Case Background
This case arose from an e-auction of a mortgaged flat conducted by a bank under the SARFAESI Act, 2002. The appellant participated in that auction and was declared the highest bidder.
After winning the bid, the appellant deposited the entire sale consideration of ₹1,87,75,000 on 19.06.2024 in favour of the respondent Bank. Despite this full payment, the bank did not hand over physical possession of the flat or execute the sale deed within what the appellant considered a reasonable time.
The original dispute was first brought before a learned Single Judge of the Patna High Court in Civil Writ Jurisdiction Case No. 16777 of 2024. In that writ, the Single Judge directed the bank to execute the sale deed in favour of the appellant, and that direction was later complied with.
However, while disposing of the writ petition by order dated 29.04.2025, the Single Judge rejected the appellant’s claim for interest on the sale consideration amount for the period during which he had neither possession nor title. Aggrieved only by this rejection of interest, the appellant filed the present Letters Patent Appeal No. 615 of 2025 before a Division Bench of the Patna High Court.
Meanwhile, in the background, there was a proceeding before the Debts Recovery Tribunal (DRT), Patna, being S.A. No. 66 of 2024 filed by the original borrower. The auction sale itself had been conducted on 06.06.2024 subject to further orders of the DRT in that pending securitisation application.
During the writ proceedings, by an interim order dated 05.02.2025 passed in CWJC No. 16777 of 2024, the learned Single Judge directed steps that eventually led to the bank handing over physical possession of the flat to the appellant on 11.02.2025.
Thus, from 19.06.2024 (date of deposit) to 11.02.2025 (date of delivery of possession), the appellant’s money remained with the bank while he neither had possession of the property nor full enjoyment of his funds. This period of deprivation formed the core of the grievance in the appeal.
What the Court Examined and Decided
The Division Bench, comprising Hon’ble the Chief Justice and Hon’ble Mr. Justice Alok Kumar Sinha (author of the judgment), heard detailed submissions from both sides. The central question was whether, in these circumstances, the auction purchaser was entitled to interest on the deposited amount for the period when possession was delayed.
The appellant’s side argued that after he deposited ₹1,87,75,000 on 19.06.2024, the bank did not hand over physical possession until 11.02.2025 and did not execute the sale deed within a reasonable time. Counsel stressed that for nearly eight months the appellant was deprived of both the property and the use of his substantial funds.
It was emphasised that the bank continued to hold and utilise the amount without paying any interest. This, according to the appellant, was arbitrary and unjustified. The appellant acted in good faith, believing that on paying the full price he would soon receive peaceful possession and title. Instead, he remained without possession and without any return on his money.
The appellant further contended that the Single Judge erred in rejecting the claim for interest on the ground that he had voluntarily participated in the auction. The appellant maintained that participation in an auction did not mean he surrendered his right to fair treatment and equitable relief, especially when the delay was not caused by him.
On the other hand, the bank (respondents 3 to 6) attacked the Letters Patent Appeal as misconceived and an abuse of the process of law. They supported the Single Judge’s order as well reasoned and legally sound.
The bank’s counsel pointed out that the e-auction held on 06.06.2024 was expressly subject to further orders of the DRT, Patna, in S.A. No. 66 of 2024 filed by the original borrower. The appellant knew this condition and was later impleaded as a party before the DRT.
According to the bank, because the appellant knowingly entered a conditional auction, he accepted the risk of delay arising from the DRT proceedings. Therefore, he was estopped from later seeking interest or compensation on account of that very delay.
The bank also denied any arbitrariness. It argued that the delay flowed from two factors beyond its control: first, the pendency of S.A. No. 66 of 2024 before the DRT, which made the sale conditional; and second, the original borrower’s continued illegal occupation and refusal to vacate or remove their household articles. Unless those obstacles were removed, the bank claimed it could not lawfully deliver vacant possession.
Further, the bank disputed the idea that it “enjoyed” the auction money. It submitted that the deposited amount was adjusted towards the outstanding dues of a non-performing asset (NPA) and not kept in any profit-bearing account for the bank’s benefit. Under the SARFAESI Act, the main object is recovery of public money and reduction of NPAs, not unjust enrichment.
The bank also stressed that SARFAESI auctions are conducted on “As is where is”, “As is what is” and “Whatever there is” basis, governed by the principle of “caveat emptor” (let the buyer beware). Hence, the purchaser was expected to conduct due diligence on title, possession and status. The bank saw itself only as a secured creditor enforcing security interest, not as a real estate vendor guaranteeing clear title or immediate possession.
After examining the pleadings and documents, the Division Bench framed a principal issue: whether the appellant, having deposited the entire sale consideration under SARFAESI auction and receiving delayed possession due to pending litigation and related circumstances, was entitled in law or equity to claim interest for the intervening period when possession was not delivered.
The Court noted that the relevant dates were not in dispute. The full payment was made on 19.06.2024. Physical possession was given only on 11.02.2025 pursuant to the interim order dated 05.02.2025 of the Single Judge. Thus, for around eight months, the appellant’s significant funds remained with the bank while he did not enjoy possession.
