

Citation :
Civil Appeal No 4806/ 2023

Case title:

Rajendra Kumar Shrivas vs State of Madhya Pradesh and others

Date of Order:

13th March, 2023

Bench:

Justice Shaji P Chaly

Parties:

Petitioner: Vinu Mahadevan 

Defendant 1: State Bank of India

Defendant 2: The Assistant General Manager

Facts:

  • The writ petitioner, respondent No. 1, who received home loans from the State Bank of India, Vennala Branch, Kochi, filed the writ petition in order to obtain a writ of mandamus ordering the petitioner requests that the respondents grant various related reliefs, including the earliest possible release to the petitioner of the security documents, including the original title deed pertaining to Exhibit P1.
  • The following are the key material facts for the resolution of the writ petition:-By mortgaging the original of his property's Exhibit P1 title deeds, the petitioner obtained housing loans from the respondent Bank in 2015 totaling Rs. 16 lakhs. The petitioner claims that his business failed, and in order to remedy the situation, his wife received her family's share of money in 2016 and offered to invest it in the petitioner's company—subject to the requirement that she be given a 1/4 share of the petitioner's property, including the right and ownership of the first floor of the building therein. As a result, a deed was completed in the petitioner's wife's favour.
  • After learning that the settlement deed for the mortgaged property had been executed in the year 2022, the respondent Bank urged the petitioner to liquidate the loan accounts. So, as may be shown from the Exhibit P3 closure letter dated 12.04.2022, the loans were closed by the petitioner on 07.04.2022. The Bank did nothing despite the petitioner's request for the release of the security documents, including the title deed to his property.
  • In light of this, the Bank informed the petitioner by Exhibit P7 letter dated 21.07.2022 that the account is deemed fraudulent as a result of the alienation of the property without the Bank's consent and that as a result, the Bank plans to take legal action against the petitioner.
  • The second respondent has submitted a statement in which they reiterate the stance taken by the Bank in the letter at Exhibit P7. The Bank claims that during the term of the mortgage, a portion of the property was alienated by the petitioner to his wife. Subsequently, a portion of the aforementioned property was mortgaged before the Kanayannur Taluk Co-operative Agriculture and Rural Development Bank, and two loans were obtained by hiding the mortgage made in favour of the respondent bank. The Bank contends that as a result, it has the right to take action against the petitioner.
  • I have listened to the learned Standing Counsel for the Bank and the learned Counsel for the Petitioner Sri. Muraleekrishnan. Sri. M. Jithesh Menon and studied the documentation, including the pleadings.
  • The main issue to be decided is whether the bank has the right to keep the security documents just because the petitioner sold or alienated the mortgaged property while the mortgage was still in effect but the whole loan amount was paid to the bank's satisfaction. In Section 58 of the Transfer of Property Act, 1882, the term "mortgage" is defined as the transfer of an interest in a specific piece of real estate for the purpose of guaranteeing the repayment of funds advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement that may result in a pecuniary obligation.
  • The title deed that the petitioner had placed prior to the bank establishing a mortgage is no longer necessary in the transaction because the loan account has been closed by repayment and the bank's interest resulting from the mortgage of the property is fully protected.
  • In accordance with Section 60-A of the Act of 1882, a mortgagor who seeks redemption may request that the mortgagee assign the mortgage debt and transfer the mortgaged property to any third party the mortgagor may specify, rather than re-transferring the property. The mortgagee is obligated to assign and transfer in accordance with the mortgagor's instructions.
  • Apart from that, Section 83 of the Act, 1882 makes it clear that the mortgagor or any other person entitled to institute such a suit may deposit, in any court in which he might have instituted such a suit, to the account of the mortgagee, the amount still due on the mortgage and seek redemption of the mortgage at any time after the principal money payable in respect of any mortgage has become due and prior to a suit for redemption of the mortgaged property being barred.
  • The Act of 1882's Section 91 outlines the parties who may bring a suit for redemption and provides that, in addition to the mortgagor, any of the following parties may do so: (a) any party (other than the mortgagee of the interest sought to be redeemed) who has an interest in, charge against, or right to redeem the mortgaged property; (b) any party who is surety for the repayment of the mortgage debt.

Issue Raised:

  • The main issue to be decided is whether the bank has the right to keep the security documents just because the petitioner sold or alienated the mortgaged property while the mortgage was still in effect but the whole loan amount was paid to the bank's satisfaction.

Arguments:

  • Analysis of the aforementioned provisions makes it clear that even though the petitioner transferred the property while the mortgage was still in effect, the Bank's interest was still protected by closing the loan account, so the bank was not within its rights to withhold the security documents on the grounds that the petitioner had transferred the property while the mortgage was still in effect. Furthermore, the Bank is not authorised to decide a dispute regarding the allegedly committed fraud, and the Bank is not authorised to retain the title documents and other security documents that the petitioner presented to the Bank just because the Bank initiated any action.
  • This is so because the mortgage, which the petitioner paid off, was only ever intended to serve as security for the loans. Hence, a competent court of law, not the bank, must decide whether the bank experienced any loss as a result of the transfer of the property made by the petitioner. As a result, the bank's unilateral decision to hang onto the security document is unlawful and arbitrary.
  • The Bank does not have evidence that the Bank sold the mortgaged property before the petitioner's loans were closed or that the Bank experienced any loss as a result of the petitioner's assignment or transfer of the mortgaged property.

Conclusion:

I am of the considered judgement that the petitioner is entitled to success in the writ petition after taking into account the facts, the law, and the discussion made above. The writ petition is therefore granted, and the respondents will be instructed to give the petitioner access to the title documents and other security documents she provided in connection with loan account numbers 67310713808, 67310712533, and 67372186426 as soon as possible, and preferably within three weeks of the date she receives a copy of this judgement.

Click here to download the original copy of the judgement

 
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