Banks Prohibited from Using Passport or OCI Card as Security for Loan Closure: Karnataka High Court

Karnataka High Court Law Insider

LI Network

Published on: January 16, 2024 at 18:26 IST

In a significant ruling, the Karnataka High Court has asserted that banks are not entitled to withhold an individual’s passport or Overseas Citizen of India (OCI) card, even if the person willingly surrenders these documents.

This decision came in response to a petition filed by Koshy Varghese, where a single judge bench, presided over by Justice M Nagaprasanna, deemed the bank’s action as illegal.

The petitioner, a United Kingdom citizen with an OCI card, faced charges under various sections of the Indian Penal Code (IPC) based on a complaint by the then Vijaya Bank, now Bank of Baroda.

The bank claimed that the petitioner, of his own accord on October 3, 2018, undertook to close two housing loan accounts. When he failed to fulfill this commitment, the bank instructed the surrender of his passport.

However, Varghese argued that the bank lacked the authority to withhold his passport or OCI card. He contended that the power to withhold a passport issued by the United Kingdom does not rest with the bank, and in the case of the OCI card, only the Ministry of External Affairs under the Foreigners Act possesses such authority.

The bank refuted these claims, pointing to a paragraph in the undertaking where Varghese allegedly voluntarily deposited his original passport.

Upon scrutiny of the records, the bench declared that even if the petitioner had voluntarily offered to deposit the OCI card and passport, the bank had no jurisdiction to retain them beyond 15 days. The Court emphasized that these documents are the property of the issuing authorities and must be transferred to them.

Regarding the passport not being issued by any Indian authority, the court stated that no authority in the country has the power to withhold or impound it. Criticizing the bank’s actions, the court deemed both the withholding of the passport and OCI card for four years as without jurisdiction.

The Court insisted that the bank should have promptly informed the relevant authorities who could have taken legal action.

Consequently, the court allowed the petition, directing the Registry to return the passport and OCI card, deposited by the bank, to the petitioner after proper verification. This ruling sets a precedent regarding the limitations on banks regarding the retention of important personal documents.

Related Post