Telangana High Court Delivers Resounding Justice: Union Bank Ordered to Refund Auction Purchaser After Failed Property Handover

In a significant ruling that reaffirms the rights of auction purchasers, the Telangana High Court has directed the Union Bank of India to refund a hefty sum of Rs 83.25 lakh to M/s. JSR Enterprises, an auction purchaser, along with a 7% interest rate. The court's decision comes after the bank's failure to deliver possession of a property that had been fully paid for following an auction conducted under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.

The saga began when M/s.

JSR Enterprises successfully bid for a property auctioned by Union Bank of India. After diligently fulfilling all payment obligations, amounting to the principal sum of Rs 83.25 lakh, the purchaser was duly issued a sale certificate by the bank. However, the anticipated handover of the property turned into a prolonged dispute, as the bank proved unable to secure and deliver physical possession of the asset.

This failure was attributed to ongoing litigation and pre-existing disputes surrounding the property, which the bank evidently could not resolve.

Faced with a property bought and paid for but entirely inaccessible, M/s. JSR Enterprises was left with no option but to petition the High Court, seeking a refund of their invested capital.

The petitioner argued that despite their full compliance, the bank had failed to uphold its end of the bargain by not delivering clear and undisputed possession.

The High Court, after careful consideration of the facts and legal precedents, sided firmly with the auction purchaser. The division bench, comprising Chief Justice Alok Aradhe and Justice J.

Anil Kumar, underscored the statutory obligation of the secured creditor (the bank) to deliver the property free from encumbrances to the auction purchaser. The court cited a crucial Supreme Court judgment in C.Bright v. District Collector, which unequivocally states that a secured creditor has a statutory duty to hand over the possession of secured assets to the successful bidder in an auction.

The High Court emphasized that the bank cannot simply wash its hands off the responsibility after issuing a sale certificate.

The entire purpose of a SARFAESI auction is to transfer clear title and possession to the purchaser, and any failure on this front constitutes a breach of the bank's duty. The bench sternly observed that once an auction is conducted and the full bid amount is paid, the onus is entirely on the bank to ensure the successful delivery of the property.

In its landmark order, the Telangana High Court not only directed Union Bank of India to refund the principal amount of Rs 83.25 lakh but also mandated an additional 7% interest per annum.

This interest is to be calculated from the date M/s. JSR Enterprises first sought possession of the property, effectively compensating the purchaser for the undue delay and financial inconvenience caused. This ruling serves as a vital safeguard for auction purchasers, reinforcing the accountability of financial institutions in the conduct of property auctions and ensuring that due diligence extends beyond mere sale, encompassing the crucial act of possession delivery.