Banks Giving Loans Without Proper Title Search Reports : Supreme Court Flags Issue To RBI; Says Officials Who Approved Loan Be Made Liable

Read order

The Supreme Court recently underscored the significance of comprehensive title search reports in preventing legal disputes and ensuring smooth property transactions.

The Court emphasized the need for the Reserve Bank of India (RBI) and other stakeholders to develop a standardized and practical framework for preparing title search reports before loan sanctioning by banks. The Court said that the framework should also include the determination of liability of the erring bank official who sanctioned the loan based on a faulty title search report.

“we deem it necessary to observe that Banks should remain very careful with inadequate title clearance reports, more particularly, when such reports are obtained cheaply and at times for external reasons. This concerns the protection of public money and is in the larger public interest. Therefore, it is essential for the Reserve Bank of India and other stakeholders to collaborate in developing a standardized and practical approach for preparing title search report before sanctioning loans and also for the purpose of determining liability (including potential criminal action) of the Officer who approves loan. Additionally, there should be standard guidelines for fees and costs associated with title search reports so as to ensure that they maintain high quality.”, the Court said.

Until now, there's no standard mechanism developed by the RBI that regulated the title search report before loan sanctioning by banks. The banks rely on the title search report prepared by the empaneled lawyers, and there's no standardization of title search report preparation.

The bench comprising Justice JB Pardiwala and Justice R Mahadevan highlighted the need to develop such a standard framework in the wake of an instance where the bank-sanctioned loan based on the disputed mortgaged property, later discovered to have title disputes. 

Former Gujarat IAS Officer Gets 5 Years In Jail In 2004 Corruption Case

The court of principal district and sessions judge KM Sojitra convicted him in a case registered by Anti Corruption Bureau (ACB) pertaining to the allotment of a piece of land to Welspun Group at a price that allegedly caused a loss of Rs 1.2 crore to the government exchequer.

A sessions court on Monday sentenced former IAS officer Pradeep Sharma to five years in jail and fined him Rs 75,000 in a corruption case dating back to 2004 when he was the collector of Kutch district in Gujarat.

The court of principal district and sessions judge KM Sojitra convicted him in a case registered by Anti Corruption Bureau (ACB) pertaining to the allotment of a piece of land to Welspun Group at a price that allegedly caused a loss of Rs 1.2 crore to the government exchequer.

The court found Mr Sharma guilty section 13 (2) (criminal misconduct by a public servant) and section 11 (public servants obtaining an undue advantage without consideration) of the Prevention of Corruption Act.

He was sentenced to five years in jail and fined Rs 50,000 fine under section 13(2), and given a three year sentence and fine of Rs 25,000 under section 11, public prosecutor Kalpesh Goswami said, adding both the sentences will run concurrently.

'Punjab Officials Stooped So Low' : Supreme Court Finds Disciplinary Punishment Against Doctor Vengeful, Sets Aside Penalty

Read Judgment

The Supreme Court on Monday (January 20) granted relief to a retired Senior Medical Officer who was in service of the Punjab Government, by setting aside the order of penalty imposed on him in a disciplinary proceeding.

The Court observed that the disciplinary proceedings were nothing but a ruse to wreak vengeance against the appellant for having dragged high officials of the Government of Punjab to the High Court to obtain his legitimate monetary dues.

“This happens to be a case where certain officials of the GoP have stooped too low to punish a senior doctor, on the verge of retirement, for no better reason than that he had dared to take on the mighty executive in a court of law,"observed the Bench of Justices Dipankar Datta and Justice Manmohan.

The Bench made these observations while allowing the appeal filed by a Senior Medical Officer, who was relieved of his duty and made to retire eleven days before his retirement.

For background, disciplinary proceedings were initiated against him for committing misconduct. Among others, the grounds were proceeding on leave without sanction and failing to participate in the pulse polio programme. Consequent to these proceedings, the appellant was made to retire. The Disciplinary Authority ordered a cut of 2% pension with permanent.

