What should you do if Original Sale Deed is lost by bank? Legal experts suggest steps

A sale deed is an important legal document that establishes ownership of a property. For homebuyers, it is essential to have the original sale deed in their possession in order to prove ownership and conduct any property transactions. However, when you take a home loan to buy a residential property, the bank keeps the original document with itself and returns it to the borrower only after the end of the home loan.

While banks always return the sale deed along with a No Due Certificate when the borrower has fully repaid the home loan, there have been very few instances reported by borrowers where lenders failed to give the sale deed back to the homeowner in time. For instance, a Twitter user recently posted that he had taken a home loan from a housing finance bank but after repaying the loan he learnt that the lender didn’t have the original sale deed document with it. The user just received a certified copy of the sale deed from the bank and no proper response about his original property document.

In case the sale deed is lost, there are some legal remedies available to borrowers that they can explore. FE PF Desk recently got in touch with some legal experts to find out what should borrowers do if the bank fails to return the sale deed after the end of the loan. Read on to find out what they suggest:

What the law says

Experts say that no law in India currently permits the bank to retain the title/sale deeds alleging dues in respect of any other transaction, under section 171 of the Indian Contract Act. A bank is bound to receive the balance and issue a ‘No Due Certificate’ in respect of the loan and return all the documents deposited by the petitioner.

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According to Jatin Ghuliani, Senior Associate at SKV Law Offices, the mortgagee (bank) is under an obligation to return the title deeds upon payment of the entire money due under Section 60 of the Transfer of Property Act.

“This legal obligation gives an enforceable right in favour of the mortgagor (borrower) in connection with the mortgage. This legal obligation of the mortgagee to return the title deed to the mortgagor upon discharge of the mortgage loan for which the title deeds were secured, can be certainly treated as an implied contract contrary to Section 171 of the Indian Contract Act,” said Ghuliani.

“The Bank cannot assert and/or exercise a right of lien to secure any other liabilities of the mortgagor by retaining the documents of the mortgagor or guarantor, which are deposited with an intention to secure a particular loan transaction,” he added.

What are the steps you can take

While the law has already been crystallised, the borrower can still take legal recourse against the bank if it fails and/or refuses to return the original sale/title deeds despite the repayment of the loan. Following are some steps borrowers can take:

Receive an Acknowledgement from the Bank

The first step the borrower should take is to request a written acknowledgement from the bank regarding the loss of the original sale deed, according to Aditya Chopra, Managing Partner at Victoriam Legalis – Advocates & Solicitors.

This acknowledgement should clearly state that the bank has lost the document. “It is important to ensure that the acknowledgement is in writing, signed by the concerned bank officials and bears the bank’s seal. If the bank refuses to provide a written acknowledgement, you should register a written complaint with the bank, including details of the documents submitted and the acknowledgement of the loss from the bank,” said Chopra.

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Complain to the Ombudsman

If the lender bank fails to return the original Sale Deed after the loan is fully repaid, the aggrieved borrower can also complain to the Banking Ombudsman.

“From our experience, we have seen complaints to Ombudsman being extremely effective in banking-related grievances. In case this channel doesn’t help resolve the issue, then the borrower may consider sending a legal notice followed by legal action if needed,” said Rohit Jain, Managing Partner at Singhania & Co.

File Official Police Complaint

Borrowers may also ask the bank to file an official police complaint about the loss of the sale deed since it was in their possession. If the bank refuses to do so, borrowers can file a police complaint themselves and submit a copy of the complaint to the bank.

“Obtain a copy of the First Information Report (FIR) from the police and provide a copy to the bank. This FIR serves as a legal record of the loss and further strengthens your case,” said Chopra.

Publish Public Notice in Newspapers

Borrowers should also publish public notices in at least two leading newspapers, informing the public about the loss of your sale deed by the bank. The notice should include all the details of your property.

“Wait for a week or two to see if anyone returns your documents or raises any objections. Keep a copy of the newspaper notice as proof that the bank has lost your original sale deed,” said Chopra.

File a Complaint in the Consumer Forum

You can also file a complaint against the bank at the Consumer Forum for the loss of the sale deed. “This is considered a service deficiency, and you may seek compensation according to the bank’s compensatory policy for the loss of original documents,” said Chopra.

When filing the complaint, you should attach all the relevant documents, including:

• Copy of the acknowledgement issued by the bank
• Complaint filed with the bank regarding the loss of the sale deed
• Police complaint filed by you
• Documents related to the loan
• Copies of the newspaper notices

Legal Precedents: What courts have said

Ghuliani said inactions on the part of the concerned bank in failing/refusing to return the original title/sale deeds has been strongly deprecated by various judicial bodies across India.

Also Read: How much deduction is allowed for stamp duty, property registration fee?

“Recently, the Hon’ble High Court of Kerala in the case of ‘Vinu Madhavan vs. State Bank of India’ WP(C) No. 4806 of 2023, categorically held that the unilateral action of the bank withholding the security document is an illegal and arbitrary action,” said Ghuliani.

“In fact, according to the Hon’ble National Consumer Dispute Redressal Commission in the case of ‘Rajesh Gupta vs. Axis Bank’ (2018) 206 (NC), NCDRC has held that the non-returning of original title documents amounts to ‘deficiency in services’ and is an Unfair Trade Practice,” he added.

Jain said the Supreme Court in the case of Zonal Manager, Central Bank of India vs. Devi Ispat Limited & Ors. (2010) 11 SCC 186 held that once a borrower has cleared the dues, he is entitled to get the Title Deeds and other original documents. The lender bank has no legal right to retain the original Sale Deed upon discharge of loan amount.

Disclaimer: The views expressed in this article are that of the respective commentators. The facts and opinions expressed here do not reflect the views of www.financialexpress.com. Please consult your legal advisor for any property-related issues.