LAW OF BANKING

CIA 1

SUBMITTED BY:
Maitreyi Joshi
1650455
7 BBA LLB ‘A’
FACTS
Alia borrows a sum of Rupees fifty lakh from Bank of Baroda on the basis of an equitable
mortgage by depositing her title deed and executes a memorandum of agreement of mortgage by
depositing her title deeds in favor of the Bank with respect to several plots of land which
belonged to her. She would service her account regularly but due to a temporary financial issue
she had acquired several dues. Alia approached the bank and expressed her intention to settle the
entire due amount and to redeem the properties that have been mortgaged. However, when she
informs the bank of this they deny her claim of redemption of mortgage even upon full payment
of the debt. Alia has now approached the Consumer Court to redeem her property.

ISSUES
1. Is the bank liable to transfer the property to Alia upon payment of the debt amount?
2. What are the rights of Alia, as a mortgagor, in this issue?
3. Does the bank have the right of lien over Alia’s property?
4. What are the rights and liabilities of Alia is this particular case?
5. Is there a jurisdictional issue that would arise in the case?

LAWS REGULATING THE DISPUTE

There exist several laws that govern this dispute, they are as follows:

1. Indian Contract Act, 1872 - Section 128

2. Indian Contract Act, 1872 - Section 171
3. Indian Penal Code 1860 - Section 171
4. Securitization And Reconstruction Of Financial Assets And Enforcement Of Security
Interest Act, 2002 - Section 13(2)
5. Securitization And Reconstruction Of Financial Assets And Enforcement Of Security
Interest Act, 2002 - Section 13(7)
6. Securitization And Reconstruction Of Financial Assets And Enforcement Of Security
Interest Act, 2002 - Section 35
7. Securitization And Reconstruction Of Financial Assets And Enforcement Of Security
Interest Act, 2002 - Section 37
8. Transfer Of Property Act, 1882 - Section 58
9. Transfer Of Property Act, 1882 - Section 59
10. Transfer Of Property Act, 1882 - Section 60
11. Transfer Of Property Act, 1882 - Section 91
REMEDIES
1. Section 60 of Transfer of Property Act, speaks about specific rights of mortgagor. It is
clear that every mortgagor is entitled to collect the mortgage deeds and all other
documents relating to the mortgaged properties, which are in the possession or power of
mortgagee. This right of mortgagor is certainly a legal enforceable right. The mortgagee
is under an obligation to return the title deeds upon payment of the entire money due.
This legal obligation gives an enforceable right in favor of the mortgagor in connection
with the mortgage. This legal obligation of the mortgagee to return the title deed to the
mortgagor upon discharge of mortgage loan, for which the title deeds were secured, can
be certainly treated as an implied contract contrary to Section 171 of the Indian Contract
Act.

2. The bank cannot exercise right of lien to secure any other liabilities of the mortgagor by
retaining the documents of the mortgagor or guarantor, which are deposited with an
intention to secure a particular loan transaction. Lien is primarily considered as a right to
retain security.

3. The bank never claimed any right of lien in respect of the properties of the petitioner
which are given as security for the demand loan obtained by the petitioner. The petitioner
is a party and has been impleaded only in her capacity as guarantor and not as a
mortgagor of the properties.