Bank Not Entitled To Hold Title Documents If Loan Has Been Repaid: Kerala High Court

What Did The Centre Say

• In Vinu Madhavan v. State Bank of India, the Kerala High Court held that if the borrower has fully paid the loan amount, then the bank cannot withhold security documents of a mortgaged property on the grounds that during the term of the mortgage, the said property was alienated by the borrower to a third party.
• A Single Judge Bench of Justice Shaji P Chaly observed this while granting relief to the petitioner and allowing the appeal.
• What Is The Case About
• In this case, the petitioner, Vinu Madhavan, had availed of a housing loan from the respondent bank by submitting security documents of a property to the bank in lieu of the loan. 
• When the petitioner fully paid the loan amount, the bank refused to release the said security documents on the ground that he alienated his property without seeking the permission of the Bank.
• The present petition has been filed against the actions of the respondent bank.

Contentions Of The Parties

• The contention of the petitioner was that since he has fully paid the loan amount without any dues, the bank cannot withhold the title deed of his mortgage property.
• The contention of the bank was that during the term of the mortgage, the petitioner alienated a small part of his property in favour of a third party, his wife. Again a part of the property was alienated to another bank to avail of 2 more loans. All of this was done without seeking the permission of the bank and thus, legal action was taken against the petitioner.

Observations Of The Court

• The Ld. Court observed that as per Section 58, 60-A, 83 and 91 of the Transfer of Property Act, 1882, the bank is not entitled to withhold security documents if the loan has been repaid.
• The Court also observed that had the loan been due, the respondent bank would be within its rights to withhold the said documents but not in the present case.
• Accordingly, the Court allowed the appeal. 

The matter is still pending before the Court. Let us know your opinion in the comments section below!