Karnataka High Court
M/S Silktex Limited vs State Bank Of India on 18 November, 2025
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 18TH DAY OF NOVEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
WRIT PETITION NO. 12507 OF 2021 (GM-RES)
BETWEEN
M/ s SILKTEX LIMITED
REGISTERED OFFICE AT NO.34, II FLOOR,
KRISHNA REDDY COLONY,
DOMLUR LAYOUT,
BENGALURU-560071.
REPRESENTED BY ITS DIRECTOR
MR.SAKET CHURIWALA.
.... PETITIONER
(BY SRI. RAKESH B. BHAT., ADVOCATE)
AND
1. STATE BANK OF INDIA
CORPORATE CENTER
STATE BANK BHAVAN,
Digitally signed MADAM CAMA ROAD,
by SHWETHA NARIMAN POINT
RAGHAVENDRA
MUMBAI-400021,
Location: HIGH
COURT OF REPRESENTED BY ITS MANAGING DIRECTOR.
KARNATAKA 2. DEPUTY GENERAL MANAGER
STATE BANK OF INDIA,
STRESSED ASSETS MANAGEMENT BRANCH, 2ND FLOOR,
OFFICE COMPLEX BUILDING,
LHO CAMPUS,
NO.65, ST.MARKS ROAD,
BENGALURU-560001.
3. THE AUTHORIZED OFFICER AND
ASSISTANT GENERAL MANGER AND CLO-5,
STATE BANK OF INDIA,
STRESSED ASSETS MANAGEMENT BRANCH,
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2ND FLOOR, OFFICE COMPLEX BUILDING,
LHO CAMPUS,
NO.65, ST.MARKS ROAD,
BENGALURU-560001.
.... RESPONDENTS
(BY SRI. VIKRAM HUILGOL., SR COUNSEL FOR
SRI. ASHOK KUMAR.M., ADVOCATE FOR R1 TO R3)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227
OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI OR ANY OTHER WRIT OR ORDER AND QUASH THE
LETTER SBI/SAMB/LCLO-5/SILKTEX/2020-21/203 DATED 08.09.2020
ANNEXURE-Y ISSUED BY R2 AND ETC.
THIS WRIT PETITION COMING ON FOR ORDERS AND HAVING
BEEN RESERVED FOR ORDERS ON 27.10.2025, THIS DAY, THE
COURT PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
CAV ORDER
1. Petitioner is before the Court seeking for the
following reliefs:
i. Issue a writ of certiorari or any other writ or order
and quash the letter SBI/SAMB/LCLO-
5/SILKTEX/2020-21/203 dated 08.09.2020-
Annexure-Y issued by R2;
ii. Issue a writ of mandamus or any other writ or order
and direct the Respondent Bank to refund the excess
amount of Rs.4,05,93,277/- along with interest &
damages to the Petitioner.
iii. Issue a writ of mandamus or any other writ or order
and direct the Respondent Bank to compensate the
Petitioner for missing inventories.
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iv. Pass such other order as this Hon'ble Court deems fit
in the interest of justice and equity.
2. The Petitioner claims to be a public limited company
registered under the provisions of the Companies
Act, 1956, being in the business of manufacturing
and exporting silk-blended fabrics and apparel. The
Petitioner had availed of financial facilities from the
overseas branch of Respondent No. 1, State Bank of
India, as regards which the Petitioner had mortgaged
immovable properties owned by the company in
favour of the Respondent Bank, as also hypothecated
certain plant and machinery.
3. The Petitioner was unable to repay the amount in
favour of Respondent -Bank allegedly due to poor
market conditions, pursuant to which Respondent
No.3 had issued notice on 18.07.2015 under
subsection (2) of Section 13 of the Securitisation and
Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002, [hereinafter referred
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to as 'Sarfaesi Act']. Pursuant to which possession
notice having been issued on 16.09.2015, a notice
under subsection (4) of Section 13 of the Sarfaesi
Act was issued, taking symbolic possession.
