Authority: High Court of Judicature at Madras

Order Date: 07 July 2026

Case Overview

  • Petitioner: MSA Sea Foods, represented by Managing Partner M. Joseph Jegan, Chennai.
  • Respondents: 1) The Manager, Indian Overseas Bank (IOB), Asset Recovery Management, Chennai; 2) The Authorized Officer, IOB, Asset Recovery Management, Chennai.
  • Petition: Writ petition under Article 226 of the Constitution (W.P.No. 41815 of 2025, W.M.P.Nos. 46844 & 46845 of 2025) seeking a writ of certiorari and mandamus to quash the e‑auction sale notice dated 03‑Oct‑2025 published in Dinamani and the reply dated 14‑Oct‑2025, and to direct the bank to refund the entire amount paid by the petitioner.
  • Background: An individual named Sundar, claiming to be the bank’s agent, informed the petitioner that a property at Old Door No. 116, New No. 2, Sheikh Maestri Street, Kasimedu, Royapuram was to be auctioned on 27‑Jun‑2025. The petitioner participated, was declared highest bidder with a bid of Rs 1,65,33,000 and deposited 25 % (Rs 41,33,250). On 18‑Aug‑2025 the bank demanded the remaining 75 % and warned that failure to pay within 24 hours would result in cancellation and forfeiture of the deposit.
  • Key Issue: A demolition notice issued by the Chennai Corporation on 22‑May‑2025 under Section 136 of the Tamil Nadu Urban Local Bodies Act, 1998, was not disclosed in the auction notice, violating Rule 8 of the Security Interest (Enforcement) Rules, 2002 which mandates full disclosure of material encumbrances.
  • Bank’s Position: The bank argued that the purchaser must pay the balance within the stipulated time; failure to do so justifies cancellation and forfeiture.
  • Petitioner’s Position: The petitioner limited the prayer to a refund of the amount deposited, contending that the undisclosed demolition notice rendered the auction illegal.
  • Record of Payments: Apart from the 25 % deposit (Rs 41,33,250), the petitioner paid Rs 70,00,000 on various dates, totaling a substantial portion of the bid amount.
  • Legal Precedent Cited: Supreme Court judgment in Delhi Development Authority v. Corporation Bank and others (2025 INSC 1161), paragraphs 30‑31, emphasizing restitution for an innocent auction purchaser when the auction is illegal.

Final Outcome

  • The Court disposed of the writ petition, accepting the restricted prayer for refund.
  • Order: Indian Overseas Bank is directed to refund the entire amount paid by the petitioner (including the 25 % deposit and subsequent payments) within four weeks of receipt of this order.
  • Interest: No interest will be awarded.
  • Costs: No order as to costs.
  • Additional Observation: The Court noted that the petitioner is bound to verify the credentials of any secured asset brought to auction in the future.

Topics: Court Order, Banking Auction Dispute, Property Demolition