Allahabad HC Castigates Bank Of Baroda Over 'Illegal' Return Of Auctioned Property To Defaulting Borrower, Orders Heavy Compensation

Observing that the bank's conduct warranted strict action due to its "illegal and arbitrary" action, a bench of Justice Shekhar B Saraf and Justice Dr Yogendra Kumar Srivastava directed the bank to pay the auction purchaser interest on the earnest money at a rate of 24% per annum.

The Court also added that the entire action of the Bank was de hors the principles laid down by the Supreme Court in the case of Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. And Ors. 2023 LiveLaw (SC) 808.

“The aforesaid action of the Bank, in the particular case, is clearly beyond the realm of law, arbitrary, whimsical, capricious and absolutely against the principles established in law. Having sold the property to the auction purchaser after having accepted the earnest money, the Bank could not have, in any manner, returned the property to the original borrower by entering into an one time scheme with the said borrower,” the division bench observed as it called upon the bank to come to the court on April 30 with a Demand Draft for the entire specified amount.

The court passed this order while dealing with a writ plea moved by Saurabh Singh Chauhan, who had successfully bid for the property in question under the SARFAESI Act.

He claimed that the bank returned the property (for which he had already paid earnest money) to the original borrower through a one-time settlement scheme.

Though the Counsel on behalf of the Bank and the bank itself tendered his unqualified apology for illegal action, the bench directed it to pay earnest money back to the auction purchaser with a 24% interest rate as compensation.

The matter will be heard next on April 30.