18 April 2024 Banking Law >> Business & Commercial Law   |   Consumer Law >> Civil & Consumer Law   |   Property/Real Estate Law >> Property & Real Estate  

A recent court case of Govind Kumar Sharma & Anr. Vs Bank of Baroda & Ors., highlights the importance of following proper procedures in property auctions. In this case, a bank's failure to provide a mandatory notice to borrowers resulted in a successful appeal by the buyers at the auction.

Facts:

The case involved a loan default, leading the bank to initiate proceedings under the SARFAESI Act to recover its dues. The property was auctioned, and the tenants purchased it. However, the borrowers challenged the sale because they hadn't received the legally required 30-day notice before the auction.

The court agreed with the borrowers and set aside the auction. While this meant the buyers lost ownership of the property, they weren't left empty-handed. Due to the bank's error, the court ordered the bank to repay the full auction price to the buyers, along with 12% compound interest from the date of purchase.

Conclusion:

The original property owners regained ownership of the property. However, they still owed the bank the original loan amount. The court directed them to settle their accounts with the bank. Once settled, the bank was required to issue a "No Dues Certificate." This case underscores the significance of following proper legal procedures in auctions. Failing to do so can have significant consequences, both for the seller and the buyer. Borrowers have the right to be informed before their property is sold, and buyers need to be confident in the validity of the auction process.

Who Benefits?

This case offers some takeaways for different parties involved in property auctions:

• Borrowers: This case emphasizes their right to proper notice before their property goes to auction.
• Buyers: It highlights the importance of ensuring proper procedures are followed before participating in an auction.
• Lenders: The case serves as a reminder to strictly adhere to legal requirements when conducting auctions to recover debts.