SBI loses original papers for property loan; court orders bank to pay Rs 5,000 per day penalty

The Bombay High Court has ordered State Bank of India to pay Rs 5,000 a day in compensation after the bank admitted it had lost the original property documents deposited as security for a loan that was fully repaid more than two decades ago.

The court said a bank cannot escape responsibility for missing property papers by arguing that the borrower took years to ask for their return. The compensation will apply from December 1, 2023 until SBI completes the reconstruction of the missing title records.

What happened in the case

In Vogue Creations had taken loan facilities from SBI in 1979 and fully repaid them in 2003.


The firm had purchased Units/Gala Nos. 317 and 318 at Bussa Industrial Premises Co-operative Society in Prabhadevi, Mumbai. It handed over the agreements for these units, along with share certificates, to SBI's Commercial Branch at Dadar on July 26, 1979 as security for the loan.

The firm had also entered into a registered lease agreement with the Maharashtra Industrial Development Corporation (MIDC) in March 1979 for a plot at W-154, Taloja, Panvel. The lease deed and other documents relating to this property were also deposited with SBI.

After the loan was fully repaid on August 28, 2003, SBI issued a No Dues/No Claims Certificate on July 27, 2023, confirming that it had no remaining claim or mortgage over the properties.

However, the bank did not return the original property documents.

SBI later admitted that it could not trace the papers. In letters dated December 5 and December 7, 2023, the bank informed Bussa Industrial Premises Co-operative Society and MIDC that the documents could not be found and requested certified or true copies.

What did the firm do?

In Vogue Creations published a newspaper advertisement about the missing documents and filed a complaint with the Dadar Police Station. It also approached the Banking Ombudsman.

In November 2024, the Banking Ombudsman advised SBI to pay Rs 1 lakh as compensation. The firm did not accept the amount, but SBI deposited it into the firm's account.

The firm continued to seek the original documents, particularly because it wanted to sell the two properties. It argued that the replacement documents provided by SBI were incomplete and did not resolve issues related to the properties, including stamp duty.

SBI later filed an FIR and published notices in two newspapers about the missing documents. MIDC provided true copies or photocopies of some documents relating to the Taloja property, which SBI handed over to the firm.

However, the firm argued that these steps did not fully address the problems caused by the loss of the original documents.

What did SBI argue?

SBI admitted that it could not trace the original documents but argued that the firm had not asked for their return immediately after repaying the loan.

The bank said the request came more than 15 years later, by which time the branch premises had been shifted. SBI said it had made efforts to locate the documents but was unsuccessful.

The bank also argued that the firm's petition should not be entertained because it had already approached the Banking Ombudsman, which had ordered Rs 1 lakh in compensation.

SBI further argued that the RBI's September 13, 2023 circular could not apply to a loan that had been repaid in 2003. Therefore, it said the Rs 5,000-per-day compensation could not be imposed from 2003.

What did the Bombay High Court say?

A division bench of Acting Chief Justice Ravindra V Ghuge and Justice Gautam A Ankhad passed the order on September 2, 2026. SBI has been given 12 weeks to complete the process.

The High Court rejected SBI's argument that the firm's delay in asking for the documents removed the bank's responsibility.

The court referred to the RBI's September 13, 2023 circular on “Responsible Lending Conduct - Release of Movable/Immovable Property Documents on Repayment/Settlement of Personal Loans.”

Under the circular, banks and other regulated entities must return original property documents within 30 days after a loan has been fully repaid or settled.

The circular also provides for compensation of Rs 5,000 for every day of delay when the delay is attributable to the lender. If original documents are lost or damaged, the lender must help the borrower obtain duplicate or certified copies and bear the associated costs.

However, the circular applies to cases where the release of original documents becomes due on or after December 1, 2023.

The High Court therefore agreed with SBI that the circular could not be applied retrospectively from 2003. But it said this did not completely remove the bank's responsibility.

Given SBI's admission that the documents were lost and the continuing problems faced by the firm, the court said the Rs 5,000-per-day compensation would apply from December 1, 2023.

Why is the ruling important?

The court said that once a loan is fully repaid, the bank has no continuing right to retain the original property documents.

A borrower who has cleared the loan is entitled to expect the bank to preserve and return valuable property papers.

The court said responsibility for preserving, locating and returning such documents rests with the bank. Internal issues such as branch transfers, record shifting or changes in staff cannot be passed on to the borrower.

The court also noted that original property documents are important because they form part of a property's title records and are normally needed when an owner wants to sell, mortgage or transfer the property.

The Rs 1 lakh already deposited by SBI following the Banking Ombudsman's proceedings will be adjusted against the compensation ordered by the High Court.

The compensation will be calculated from December 1, 2023 and will continue until SBI provides certified copies of the missing documents and completes reconstruction of the title records, including the required endorsements, affidavits, indemnities and other supporting documents.