Reinitiation Of SARFAESI Action By Bank Upon Borrower Not An 'Exceptional Circumstance' To Dilute Forfeiture Under Rule 9(5) Of 2002 Rules: Allahabad HC

The Allahabad High Court ruled that security deposits under SARFAESI Act must be refunded with interest if no dues remain after asset sale. Justice Siddharth held that banks cannot indefinitely retain deposits after recovering their dues through enforcement actions. The case involved a ₹18 lakh deposit withheld for two years post-auction despite full loan recovery. The judgment clarifies that such deposits serve as security, not penalty, and must be returned once their purpose is fulfilled. This protects borrowers from arbitrary deposit forfeitures while ensuring bank recovery rights. The court directed 9% interest payment for the retention period, setting a precedent for timely refunds in secured transactions. Financial institutions must now establish clear policies for deposit handling in NPA recoveries.