A Division Bench of the Bombay High Court recently ruled that the bank cannot keep the borrower's title deed after the loan has been repaid. As soon as the loan account is settled, the relationship between the bank and the customer comes to an end. The court further directed the Union Bank of India to handed over the title deeds to the borrower and directed the bank to continue the recovery of another loan under the DRT.
Facts
The petitioner had borrowed a personal loan of sum Rs 21 Lakhs from respondent bank on condition that loan is repayable in 300 monthly installments with the deposit of Title Deeds of flats with bank as security. On the other hand, the petitioner is also a Director and Personal Guarantor in the Company under the name and style as ‘Sunil Hitech Limited’. As the Company was in debt went in the liquidation.
Due to financial crisis he decided to sell the flat and repay his personal loan and sought the banks for NOC for the same. After selling the flat, the borrower closed his personal loan account, but the bank refused to return his flat’s title documents, which were meant to be handed over to the buyer of the flat.
Hence, by invoking the jurisdiction of writ, the question raised by the petitioner in the present writ petition is whether the respondent-Bank has right to withhold the documents of security in view of Section 171 of the Indian Contract Act, 1872 under the right of general lien especially when petitioner has fully repaid the amount of loan.
Contention Made
Petitioner: That the documents of title had been furnished as security towards loan account. After satisfaction of the loan amount Bank has no right to retain the documents of title. In support Learned Counsel relied on Apex Court in the case of Zonal Manager, Central Bank of India vs. Devi Ispat Limited and others (2010) 11 SCC 186, it is submitted that the respondent-Bank had no legal right to retain the said documents of title.
Respondent: In the view of Section 171 of the said Act the action of the Bank of retaining the documents of title is justified. That the petitioner was guarantor in respect of another loan account regarding the loan which was obtained for the Company. Therefore, the said Title Deed is required by the Bank for obtaining necessary orders from the Debt Recovery Tribunal regarding the attachment of the property. Hence, Learned Counsel sought dismissal of the writ petition.
Court Observation
The Division Bench analyzed the provision of Section 171 of the Act and observed that In its primary or legal sense, “lien” means “a right of common law in a person to retain that which is rightfully and continuously in their possession belonging to another until the present and accrued claims (of the person in possession) are satisfied”. The relationship of banker and customer could not have been continued when the petitioner has repaid the amount where the entire loan account is satisfied.
Judgment
The court held that Thus, the material on record shows that the petitioner has cleared the entire dues in respect of loan which was obtained by him in his individual capacity to purchase the flat. The said loan transaction came to an end, therefore, the relationship of the banker and customer between the petitioner and the respondent in respect of the concerned loan account came to an .
Further the court held that, the contention of the respondent-Bank that it was exercising the right of general lien under Section 171 of the said Act is not sustainable. However bank was free to pursue its case before the debt recovery tribunal but must release petitioner’s flat title deeds within a period of four weeks.
Case: Mr Sunil vs Union Bank of India
Citation: W.P. NO. 32 OF 2022
Bench: Justice A.S. Chandurkar and justice Urmila Joshi-Phalke
Decided on: 13th June, 2022.
Read Judgment @Latestlaws.com
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