4. Thereafter, the Respondent issued an e-auction sale
notice dated 14.12.2015, fixing the date of auction
as 19-01.2016. The auction not being successful,
another e-auction notice was issued on 10.02.2016,
which was also unsuccessful for want of bidders.
5. A further notice of intimation of sale was issued on
16.04.2016 of movable and immovable properties, as
regards which a e-auction sale notice had been
issued on 13.04.2016, indicating the date of auction
on 18.05.2016. The said auction was also not held on
account of a lack of bidders. Respondent-Bank took
physical possession of the entire property, including
the factory premises, plant and machinery under
subsection (4) of Section 13 of the Sarfaesi Act.
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6. On 14.08.2018, the Bank informed the Petitioner
that State Bank of India has come out with a one-
time settlement scheme 2018 [OTS] and the
Petitioner would be eligible to take benefit of the OTS
scheme. In the said letter, a one-time settlement for
an amount of Rs.6,23,31,720/-, was given to the
Petitioner with the Petitioner having time until
30.09.2018 to communicate its acceptance of the
offer and pay 5% of the OTS amount, namely
Rs.31,16,586/-.
7. In the meanwhile, on 30.08.2018, the Bank issued a
statutory notice of 15 days under Rule 6(2) and Rule
8(6) of the Security Interest Bracket (Enforcement)
Rules, 2002, for the sale of movable and immovable
assets, with the auction scheduled to be held on
18.09.2018. Immediately on receipt of the notice,
the Petitioner visited the respondent-Bank to inform
them that it intended to avail the benefit of the OTS
scheme and that they would submit their acceptance
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letter with initial payment of Rs.31,16,586/- within
the period as prescribed in the OTS letter. These
amounts were deposited on 28.09.2018. However,
on 16.10.2018, Respondent Bank sent an email
containing an attachment, a letter dated 12.10.2018,
indicating that the Respondent had proceeded with
the e-auction sale, the property had been auctioned,
it is under the cover of that letter that a Bankers
cheque was issued, returning the amount deposited
by the Petitioner.
8. Further, respondent No.2 had mentioned that the
property, having been auctioned for a total
consideration of Rs.13,05,00,000/- the total due
being Rs.16,80,03,570/-, the balance amount is
required to be paid by the Petitioner.
9. The Petitioner challenged the auction sale before this
Court in WP No. 47816/2018, which came to be
disposed of vide order dated 17.12.2018, indicating
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that the Petitioner has an alternative remedy
available under Section 17 of the Sarfaesi Act.
10. Hence, the Petitioner challenged the auction before
the Debt Recovery Tribunal in SR No. 11184 of 2018
by filing an application for condonation of the delay
of 75 days. The said application came to be
dismissed, and so also the appeal came to be
dismissed as barred by limitation. The Petitioner
thereafter approached the Debt Recovery Appellate
Tribunal.
11. The Petitioner, in the meanwhile, made an
application to the Respondent to adjust the OTS
amount of Rs.6,23,31,720/- from the total auction
proceeds of Rs.13,05,00,000/- and pay the balance
amount, which was refused by the Respondent. The
Petitioner also raised certain issues regarding
missing machinery and called upon the Respondent
to ascertain the same and secure those machines,
inasmuch as only a few of the machinery had been
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sold, and other machinery was required to be
present in the factory premises. When inspection was
made, the machinery not being found, and the same
was also taken up with the respondent authorities.
The Petitioner is now before this Court seeking the
aforesaid reliefs being aggrieved by non-acceptance
of the OTS proposal, illegal sale of the property,
missing machinery and valuation reports not being
done properly.
12. Sri. Rakesh B. Bhat, the Counsel for the Petitioner,
would submit that:
12.1. Once the one-time settlement proposal was
issued on 9.08.2018, providing a time frame
until 30.09.2018, it was required for the
Respondent to wait for that period and not
issue an e-auction notification. Once the e-
auction notification was issued and the
Petitioner had approached the Respondent-
Bank accepting the OTS proposal and having
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paid 5% of the OTS amount of Rs.31,16,586/-,
the Respondent could not have confirmed the
auction and returned the above deposit.