The Court observed that the delay was not attributable to the appellant. He had complied with all terms of the auction notice and the conditions of sale.
The Division Bench then recorded that it found merit in the appellant’s submissions. It held that once the bank accepted the entire consideration amount, it was under a legal and equitable obligation to deliver possession within a reasonable time.
The plea that delay was due to pending litigation or the borrower’s conduct could not absolve the bank of its duty to safeguard the interests of a bona fide auction purchaser. In clear terms, the Court stated that after accepting the amount and confirming the sale, the bank effectively became a trustee of the deposited funds to the extent that it could not unjustly retain or utilise them without giving possession.
The Court further held that withholding possession for nearly eight months, despite receiving full payment, caused clear financial prejudice to the appellant. He was deprived of the use of both the funds and the flat.
The Division Bench also found fault with the Single Judge’s approach. It held that the Single Judge failed to appreciate that the interest claim arose not from a commercial bargain but from principles of equity, fairness and accountability.
Even if the SARFAESI Act or the Security Interest (Enforcement) Rules do not explicitly provide for interest in such a situation, the High Court’s inherent jurisdiction under Article 226 of the Constitution allows grant of just and equitable relief. The Court emphasised that such relief is meant to ensure a party does not suffer for reasons not attributable to it.
Accordingly, the Court concluded that the appellant was legally entitled to interest on the amount of ₹1,87,75,000 because the bank’s retention of such a large sum, without delivering possession, was unjustified.
However, the Court also balanced the equities. It held that the bank could not reasonably be asked to pay interest for an initial processing period. The Court therefore denied interest from 19.06.2024 to 18.09.2024, considering this ninety-day duration as reasonable “handling process time” for the bank from the date of deposit.
Thus, the Court set aside the Single Judge’s order only to the extent of rejection of interest. The Letters Patent Appeal was allowed. The respondents were directed to pay simple interest at 6% per annum on the amount of ₹1,87,75,000 for the period from 19.09.2024 to 11.02.2025, i.e., from the end of the 90 days after deposit till the date of delivery of possession. This payment is to be made within four months from the date of receipt of the judgment. All pending interlocutory applications were disposed of.
Why This Judgment Matters
This judgment of the Patna High Court is important for people who buy properties through bank auctions under SARFAESI.
It makes clear that if a buyer has paid the full price but the bank delays handing over possession for reasons not caused by the buyer, the bank may be ordered to pay interest for the period of unreasonable delay.
The Court treated the bank, after taking full money, like a trustee with a duty to protect the buyer’s interests. It did not allow the bank to keep a large sum for months without either giving possession or compensating the buyer with interest.
At the same time, the Court recognised that banks need some processing time and excluded a reasonable 90-day period from interest liability. This creates a balanced approach between protecting auction purchasers and recognising the practical functioning of banks.
For laypersons and investors, this judgment shows that even when auction terms are strict and the sale is “as is where is”, the High Court can still use its constitutional powers to grant equitable relief where there is clear unfairness not caused by the buyer.
Legal Issues and Answers
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Issue: Whether an auction purchaser who deposited full sale consideration in a SARFAESI auction, but received delayed possession due to pending litigation and borrower’s occupation, is entitled to interest on the deposited amount for the intervening period.
Answer: Yes. The Patna High Court held that, in equity and under its jurisdiction in Article 226, the purchaser is entitled to simple interest at 6% per annum on the sale consideration for the period beyond a reasonable 90-day processing time, i.e., from 19.09.2024 to 11.02.2025.
Cases Cited by the Court
- No specific earlier judgments are cited or relied upon in the text of this decision.
Case Details
Case Number: Letters Patent Appeal No. 615 of 2025 in Civil Writ Jurisdiction Case No. 16777 of 2024
Case Title: Vishal Kumar v. The State of Bihar & Ors.
Coram: Hon’ble the Chief Justice; Hon’ble Mr. Justice Alok Kumar Sinha (judgment authored by Hon’ble Mr. Justice Alok Kumar Sinha)
Citation: 2025(4) PLJR 712
Advocates:
For the appellant: Mr. Sanjeev Kumar Mishra, Senior Advocate; Ms. Manini Jaiswal, Advocate; Mr. Manas Rajdeep, Advocate; Mr. Shubham Kumar Upadhayay, Advocate; Ms. Adya Pandey, Advocate; Mr. Kumar Ravish, Advocate.
For the State: Mr. Sanjay Kumar Ghosarvey, AC to AAG-3.
For the Bank of Baroda: Mr. Mrigank Mauli, Senior Advocate; Mr. Santosh Kumar Singh, Advocate; Mr. Anubhav Verma, Advocate.
Nature of the Case: Letters Patent Appeal challenging part of a writ judgment (order in a civil writ jurisdiction case) concerning SARFAESI auction, delayed possession, and claim for interest.
Date of Judgment: 15.10.2025
Link to Judgment: Click here to read the full judgment of the Patna High Court
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