Bank Cannot Cancel E-Auction After Confirming Sale: DRAT Calls Bank of Baroda's Act Illegal [Read Order]

The Debts Recovery Appellate Tribunal (DRAT) in Kolkata has allowed four appeals filed by an auction purchaser against Bank of Baroda and others holding that the bank cannot cancel E-Auction after confirming sale. The appeals challenged the bank's unilateral cancellation of an e-auction sale after the purchaser had been declared successful and had paid the full bid amount.

Prakaram Land and Development Pvt. Ltd., the appellant was the highest bidder in an e-auction conducted by Bank of Baroda on March 4, 2024, for properties mortgaged by Era Infra Engineering Ltd. After being declared successful, the appellant deposited 25% of the bid amount and was issued a 'sale confirmation letter' by the bank on March 6, 2024.

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Subsequently, the appellant deposited the remaining 75% of the consideration on March 21, 2024. However, on July 28, 2025, the bank unilaterally cancelled the entire auction process, citing vague 'legal conflicts,' and refunded the money to the appellant without providing an opportunity for a hearing.

The bank and the original borrowers contended that the auction purchaser did not have a vested right until a formal sale certificate was issued. They argued that the DRAT had previously stayed the confirmation of the sale and that the bank was well within its rights, as per a clause in the auction notice, to cancel the sale.

They further claimed that the appeals were not maintainable and that the reliefs sought had become infructuous since the money had been refunded. A subsequent purchaser, Violetta Promoters Pvt. Ltd., asserted that they were a bona fide purchaser who acquired the property legally after the bank had cancelled the auction.

The DRAT, relying on the Supreme Court's decision in CELIR LLP vs. Bafna Motors (Mumbai) Private Limited & Others, ruled that the sanctity of the auction process must be protected. The tribunal held that once the bank confirmed the sale and the purchaser paid the full amount, a 'vested right' accrued in favor of the auction purchaser.

The court found the bank's cancellation letter to be illegal, arbitrary, and in violation of the principles of natural justice, as it was issued without any specific reason and without providing the appellant an opportunity to be heard, a principle affirmed in the case of IDBI Bank Limited vs. Ramswaroop Daliya.

The bench held that the appellant had a prima facie case and would suffer irreparable loss if the property was alienated, the DRAT allowed the appeals. The tribunal granted interim relief, restraining the bank and the original borrowers from selling or transferring the disputed property until the pending Securitisation Applications are decided by the Debts Recovery Tribunal. The DRT was directed to expedite the hearing of these matters.

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