Auction purchaser sought refund of Rs.24,00,000 forfeited by UCO Bank after cancellation of an e-auction. The Bank had misdescribed a B khata property as A khata and concealed CBI investigation into loan fraud. Holding the forfeiture arbitrary and in violation of Rule 8(7), the Court allowed the petition and directed refund with interest.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 18TH DAY OF JANUARY, 2024
BEFORE
THE HON’BLE MR. JUSTICE K. V. ARAVIND
WRIT PETITION NO.14632/2021(GM-RES)
BETWEEN:
SANTHOSH KUMAR B. S., S/O SIDDALINGAIAH H. C., AGED ABOUT 29 YEARS, RESIDING AT NO 720, 5TH MAIN ROAD, NEAR WARD OFFICE, KAMALANAGARA, BANGALORE - 560079.
...PETITIONER
(BY SRI SHARATHKUMAR SHETTY, ADVOCATE)
AND:
UCO BANK, JAYANAGAR BRANCH, BRANCH OFFICE AT No.238/35, 9TH MAIN ROAD, 3RD BLOCK, JAYANAGAR, BENGALURU - 560011. REPRESENTED BY: THE AUTHORIZED OFFICER.
…RESPONDENT
(BY SRI VIGNESH SHIVARAM SHETTY, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE RESPONDENT TO RETURN THE ACTION SALE DEPOSITED AMOUNT OF Rs.24,00,000/- IN FAVOUR OF PETITIONER.
2
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 11.12.2023, THIS DAY THE COURT PRONOUNCED THE FOLLOWING:
O R D E R
This petition seeking mandamus to the respondent to refund a sum of Rs.24,00,000/- forfeited vide Annexure-E dated 14.10.2020.
2. Brief facts:
The respondent-Bank conducted e-auction for sale of immovable property bearing No.34, New PID No.012W0934-22 situated at Shettyahalli Village, Yashwanthpura Hobli, Bangalore North Taluk, Bengaluru. The auction was conducted on 08.09.2020. The petitioner participated in e-auction and was successful bidder purchasing the subject property for a sum of Rs.55,75,000/-. The petitioner deposited 25% of the bid amount Rs.14,00,000/- including the earnest money of Rs.5,50,000/- within the stipulated time. The balance amount of Rs.41,75,000/- was to be deposited within fifteen days from the date of e-auction, which is 22.09.2020. The petitioner has paid further sum
3
of Rs.10,00,000/- from 19.10.2020 to 27.10.2020. The respondent issued sale intimation letter dated 08.09.2020. By letter dated 09.09.2020, the respondent intimated the petitioner to pay balance amount of Rs.41,75,000/- within fifteen days from 22.09.2020.
4
canceling the auction sale due to non-deposit of the remaining consideration of the auction amount.
5
the stipulated period is due to non-furnishing of the documents and information requested by the petitioner and not due to any other reasons. The Bank dealing with the public money is expected to conduct its business and affairs in a transparent manner, due to the suppression of material facts which goes to the root of the title of the property auctioned by the Bank, the forfeiture of the amount is without authority of law and leads to unjust enrichment. On the above submissions, prays to allow the writ petition.
6
would have been considered if the petitioner has made payment of balance 75% of the sale price. The writ petition is not maintainable in view of alternative remedy of statutory appeal under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI Act' for short) of the Debt Recovery Tribunal. On the above submissions, prays to dismiss the writ petition.
7
8
over an un-encumbered property comes into the picture only after issuance of certificate of sale in favour of the successful purchaser on payment of the remaining balance of 75% of the sale price. This specific contention of the respondent has to be inferred as admission of the allegations alleged by the petitioner in the petition.
9
auction, the Bank would disclose all material facts which would have been reasonably considered as relevant by the Bank when the loan was sanctioned. The suppression alleged and such allegation not rebutted by the Bank would shake the public confidence.
10
substantial impact on the potentiality of the property, was an important aspect expected to be notified by the Bank with fairness to the auction participants. The respondent - Bank having failed to do so further preferred to maintain silence on this aspect in the statement of objections and by choosing not to reply to the legal notice.
11
12
and the same not being answered or clarified by the respondent, it is not permissible for the respondent to contend that under Rule 9(4) of the Rules, petitioner ought to have requested for extension, such request not being made, forfeiture under Rule 9(5) of the Rules is justified.
of period as agreed between the purchaser and the secured creditor. In view of unambiguous language, it cannot be read that extension under Rule 9(4) of the Rules can be only at the request of the purchaser. In view of irregularities committed by the respondent in failing to disclose the details as required under Rule 8(7) of the Rules and necessary clarifications as requested by the purchaser not being issued by the respondent - Bank, the secured creditor/respondent - Bank ought to have extended the period under Rule 9(4) of the Rules.
13
operated by the respondent and paid the remaining sale price within the stipulated period. Further, on 09.02.2021, the property has been notified for re-auction and concluded on 24.02.2021 with a sale price of Rs.51,52,000/- thereby reducing the earlier sale price by Rs.4,23,000/-. This reduction in sale price can be for the reasons/defects pointed out by the petitioner.
14
forfeiture of the amount exercising Rule 9(5) of the Rules is arbitrary and illegal.
15
loan extended to the subject property itself, the
respondent is expected to be fair and transparent.
16
violate the principles of natural justice. In the circumstances, writ petition under Article 226 of the Constitution is maintainable.
Order
i) Writ Petition is allowed . ii) The respondent-Bank is directed to refund the entire amount of Rs.24,00,000/to the petitioner with applicable interest within period
17
of six weeks from the date of receipt of copy of
this order.
iii) No order as to costs.
Sd/JUDGE
VBS
2 issues framed by the court
Whether forfeiture of the auction deposit was justified when the Bank failed to disclose material facts about the property under Rule 8(7).
Whether the writ petition was maintainable despite the alternative remedy under Section 17 SARFAESI Act.
5 provisions across 3 enactments
Santhosh Kumar B. S.
UCO Bank, Jayanagar Branch, Bengaluru (represented by the Authorized Officer)
K. V. Aravind
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
