In a strongly worded judgment, the Allahabad High Court has severely criticized the Bank of Baroda for acting in an illegal and arbitrary manner by returning a property to a defaulting borrower, even after completing the auction process and collecting the earnest money from the auction purchaser.
The case was filed by Saurabh Singh Chauhan, who had successfully bid for the auctioned property under the SARFAESI Act. Despite this, the bank handed back the property to the original borrower through a one-time settlement scheme.
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"The action of the Bank is clearly beyond the realm of law, arbitrary, whimsical, capricious and absolutely against the principles established in law," observed a division bench comprising Justice Shekhar B. Saraf and Justice Dr. Yogendra Kumar Srivastava.
The Court noted that the bank’s actions directly violated legal precedents, specifically referencing the Supreme Court’s ruling in Celir LLP vs. Bafna Motors (Mumbai) Pvt. Ltd. and Others, (2024) 2 SCC 1.
Despite an unqualified apology from the bank and its counsel, the Court emphasized that such misconduct required a strict response.
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“Having sold the property to the auction purchaser after accepting the earnest money, the Bank could not have, in any manner, returned the property to the original borrower,” the judges added.
As a result, the Court directed the Bank of Baroda to compensate the petitioner by paying interest at 24% per annum on the earnest money amount of Rs. 4,64,500. This interest is to be calculated from the date of acceptance of the earnest money until April 30, 2025.
“The Bank should come with the demand draft for the entire sum including the principal and interest on the next date fixed,” the Court ordered.
The matter has been listed for the next hearing on April 30, 2025, and the Court has made it clear that compliance with its order is non-negotiable.
Case title - Saurabh Singh Chauhan vs. Bank Of Baroda, Regional Stressed Assets Recovery Branch And Another
