IDBI BANK LTD. [APPELLANT(S)] Vs. RAMSWAROOP DALIYA AND ORS. [RESPONDENT(S)]
CIVIL APPEAL NOS. OF 2024 (Arising out of S.L.P. (C) Nos. 8159-8160 OF 2023)
(2JB, PANKAJ MITHAL and R. MAHADEVAN JJ., delivered by PANKAJ MITHAL, J.)
In a landmark judgment regarding the cancellation of an auction purchase by IDBI Bank, the Supreme Court of India recently addressed the responsibilities of auctioneers and the rights of auction purchasers. The case revolved around IDBI Bank’s refusal to issue a sale certificate to an auction purchaser despite the latter’s compliance with the terms of the auction and the timely offering of the balance payment. The Court’s decision underscored the principle that an auctioneer, once committed to the terms of an auction, cannot unilaterally withhold the issuance of the sale certificate if the purchaser fulfills their obligations. The dispute began when IDBI Bank conducted an auction of a property. The highest bidder, now the auction purchaser, complied with the auction terms, including depositing the requisite bid amount and offering to pay the remaining balance within the stipulated period. However, despite this adherence, IDBI Bank did not issue the sale certificate.
In its ruling, the Supreme Court emphasized that the auctioneer’s duty to issue a sale certificate is bound by the terms of the auction, provided the purchaser has not defaulted. The Court specifically highlighted that the auction purchaser in this case had complied with all stipulated conditions, including offering to deposit the balance auction amount within the prescribed time frame. Thus, the reason for the non-issuance of the sale certificate rested solely with the appellant bank and not with the purchaser. The Court remarked, “The reason for the non-issuance of the sale certificate is solely attributable to the appellant-Bank and that there were no lapses or failures on the part of the auction purchaser in fulfilling their obligations.”
The judgment has broader implications, particularly in protecting auction purchasers from arbitrary actions by financial institutions and auctioneers. By ruling in favor of the purchaser, the Supreme Court reinforced the principle that an auction purchaser is entitled to receive a sale certificate as a matter of right once the auction terms are fulfilled. The ruling also clarified that institutions conducting auctions must adhere to the auction’s rules and cannot later introduce arbitrary reasons to rescind the process or refuse the sale certificate. Such conduct would erode confidence in the auction process and potentially harm the interests of bona fide purchasers. Additionally, the Supreme Court’s decision serves as a precedent ensuring that the balance of fairness in auction transactions is maintained. The ruling highlights that if a bank or any auctioning authority refuses to issue a sale certificate despite compliance by the purchaser, it is the auctioning authority’s action that constitutes a breach. This judgment is crucial in the context of non-performing asset (NPA) auctions frequently conducted by banks and financial institutions, as it holds them accountable for honoring their commitments to the auction process. In conclusion, the Supreme Court’s judgment in the IDBI Bank case has reaffirmed the rights of auction purchasers and set a clear standard for auctioneers’ conduct.
