Writ Plea Challenging Cancellation of Auction Sale Allowed as Lender Bank Cancelled Sale Solely Upon Direction of CBI

Case Details: Ram Swaroop v. IDBI Bank Ltd. - [2024] 167 taxmann.com 658 (HC-Telangana)

Judiciary and Counsel Details

• P. Naveen Rao & J. Sreenivas Rao, JJ.
• Shyam S. Agrawal, Counsel for the Petitioner. 
• B. Harinath Rao for the Respondent.

Facts of the Case

In the instant case, the Respondent bank extended a loan to the borrower. However, when the borrower defaulted on repayment, the bank resorted to the provisions of the SARFEASI Act, 2002.

The bank filed a complaint with the CBI alleging that borrowers committed irregularities. An e-auction was conducted of secured assets, including the subject land, and the petitioner/auction purchaser were successful auction bidders. The sale was confirmed in favour of the petitioner, and the petitioner deposited an advance amount.

The CBI advised the bank to keep the original property documents and mortgaged properties in safe custody until further directions from the CBI. Thereafter, the bank communicated to the petitioners informing them that the auction was cancelled and that the amount remitted by the petitioners would be refunded.

On a writ petition, the petitioner prayed to declare acts of the bank of cancellation of e-auction and thereby returning the bid amount as illegal and consequently sought to direct the bank to issue a sale certificate in respect thereof by receiving balance sale consideration from the petitioners.

It was noted that the petitioners fairly requested the bank to register the property in their names, and they would wait till the conclusion of the investigation/prosecution by the CBI; this offer was reasonable.

Further, the petitioners were willing and ready to pay the balance of the sale consideration and get the sale deeds registered in their names; therefore, the bank could not deny the registration of the property.

High Court Held

The High Court held that except for the direction to CBI and ED not to release the original documents of the secured asset, there was no other impediment to channelizing the sale proceeds. Further, since the bank erred in cancelling the auction and seeking to return the advance amount paid by the petitioners, the instant writ petition was to be allowed.