INTRODUCTION–
The Supreme Court of India, in a blunt statement, recently chastised Punjab National Bank (PNB), on the circumstances of a property auction under the SARFAESI Act in Mohammad Zubair Ahmad v. Punjab National Bank & Anr SLP (c) no. 7273/2025. In characterizing the facts as “gross” and warning the Bank about casual recourse to writ jurisdiction, the Court expressed it was profoundly concerned about just how PNB had treated its obligations. The apex court ordered PNB to immediately withdraw its writ petition before the Allahabad High Court, issue a final sale certificate to the auction purchaser, and think about why it irregularly settled with the borrower in a Lok Adalat. The case has become representative of the “sorry state of affairs” in bank litigation that the Court described about the overarching issues of systemic failures in due diligence, accountability, and compliance with statute.
BACKGROUND-
The matter arose after an auction purchaser Mohammad Zubair Ahmad moved the Supreme Court for possession and title after having successful bid for a property in an auction held by PNB under the SARFAESI Act where PNB further made the situation complicated by having inappropriate settlement discussions with the defaulting borrower before a Lok Adalat while failing to conclude on a successful bid. To further worsen the situation, the Bank invoked writ jurisdiction before the Allahabad High Court – despite being cautioned in several previous Supreme Court decisions against considering writs relating to SARFAESI appeals. The High Court issued notices and summoned the Bank’s Chief General Manager creating even more complexity.
The auction purchaser was understandably aggrieved and returned to the Supreme Court. During the hearings of the matter, Justices J.B. Pardiwala and Sandeep Mehta expressed their utter shock at PNB’s conduct and summoned not only PNB’s Chairman-cum-Managing Director but also their Chief General Manager and required the Attorney General of India to attend to explain the position of the Bank.
KEY POINTS-
The Supreme Court’s order emphasizes a few important points regarding banking accountability and judicial discipline:
1. Biased completion of SARFAESI procedure: The Court noted its disappointment that PNB had “bargained” with the borrower rather than fulfill the statutory process and return the property to the auction purchaser, wasting the entire auction process.
2. Misuse of Article 226 jurisdiction: Unsurprisingly, the Court lamented PNB’s decision to pursue the high court under Article 226 in a SARFAESI proceeding, contrary to the well-established law dictating that any processors must be dealt with before the Debt Recovery Tribunal (DRT).
3. Judicial Instructions: Crucially, the Court directed PNB to withdraw the writ petition within 48 hours and provide the final sale certificate to the auction purchaser, “without further ado” and beyond that any conveyance deed has to be executed pursuant to law.
4. Officer Accountability: The Court stated, in a scolding manner regarding the Lok Adalat settlement, that the Bank ought to first take into account departmental action against the errant officers accountable for the deplorable and unjust act.
5. Need for policy changes: The Attorney General guaranteed the Court that PNB would consider taking necessary policy to scale its policies in response to activities such as those discussed. The Court reiterated to banks that mere reference to hierarchy must remain an exception when specialized tribunals exist.
RECENT DEVELOPMENTS-
Following the Supreme Court’s stern intervention, the Bank’s top management personally attended before the Court and admitted certain lapses. The Attorney-General volunteering stated that it was a mistake by the Bank to do a Lok Adalat settlement with the borrower. He assured the Court that the Bank would withdraw the petition in the High Court, at the earliest.
The Court has kept the matter pending and posted it for hearing on 17 September 2025, treating it as “part heard.” While excusing the personal presence of PNB’s senior officers for further dates the Court also warned them to exercise extreme caution in future fund recovery cases.
The judgment has elicited wider debate among other legal circles and in financial circles. Detractors point out that the whole episode highlights a more worrying malaise for public sector banking, which often results in conflicts where there are poor internal checks, and poor accountability, and a litigation strategy that is very much ad-hoc rather than resource-efficient, producing avoidable disputes. For borrowers as well as customers, the case signifies that banks need to properly follow statutory remedies and not engage in nefarious or dubious conduct and set artificial shortcuts to achieve resolution, delaying justice for all.
CONCLUSION-
The Supreme Court’s comments about this situation, specifically its description of a “sorry state of affairs” have implications that reach far beyond this single dispute. The case raises three interrelated issues of concern: the banks’ responsibility to ensure a statutory process is followed to provide accountability to the public; the honour of auctions conducted under SARFAESI; and the implications of the 2016 Department of Trade and Industry judgment in pursuance of public trust.
For PNB, whose own credibility has been damaged by earlier controversies, this judgment is a signal to reform its approach to litigation and compliance. For the wider banking sector, it reminds it possesses fiduciary obligations to the public; and a casual or negligent approach to property rights and public trust cannot be an acceptable approach in dealing with people’s rights.
Ultimately, the Court’s intervention has protected the auction purchaser’s rights (a party who had potentially been left in limbo simply due to the negligence of institutions. The Court also reinforced the principle that banks must pursue recovery by the process of law, and not through avoidance of statutory forums or disreputable compromises.
This judgment may, in time, become a watershed moment in promoting accountability and discipline among banks in SARFAESI proceedings. Yet, unless lessons are learned and reforms made, the “sorry state of affairs” lamented by the Court will remain a permanent wound on the credibility of public sector banking in India.
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Written by- Anwesha Anant
