HC orders a refund to the winning bidder after criticizing PNB for selling property without a clear title.

BENGALURU: The high court has ordered a nationalized bank to repay Rs 30.7 crore to a winning bidder for a property after noting that the “as is where is” condition in a public auction doesn’t mean that the real estate in question does not have an absolute title.

Justice M. Nagaprasanna granted M/s Paramount Constructions’ petition and ordered Punjab National Bank (PNB) to pay the petitioner Rs 30, 69,08,217 as the purchase price of the scheduled property, plus interest at the bank’s lending rate and incidentals.

The judge further mentioned that the Supreme Court had determined in the Unitech Limited vs. Telangana State Industrial Infrastructure and Others case that, in some situations, even on a money claim, the writ would be valid, if the state’s action reeks of arbitrariness.

After placing a winning bid of Rs 15.2 crore in an online auction for a mortgaged property in Peenya, the petitioner received a sale certificate for the property in October 2014. In response to the petitioner’s request for a khata transfer, a few people who claimed to be the owners of the agreement over the subject property raised concerns.

In response to these complaints, the BBMP started legal action under the KMC Act against the auction buyer.

Following that, a number of lawsuits were brought up, including one by one Madhava Iyengar, the property’s original owner, and his legal counsel.

In the course of the sale of the property, which was hypothecated to PNB in order to receive a business loan, there were also complaints, allegations of fraud, and fabrications of truth.

The petitioner sought the bank to request a refund of Rs 30,69,08,217 in light of the legal disputes. The bank’s evasive response, however, prompted the petitioner to go to the top court.

After reviewing the evidence, Justice Nagaprasanna observed that the bank’s refusal to deliver a property free from all encumbrances resulted in an innocent auction buyer bearing the weight of needless litigation.

If the bank had exercised due diligence when giving the loan to the company in 2010, the current situation would not have arisen. The bank is currently attempting to wash its hands of the situation by claiming that it is not liable for any issues that might arise following the sale because the e-auction notice made it abundantly clear that the property was being offered “as is, where is, and as is basis.”

This would not imply that a property that is not free from encumbrances might be given to an auction purchaser, the court continued.

The bank’s sole objective, according to the court, “seems to have been to regain its charge over the property and find a way to recover the loan amount,” it concluded.