Simplified Explanation of the Judgment
In February 2021, the Patna High Court dealt with a petition where two individuals challenged the Bank of Baroda’s move to take possession of and auction their only residential house. The petitioners had taken a term loan but fell behind on payments from December 2019 onwards. They argued that floods and the COVID-19 pandemic lockdown had caused financial hardship, which led to defaults.
They sought multiple reliefs from the Court:
- Quashing the possession notice issued by the Bank in June 2020 under the SARFAESI Act.
- Directing the Bank not to auction their house, as it was their sole residence.
- Seeking waiver of additional interest and charges for the default period, citing the pandemic.
On 03.12.2020, when the case first came up, the petitioners pleaded for protection as the auction was scheduled for 05.12.2020. They gave an undertaking to the Court that they would clear overdue amounts by 31.12.2020 and also pay ₹6,00,000 in January 2021. The Court accepted this assurance, put the auction on hold, and recorded a mutual arrangement between the parties.
However, by 08.02.2021, when the matter was reviewed, the petitioners had not honored their commitments. Instead of clearing ₹9.53 lakhs due by December 2020 and an additional ₹6 lakhs in January 2021, they deposited only ₹1 lakh in December and ₹19,000 in January. The Bank pointed out this failure and opposed any further indulgence.
The petitioners claimed they were in the process of selling another property and sought more time. But the Court held that they had “miserably failed” to comply with their solemn undertaking before the Court. It observed that the auction had already been stalled once as an exceptional measure, thanks to the Bank’s cooperation. Since the petitioners breached their own assurances, they were no longer entitled to equitable relief under Article 226 of the Constitution.
The writ petition was dismissed. The Court allowed the Bank to proceed in accordance with law to realize its dues, including by auctioning the mortgaged residential property.
Significance or Implication of the Judgment
This ruling reinforces that borrowers cannot seek repeated indulgence from the Court after failing to comply with their own commitments. High Courts exercise discretionary writ jurisdiction under Article 226 only in extraordinary situations. Once a borrower defaults on an undertaking recorded by the Court, it cannot expect further leniency.
For banks, the decision is significant because it upholds their right to recover dues through the SARFAESI process, even if the mortgaged property is the borrower’s only residence. For borrowers, it is a cautionary reminder that courts will not protect them indefinitely if they fail to act in good faith and honor commitments made in court.
The judgment also illustrates that while courts may temporarily intervene to balance humanitarian considerations (like COVID-19 hardship), ultimately loan contracts and repayment schedules must be respected.
Legal Issue(s) Decided and the Court’s Decision with Reasoning
- Whether the possession and auction notice issued under SARFAESI could be quashed due to COVID-19-related hardship?
❌ Decision: No. The Court initially protected the petitioners but only based on their undertaking to pay. When they failed to honor it, the Court refused further relief. - Whether the Bank acted unfairly in proceeding with auction of a sole residential property?
❌ Decision: No. The Bank had lawfully exercised its rights under SARFAESI. The Court noted that the Bank had already shown cooperation and deferred auction once. - Whether further indulgence could be granted despite non-compliance?
❌ Decision: No. Failure to fulfill undertakings before the Court disentitles a party from relief under Article 226.
Case Title
Petitioners v. Bank of Baroda & Ors.
Case Number
Civil Writ Jurisdiction Case No. 8883 of 2020
Citation(s)
2021(1) PLJR 782
Coram and Names of Judges
Hon’ble Mr. Justice Ahsanuddin Amanullah
(Oral Judgment dated 08.02.2021)
Names of Advocates and Who They Appeared For
- For the Petitioners: Mr. Ajit Kumar Singh, Advocate
- For the Respondents (Bank of Baroda): Mr. Manish Kishore, Advocate
Link to Judgment
https://patnahighcourt.gov.in/viewjudgment/MTUjODg4MyMyMDIwIzEjTg==-LduYj39st6M=
If you found this explanation helpful and wish to stay informed about how legal developments may affect your rights in Bihar, you may consider following Samvida Law Associates for more updates.
