Bombay High Court Orders Refund with 10% Interest in E-Auction Dispute, Citing Bank’s Failure to Ensure Property Was Free from Legal Disputes and Undisclosed Litigation

Court’s Decision:
The Bombay High Court ordered the refund of ₹5,03,42,000 to RVS Global Solutions Pvt. Ltd., the petitioner, along with 10% interest per annum from January 1, 2024. The Court held that the petitioner was not obligated to proceed with the e-auction purchase due to unresolved litigation involving the auctioned property and directed the respondent, Bank of Baroda, to return the amount.

Facts of the Case:
RVS Global Solutions Pvt. Ltd. participated in an e-auction conducted by Bank of Baroda for commercial premises located in Vashi, Navi Mumbai. The petitioner was the highest bidder, depositing ₹5,03,42,000 for the property.

However, after the auction, it was revealed that the property was embroiled in litigation in the Debt Recovery Tribunal (DRT) and other courts, which had not been disclosed to the petitioner prior to the auction. The petitioner argued that it was no longer interested in purchasing the property due to the ongoing legal disputes and sought a refund of the deposited amount.

Issues:
The primary issue was whether the petitioner was entitled to a refund of the auction amount, given the undisclosed litigation affecting the property.

Petitioner’s Arguments:
The petitioner contended that it had participated in the auction under the assumption that the property had a clear title, and that the undisclosed litigation posed a significant risk.

The petitioner argued that Bank of Baroda, having failed to disclose the litigation, should not retain the auction amount.

Respondent’s Arguments:
Bank of Baroda, represented by the respondents, argued that the petitioner should be relegated to pursuing remedies before the Debt Recovery Tribunal (DRT) and that the High Court’s writ jurisdiction was not appropriate for the dispute.

The bank also contended that the auction process was conducted in good faith, and any issues with the property title were discovered later.

Court’s Analysis:
The Court found that the petitioner, as a third party, could not be expected to engage in ongoing litigation concerning the property. It held that Bank of Baroda should have taken the utmost care to ensure the property was free from legal disputes before conducting the auction. The Court emphasized that the petitioner had a legitimate expectation of receiving clear title upon participating in the auction and that failure to disclose the pending litigation undermined the auction’s validity.

The Court rejected the argument that the petitioner should approach the DRT, noting that the petitioner’s rights were independent of the ongoing DRT proceedings involving the borrower.

Conclusion:
The Bombay High Court ordered Bank of Baroda to refund the ₹5,03,42,000 to the petitioner with 10% interest per annum from January 1, 2024.