Accept money from buyers within three months of date of finalization of sale: Gujarat HC to banks

Responding to a writ petition with regard to the SARFAESI Act of 2020, the Gujarat High Court ordered banks to accept money from buyers of property within three months of the date of finalization of sale and not three months of the date of the auction of the property.

Ahmedabad (Gujarat): In an significant judgement with regard to the SARFAESI Act of 2020, a division bench of the Gujarat High Court comprising Chief Justice Vikram Nath and Justice AJ Shastri held that banks can accept money from buyers of property within three months of the date of finalization of sale and not three months of the date of the auction of the property.

The order came in response to a writ petition challenging a bank’s refusal to accept money from the buyer of a property put on auction.

The High Court observed that even rule 9 of the SARFAESI Act does not provide banks to accept money from the buyer within three months of the date of auction of a property and ordered banks to accept money within three months from the date on which the sale was finalized.

The petitioner had appealed to a bank to extend the time limit for paying the remaining due amount which the bank had extended by 90 days from the date of the auction.

However, the High Court found flaw in this and noted that the bank should have extended the date by three months from the date of the finalization of the sale.

The High Court further noted that according to the 9(4) of Security Interest Rule 2002 in the case of immoveable property auction, bank can accept the remaining part of the due amount from the buyer within 15 days of the finalization of the sale.

However, according to the second part of the rule if the buyer and the recipient have signed an agreement, the bank can extend the period by three months for the buyer to settle the dues.

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The High Court further observed that there is no mention about the deadline of three months from the date of auction or the date of finalization of sale in case of a written agreement for the bank to recover the due amount from the buyer.

Bank of Baroda had put on auction plot No. 35 of the Daman-based Somnath Industrial Coopertive Society on November 20, 2019.

Petitioner Annapurna Dealer Pvt Ltd had bid the highest price of Rs 1.42 crore following which he was allotted the plot.

The sale was finalized on November 26 after which the petitioner had paid Rs 1.01 crore to the bank. For the payment of the remaining Rs 39 lakh, the petitioner had asked the bank to give him three month’s time after entering into a written agreement.

The bank had extended the time up to February 17, 2020, which was 90 days from the date of auction.

The petitioner then approached the High Court after the bank refused to accept the remaining Rs 39 lakh after February 20.

Taking the date of finalization of sale as the bench mark, the due date of payment was February 26. Hence, the High Court had ordered the bank to accept the cheque by February 26.