Bank's failure to disclose pending litigations results in refund with interest to distressed buyer
The Andhra Pradesh High Court has ruled in favor of V Amasa Reddy, an auction purchaser, ordering the refund of Rs. 1,30,50,000/- along with interest, following the discovery of defects in the property title post-sale. The judgment, delivered by Justices Battu Devanand and A. Hari Haranadha Sarma, underscores the duty of banks to ensure clear title before conducting property auctions.
The petitioner, V Amasa Reddy, faced multiple legal challenges after purchasing a property in Sri Kalahasthi Town, which was auctioned by Indian Bank. These challenges arose due to undisclosed litigations, including objections from the Kalahasthi Municipality and a pending suit in the X Additional District and Sessions Court. Despite efforts to resolve the issues, the petitioner was unable to gain possession of the property, leading to financial hardship and bankruptcy.
The court found that the bank failed in its duty to verify and disclose the title status, thereby holding the bank liable for refunding the auction amount and related expenses. The judgment dismisses the principle of "Caveat Emptor" in cases of latent defects, emphasizing the bank's responsibility to ensure a clear title. The court also ordered the reimbursement of stamp duty and registration charges with interest, setting aside the sale certificate and deed issued to the petitioner.
This landmark decision reinforces the legal obligation of banks to provide transparent information during property auctions, protecting the rights of auction purchasers from unforeseen litigations.
Bottom line:-
Auction Purchaser of immovable property through a bank auction is entitled to a refund of the auction amount with interest if defects in the title of the property are discovered post-sale, and such defects were not disclosed at the time of the auction.
Statutory provision(s): SARFAESI Act, Transfer of Property Act, 1882 Section 55(2)
