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HC directs SBI to refund forfeited money

Last Updated 02 May 2022, 22:31 IST

The Karnataka High Court has directed State Bank of Mysore (now SBI) to refund the forfeited money to a bidder in view of the fact that the property was alienated as a gift deed before the auction sale.

The petitioner was a successful buyer of the property situated at Nayandahalli off Mysuru Road after he quoted Rs 56.40 lakh. The petitioner had deposited Rs 24.10 lakh and was asked to deposit the balance amount by November 20, 2010. However, on making enquiries in the office of the jurisdictional sub-registrar office, the petitioner came to know that the borrower had executed a registered gift deed in favour of his wife even before the auction sale notification in 2010.

The grievance of the petitioner was that the bank not only refused to annul the transaction between the borrower and his wife, but insisted he deposit the remaining amount and forfeited the already deposited Rs 24.10 lakh.

The court noted that the outstanding loan was also settled by way of a 'One Time Settlement' (OTS) scheme. The bank has taken a position that since the assets were taken over by it under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, the gift deed executed would not have any legal effect on the efficacy of the sale and transfer of title in favour of the highest bidder.

Justice P Krishna Bhat noted that the bank cannot use a further part amount deposited by the petitioner after having settled the loan account with the borrower.

“Since Respondent no 1 (bank) has not suffered any loss or damage, it is not entitled to retain the amount of Rs 24.10 lakh deposited by the petitioner,” the court said.

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(Published 02 May 2022, 19:34 IST)

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