12.2. His submission is that until 30.09.2018, the
Respondent ought to have stayed their hands,
and it is only in the event of the Petitioner not
accepting the said OTS offer that the Bank
ought to have proceeded with the auction. In
the present matter, before the auction, the
Petitioner, having accepted the offer of OTS,
the question of the sale being carried out would
not arise.
12.3. Be that as it may, he submits that a long period
has lapsed, the Petitioner would not insist as
regards the illegal sale, but would submit that
the amount received on account of the e-
auction in excess of the OTS amount proposed
by the Respondent bank would have to be
returned to the Petitioner along with interest.
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12.4. His submission is that the OTS proposal for a
sum of Rs.6,23,31,720/-, having been accepted
by the Petitioner, the Petitioner could only
recover that amount and any amount received
on account of the auction over and above the
said OTS amount would have to be returned to
the Petitioner. His submission is, therefore, that
the Petitioner is neither challenging the auction
nor the proceeding which had been initiated
against the Petitioner. Even if the actions of the
Respondents were held to be proper, it is the
balance amount which the Petitioner would be
entitled to with the same bank rate of interest
as that recovered from the Petitioner.
12.5. Though he makes various submissions as
regards the missing machinery and or the
machinery not having been sold is not
traceable, the said submission is a feeble
attempt made in that regard.
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12.6. On the basis of the above submissions, he
submits that the writ petition is required to be
allowed and the reliefs sought for granted.
13. Sri Vikram Huilgol, learned Senior counsel appearing
for Sri.Ashok Kumar.M, learned counsel for the State
Bank of India, would submit that,
13.1. All actions which have been taken up by the
Respondents are proper and correct. The
procedure under Section 13 has been followed
to the letter. The Respondents had brought the
property for e-auction on several occasions, the
auction not being successful, it is only the last
auction which having been successful, the
Petitioner has raised all these issues. There is
no bonafides on the part of the Petitioner until
then to make payment of any money. The
Petitioner has waited till the last moment and
then come up with the proposal.
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13.2. His submission is that the OTS offer made by
the Respondent cannot be treated as a contract
of OTS, nor could the Respondent bank be
restrained from taking further action merely
because an OTS proposal had been given. The
Bank being obligated and OTS -scheme 2 of
2018 as mandated by the Reserve Bank of
India, had made the offer as per the said
scheme. Merely making the offer did not curtail
the rights of the Bank to initiate an auction sale
of the property. The conduct of the Petitioner
has been deprecated by this Court, as also by
the DRT and as such, the Petitioner would not
be entitled to any equitable consideration. The
property, having been brought for auction 11
times, it was always available for the Petitioner
to have during any of those 11 times to make
payment of the amounts.
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13.3. The Petitioner had made a similar prayer in WP
47816/2018, which, having been dismissed,
would act as res judicata in the present matter.
13.4. On all the above grounds, he submits that the
writ petition as filed is required to be dismissed.
14. Heard Sri.Rakesh B.Bhat, learned counsel for the
Petitioner and Sri.Vikram Huilgol, learned Senior
counsel for Sri.Ashok Kumar.M, learned counsel for
respondents No.1 to 3. Perused papers.
15. The points that would arise for consideration are;
i. Whether, after the issuance of an OTS
proposal, the Respondent bank could
proceed with the auction of the property
before the time period of the OTS expired?
ii. Whether the conduct of the Petitioner on
earlier 11 auctions and its repeated failure
would be a ground for consideration for
the Respondent to carry out the auction
during the subsistence of the OTS
proposal?
iii. Whether the Bank could have appropriated
the entire auction proceeds without giving
due credit in derogation of the OTS offered
by the Bank?
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iv. Whether the reliefs which have been
sought for in the present matter ought to
be granted?
v. What Order?
16. I answer the above points as follows:
17. ANSWER TO POINT NO.1: Whether, after the
issuance of an OTS proposal, the Respondent
bank could proceed with the auction of the
property before the time period of the OTS
expired?
