HYDERABAD: The Telangana High Court has dismissed an appeal from Union Bank of India regarding the cancellation of an auction for a property owned by a city-based company undergoing liquidation. The court found that the bank had not adhered to proper legal procedures.
A division bench, featuring Justices K. Lakshman and V. Ramakrishna Reddy, stated that while banks can recover funds through auctions, they must do so transparently and involve the official liquidator to ensure the property achieves the best possible sale price.
The ruling came during the bank’s appeal against a March 2025 decision, in which a single judge ordered the company’s winding-up and liquidation.
The situation arose from a default by the company, located in Kukatpally, which owed ₹21,38,615 to a material supplier in Jaipur as of May 2012 for raw materials supplied in 2010.
The single judge’s decision to wind up the company followed its announcement of financial distress and non-payment issues. Despite the property being auctioned by the bank to recover outstanding loans, the bank filed an appeal.
During the appeal, the division bench noted that the company’s former director had proposed a settlement and found a buyer willing to pay over ₹32 crore for the property. Nevertheless, the bank opted for an online auction, resulting in a sale for only ₹25.80 crore.
Both the former director and the official liquidator objected, indicating that the bank ignored the higher bid and did not involve the liquidator as required by law.
The High Court emphasized the need for transparency in bank dealings, highlighting that the liquidator represents the interests of all creditors and employees and must participate in the sale process to ensure maximum returns.
The bench concluded that the bank’s failure to collaborate with the liquidator and its decision to sell for a lower price constituted a breach of necessary rules. Consequently, the court upheld the cancellation of the auction and rejected the bank’s appeal.
