Documents misplaced by financial institution? Their legal responsibility


Pushpa Girimaji

I had taken an schooling mortgage for my daughter’s greater schooling and the final instalment of the mortgage was paid within the third week of March. In view of the nationwide lockdown introduced by the federal government in March to comprise the unfold of Covid-19, I couldn’t go to the financial institution instantly to gather the title deed of my property, which I had given as collateral. Now, after the current relaxations within the lockdown, I went to gather the papers and, to my utter shock and dismay, the financial institution advised me that my papers are misplaced. I have no idea what to do now.

This is really unlucky and the financial institution has to do every thing attainable to minimise the loss brought about to you because of its negligence. This consists of supplying you with an acknowledgement of its having misplaced the title deed entrusted to its care, submitting an FIR with the police concerning the loss, issuing a discover concerning the loss in three (English and regional language) newspapers, getting you an authorized copy of the title deed from the sub-registrar’s workplace and anything that may assist set up your possession of the property. And it has to do all this at its value.

In addition, the financial institution may also need to compensate you for the monetary loss that will probably be brought about to you for those who promote the property with out the unique papers. Of course, that is troublesome to quantify because it depends upon the worth of the property on the time of sale and the quantum of discount in its worth on account of the absence of papers. Consumer courts have arrived at some tough estimates whereas awarding compensation in such instances. However, the financial institution should pay compensation. If they don’t, you’ll have to search the assistance of the buyer court docket within the matter.

Can you quote a current resolution of the buyer court docket in an identical case?

In State Bank of India Vs Amitesh Mazumdar (RP No 2732 of 2019), selected Jan 3, 2020, the National Consumer Disputes Redressal Commission upheld the orders of the decrease client courts awarding the buyer Rs5 lakh as compensation and Rs30,000 as prices. It additionally upheld the instructions of the decrease client courts to the financial institution to file an FIR and in addition subject discover of the lack of the papers in three newspapers.

In its revision petition earlier than the apex client court docket, the financial institution stated it was ready to get an authorized copy of the title deed, subject commercials in newspapers and in addition give an acknowledgement to the buyer of the financial institution having misplaced the papers. However, it argued towards fee of compensation.

Dismissing such a plea of the financial institution and upholding the award of compensation and prices to the buyer, the apex client court docket pointed to the monetary loss that the buyer would undergo if he tried to promote the property with out the unique title deed.

The Commission noticed: “No one in the market will agree to purchase an immovable property on payment of its prevailing market value, if he knows that the original Title Deed of the property will not be delivered to him by the seller. There will always be an apprehension of the misuse of the Title Deeds of the immovable property by an unscrupulous person, by depositing the same with a bonafide lender, since an Equitable Mortgage can be created by deposit of the Title Deeds. The erosion in the value of the property if it is to be sold without the Title Deeds would be substantial and in fact even the compensation awarded by the District Forum and maintained by the State Commission may not be sufficient to make up such erosion in the market value of the property.”

The Commission additionally pointed to the opposite issues that the buyer would face within the absence of the title deed: “Moreover, if the complainant decides to take a loan by deposit of the Title Deeds of the property against the property, he will not be able to get a ready lender in the market unless the Title Deeds of the property are deposited. In fact, even a bank may be unwilling to give a loan against an immovable property unless the Title Deeds of the property are deposited with it. Therefore, the compensation awarded by the fora below was eminently justified…” the Commission noticed.

So do use this case to argue for an inexpensive compensation, conserving in thoughts the worth of the property and the loss you’ll undergo. You can get the unique order of the Commission on its web site.



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