Kerala High Court rules that when a loan has been repaid, a bank cannot withhold title documents merely because the borrower transferred the mortgaged property.

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In a significant ruling, the Kerala High Court has held that a bank cannot withhold title documents merely because the borrower has transferred the mortgaged property, if the loan has been repaid. The ruling came in response to a case where a borrower had repaid his loan, but the bank had refused to return the title documents as the borrower had transferred the mortgaged property. The borrower had taken a loan from the bank and had mortgaged his property as security for the loan. After repaying the loan, he had transferred the property to a third party.
However, the bank had refused to return the title documents to the borrower, citing the transfer of the property.
The borrower had approached the High Court, arguing that the bank had no right to withhold the title documents once the loan had been repaid. The High Court upheld the borrower’s argument, stating that the bank could not hold the title documents as collateral for the transfer of the property. The Court observed that once the loan had been repaid, the borrower’s liability to the bank had come to an end. The bank had no right to withhold the title documents, which were the property of the borrower, merely because the mortgaged property had been transferred.
The case before the Kerala High Court highlights a common practice among banks in India, where title documents of mortgaged properties are often withheld even after the loan has been repaid. This practice has been a major source of frustration for borrowers who have repaid their loans but are unable to reclaim their title documents.In recent years, several cases have been reported where banks have withheld title documents, even when the loan has been repaid in full.
This has led to a lot of litigation, as borrowers have approached the courts seeking relief. The issue has been a matter of concern for both borrowers and legal experts, who have argued that the practice is arbitrary and violates the rights of borrowers. In many cases, banks have used the title documents as collateral to extract further concessions from borrowers, such as higher interest rates or additional security. The Kerala High Court’s ruling is therefore seen as a landmark decision, as it provides clarity on the issue and protects the rights of borrowers. It is expected to have far-reaching implications for the banking sector in India and could lead to a change in the way banks deal with borrowers who have repaid their loans.

The ruling is significant as it protects the rights of borrowers who have repaid their loans. Banks cannot use the title documents as a tool to hold on to the mortgaged property or to extract further concessions from the borrower. The Court’s ruling also underscores the importance of banks following due process in their dealings with borrowers. Banks must ensure that they do not infringe on the rights of borrowers and must act in accordance with the law.
The Kerala High Court’s ruling that a bank cannot withhold title documents merely because the borrower has transferred the mortgaged property, if the loan has been repaid, is a welcome decision. It protects the rights of borrowers and ensures that banks follow due process in their dealings with borrowers. Banks must act in accordance with the law and must not infringe on the rights of borrowers.

Written By- Lakshya Sharma students of 1 st year BBA LLB at Vivekananda Institute of Professional Studies affiliated to Guru Gobind Singh Indraprastha University

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