The court established that an auction purchaser is entitled to interest on the auction amount when delayed refunds occur due to no fault of their own.

JUDGMENT

ABHAY S. OKA, J.

1. Leave granted.

FACTUAL ASPECT

2. The 4th respondent is a Co-operative Bank. The 1st, 2nd, 5th and 6th respondents had taken a business loan of Rs.25,00,000/- from the 4th respondent. 7th to 9th respondents guaranteed re-payment of the said loan.

3. As the 1st, 2nd, 5th and 6th respondents committed defaults in payment of instalments, the 4th respondent bank filed a dispute before the 3rd respondent for recovery of the loan amount with interest. The 3rd respondent is the Assistant Registrar of Co-operative Societies and Recovery Officer. The dispute was allowed. The 4th respondent was held entitled to a sum of Rs.21,92,942/- with further interest and costs from the borrowers. In recovery proceedings, on 10th June 2019, a sale proclamation was issued by the 3rd respondent for the sale of property held by the 1st and 2nd respondents. The value of the property subject matter of auction was fixed at Rs.80,67,500/- . The sale proclamation of the auction sale fixed on 22nd July 2019 was published in the local newspapers on 4th July 2019. In the auction sale, the highest bid of Rs.81,20,000/- offered by the appellant was accepted. A sale confirmation certificate was issued on 5th September 2019 by the 3rd respondent to the appellant. The amount of Rs.81,20,000/- was deposited by the appellant on 21st July 2019 with the 3rd respondent. The excess amount of Rs.59,64,600/- was sought to be refunded to the borrowers by the 3rd respondent by a cheque along with a letter dated 5th September 2019. It appears that the cheque was returned due to inter se dispute amongst the borrowers.

4. The 1st and 2nd respondents invoked the writ jurisdiction of the High Court of Karnataka for setting aside the auction. By judgment dated 17th March 2022, the learned Single Judge proceeded to set aside the auction sale made in favour of the appellant. The learned Single Judge held that the 4th respondent bank was entitled to the awarded amount along with interest, and the 1st and 2nd respondents are liable to pay the said amount to the bank. The learned Single Judge noted that the amount of Rs.25,61,400/- was deposited by the 1st and 2nd respondents within three months of filing the writ petition. The learned Single Judge allowed the 4th respondent bank to withdraw the said amount together with interest accrued thereon. The learned Single Judge directed the 4th respondent to refund the entire auction amount paid by the appellant along with an additional amount of 5 per cent of the said amount in the light of sub-rule 4(b) of Rule 38 of the Karnataka Co- operative Societies Rules, 1960 (for short, ‘the Rules’).

5. Being aggrieved by the judgment of the learned Single Judge, the appellant preferred Writ Appeal before the Division Bench, which was dismissed by the judgment dated 5th September 2022.

6. The decisions of the learned Single Judge and the Division Bench are the subject matter of challenge in this appeal.

7. Though the direction to set aside the auction sale was challenged in this appeal, as can be seen from the order dated 17th March 2023 passed by this Court, notice was issued only on the issue of adequately compensating the appellant. The said order records that the 4th respondent bank retained the sum of Rs.81,20,000/- paid by the appellant from 21st July 2019. Order dated 4th January 2024 records the statement of the learned counsel appearing for the 4th respondent that the amount deposited by the appellant was received by the said respondent on 13th October 2022. Till that date, it was lying with the 3rd respondent. The order dated 12th January 2024 passed by this Court records that the appellant was claiming interest from the 3rd and 4th respondents.

SUBMISSIONS

8. We have heard the learned counsel appearing for the appellant and the learned counsel for the 4th respondent. Notice has been duly served to the 3rd respondent.

9. The submission of the learned counsel appearing for the appellant is that solatium at 5 per cent of the