Bengaluru Advocate Wins Landmark Case Against SBI Over Unreturned Loan Security
A lawyer from Bengaluru's Electronics City has won a significant consumer dispute against the State Bank of India's Malleswaram branch. The bank failed to return six blank security cheques and crucial property documents even after the advocate fully repaid his construction loan and received an official closure certificate.
Consumer Commission Finds Bank Guilty of Service Deficiency
The Bengaluru Urban Consumer Disputes Redressal Commission delivered a strong verdict against the national bank. The commission declared SBI guilty of deficiency in service. It directed the bank to execute a proper discharge deed and return all security cheques to the complainant.
Background of the Property Loan Dispute
N Udaya Kumar, a 51-year-old advocate, purchased a property measuring 40x60 feet in Seshadripuram along with three colleagues. They planned to develop a five-apartment residential complex under a memorandum of understanding. In February 2020, Kumar secured a construction loan worth Rs 50 lakh from SBI's Malleshwaram branch.
The bank disbursed Rs 40 lakh in instalments. As security, SBI collected six blank cheques from Kumar in March 2020. The bank also executed a standing instruction for automatic fund transfers from his account.
Documentation Issues and Bank's Alleged Negligence
Kumar executed an updated Memorandum of Title Deposit immediately after receiving the loan. He also submitted a letter exempting his personal appearance for documentation. Both documents were registered on the same day.
Although Kumar's co-owners applied for separate loans, the bank allegedly registered the Memorandum of Title Deposit in all joint owners' names. This included all their account numbers, creating complications despite separate loan applications.
Loan Repayment and Subsequent Struggle
After clearing the entire loan amount, SBI issued a home loan closure certificate to Kumar on January 13, 2022. This certificate explicitly directed the release of all security documents. Despite repeated requests over two years, the bank failed to execute the necessary release deed or return the security cheques.
Frustrated by the bank's inaction, Kumar filed a formal consumer complaint on February 29, 2024.
SBI's Defense and Commission's Rejection
SBI argued that Kumar, being an advocate himself, understood the implications of a single mortgage deed versus separate deeds. The bank claimed he never requested individual Memorandums of Title Deposit.
The bank acknowledged that the Memorandum of Title Deposit included all co-owners—N Kumar, Ravikumar C, and Ravi Kumar KV. It confirmed releasing Rs 40 lakh and issuing the home loan closure certificate on March 31, 2023. SBI stated the matter was referred to higher authorities due to its complexity and remained under legal department review.
The commission dismissed complaints against Kumar's co-owners, noting no contractual relationship existed between them and the complainant.
Commission's Strong Observations
The bench, comprising President Syed Anser Kaleem and Member Sharavathi SM, made critical observations about the bank's conduct. "When the complainant cleared the housing loan, it was the duty of the bank to release the discharge deed and to return the six blank cheques collected as security," the commission stated.
"However, the bank officials did not act in a prudent manner while creating the deposit of title deeds separately, but took it jointly, for which the complainant, being a customer, should not suffer, and the bank made him wander from pillar to post," the bench added.
Final Order and Compensation
In November 2025, the commission issued a clear order to SBI. The bank must execute the release or discharge deed and return all six security cheques within thirty days. Additionally, SBI must pay Rs 5,000 as compensation for the cost of proceedings.
The commission emphasized that "non-executing the discharge deed and returning the security cheques" constituted a clear deficiency in banking service. This ruling sets an important precedent for consumer rights in banking transactions across Bengaluru and potentially nationwide.
