- 1 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 4TH DAY OF MARCH, 2025 PRESENT THE HON'BLE MR JUSTICE V KAMESWAR RAO AND THE HON'BLE MR JUSTICE T.M.NADAF WRIT APPEAL NO.336 OF 2024 (GM-RES) BETWEEN: 1. DBS BANK INDIA LTD (ERSTWHILE THE LAKSHMI VILAS BANK LTD), AMALGAMATED WITH DBS BANK INDIA LTD, AS PER NOTIFICATION NO.CG-DL-E-25112020-223301 DATED 25-11-2020, PUBLISHED IN THE GAZETTE OF INDIA HAVING ITS SPECIAL ASSETS MANAGEMENT RMG NO.460/2, PTK COMPLEX, 8TH B MAIN ROAD, JAYANAGAR 4TH BLOCK, BENGALURU-560 011 REPRESENTED BY ITS, REGIONAL RECOVERY HEAD KVSRK PRASAD 2. DBS BANK INDIA LTD (ERSTWHILE THE LAKSHMI VILAS BANK LTD), HAVING ONE OF ITS BRANCH OFFICE AT SHIMOGGA BRANCH, SREE KARTHIK PLAZA, OPP: MALLIKARJUN THEATRE, DURGI GUDI EXTENSION, SHIMOGGA – 577 201 NOW REPRESENTED BY ITS REGIONAL RECOVERY HEAD KVSRK PRASAD …APPELLANTS (BY SRI. VENKATRAMANA M K, ADVOCATE) Digitally signed by MADHUSHREE H Location: High Court of Karnataka - 2 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 AND: MRS. VASANTHA BAI @ VASANTHA BAI T N AGED ABOUT 42 YEARS, W/O MR.RAMESH. K. L., RESIDING AT TATTEHALLI VILLAGE, KALLIHAL POST, BHADRAVATI TALUK, SHIVAMOGGA - 577 201. …RESPONDENT (BY MS. ANAGHA NARASIMHA C N, ADVOCATE FOR SRI. P.B.AJITH, ADVOCATE FOR C/R1) THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE FINAL ORDER DATED 23.01.2024 PASSED BY THE LEARNED SINGLE JUDGE IN W.P.NO.18810/2022 WITH ANNEXURE-A WITH REGARD THAT THE ORDER FOR ‘THE APPELLANTS SHALL REFUND THE AMOUNT TO RESPONDENT WITHIN 8 WEEKS FROM THE DATE OF RECEIPT OF THE COPY OF WRIT PETITION ORDER, WHICH SHALL BE WITH 6.00% INTEREST FROM THE DATE OF FIRST REPRESENTATION OF THE RESPONDENT i.e., 30.07.2020 TILL ITS PAYMENT BY ALLOWING THIS APPEAL, IN THE INTEREST OF JUSTICE AND EQUITY, ETC. THIS APPEAL COMING ON FOR ORDERS THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE V KAMESWAR RAO and HON'BLE MR JUSTICE T.M.NADAF ORAL JUDGMENT (PER: HON'BLE MR JUSTICE V KAMESWAR RAO) This appeal has been listed before the Court in view of the memo moved by the counsel for the appellants. We - 3 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 note that the Registry has notified six objections. We have seen the six objections as notified. As we have heard the counsel for the parties finally, the objections as notified are over-ruled. 2. The subject matter of the appeal is an order passed by the learned Single Judge dated 23.01.2024 in W.P.No.18810/2022 whereby, the learned Single Judge has allowed the writ petition filed by the respondent herein by stating in paragraph Nos.10, 11 and 12 as under:- “10. What would emerge is that the Bank did not project that the property was completely free from encumbrances. The fact that the Bank was not a party to any of the transactions between the principal borrower and the agreement holder is of no consequence, as the submission of the petitioner would be neither here nor there. The Bank before putting the property for sale, though it is on as is where is basis, due diligence ought to have been shown, but it had failed to do so. It is the petitioner’s diligence that brings out the name of somebody else in the encumbrance certificate which the petitioner, an auction purchaser did not want to take further, as it is not for any auction purchaser to - 4 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 invite legal problems in a property that is purchased in an auction conducted by the Bank. 11. The petitioner also from time to time represented to the Bank to correct the anomaly, so that she would pay the balance 75% of the amount and at no point in time the petitioner would say that she would not pay the amount. The Bank thereafter sells the property at an higher price than it was projected earlier. No loss is suffered by the Bank, except that they had to wait for six months that the petitioner would make the payment. It was the time of COVID-19 engulfing the entire nation. Therefore, no sale could not take place on time. The Bank cannot project that the petitioner is at fault and enrich themselves with the amount paid by the auction purchaser. The petitioner is thus entitled for the refund of the amount as is claimed, as the Bank has admittedly has not suffered any loss for the action of the petitioner. 