High Court of Delhi Directs Refund of Auction Amount with Interest for Non-disclosure of Litigations: Upholds Transparency and Fairness in Bank Auctions”
In a landmark judgment reinforcing the principles of transparency and fairness in bank auctions, the High Court of Delhi has directed the refund of the amount paid by a petitioner in an e-auction, along with interest and compensation for undisclosed litigations and encumbrances. The judgment, pronounced by Hon’ble Mr. Justice Purushaindra Kumar Kaurav, addresses crucial aspects of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
In the case [W.P.(C) 2829/2023 & CM APPL 10919/2023], M/s Kalyani (India) Private Limited, the petitioner, successfully bid for a property in a bank auction conducted under the SARFAESI Act. However, it was later discovered that the property was embroiled in several undisclosed litigations, leading to the petitioner not receiving possession.
Justice Kaurav, in his judgment, emphasized the duty of banks to act transparently and provide full disclosure, stating, “The mandate of full and true disclosure would emanate from the concept of legitimate expectation, which has an established place in our constitutional scheme.” He further highlighted, “An ‘as is where is’ clause must be construed in a pragmatic sense and a buyer cannot be held responsible if the seller indulged in an active concealment of foundational facts.”
The court ordered the respondents to refund Rs.34,10,000 paid as stamp duty and Rs.14,37,536 paid as house property tax to the petitioner within six weeks. Additionally, the respondents were directed to pay interest at the rate of 8% per annum on the principal sum of Rs.4,90,25,000, from the date of the deposit of the amount till the date of refund.
This judgment is seen as a significant step towards ensuring fairness in bank auctions and protecting the interests of auction participants against non-disclosure of material information. The court’s reliance on various judicial precedents underscored the evolving jurisprudence in favor of consumer rights and the obligations of financial institutions in such transactions.
Date of Decision: 24th January 2024
M/S KALYANI (INDIA) PRIVATE LIMITED VS PUNJAB NATIONAL BANK AND ANOTHER
