High Court Recalls Direction to Pay Interest on Auction Deposit Upon Disclosure of Suppressed Facts; Holds Remedy Lies Before DRT

The High Court recalled its earlier direction to pay interest on the auction deposit upon discovering that material facts had been suppressed, and held that the petitioner’s remedy lies before the Debts Recovery Tribunal.

The Division Bench of the Allahabad High Court, comprising Justice Shekhar B. Saraf and Justice (Dr.) Yogendra Kumar Srivastava, while adjudicating a writ petition, held that when an auction is cancelled and the earnest money is promptly refunded, no interest is payable—particularly where earlier directions of the Court were obtained through suppression of material facts. The Court further held that any residual remedy available to the petitioner lies before the Debts Recovery Tribunal.

The High Court considered a writ petition where, by its earlier order dated April 9, 2025, it had directed the respondent Bank to compensate the petitioner with interest at the rate of 24% per annum on the auction amount deposited by the petitioner. This direction was issued based on submissions made at that time, which indicated that the petitioner’s earnest money had remained with the Bank due to the failure of the auction process.

Upon further hearing and consideration of submissions from both parties, the Court noted that crucial facts had been previously suppressed. It was brought to light that the auction in question had been cancelled within five days of its conduct, and the earnest money deposited by the petitioner was returned within seven days thereafter. The Court held that the earlier order directing interest payment had been passed under a misapprehension of facts, due to the omission of this key information.

Given the corrected factual matrix, the Court recalled the portion of its April 9, 2025, order concerning payment of interest and return of funds to the petitioner. It also observed that no sale certificate had been issued in favour of the petitioner since the auction was cancelled, and the Bank had entered into a One-Time Settlement (OTS) with the borrower, returning possession of the property to them.

In light of these developments, the Court concluded that no further interference was required under its writ jurisdiction. It clarified that any remedy available to the petitioner would lie before the Debts Recovery Tribunal. Accordingly, the writ petition was disposed of.

Mr. Afzal Parvej and Mr. Arif Ikbal, Advocates, represented the Petitioner.

Mr. Ajal Krishna and Mr. Anadi Krishna Narayana, Advocates, appeared for the Respondents.

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