Bank Must Refund Deposits and Attempt Amicable Settlement if Property Possession Cannot Be Delivered Post-Auction

The Petitioner participated in an e-auction conducted by Punjab National Bank on March 10, 2015, for a shop property in Bilaspur.

He deposited 25% of the bid amount, totaling ₹6,93,750/-.

Despite repeated requests for possession and execution of the sale deed between 2018 and 2021, the Bank remained silent.

In March 2026, the Petitioner discovered that at the time of the auction, the Bank was not in physical possession of the property and was engaged in litigation with the original owner (Smt. Polly Chakraborty), which included a stay order on auction proceedings issued by the High Court in 2015.

The Petitioner alleged that the Bank suppressed these material facts and sought a refund of the deposited amount with interest.

1. Whether the respondent Bank is liable to refund the deposited amount due to the suppression of material facts regarding pending litigation and lack of physical possession.

2. Whether the Petitioner is entitled to interest on the refunded amount despite the Bank’s administrative constraints.

The Court primarily relied on the principles of transparency and disclosure in public auctions as established by the Hon’ble Supreme Court in Mohd. Shariq v. Punjab National Bank & Others (2023 SCC OnLine SC 392), which mandates that secured creditors must disclose known encumbrances and litigation to bona fide auction purchasers.

The court also applied general principles of equity and administrative law regarding arbitrary and mala fide conduct by instrumentalities of the State under Article 226 of the Constitution of India.

The Court evaluated the Petitioner’s contention that the Bank conducted the auction under the false pretense that the property was free from encumbrances while omitting the fact that a stay order existed in WPC No. 807/2015.

The Petitioner argued that had the litigation been disclosed, he would not have deposited the funds.

During the proceedings, the Bank conceded "in principle" to the refund of the principal amount but contested the payment of interest citing internal "constraints".

The Court noted the failure of the Bank to execute the deed or deliver possession for over a decade and observed the necessity for an amicable settlement to resolve the specific dispute over interest and the timeline of repayment.

The Court ordered the Petitioner to appear before the Bank in the week commencing May 4, 2026, for settlement talks and the writ petition was disposed of with a grant of liberty to the Petitioner to file a fresh petition if no settlement is reached.