A consumer disputes redressal commission in Kerala has found the manager of Federal Bank’s Pudunagaram branch liable for deficiency in service after the bank retained a customer’s original property documents for nearly 16 months after her loan accounts were closed. The commission directed the manager to pay a total of Rs 2.5 lakh in compensation and legal costs.
The ruling was delivered by a panel consisting of Commission President Vinay Menon V and members Vidya A and Krishnankutty N K. The commission was hearing a complaint filed by Shabina M A, who accused the bank of unauthorizedly holding her original title deeds despite having no active loan requiring collateral security. The panel noted that after the relevant loan account was closed on March 22, 2023, the bank held the title deeds for nearly one year and four months. In its June 29 order, the commission stated that because the bank offered no explanation for this delay, the retention must be presumed arbitrary and illegal.
Dual Loans And Document Retention
According to the complainant, she deposited her original property title deeds with the bank’s managing director in 2016 to secure a Prathyasa loan, a scheme designed to assist distressed farmers. She repaid this loan in full and closed the account without any default in 2021. Meanwhile, in 2019, she obtained a Prime Minister’s Employment Generation Programme (PMEGP) loan from the same branch, for which the bank extended the existing property deeds as collateral security.
Shabina stated that she later discovered collateral documents were not legally required for loans below Rs 10 lakh. However, she alleged that branch officials informed her she would not receive her PMEGP subsidy if she took back her deeds. Even after her loan account was closed in March 2023, the bank continued to hold the title deeds. Seeking to resolve the issue, she filed a complaint with the bank’s head office but did not receive a satisfactory response.
On June 19, 2024, Shabina submitted a complaint through the Prime Minister’s Grievance Portal. In its response, Federal Bank stated that no property was charged against her PMEGP loan. The bank subsequently returned her documents in two stages on July 18, 2024, and August 10, 2024. Shabina then filed her complaint with the consumer commission, seeking Rs 4 lakh for financial losses, Rs 2 lakh for mental agony, and Rs 50,000 in litigation costs.
Commission Rejects Claims Of Indirect Damage
While the commission agreed that the bank’s delay in returning the documents constituted a clear deficiency in service, it dismissed Shabina’s claims of further financial injury. She had argued that the lack of documents prevented her from selling a property to fund her daughter’s wedding, resulting in a cancelled marriage proposal and a forced sale of another property at a heavily reduced price.
The commission found these arguments unsupported by evidence, noting that she failed to clarify how the bank’s actions affected the property’s valuation. It also questioned why she had sold another property in 2021 if the wedding was set for the 2023–2024 period. Describing these specific claims as unsubstantiated, the panel approved the complaint only in part, ordering the branch manager to pay Rs 2 lakh in compensation within 45 days, plus Rs 50,000 to cover legal costs.
Bank Alleges Vengeful Litigation
Represented by advocate Ullas Sudhakar, the bank and its managing director denied any service deficiency or illegal conduct. They argued that the complainant had voluntarily deposited the collateral security of her own free will. The defense asserted that the documents had already been returned to her by August 2024 and argued that the legal complaint was a retaliatory action. According to the bank, the actual dispute originated from minimum balance penalty charges debited from the customer’s account.
