Mohd. Shariq vs. Punjab National Bank and Others
Background
The appellant was the highest bidder (Rs. 2.01 crore) in a bank auction of a defaulting borrower's mortgaged property under the SARFAESI Act, and had deposited earnest money plus 25% of the bid amount. Unknown to him, the Debt Recovery Tribunal had passed an interim order the same day keeping confirmation of the sale in abeyance; he was never informed of this pending litigation. When the bank later demanded the balance and threatened forfeiture, he offered to pay once the DRT proceedings were resolved, but the bank instead forfeited his deposit and re-auctioned the property to someone else at a lower price. He challenged this in the High Court; the Single Judge ruled in his favour and ordered the sale deed executed in his favour, but the Division Bench reversed this (while leaving the earlier auction's outcome undisturbed) and told him to separately pursue a claim for the forfeited amount.
Decision Breakdown
The Supreme Court held that the appellant had acted in good faith throughout, depositing further large sums when asked by the High Court to prove his bona fides, and was never told about the pending DRT proceedings that would have let him reconsider participating in the auction. Since the underlying facts (that Rs. 50.25 lakh had been deposited by the appellant pursuant to the original auction) were undisputed by either side, the Court held there was no justification for relegating him to a separate, fresh legal proceeding to recover the forfeited amount: the Division Bench had erred in leaving this issue unresolved when it could and should have decided it. The Bank was directed to refund the Rs. 50.25 lakh within two months, failing which it would carry 12% annual interest; however, since the appellant himself had filed the appeal after a long delay (which was condoned), he was not entitled to interest for the period before that.
Lesson Learnt
A bidder who is kept in the dark about litigation affecting a public auction cannot fairly be blamed for the auction's later cancellation, and courts should resolve genuinely undisputed money claims directly rather than sending a person through fresh rounds of litigation to get back what is indisputably owed to them.