Pursuant to this, the Health and Family Welfare Department ordered a pension cut. Subsequently, the Division Bench of the High Court modified this order to a 2% pension cut for a period of five years. Against this background, the matter reached the Apex Court.

At the outset, the Court reiterated that an administrative order punishing a delinquent employee is not reviewed unless there is a violation of natural justice principles or the impugned order is ex facie arbitrary or capricious.

“After all, public servants to whom Article 311 of the Constitution apply do enjoy certain procedural safeguards, enforcement of which by the high court can legitimately be urged by such servants depending upon the extent of breach that is manifestly demonstrated.,” the Court said.

Drawing inspiration from landmark cases, including the recent case ofMadhayamam Broadcasting Ltd. v. Union of India, observed that these principles also include procedural fairness before holding a public servant guilty of misconduct.

“To test whether interference is warranted, this Court has laid down that the scrutiny ought to be confined to finding out whether the disciplinary proceedings have been conducted fairly; if not, an inference can be drawn that this has caused prejudice to the charged employee.”

Building on this, the Court adverted to the facts of this case. While acknowledging that leave is regulated by rules that need to be adhered to by each public servant, the Court found no such circumstance to hold the appellant guilty of serious misconduct. The Court noted the submission of prosecution that the Civil Surgeon had refused to sanction leave. Apart from that, the appellant was also telephonically informed about the same.

However, the Court concluded that there was no record of the Civil Surgeon's refusal to sanction leave. So far as not participating in the pulse polio programme and thus also violating the Election Commission's directions, the Court said:

“It is the clear finding of the Inquiry Officer, based on the evidence on record, that the appellant was not assigned any duty in connection with election duty and pulse polio programme during the period he wished to avail leave to attend court proceedings before the High Court. Insofar as defiance of Election Commission's directions by the appellant are concerned, no such written directions were part of the documentary evidence led before the Inquiry Officer… Rather curiously, the Inquiry Officer resorted to ingenuity to hold the appellant guilty.”

Imperatively, at this stage, the Court pointed out that the appellant had submitted a detailed response to the inquiry report. However, the same was dismissed by a single sentence. Finding the same to be unacceptable, the Court ruled that this was not a fair procedure.

The Court also observed that issuance of limited notice does not fetter the court's powers to enlarge the scope of the petition and grant justice to the parties. Elaborating, the Court said that the observation, while issuing the notice, cannot limit the court's jurisdiction to consider the controversy.

“If the court seized of the petition/appeal considers that the justice of the case before it demands enlargement of the scope, notwithstanding that a limited notice had been issued earlier, the court's powers are not fettered particularly when enforcement of any Fundamental/Constitutional right is urged by the party approaching it.,” 

Moving forward, the Court also highlighted that though the impugned order had clear findings in favour of the appellant, it did not interfere with the charges.

“In our considered opinion, the tenor of the impugned order does suggest that the Division Bench found the appellant to have been wronged and regard being had thereto, the Division Bench ought to have set things right by interfering with the findings and granting full relief that we intend to grant to the appellant.”

Before parting, the Court also brought its attention to an order issued by the Election Commission. It clearly stated that doctors and officers who are due to retire within six months be exempted from election duty. In this regard, the Court observed that disciplinary proceedings should not have been initiated against the appellant.

“The appellant is, therefore, quite right in contending that the disciplinary proceedings culminating in the order of penalty were nothing but a ruse to wreak vengeance for he having dragged high officials of the GoP ((Government of Punjab) to the High Court and in tasting success to obtain his legitimate monetary dues. The Constitutional concept is that not only the country but every State in the country would be a welfare state.”

“This happens to be a case where certain officials of the GoP have stooped too low to punish a senior doctor, on the verge of retirement, for no better reason than that he had dared to take on the mighty executive in a court of law.”

In view of this, the Court directed that the appellant should be compensated with Rs.50,000/. The Government of Punjab was given liberty to recover the cost from the delinquent officers.