The Punjab and Haryana High Court has ruled that banks have the full right to auction a mortgaged property if the borrower fails to repay the loan. The court clarified that once a property is mortgaged, banks do not need separate permission to conduct a public auction.
Background of the Case
The decision was made during the hearing of a petition filed by Sunil Kumar and others. They had requested a No Objection Certificate (NOC) and the transfer of a plot from the Haryana Urban Development Authority (HUDA) for a property located in Gurugram.
Earlier, the State Bank of India (SBI) had auctioned the property for ₹2.28 crore and issued a sale certificate to the successful bidder. In October 2021, the District Magistrate of Gurugram also handed over possession of the property to the buyer.
Government’s Objection and Court’s Verdict
The petitioners approached HUDA for the NOC and re-allotment letter, but officials refused, stating that the bank had not taken prior permission for the auction. The Haryana government argued that while SBI had permission to mortgage the property, it did not have the right to sell it. Therefore, the auction was illegal.
However, the High Court rejected this argument, ruling that when a bank or financial institution is allowed to mortgage a property, it automatically includes the right to auction it in case of loan default. The court stated that the government’s argument about the lack of a separate NOC for the auction was not valid.
Final Decision
Since the state government could not prove any irregularities in the auction, the High Court directed the Haryana government to issue the NOC and ensure the proper transfer of the plot to the buyer. This verdict strengthens the rights of banks and financial institutions in recovering loans through public auctions.
