Sharma (None) 08 January 2018

Recovery of Earnest Money from Bank

Summary: 1. We deposited earnest money (10% of reserve price) through secure online website (auctioning agent) in order to qualify for the auction of a property by a PSU bank. 2. A day before the auction, an email was sent to us by the lawyer of the defaulting party from their corporate domain (ex. xyz@companydomain.com) informing us of the matter being sub judice and their intention seek a stay on the entire process. 3. Since the earnest money was deposited online by us through secure online means (bank authorized online auctioning website), this meant that the auction officer / other bank officials had leaked our contact details to the defaulting party (so that they could start harassing us). 4. The Terms and Conditions of the auction expressly specified that any information pertaining to the bid would be kept confidential. 5. Oblivious to this (since we did not see the email till the next day), we went ahead and submitted the only (and winning) bid on the property on the day of the (online) auction. 6. When we logged in to check the email for expected communication from the bank, we were shocked to see this letter from the lawyer of the defaulting party in our inbox. 7. Once we realized that the bank branch officials were upto this kind of brazen mischief, we decided to withdraw from the auction process citing violations to the terms of confidentiality. (If they could leak our bid details to the defaulting party during the very first step, it was nearly certain that all subsequent steps would also be suspect, even resulting in physical intimidation) Our formal application to the bank for the refund of earnest money was responded back by the officiating officer as being frivolous. Escalation to higher bank officials for a proper forensic investigation have not been responded to even after multiple follow up via emails and posts. Ombudsman process does not cover auctions. To the experts in this field: Could you please opine on the legal remedies that may be available to us to recover our hard earned money or have we been taken for a ride by the bank officials? Thanks and regards,

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6 Replies

R.Ramachandran (Advocate) 08 January 2018

1. What was the date of auction?

2. Whether there were other bidders or you are the lone bidder?

3. Whether the auction took place on the appointed day?

4. What was the outcome of the auction?

Sharma (None) 08 January 2018

1. The auction was in Sep 2. We were the lone bidders on the day of the auction, however we don't know if anyone else also deposited the earnest money but did not participate 3. The auction took place at the appointed time 4. The bank official called us to submit our bid, apparently we were the only ones to bid and therefore declared winners. While we were strongly inclined to buy the property initially, once we realized that the bank officials were hand in glove with the defaulting party, we decided not to proceed further as it was apparent that the woes were only going to grow due to the collusion. It appears that the entire process was a sham carried out by the bank under pressure from RBI/govt while trying to prevent the property from actually getting auctioned. Please note that confidentiality was one of the written/ stated conditions under which this auction was to be carried out and our details were leaked even before the auction started. Thanks,

R.Ramachandran (Advocate) 08 January 2018

If you were the only bidder, then you will not be able to get the EMD back. The very purpose of taking EMD is to ensure that the successful bidder does not back out.

All other things that you have posted have no relevance.

Sharma (None) 08 January 2018

Thank you for your inputs. If it were only the question of how the EMD mechanism works, I would not have raised the question. The moot point is with regards to the beach of terms of the secure auction. Non disclosure was an explicit condition stated in writing by the bank. One of the reasons confidentiality needs to be maintained is to prevent harassment, intimidation & collusion. Are you saying that breach of auction terms (under contract law) have no bearing at all? Does that mean that bids and bidder details can be leaked without any legal recourse? IMHO, isn't that a fundamental premise of a secure auction in the first place?

R.Ramachandran (Advocate) 09 January 2018

Breach of any confidentiality may be another cause of action. But cannot be a reason to withdraw from the submitted bid.

Further your statement that "It appears that the entire process was a sham carried out by the bank under pressure from RBI/govt while trying to prevent the property from actually getting auctioned." appears unfounded as the bank did auction and also called upon you to proceed with your bid.

If you still feel very strongly about your case, better take steps to approach the appropriate court of law.