- 1 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF DECEMBER, 2025 BEFORE THE HON'BLE SMT. JUSTICE LALITHA KANNEGANTI WRIT PETITION NO. 9170 OF 2024 (GM-DRT) BETWEEN: MR.SURESH KUMAR SON OF LATE MR M.JEETHMAL AGED ABOUT 55 YEARS, RESIDING AT KOTHARI NIVAS, KOTHARI COMPLEX, CHIKKABASTI ROAD, HASSAN-573 201 …PETITIONER (BY SRI. DIVYA A JAIN, ADVOCATE) AND: THE AUTHORISED OFFICER AND CHIEF MANAGER PUNJAB NATIONAL BANK, HAVING ITS OFFICE AT PEENYA INDUSTRIAL ESTATE 1ST CROSS, 1ST PHASE, BENGALURU-560 015 ® Digitally signed by MEGHA MOHAN Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 ALSO AT NO. 26, 27 RAHEJA TOWERS, MG ROAD, BENGALURU-560 001 …RESPONDENT (BY SRI. SHETTY VIGNESH SHIVARAM, ADVOCATE) THIS PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, PRAYING TO DIRECTING THE RESPONDENT TO DELIVER THE VACANT PHYSICAL POSSESSION OF THE SCHEDULE PROPERTY TO THE PETITIONER. THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED ON 11.11.2025, COMING ON FOR PRONOUNCEMENT OF ORDER THIS DAY, THE COURT PRONOUNCED THE FOLLOWING: CORAM: HON'BLE SMT. JUSTICE LALITHA KANNEGANTI - 3 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 CAV ORDER The present writ petition is filed seeking the following prayer: “PRAYER WHEREFORE, the Petitioner prays that this Hon'ble Court may be pleased to: a. ISSUE a writ of mandamus directing the Respondent to deliver the vacant physical possession of the Schedule Property to the Petitioner; OR ISSUE a writ of mandamus directing the Respondent to pay to the Petitioner interest at the rate of 12% p.a.on the 25% deposited by the Petitioner from the date of payment till realisation; b. ISSUE a writ of mandamus directing the Respondent to pay Rs. 50,00,000/- (Rupees Fifty Lakhs Only) to the Petitioner, towardsas damages and loss of profits; c. ISSUE such other orders, writs, directions as this Hon'ble Court deems fit under the circumstances of this case, in the interest of justice and equity.” 2. The brief facts of the case as stated in the writ petition are that the petitioner herein came across a public E-Auction Sale notice issued by the respondent under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (hereinafter referred to as ‘SARFAESI Act’) in the Indian Express - 4 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 Newspaper dated 07.07.2019, inviting bids for three properties, including the scheduled property. The petitioner decided to participate in the E-Auction Sale in respect to the scheduled property against the recovery of a sum of Rs.2,72,03,000/- along with further interests, charges and costs. In the auction notice dated 07.07.2019, the reserve price of the scheduled property was fixed at Rs.89,00,000/-. The petitioner had deposited an amount of Rs.8,90,000/- as earnest money deposit (hereinafter referred to as ‘EMD’) with the respondent/bank on 08.08.2019 through RTGS. Thereafter, the petitioners participated in the auction proceedings held on 14.08.2019 and submitted a bid of Rs.89,15,000/- towards the scheduled property. As the petitioner’s bid was the highest, the bid is knock down in favour of the petitioner, which is reflected in the acceptance letter dated 14.08.2019 issued by the respondent. As per the terms and conditions of the bid, as required under Rule 9(3) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as ‘Rules, 2002’), the petitioner deposited 15% of the balance bid amount i.e., Rs.13,38,750/- on 16.08.2019 through RTGS in favour of the respondent. It is stated that the - 5 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 EMD and the advance payment amount of 25% of the total bid amount is paid. 3. As per Clause 4 of the Acceptance Letter, the balance 75% of the bid amount was payable by the petitioner on demand and after the respondent obtained the physical possession of the scheduled property and within 7 days of obtaining such possession. Further, the Sale Certificate would be issued after remittance of the balance of 75% of the bid amount and appropriation of such amount and thereafter, the physical possession of the scheduled property would be handed over to the petitioner. Hence, the petitioner has not deposited 75% of the amount with the respondent as they failed to obtain the physical possession of the scheduled property. It is stated that, to participate in the bid and meet the payment requirements of the bid, the petitioner had availed an overdraft facility from Karnataka Bank Limited. The petitioner deposited the EMD and 15% of the bid amount upon availing the same from the overdraft account. The rate of interest charged by the Karnataka Bank on the overdraft account is at the rate of 9.95%. It is sated that the said rate of interest is confirmed by the Karnataka Bank Limited vide - 6 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 letter dated 26.12.2023 in reply to the letter dated 26.12.2023 issued by the petitioner and the said copy is filed before this Court. It is stated that the petitioner has made several communication with the respondent for giving the physical possession and for payment of the remaining amount. But the false assurances were given by the respondent convincing the petitioner that he would be given the physical possession of the scheduled property within a short time. But the respondent failed to hand over the physical possession of the scheduled property. 