12. For the aforesaid reasons, the following: ORDER (i) Writ Petition is disposed. (ii) The respondents/Bank shall refund the amount to the petitioner herein within 8 weeks from the date of receipt of the copy of this order, which - 5 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 shall be with 6% interest from the date of first representation of the petitioner i.e., on 30-07-2020 till its payment. (iii) It is made clear that in the event the respondents/Bank would not refund the amount within 8 weeks as directed, the petitioner would become entitled to interest at 12% per annum.” 3. The writ petition was filed by the respondent before the learned Single Judge challenging the letter/communication dated 05.04.2022 by which, the appellants - Bank has forfeited 25% of the bid amount deposited by the respondent on her becoming a successful auction purchaser in an auction conducted by the appellants - Bank. 4. The facts to be noted for the purpose of this order are that the borrowers namely, K.E.Shekharappa and Mrs.D.C.Veena availed a loan of Rs.85,00,000/- from the erstwhile Lakshmi Vilas Bank which has later merged with the appellants - Bank and executed a mortgage deed of the subject property in favour of the Bank. It is the - 6 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 conceded position that the borrowers defaulted in payment which lead to the appellants – Bank to initiate proceedings under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (hereinafter referred to as ‘SARFAESI Act’ for short). The appellants - Bank had put the property for sale by issuing e-auction notice dated 13.05.2020 seeking to hold auction on 29.05.2020. The respondent participated in the said auction and emerged as the highest bidder, bidding the property for Rs.1,55,10,000/-. On 29.05.2020, as per the terms of the auction notification, 25% of the bid amount was deposited by the respondent, which amount is Rs.38,77,500/-. As per the terms of the sale, balance amount of 75% was to be deposited within a period of 15 days from the date of deposit of 25%. Before the expiry of 15 days, the respondent submitted a representation dated 12.06.2020 seeking four weeks time to remit the balance amount of 75%. Four months time was not granted but extension of time was restricted to three months. Before expiry of - 7 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 three months, respondent made a communication dated 30.07.2020, having applied for the encumbrance certificate. It was the case of the respondent that the encumbrance certificate depicted the name of some other persons. She accordingly requested the Bank to depict her name in the encumbrance certificate, as she is the successful bidder so that she would deposit balance 75% of the amount. The reply given by the appellants - Bank on 31.07.2020 was that the respondent should deposit the entire amount on or before 28.08.2020, failing which, the amount of 25% already deposited shall stand forfeited. It was in this background that the appellants - Bank has sent a communication dated 20.11.2020 to the respondent stating that since the amount as directed was not deposited, 25% of the bid amount of Rs.38,77,500/- would stand forfeited. 5. It may be necessary to state here that the learned Single Judge has also noted the fact that after about two years, a second sale notice was issued for the - 8 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 very same property on 03.03.2022 and the property was sold over and above Rs.20,00,000/- of the bid amount in which, the respondent had participated. The respondent had secured the documents under the Right to Information Act and seeks refund of the amount by a representation dated 31.03.2022 which was not acceded to by the Bank. 6. The case of the respondent before the learned Single Judge was that the appellants - Bank ought to have shown due diligence before putting property for auction. The property was not free from encumbrances. The name of the agreement holder was projected in the encumbrance certificate and a suit was pending consideration in O.S.No.21/2018 before the Court concerned. The appellants - Bank had put the property for sale without referring to any of the pending encumbrances over the property. 7. On the other hand, case of the appellants - Bank was that the respondent had to pay the amount completely within the stipulated period. The respondent - 9 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 though deposited 25% on the date of auction, she did not comply with the direction of deposit of remaining 75% of the amount. Therefore, no fault can be found with the bank forfeiting 25% of the amount of auction that was deposited by the respondent. 