Bank of Baroda Vs Karwa Trading Company & Anr. (Supreme Court of India)
Summary: In Bank of Baroda v. Karwa Trading Company & Anr. (Civil Appeal No. 363 of 2022, decided on 10 February 2022), the Supreme Court examined whether a borrower undergoing recovery proceedings under the SARFAESI Act, 2002, could reclaim possession of mortgaged property by merely depositing the reserve price fixed for auction rather than discharging the full outstanding liability. The borrower had availed loan facilities from the appellant bank secured against two properties but defaulted, leading to classification of the account as NPA. Following statutory procedure under Section 13(4) of SARFAESI Act, symbolic and actual possession of the properties was taken, and auction notice was issued fixing the reserve price at ₹48.65 lakh. The borrower challenged the auction before the DRT, which allowed bids but stayed the sale certificate subject to borrower depositing the reserve price. Though bids up to ₹71 lakh were received, the auction failed owing to litigation, and ultimately the Rajasthan High Court directed the bank to release the property to the borrower on payment of ₹65.65 lakh. On appeal, the Supreme Court held that such directions were contrary to Section 13(8) of SARFAESI Act, which provides that redemption of mortgaged property is permissible only upon full discharge of “mortgage money” i.e., the entire outstanding dues together with costs and expenses. Payment of reserve price or part dues cannot compel restoration of possession or release of title documents. The Court clarified that unless the borrower pays the entire outstanding dues with costs, banks cannot be restrained from auctioning mortgaged properties to realize debts, thereby upholding the legislative intent of SARFAESI to ensure recovery without undue judicial interference.