4. It is further stated that the petitioner has addressed a letter dated 27.09.2021 to the respondent seeking information regarding the physical possession so that the petitioner would be in a prudent and better position to make arrangements for the payment of balance 75% of the sale consideration i.e., Rs.66,86,250/-. The said letter was delivered to the respondent by hand and the respondent has also acknowledged the receipt of the letter. But still respondent has failed to give any clarification or issue a reply to the letter dated 27.09.2021. It is stated that to the utter shock and dismay of the petitioner, the respondent issued a letter dated - 7 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 21.12.2023 to the petitioner informing him that the DRT-II, Bangalore vide its order dated 28.02.2023 in S.A.No.314/2020 has set aside the Auction Notice dated 06.07.2019 and has cancelled the sale confirmation letter dated 14.08.2019 and consequently, in compliance with order dated 28.02.2023, 25% of the bid amount of Rs.22,28,750/- was refunded along with interest of 6% i.e. Rs.5,82,087.95/- to the petitioner on 21.12.2023. Aggrieved there by the petitioner is before this Court by filing the instant writ petition. 5. It is stated that without issuing any notice to the petitioner, without making him as a party to the proceeding before the DRT, an order was passed by the DRT. Though the respondent is aware of the pending proceedings, he has not informed the same to the petitioner and made him to suffer the loss. The petitioner having availed the loan in the year 2019 had paid the amount. It has been retained by the respondent for 4 ½ years. It is stated that even today, he is ready to pay the 75% of the bid amount. He has deposited the 25% with an intention to deposit the remaining 75% and to purchase the property for investment purpose. Before taking this major investment decision, he underwent the required - 8 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 financial planning in the hope to get the possession of the scheduled property. But not only the 25% of the amount was stuck for 4 ½ years and the petitioner was not in a position to plan his future investment as there is no clarity. The respondents, without any explanation, returned 25% advance amount with 6% interest and the value of the property has substantially increased. On one hand, the petitioner is stuck paying the interest at the rate of 9.95% on the Overdraft Account and on the other hand, he lost the opportunity of the investment which is shown to be profitable as per the records. 6. Learned counsel appearing for the petitioners submits that he has sought a prayer to deliver the vacant physical possession of the scheduled property or alternatively direct the respondent to pay interest at the rate of 12% per annum from the date of payment till realization and also Rs.50,00,000/- towards damages and loss of profits. Learned counsel submits that the petitioner is a bonafide auction purchaser and the bank had kept quiet for a period of 4 ½ years and deprived the petitioner of his investment and the interest on the money. He submits that the bank shall return the money at 12% interest. - 9 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 7. Learned counsel has relied on the judgment of the Co- ordinate Bench of this Court in WP No.46450/2014 dated 20.04.2022 in case of P.Balaji Babu Vs. State Bank of India and Others, wherein the Court had allowed the writ petition and as respondent No.1 therein had retained the amount from 15.10.2010, to pay interest at 8% per annum to the petitioner and directed the respondent No.1 therein to refund the amount of Rs.24,10,000/- with interest at 8% per annum from 15.11.2010 till the date of payment. 8. He had also relied on another judgment of the Allahabad High Court in the case of Rakesh Kumar Kaushal Vs. State of U.P.1, on paragraph No.47 of the judgment reads thus: “47. In light of the aforesaid discussion, we allow this writ petition with the direction to the respondent bank to refund Rs. 60 lakhs, which was deposited by the petitioner being the auction-purchaser of the aforesaid property, to the petitioner within a period of one month, along with interest @ 9 percent. Considering the mental trauma and harassment with which the petitioner has suffered during such a long period after investing such a huge amount, we impose a cost of Rupees two lakhs to secure the ends of justice, which shall be paid by the Bank to the petitioner within a period of one month from today failing which petitioner will approach the District 1 2018 SCC Online ALL 5757 - 10 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 Magistrate, Sultanpur, who shall recover the amount aforesaid, as arrears of land revenue and pay the same to the petitioner or to any person authorized by him.” 9. It is submitted that in this case also, for the delay and latches on the part of the respondent/bank, the petitioner is entitled for the return of the EMD with interest at the rate of 12%. 10. The respondent bank has filed its objections. In the objections, it is stated that the bank has issued a notice under Section 13(2) on 25.04.2018 and under Section 13(4) on 09.08.2018 under the SARFAESI Act. Against the possession notice dated 09.08.2018, the borrowers have filed an application in S.A.No.167/2020 and the same was allowed by an order dated 27.01.2020 wherein the Debt Recovery Tribunal was pleased to set aside the possession notice dated 09.08.2018. The respondent/bank during the pendency of S.A.No.167/2020 had issued a Sale Notice dated 06.07.2019 and published the notice in the newspaper. The petitioner emerged as a successful bidder in the auction held on 14.08.2019 and bid acceptance letter dated 14.08.2019 was issued to the plaintiff. Then on 28.02.2023 S.A.No.314/2020 - 11 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 was allowed by setting aside the auction notice dated 06.07.2019 and sale confirmation letter dated 14.08.2019 issued to the petitioner and directed the respondent/bank to return the EMD amount to the petitioner along with 6% p.a. from the date of sale in accordance with law and accordingly they have returned an amount of Rs.22,28,750/- along with interest of Rs.5,82,087.95/- on 21.12.2023. Thereafter, the borrower has settled the loan. 11. Learned counsel appearing for the respondent/bank submits that the bank had acted in accordance with law and as per the orders of the Debt Recovery Tribunal had returned the amount to the petitioner. The petitioner cannot come before this Court seeking such a relief. It is submitted that the petitioner cannot seek the interest at 12% and also damages of Rs.50,00,000/- from the bank and bank had acted in accordance with law and the petition is not entitled for any relief from this Court. 