17.1. The facts are not in dispute. The Respondent-
Bank has not denied the fact that the Bank had
on 14-08-2018 issued an OTS proposal
categorically stating that the book outstanding
as on that date was Rs.8,90,45,314/- and OTS
amount required to be paid was
Rs.6,23,31,720/- which OTS would be
processed on deposit of 5% amounting to Rs.
31,16,586/- and 20% of the amount namely
Rs.1,24,66,344/- would have to be paid within
30 days from the date of sanction of the OTS.
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The balance being liable to be paid within six
months thereafter.
17.2. In the said letter, the Bank had called upon the
Petitioner to advise on its willingness to settle
the dues by 30.09.2018. However, the Bank on
30.08.2018 itself had issued the e-auction
notice for the properties and proceeded to sell
the same.
17.3. The contention of Sri Vikram Huilgol, learned
Counsel for the Bank is that the Bank could
proceed with the sale irrespective of the OTS
proposal to protect its own interest. I am
unable to accept the said submission. Section 2
of the Indian Contract Act. 1872, being the
interpretation clause of the Contract Act, is
reproduced hereunder for easy reference:
2. Interpretation-clause.--In this Act the
following words and expressions are used in the
following senses, unless a contrary intention
appears from the context:--
(a) When one person signifies to another his
willingness to do or to abstain from doing anything,
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with a view to obtaining the assent of that other to
such act or abstinence, he is said to make a
proposal;
(b) When the person to whom the proposal is made
signifies his assent thereto, the proposal is said to
be accepted. A proposal, when accepted, becomes a
promise;
(c) The person making the proposal is called the
"promisor", and the person accepting the proposal
is called the "promisee";
(d) When, at the desire of the promisor, the
promisee or any other person has done or abstained
from doing, or does or abstains from doing, or
promises to do or to abstain from doing, something,
such act or abstinence or promise is called a
consideration for the promise;
(e) Every promise and every set of promises,
forming the consideration for each other, is an
agreement;
(f) Promises which form the consideration or part of
the consideration for each other are called
reciprocal promises;
(g) An agreement not enforceable by law is said to
be void;
(h) An agreement enforceable by law is a contract;
(i) An agreement which is enforceable by law at the
option of one or more of the parties thereto, but not
at the option of the other or others, is a voidable
contract;
(j) A contract which ceases to be enforceable by law
becomes void when it ceases to be enforceable.
17.4. Clause (a) of Section 2 would indicate that
when one person signifies to another his
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willingness to do or to abstain from doing
anything with a view to obtaining the assent of
that other to such act or obstinance, he is said
to make a proposal. The OTS proposal made by
the Bank in this case qualifies to be an offer.
17.5. Section 3 of the Contract Act is reproduced
hereunder for easy reference:
3.Communication, acceptance and revocation
of proposals.--The communication of proposals,
the acceptance of proposals, and the revocation of
proposals and acceptances, respectively, are
deemed to be made by any act or omission of the
party proposing, accepting or revoking by which
he intends to communicate such proposal,
acceptance or revocation, or which has the effect
of communicating it.
17.6. In terms of Section 3, the communication of
proposal and acceptance of proposal and
revocation of proposal and acceptance could be
made by any act or omission of the party by
which he intends to communicate such
proposal. In this case the email enclosing the
attachment offering an OTS is a clear and
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categorical communication of such an offer by
the Bank.
17.7. Section 4 of the Contract Act is reproduced
hereunder for easy reference:
4. Communication when complete.--The
communication of a proposal is complete when it
comes to the knowledge of the person to whom it
is made. The communication of an acceptance is
complete,--
as against the proposer, when it is put in a course
of transmission to him, so as to be out of the
power of the acceptor;
as against the acceptor, when it comes to the
knowledge of the proposer.
The communication of a revocation is complete,--
as against the person who makes it, when it is put
into a course of transmission to the person to
whom it is made, so as to be out of the power of
the person who makes it;
as against the person to whom it is made, when it
comes to his knowledge.
