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In a recent judgment, the high court strongly reprimanded officials of Canara Bank for disregarding established procedures and confiscating the payment made as part of a property sale without adhering to legal norms.
The high court emphasized that banks and financial institutions should not act as property dealers when recovering debts and should instead conduct themselves fairly and in strict accordance with statutory provisions.
Syed Hidayathulla, a resident of Chilakaluripet in Guntur district, approached the high court after Canara Bank rejected his request for a refund of the money he had paid as part of the sale consideration for a property that the bank had auctioned.
Hidayathulla had participated in a Canara Bank auction in 2019, and his bid had been accepted. As per the auction norms, he paid 25% of the sale consideration at the time of the auction. However, due to his deteriorating health, he was unable to pay the remaining amount and duly informed the bank about his circumstances.
Considering his situation, the bank granted him an extension for the final payment. During this period, Hidayathulla sought clarifications regarding the property he had purchased, as he discovered that the total area was less than what had been stated in the auction notice. He also argued that the bank had not provided information about the shape of the property and the pathway between two large buildings, which was part of the total area.
Despite raising his concerns, Hidayathulla paid an additional 15 lakh on the last day of the extended payment period. However, the bank forfeited this amount, citing his failure to fulfill his obligations within the stipulated time. Subsequently, the bank reached a "One Time Settlement" with the original borrower who had defaulted on payment, accepting a lesser amount and returning the title deeds of the land to him.
Hidayathulla argued that the bank's settlement of the loan account with the original borrower before the payment deadline was illegal.
On the other hand, the bank contended that it had the right to forfeit the petitioner's payment if the full amount was not received within the specified time.
Justice DVSS Somayajulu noted that while the bank had the right to forfeit the amount in the event of the auction purchaser's non-payment, it should do so only after the stipulated time. The high court stated that until the last payment date, the advance payment made belonged solely to the auction purchaser, and the bank could not use that money to settle the account of the original borrower.
Expressing dissatisfaction with Canara Bank's actions, the high court ordered the officials to refund the amount paid by Hidayathulla.
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