12. Having heard the learned counsels on either side, perused the material on record. The auction had taken place on 14.08.2019 and the petitioner has emerged as the highest - 12 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 bidder and he has paid an amount of Rs.8,90,000/- on 08.08.2019 and also paid an amount of Rs.13,38,750/- on 16.08.2019. The bank's communication to the petitioner is on 21.12.2023 stating that the DRT has set aside the auction and they are refunding the amount along with 6% interest. It is the case of the petitioner that he has been continuously in touch with the bank and the bank has never informed them about the pending proceedings. The borrower had filed S.A.No.167/2020, where they have questioned Section 13(4) notice issued by the bank, which was set aside on 27.01.2020. In the interregnum period, Bank had conducted the auction. Even on 27.01.2020, it was not informed to the petitioner. The borrower had filed S.A.No.314/2020 challenging the auction notice dated 06.07.2019 and the Debt Recovery Tribunal by order dated 28.02.2023, had set aside the auction Sale Notice dated 06.07.2019 and Sale confirmation letter dated 14.08.2019 and directed to return the EMD amount along with 6% interest. At any stage of the proceedings, neither the principal borrower nor the bank has made any efforts to make the petitioner as a party respondent. When the bid of the petitioner is accepted, when - 13 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 25% of the amount is deposited by the petitioner, he is a necessary party to the proceedings because any outcome in the S.A. proceedings will have an impact on the rights of the petitioner. Had this petitioner been a party to the proceedings, with regard to the 6% interest and other things, he would have submitted before the DRT and he might have asked for the return of the EMD in the year 2020 itself. But for the best reasons known to the Bank and to the borrower, he was not made a party. When the auction was challenged by the borrower and it was brought to the notice of the DRT, the DRT ought to have directed to implead the petitioner who is an auction purchaser. Because of the lapses on the part of the respondent and on the part of the borrower, the petitioner is made to face the consequences of losing the interest as he is paying 9.5% to the Karnataka Bank and also he is not able to have the property and the value of the property according to the petitioner has increased multifold. If this was brought to his notice right in the year 2020, he would have taken appropriate action and he would have invested the money in some other property. - 14 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 11. The petitioner has placed before this Court the letter dated 26.12.2023 addressed by the Karnataka Bank which reads thus: “with regard to the above subject, we wish to inform you that, we have charged ROI at 9.95% for your Overdraft a/c for the August 2019 month. The transactions mentioned in your letter i.e. Rs.8,90,000/- on 08.08.2019 and Rs.13,38,750/- on 16.08.2019 is also being charged at the rate of 9.95%. This is for your kind information. This letter is issued on your specific request without any obligation on the signing officials.” 12. If the Banks are acting in this manner by keeping the auction purchaser in complete darkness for a Period of more than 3 years, the auction system itself will collapse and no prudent bidder will participate in the auction. Banks while conducting the auction are discharging the duties of a statutory authority but not like a private party/ seller. They owe a fiduciary duty towards the auction purchaser. The relationship of the Bank and the auction purchaser shall be governed by fairness, transparency disclosures and reasonableness. Suppressing the pending litigation by the bank is nothing but misrepresentation and amounts to abuse of Statutory power vested with them. The Hon’ble Apex Court - 15 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 in Mathew Varghese v. M. Amritha Kumar & Others2 has held that a secured creditor must strictly comply with the statutory mandate and act fairly and transparently in the Sale process. The auction purchaser’s deposit with the bank is not a voluntary investment with the Bank or an interest free loan. Once the bank fails to confirm the sale and keeps the purchaser in darkness about the litigation initiated by the borrower, the auction purchaser is entitled for interest on that amount. The Bank cannot auction with one hand and litigate with the other while using the purchaser money interest free for almost three years. In the light of the above discussion this Court deems it appropriate to pass the following: ORDER i. The bank shall pay the interest on 25% of the EMD amount i.e., an amount of Rs.22,28,750/- at the rate of 9.95%, within a period of four weeks from the date of the receipt of copy of this order. 2 (2010) 5 SCC 610 - 16 - HC-KAR NC: 2025:KHC:53420 WP No. 9170 of 2024 ii. Considering the lapses on the part of the bank in informing the auction purchaser, towards whom the bank owes responsibility, the bank shall pay an amount of Rs.50,000/- towards costs within a period of four weeks from the date of the receipt of copy of this order. iii. Accordingly, the writ petition is allowed. iv. All I.As. in this petition shall stand closed. SD/- (LALITHA KANNEGANTI) JUDGE MEG List No.: 1 Sl No.: 3