17.8. In terms of Section 4, the communication of the
proposal is stated to be complete when it
comes to the knowledge of the person to whom
it is made. In this case, the offer of OTS made
by the Bank to the Petitioner is complete when
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it came to the knowledge of the Petitioner, i.e.,
when the email was received by the Petitioner.
17.9. Revocation of proposal or acceptance is dealt
with by Section 5, which is reproduced
hereunder for easy reference:
5. Revocation of proposals and acceptances.--
A proposal may be revoked at any time before the
communication of its acceptance is complete as
against the proposer, but not afterwards. An
acceptance may be revoked at any time before the
communication of the acceptance is complete as
against the acceptor, but not afterwards.
17.10. A proposal could be revoked at any time before
the communication of its acceptance is
complete as against the proposer, but not
afterwards. That is to say, an offer of OTS could
have been withdrawn before the same was
accepted by the Petitioner. In the present case,
the offer which had been made by the Bank on
14.08.2018, provided a time period until
30.09.2018 for the Petitioner to accept it, which
was infact accepted on 28.09.2018 and 5%
amounts paid. Once a time period was fixed, in
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my considered opinion, the Respondent Bank
could not have, before the expiry of the said
time period, initiated any proceedings inasmuch
as it was always available for the Petitioner to
accept the OTS offer until 30.09.2018 by
making payment of 5% of the OTS amount and
it is only after sanction of the OTS, 20% of the
amount was to be paid. The offer having been
accepted by the Petitioner on 28.09.2018 and
until then there being no revocation of the offer
made by the Bank, let alone being
communicated to the Petitioner, the payment of
the 5% amount resulted in a binding contract
between the parties.
17.11. There would be no sanctity to an offer of OTS
by a Bank if the submission of the learned
counsel for the Respondent were to be accepted
that, on the one hand an offer for OTS would be
issued by the Bank, but on the other the Bank
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would continue with the recovery proceedings
in this case by way of sale of a property.
17.12. The Petitioner having accepted the offer on
28.09.2018. and indicated the same by
performing its obligation of deposit of 5%, the
proposal made by the Bank having been
accepted by the Petitioner, a binding contract
came into being and even at that stage, the
Respondent Bank ought to have stayed its hand
and not proceeded with the sale of the
property, but to have called upon the Petitioner
to make payment of 20% of the amount within
30 days and the balance within 6 months. It is
a matter of fact and record and not in dispute
that the Bank did not revoke its offer by way of
any communication before 28.09.2018.
17.13. Respondent Bank could not have proceeded
with the auction and recovered the money.
Hence, I answer point No.1 by holding that
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after the issuance of an OTS proposal, the
Respondent bank could not proceed with the
auction of the property before the time period
of the OTS expired, or without revoking OTS
proposal before its acceptance by the Petitioner
which was so accepted on 29.09.2018.
18. ANSWER TO POINT NO.2: Whether the conduct
of the Petitioner on earlier 11 auctions and its
repeated failure would be a ground for
consideration for the Respondent to carry out
the auction during the subsistence of the OTS
proposal?
18.1. Much has been sought to be contended by
Counsel for Respondent No.2 that on 11 earlier
occasions when the property was brought to
sale, the Petitioner had not come forward to
make payment of the monies, it is only on this
12th occasion when the auction sale was
successful that the Petitioner has come running
to the Bank and as such, the Bank could
proceed with the auction.
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18.2. For the very same reasons as indicated in
answer to point No.1, I am of the opinion that
once an offer of OTS had been made and a time
period had been fixed, the said time period was
required to be adhered to by the Bank and the
Bank could not have, before the expiry of the
time, proceeded with the auction irrespective of
the conduct of the Petitioner, without revoking
the offer made. The offer made by the Bank
was, despite the 11 earlier auctions being
unsuccessful, it is expected of the Bank to
comply with the time period and adhere to the
terms of its own offer, now to blame the
conduct of the Respondent and contend that
conduct would entitle the Bank to sell the
property is not sustainable, moreso when the
Petitioner had accepted the offer on
29.09.2018.
