• Can bank withhold release of property documents after full payment

I have two loans with IDBI. Both secured loans against different properties. One is a home loan and the other was on a factory site. Both became overdue. The Bank issued us Sarfesi notices of possession. Both cases were in CMM court. The factory case already got a possession verdict.

We verbally spoke to the Bank and told them we will sell our house, and pay off the Home Loan. The bank accepted the Demand Drafts of our Buyers bank. Only gave us receipts for full payment with all interest and penalties. Now after a month they refuse to release our home documents, saying that until and unless we pay off our factory loan, they will withhold the documents of the home.

Our home buyer and his bank are now demanding us for original documents, which IDBI is not releasing. We sold our property in good faith to pay off the loan. 

What is the best legal solution? Our court date for CMM court for the home loan is 5th May.
Asked 4 years ago in Property Law
Religion: Hindu

First answer received in 10 minutes.

Lawyers are available now to answer your questions.

15 Answers

The two loans are separate, and the Bank is not permitted to keep these home documents as a collateral against another loan(loan against factory site), needless to say with respect to which they have already obtained the Court verdict to take possession upon collateral reserved separately against the said loan, i.e, the factory.

Ideally, they must release these papers upon repayment of the home loan by you.

Press this issue before the Court. Apprise your lawyer about this difficult situation you are facing.

Vibhanshu Srivastava
Advocate, New Delhi
9426 Answers
245 Consultations

5.0 on 5.0

1) bank can exercise right of lien and refuse to return original documents until factory loan is repaid off

Ajay Sethi
Advocate, Mumbai
87938 Answers
6207 Consultations

5.0 on 5.0

Dear Client,

Object before the CMM court that no order of possession be granted as a resort. Bank cannot withheld documents after payment has been made. For another loan default, cleared account cannot be taken under hostage.

Is there any dispute resolution clause in loan agreement, invoked same , if no clause than civil suit.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

1. The bank mostly wants to retain a greater security for the unpaid loan against your factory

2. However both the loan accounts are separate and independent even though the borrower may be the same

3. You need not worry. You will simply need to file a miscellaneous application in the pending matter initiated by the bank, for a direction to the bank by the court to release the originals of the house whose loan is completely foreclosed by the bank together with all interes and penalties.

4. Clearly the bank's act is not justified and when the court is notified about the same, it will also order and direct the bank to release the original papers since the entire loan is repaid to the bank.

Yusuf Rampurawala
Advocate, Mumbai
6882 Answers
79 Consultations

5.0 on 5.0

Hi, The Bank has the power to retain the documents under general lien. Better you can approach the CMM court and file an application seeking direction to the Bank to release the documents.

Pradeep Bharathipura
Advocate, Bangalore
5396 Answers
310 Consultations

4.5 on 5.0

Dear Sir,

The Bankers have no legal power like that. Similar case is here under where in High Court directed the bank to return the documents.

Kishan Dutt Kalaskar
Advocate, Bangalore
6050 Answers
381 Consultations

4.8 on 5.0

You should remove an application before the chief metropolitan magistrate for supply of certified copy of the original documents. In fact the original document is under the custodia legis of the court therefore Bank cannot give you original document without leave of the court. You will get certified copy after payment of requisite fee in the registry of said court.

Shivendra Pratap Singh
Advocate, Lucknow
5127 Answers
78 Consultations

4.9 on 5.0

Hello,

File an application before the court for getting the documents released.

if the loan has been paid then they are bound to release the documents of the said property.

Regards

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

Sir bank has power power to create alien on the other properties to secure loan though they are separate loan.under 171 Contract act

171. General lien of bankers, factors, wharfingers, attorneys and policy-brokers.—Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.1 —Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.1"

But in case you have sold the property vide a agreement and received consideration for the amount and paid off one loan of the bank the third party interest is created in the property, though a mistake on your part that no written sanction from bank was taken by you for sale.

Now first of all raise the issue before the CMM court vide an application for release of house paper as third party interest is created for paying off the house loan and you were bonefide to sell the property to pay off the loan.

If you did not get any relief from the CMM court file a writ before High Court seeking direction for the bank to release the documents.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

You can do the following:

1. Move an application before the MM Court and ask for the release of the home;

2. The bank cannot withhold the home papers being given to you;

3. Factory site and home are different as there are also two different loans for the same;

4. One will have to go through the papers and the documents/agreement you entered with the Bank to advise you further on this.

Gowaal Padavi
Advocate, Mumbai
1920 Answers
5 Consultations

5.0 on 5.0

Hello sir, it is advisable to file a civil suit for specific performance against the bank officials ..

Hemant Chaudhary
Advocate, Gurgaon
4619 Answers
67 Consultations

4.9 on 5.0

Send them legal notice and lodge a consumer complaint seeking for damages for failing to give back documents even after the amount is paid by the buyer. On the other hand ask the buyer too Send them legal notice stating if the documents are not released they will initiate criminal action against manager of bank for cheating. In CMM court fIle a memo with receipt document stating that the home loan amount is realised by the bank and to direct them to release documents.

Swarnarka Chowdhury
Advocate, Mysore
1878 Answers
5 Consultations

5.0 on 5.0

Hi

1) IDBI bank has opted to exercise its rights under a concept called Banker's lien and thereby withheld the release of home documents despite payment by you.

2) However IDBI has very limited rights to exercise its banker's lien as in order to invoke a lien by the bank, there should exist mutuality between the bank and the customer i.e. when they mutually exist between the same parties and between them in the same capacity. Retaining the customer’s properties beyond his liability is unauthorized and would attract liability to the bank for damages

3) Also a Lien is not permissible in the following cases, viz.

(a) Where the entrustment of goods (documents of title) is for a specific purpose stated to banker- Greenhalgh v. Union Bank of Manchester,(1924) 2 K.B.153.

(b) When the deposit with the banker is for a specific purpose, if the banker has implied or express notice of such purpose.

It appears that you have a fair chance to win your case against the bank at DEBT RECOVERY TRIBUNAL provided if you can establish that

a) the documents of title were deposited for the purpose of availing home loan and the banker was fully aware of the deposit of title deed for the purpose of home loan only and not related to the factory loan.

hope this information is useful.

Rajgopalan Sripathi
Advocate, Hyderabad
2169 Answers
394 Consultations

5.0 on 5.0

The bank would prevail upon such conditions since the other account is also NPA and they would like to have a hold on it, even though the bank knows it to be illegal.

You have to issue a legal notice demanding release of the title documents held in their possession and then escalate the matter either through Ombudsman or consumer forum because they will not pay any heed to the legal notices.

T Kalaiselvan
Advocate, Vellore
78096 Answers
1543 Consultations

5.0 on 5.0

Hi,

Since there are separate loans, it is illegal to hold the home documents by bank.

Ganesh Singh
Advocate, New Delhi
6646 Answers
16 Consultations

4.5 on 5.0

Ask a Lawyer

Get legal answers from lawyers in 1 hour. It's quick, easy, and anonymous!
  Ask a lawyer