An auction purchaser cannot be made to await indefinite litigation when the bank cannot deliver possession; refund with interest is warranted.

Canara Bank conducted an e-auction of a secured property on 29 April 2024. Noorul Hasan was the successful bidder, paid the entire bid amount of ₹98,10,000, and received a sale certificate on 18 May 2024; the Bank nevertheless did not deliver physical possession or execute a conveyance.

Although the Bank obtained orders under Section 14 of the SARFAESI Act on 13 December 2024 and 29 March 2025, possession remained undelivered.

A third party subsequently sued, claiming rights under a development agreement with the borrower, and obtained an ex parte order restraining the defendants from creating third-party interests in the property.

The Bank’s application under Order VII Rule 11 CPC remained pending, and it had not filed an appeal against the interim order.

The purchaser sought either possession and conveyance or a refund with interest; he ultimately pressed for cancellation and refund.

Whether an auction purchaser who paid the full bid amount and received a sale certificate could be required to await the uncertain outcome of third-party civil litigation when the Bank had not delivered physical possession

Whether the purchaser’s knowledge that the Bank held only symbolic possession precluded a refund where physical possession remained undelivered and litigation created continuing uncertainty

The Court held that auction-sale terms such as “as is where is” and “as is what is” do not give a secured creditor unfettered protection in every circumstance, nor do they necessarily amount to an auction purchaser’s acceptance of indefinite deprivation of the property’s benefits or exposure to litigation after full payment and issuance of a sale certificate.

A purchaser’s knowledge that the Bank held symbolic possession did not, on these facts, require the purchaser to await indefinitely the resolution of subsequent litigation.

The Court referred to Section 14 of the SARFAESI Act in recounting the Bank’s efforts to obtain possession and noted the pending proceedings under Section 34 of that Act and Order VII Rule 11 CPC; it did not decide the jurisdictional question raised in those proceedings.

The petitioner cited K.D. Fabrics Pvt. Ltd. v. State Bank of India and Mr. Mandava Krishna Chaitanya v. UCO Bank in support of a refund with interest; the Court’s decision was, however, expressly grounded in the peculiar facts and balance of equities in this case.

The Bank had been unable to deliver possession despite obtaining two orders under Section 14, while a third-party suit and interim restraint left the purchaser facing prolonged uncertainty.

The Court accepted that the purchaser’s awareness of symbolic possession was relevant, but found it did not amount to accepting indefinite delay and litigation after full payment and issuance of the sale certificate.

Given the circumstances and balance of equities, the Court considered it just to end the transaction and refund the purchase price, without expressing any view on the parties’ rights in the pending suit.

It fixed interest at 8% per annum, taking account of the commercial nature of the transaction, the purchaser’s knowledge of symbolic possession, and the Bank’s pursuit of remedies in the civil proceedings.

Payment was to be made within four weeks of receipt of the order.

The writ petition was disposed of, with no order as to costs; the Court stated that its decision was confined to the case’s peculiar facts and was not to be treated as a precedent.