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18.3. Hence, I answer point No.2 by holding that the
conduct of the Petitioner on earlier 11 auctions
and its repeated failure would not be a ground
for consideration for the Respondent to carry
out the auction during the subsistence of the
OTS proposal, without having revoked the
proposal. So long as it was not revoked, the
offer was subsisting and on acceptance by the
Petitioner on 29.09.2018, fructified into a
contract.
19. ANSWER TO POINT NO.3: Whether the Bank
could have appropriated the entire auction
proceeds without giving due credit in
derogation of the OTS offered by the Bank?
19.1. Though my answers to points No.1 and 2 would
lead to the inevitable conclusion that the sale is
required to be set aside, the submission of
Sri.Rakesh Bhat, learned counsel for the
Petitioner being that he would not press for the
same, but only press for adjustment of the OTS
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amounts and return the balance amount, I am
of the considered opinion that the Bank having
issued a OTS proposal on 14.08.2018 for a sum
of Rs.6,23,31,720/-, the Bank having
categorically indicated that it is ready to close
the account of the Petitioner by receiving the
aforesaid amount, 5% to be paid upfront, 20%
in 30 days and balance in 6 months and agreed
to settle the loan for the OTS amount, the said
OTS offer having been accepted by the
Petitioner on 29.09.2018 by depositing the
requisite 5%, the Bank cannot be heard to
contend that the entire due amounts would be
required to be paid to the Bank when it has
made a proposal to settle the account for a
lesser amount, which has been accepted by the
Petitioner and the Petitioner had in fact
deposited 5% of the amount, which was
returned much subsequently by the Respondent.
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19.2. Thus, I answer point number 3, by holding that
the Bank could not have appropriated the
entire auction proceeds in derogation of
the OTS offered by the Bank, it could only
adjust the amounts offered under the OTS.
20. ANSWER TO POINT NO.4: Whether the reliefs
which have been sought for in the present
matter ought to be granted?
20.1. In view of my answers to points No.1 to 3, the
sale not being capable of being carried out after
29.09.2018, the Respondent Bank could not
contend that the acceptance of the OTS by the
Petitioner has happened after the sale and deny
the Petitioner the benefit of the OTS. Whether
the acceptance of the OTS was conveyed by the
Petitioner before the sale or after the sale, the
fact remains that the same was conveyed prior
to the last date indicated by the Bank itself,
namely 30.09.2018, which is an admitted fact
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and more importantly before the revocation of
the offer, in as much as the Bank has never
revoked its OTS offer, the said offer continued
to stand and at the most would have expired by
efflux on time at the midnight of 30.09.2018
and not before.
20.2. In that view of the matter, the rejection of the
request made by the Petitioner by the
Respondent for payment of the excess amount
of consideration received over and above the
OTS amount is not sustainable. Consequently,
the difference between the OTS amount and
the sale amount would be required to be paid
by the Respondent Bank to the Petitioner along
with interest at the same rate as that charged
by the Respondent against the Petitioner.
20.3. The aspect of a challenge to the sale having
been given up, so also the aspect of missing
inventories having been given up by the
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Petitioner, no order in respect thereto is
required to be made.
21. ANSWER TO POINT NO.5: What Order?
21.1. In that view of the matter, I pass the following:
ORDER
i. The writ petition is partly allowed, a certiorari is issued, the letter SBI/SAMB/CLO-T/SILKTEX/2020-21/203 dated 8.09.2020 at Annexure-Y is quashed.
ii. A mandamus is issued directing the respondent-Bank to make payment of the excess amount received over and above the due amount of Rs.6,81,68,280/- to the Petitioner along with interest from the date of receipt of the entire sale consideration from the auction purchaser by the Bank.
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NC: 2025:KHC:47592 WP No. 12507 of 2021 HC-KAR iii. The said payment to be made within a period of 30 days from the date of receipt of a copy of this order.
SD/-
(SURAJ GOVINDARAJ) JUDGE LN List No.: 2 Sl No.: 2