The High Court of Karnataka has directed a public sector bank to pay a hefty interest to a person for arbitrarily forfeiting ₹24.1 lakh deposited by him in 2010 to purchase a mortgaged property, which was put to auction by the bank without disclosing proper status of the property.
The erstwhile State Bank of Mysore, now merged with the State Bank of India, has been directed to refund ₹24.1 lakh rupees with an interest of 8% per annum from November 15, 2010, till the refund of the deposited amount. The interest would be almost equal to the amount deposited.
Justice P. Krishna Bhat passed the order while allowing a petition filed by one P. Balaji Babu, a resident of Bengaluru.
The bank had issued notification on October 15, 2010, to auction a property as its owner had failed to repay the loan secured by mortgaging that property.
The petitioner, on being the successful bidder in the auction, had deposited ₹24.1 lakh as first part of offer price. However, the petitioner refused to deposit remaining portion of the bid amount after he came to know from the documents of sub-registrar’s office that property put on auction was not in the borrower’s name and the bank had not disclosed this in the auction document though knowing this aspect.
Meanwhile, the bank had settled the dispute with the borrower through a one time settlement scheme as a third party had paid the outstanding loan amount on behalf of the borrower. However, the bank forfeited his deposit on the ground that he had failed to pay the price offered as per the bid claiming that the bank had suffered loss for his failure to pay the remaining amount.
Observing that bank was at fault in retaining deposit, the court said that no loss was caused to the bank from petitioner’s action.