8. The learned Single Judge did not agree with the stand taken by the Bank and allowed the writ petition. We have already reproduced the relevant paragraphs of the impugned judgment wherein, learned Single Judge takes a view in favour of the respondent herein. 9. The submission of the learned counsel for the appellants is primarily that the auction was effected on ‘as is where is basis’ and as such, the respondent could not have taken a plea that the Bank had not informed about the encumbrance and also the fact a suit is pending in O.S.No.21/2018. He also states that failure on the part of the respondent to deposit 75%, the necessary consequence thereof is forfeiture of 25% of the amount deposited on the date when the auction had taken place. - 10 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 10. We have seen the contents of the communication which had been noted by the learned Single Judge including the communication dated 30.07.2020 of the respondent and a reply thereof of the Bank. The respondent had in her communication clearly stated the following:- "xxx I had applied for new EC and other related documents with regard to the said property. But unfortunately, I observe that the name in the EC and other related documents of the said property has not been changed itself. Rather the EC and other documents contends the old name i.e., Shekarappa, C.Veena and B.V.Nataraj. I am the present owner of the said property as I am the successful bidder in e- auction conducted by Lakshmi Vilas Bank, Durgigudi Main Road, Shimoga, dated 29.05.2020 of the above said schedule property. As it is your responsibility to change the name in the EC and other related documents, I am requesting you to change the name in EC and other related documents with regard to the said property and replace it with my name i.e., Vasantha Bai, as I am the successful bidder of the above mentioned schedule property. Further I am ready to pay the remaining bid amount, if the name - 11 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 in EC and other documents is changed and replaced by my name i.e., Vasantha Bai. xxx.” 11. We also note that the learned Single Judge has also in paragraph No.6 of the impugned order refers to the pendency of a suit being O.S.No.21/2018 before the concerned Court. It is the case of the respondent that even the reference to that suit was not given in the notice. The only submission of the learned counsel for the appellants is that the suit was filed for recovery of money between the prospective buyer and borrowers and as such, the same had no bearing in so far as sale is concerned. But during the course of submissions, he concedes that Bank was a party and the subject matter of the suit was a subsequent sale transaction which had been executed by the borrowers with a third party which was through a registered sale agreement. He also conceded that this aspect was not reflected in the sale notice. 12. At this stage, learned counsel for the appellants would submit that even the direction for grant of interest - 12 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 from the date of first representation of the respondent i.e., on 30.07.2020 is erroneous in as much as the first representation made by the respondent for the refund of amount was only on 04.11.2020 and not on 30.07.2020 and hence, any grant of interest must be from 04.11.2020 and not from an earlier date. 13. This submission of the learned counsel for the appellants is not contested by the learned counsel for the respondent. 14. If that be so, not interfering with the order of the learned Single Judge and upholding the same, the direction at (ii) of page No.33 in the impugned order of the learned Single Judge, shall henceforth be read as under:- “(ii) The respondents/Bank shall refund the amount to the petitioner herein within 8 weeks from the date of receipt of the copy of this order, which shall be with 6% interest from the date of first representation of the petitioner i.e., on 04.11.2020 till its payment.” - 13 - NC: 2025:KHC:9218-DB WA No. 336 of 2024 15. In view of the above, the learned Single Judge having taken a view in favour of the respondent, we are of the view that the same is justified and challenge to the impugned order has necessarily to fail, we dismiss the appeal, in terms of above. Sd/- (V KAMESWAR RAO) JUDGE Sd/- (T.M.NADAF) JUDGE MH/- List No.: 1 Sl No.: 2