Telangana High Court Dismisses Union Bank's Appeal in Auction Case
The Telangana High Court has firmly rejected an appeal filed by Union Bank of India. The bank challenged the cancellation of an auction for a property belonging to a Hyderabad-based company under liquidation. The court found that Union Bank did not follow proper legal procedures during the auction process.
Bench Emphasizes Transparency and Liquidator Involvement
A division bench comprising Justices K Lakshman and V Ramakrishna Reddy delivered the verdict recently. The bench acknowledged that banks possess the power to recover money through auctions. However, it stressed that banks must act with complete transparency. They must involve the official liquidator to ensure the property sells for the best possible price.
The case originated from a March 2025 order by a single judge. That order directed the winding up and liquidation of a defaulter firm located in Kukatpally, Hyderabad. The firm owed ₹21,38,615 to a Jaipur-based material supplier for raw materials supplied in 2010. The default occurred as of May 2012. Due to the payment default and the firm's declaration of a financial crisis, the single judge ordered its liquidation.
Bank's Auction Challenged Despite Higher Offer
Union Bank of India had already auctioned the firm's property to recover loan dues. Following the liquidation order, the bank filed an appeal. During the appeal hearing, the division bench noted a critical detail. The firm's former director had proposed a settlement. He identified a buyer willing to pay over ₹32 crore for the property.
Despite this higher offer, Union Bank proceeded with its own online auction. The bank sold the land for approximately ₹25.80 crore, a significantly lower price. Both the former director and the official liquidator raised objections. They argued the bank ignored the better offer. They also stated the bank failed to include the liquidator in the process, as required by law.
Court Upholds Cancellation, Dismisses Appeal
The high court ruled that banks must maintain transparency in all their dealings. It highlighted that the liquidator represents the interests of all creditors and workers. The liquidator's involvement in every step is crucial to secure the highest sale price.
By failing to collaborate with the liquidator and selling the asset for less money, Union Bank did not adhere to the necessary legal rules. The bench remarked on this failure. It upheld the earlier decision to cancel the auction. Consequently, the court dismissed the bank's appeal entirely.
This ruling reinforces the legal framework governing bank-led auctions during company liquidations. It underscores the mandatory role of the official liquidator in safeguarding creditor interests and ensuring fair market value for assets.
