Banks shouldn’t behave like real estate agents, claims HC

VIJAYAWADA: In a recent ruling, the high court reprimanded Canara Bank employees for forfeiting money without obeying the rules when it came to property sales consideration.

The high court stated that banks and financial institutions should operate fairly and strictly in accordance with the law regulations when trying to recover their money, noting that they should not act like property dealers.

Syed Hidayathulla from Chilakaluripet in the Guntur district petitioned the high court after Canara Bank denied his request for a refund of the money he paid as part of the sale consideration of a property it had auctioned off.

Hidayathulla took part in the Canara Bank auction in 2019 and had his bid accepted. He made the customary 25% of the sale consideration payment during the auction. He then neglected to pay the remaining sum due to his poor health, and the bank was alerted of this.

The bank granted his request and extended the deadline for full payment. Hidayathulla sought information on the land he bought in the interim because the entire area was smaller than what was stated in the auction announcement. He further argued that the bank was not informed about the property’s shape or the pathway that runs between two substantial structures, both of which are a portion of its overall extent.

Despite his protests, he made a further payment of Rs. 15 lakh on the final day of the extended time.

However, the bank kept the money he paid because he didn’t complete the tasks within the allotted time, therefore it was forfeited. The original borrower later received the title deeds to the property back from the bank as part of a

“One Time Settlement” for less money. Hidayathulla argued that it was unlawful for the bank to have paid the original borrower’s loan account before the deadline for payment.

In contrast, the bank asserted that in the case that the full amount is not paid within the allotted time, it is within its rights to keep the money that the petitioner paid.

Justice DVSS Somayajulu noted that even while the bank has the authority to forfeit the money if the auction buyer didn’t pay in full, it can only do so after the allotted length of time has passed. According to the high court, the bank cannot use the advance cash paid to settle the account of the original borrower after the last day of payment because it belongs to the auction buyer solely.

The Canara Bank executives’ actions were criticized by the high court, which ordered them to return the petitioner’s money.