Bombay HC Sets Aside NSEL Auction, Orders Fresh Sale Under MPID Act

The matter arose from auction proceedings conducted under the Maharashtra Protection of Interest of Depositors (MPID) Act in connection with properties attached during investigation of the NSEL scam. The Competent Authority had issued a Sale Certificate dated 31 August 2020 in favour of Rudraveerya Developers Ltd. The valuation exercise leading up to that sale was carried out by Quiker Realty Ltd. Multiple appeals before the Bombay High Court challenged the manner in which the auction was conducted and the price at which the attached properties were sold.

What the Court Held

A Division Bench of Justice A.S. Gadkari and Justice Kamal Khata set aside the Sale Certificate dated 31 August 2020. The Court emphasised that an auction of attached properties must give intending bidders a fair opportunity to participate so that the highest realisable value can be fetched. In the Court's words, if that path is cut down or closed, the possibility of fraud or of securing an inadequate price or underbidding looms large, and it is the duty of the Court to exercise its discretion wisely and with circumspection in such cases.

Directions Issued

The Court directed the State to appoint a new Competent Authority within four weeks. The new Competent Authority is to appoint a fresh valuer for valuation and sale of the attached NSEL properties, and thereafter conduct a fresh process of auction with wide publicity in local newspapers as well as on electronic media. The attachment of the properties will continue pending the reauction.

The amounts received from Rudraveerya Developers Ltd. are to be refunded within four weeks of uploading of the order. Significantly, the State has been directed to investigate and take appropriate action against the members of the earlier Competent Authority and the valuer Quiker Realty Ltd., and to file a compliance affidavit six months after the order is uploaded.

Criminal Appeal No. 932 of 2022 was allowed and the connected appeals were disposed of in the same terms, with all connected interim applications also disposed of.

Why It Matters

The order reinforces that auctions under the MPID Act are not mere ministerial exercises. Competent Authorities and empanelled valuers carry a fiduciary obligation to depositors whose money the attached assets are meant to recover. A sale that lacks adequate publicity or competitive bidding is vulnerable to being set aside even years later, and individual liability of the officials and valuers involved is now squarely on the table.

Takeaway: Auction purchasers under MPID and similar attachment regimes must verify that the Competent Authority has followed wide publicity and proper valuation, since defective sales can be unwound and refunds ordered long after the certificate is issued.