Common Order:

Moushumi Bhattacharya, J.

1. The Writ Petitions have been filed by the Borrowers in relation to a Common Order passed by this Court on 29.06.2026 granting liberty to the petitioners to withdraw W.P.Nos.40594 and 40595 of 2025. The two Writ Petitions were filed by the petitioners/Borrowers challenging an order passed by the Debts Recovery Appellate Tribunal (‘DRAT’) dated 18.11.2025.

2. The Common Order reflects that the leave to withdraw the Writ Petitions was granted on the prayer made by learned counsel appearing for the petitioners that a settlement has been arrived at between the petitioners and the Auction Purchaser and that the petitioners intend to approach the DRAT only with regard to the declaration of the petitioners’ accounts as NonPerforming Assets. The Court dismissed the Writ Petitions as withdrawn while granting liberty to the petitioners as prayed for subject to the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’) and The Limitation Act, 1963.

3. The stand of the petitioners would also be reflected from an undated Memo filed by the petitioners wherein it is stated that -

               “It is made clear that the petitioner will not seek restoration of the auction property even if the declaration of the NPA is found to be illegal by the Debts Recovery Appellate Tribunal. The Respondent Bank, having realized its dues, may be directed to release the withheld auction proceeds upon withdrawal of the Writ Petition”

4. The petitioners have now filed the present Writ Petitions for a direction on the respondent No.1/Bank to release the differential amount over and above the satisfaction of the debt to the petitioner Nos.3 and 4.

5. Learned counsel appearing for the petitioners, who was also representing the petitioners in the earlier Writ Petitions at the time of passing of the Common Order dated 29.06.2026, submits that the respondent No.1/Bank has realized the debt to its full and final satisfaction from the sale of the secured asset which was under-valued for the purpose of sale. Counsel submits that the petitioners/Borrowers and the respondent No.2/Auction Purchaser thereafter entered into a settlement which is not disputed by the respondent No.1/Bank.

6. The only prayer of the petitioners in the present Writ Petitions is that following the realisation of the debt in full, the Bank cannot withhold the residual amount obtained by the Bank from sale of the secured asset.

7. Learned Senior Counsel appearing for the respondent No.1/Bank submits that the Bank is ready and willing to return the excess amount subject to a letter of indemnity being furnished by the writ petitioners. Senior Counsel submits that the letter of indemnity is required since the petitioners seek to continue litigating against the respondent No.1/Bank in the DRAT/other fora.

8. The respondent No.2/Auction Purchaser is also represented. Learned counsel appearing for the respondent No.2/Auction Purchaser submits that Auction Purchaser and the writ petitioners/Borrowers have entered into a settlement and places the relevant portion of the Memo filed by the petitioners to reinforce the stand of the writ petitioners that they shall not seek restoration of the auctioned property/secured asset even if the writ petitioners were to succeed before the DRAT.

9. We have considered the submissions made by learned Senior Counsel and learned counsel appearing for the parties.

10. It is undisputed that the respondent No.1/Bank is holding on to the excess amounts/excess sale proceeds which would be evident from a mail sent by the Bank to the writ petitioners on 23.07.2026. The mail contains a tabulated statement indicating excess sale proceeds of to the tune of Rs.6,14,47,590.75/- at item E. The Bank further admits to its knowledge of the petitioners/Borrowers settling with the respondent No.2/Auction Purchaser. The Bank however states that it will continue to hold on to the excess amounts subject to the petitioner a judicial order for refund of the excess sale proceeds.

11. The argument of the Bank in relation to refusing the excess sale proceeds of Rs.6,14,47,590.75/- to the petitioners should be tested the law on the subject.

12. Section 13(7) of the SARFAESI Act. 2002, provides that where any action has been taken against the Borrower under section 13(4), all costs, charges and expenses which have been incurred by the secured creditor shall be recoverable from the Borrower. The money which is received by the secured creditor shall, in absence of any contract to the contrary, be held by the secured creditor in trust and is to be applied for costs, charges, expenses and in discharge of the dues of the secured creditor. The last limb of section 13(7) is relevant to the present case. Section 13(7) concludes by stipulating that the ‘residue’ of the money received by the secured creditor shall be paid to the ‘person entitled’ thereto in accordance with his rights and interests.

13. In the present case, there is no doubt that the ‘person entitled’ under section 13(7) would be the writ petitioners/Borrowers whose secured asset was sold to the respondent No.2/Auction Purchaser in full and final satisfaction of the debt due and owed to the Bank. The mail dated 23.07.2026 from the Bank does not state anything contrary to the aforesaid.

14. Section 13(7) does not stipulate any condition being imposed on the ‘person entitled’ (in this case the petitioners/Borrowers) including any letter of indemnity or any document of comfort to the Bank for refund of the residual amount to the ‘person entitled’. The Bank is hence precluded from demanding any indemnity from the petitioners. This would be contrary to section 13(7) of the SARFAESI Act.

15. In fact, section 13(7) of the SARFAESI Act precludes the secured creditor from doing any act including recovering money from the Borrower or holding excess money in Trust, which is contrary to the contract between the parties. The authority of the Bank to do the acts contemplated under section 13(7) can only be done within the four corners of the conferment of such power. The Courts have called for a strict interpretation of section 13(7) including that return of the money cannot be intermixed with other rights of the secured creditor including a different loan transaction. In other words, the right of the Bank to retain surplus amount as the Trustee must be within the particular loan transaction between the Bank and the Borrower (Gaurangbhai Bipinbhai Pandya v. Bank of Baroda (AIR 2008 GUJ 141)).

16. In the present case, section 13(7) of the SARFAESI Act contains a mandate on the secured creditor to return the residual amount to the person entitled without attaching any condition thereto.

17. The mail of the Bank dated 23.07.2026 makes it clear that the only condition imposed therein was that the petitioners obtain a judicial order directing the refund. The fact of the petitioners continuing the challenge before the DRAT against the contentions of the Bank cannot be leveraged to hold on to the excess amount particularly where the Bank’s claim against the petitioners/debt has been fully satisfied. We hence do not find any impediment in granting the prayer as sought for.

18. W.P.Nos.23833 and 23834 of 2026, along with all connected applications, are accordingly allowed. The respondent No.1/Bank is directed to return the amount of Rs.6,14,47,590.75/- to the petitioners by 08.08.2026.