Central Bank asked to return title deeds 

THE Supreme Court has directed Central Bank of India to return the mortgage deed and all collateral securities of a company after the PSU bank shifted the loan account of the borrower company to another lender, State Bank of India.
The court rejected the plea of the bank which had said that return of the title deeds deposited by the borrower as a security cannot be a subject matter of Article 226 (writ jurisdiction of high courts) of the Constitution. The company had challenged a Calcutta High Court order which had asked the bank to return such mortgaged deeds and collateral securities.
The appellant-bank, being a public sector bank, discharging public functions is a state in terms of Article 12 of the Constitution of India amenable to the writ jurisdiction, said the apex court.
The appellant-bank (Central Bank of India) is directed to return the title deeds deposited by the respondent-company within a period of two weeks, ruled an SC bench.
The company, Devi Ispat, which carries on the business of manufacturing and trading in ingots and various other types of steel had been banking with Central Bank of India in Kolkata. In view of business needs, the company requested the bank to review and enhance its credit facilities.Subsequently,the bank intimated the company of its decision of review and enhanced credit facilities of the companys account.
According to enhanced arrangement, the company was to enjoy two term loans of 360 lakh and another for 215 lakh, cash credit for 300 lakh, working capital demand loan for 1,200 lakh and a letter of credit in favour of the West Bengal State Electricity Board for 56 lakh.
But due to various irregularities in the account of the company, the bank advised the company to shift its loan account to some other bank.
On January 12,2009,the bank sent the credit information report of the company to its new banker, State Bank of India. However, on February 25,2009,Central Bank of India received an internal audit report in respect of the fraud perpetrated in the accounts of Rajco Steel Enterprises and Kali International, pointing out siphoning away of crores of rupees to the account of the company. Therefore, Central Bank of India filed complaints to the Central Bureau of Investigation about the fraud.
Subsequently, on May 6,2009,the company requested the bank to handover the original title deeds of its factory premises and all the collateral securities held by it to its new banker SBI. On May 9,2009,SBI issued a bankers cheque of 15 crore to the company which Central Bank encashed and appropriated in lieu of the outstanding balances lying against the company.
The company requested the bank to return the security documents and issuance of No Objection Certificate and `No Due Certificate. Drawing blank, the company moved the Calcutta High Court which directed the bank to return such deeds.
Aggrieved by the high court order, the bank had came to the apex court.

Economic Times, New Delhi, 02-08-2010