The Kerala Hc in the case of Vinu Madhavan v State Bank of India & Anr. has observed that “It is clear that merely because the property was transferred by the petitioner during the subsistence of the mortgage, however, the interest of the Bank is protected by closing the loan account, the Bank is not entitled to withhold the security documents on the ground that the petitioner has transferred the property during the subsistence of the mortgage. Further, the Bank is not entitled to adjudicate an issue concerning the fraud allegedly committed; This is because the mortgage was created solely to secure the loans, which were paid off by the petitioner.”

In this instant case, the petitioner took a home loan from the State bank of India amounting to Rs. 16 lakhs in 2015. For security, he mortgaged the original title deed of the property. He closed the mortgage on 7th April 2022. When the petitioner requested the bank to release the security documents including the title deed of his property, SBI paid no heed. The SBI argued that while the mortgage was in subsistence a portion of the property was alienated by the petitioner in favour of his wife and was mortgaged to other banks creating two loans.

Justice Shaji P chaly further observed that “The unilateral action of the bank withholding the security document is illegal and arbitrary. Therefore, if at all the bank suffered any loss consequent to the transfer of the property made by the petitioner, it has to be adjudicated by a competent court of law and not by the bank.”