Flawed NSEL Auction Set Aside, Bombay HC Orders Fresh Sale

The Bombay High Court has set aside the Sale Certificate dated 31 August 2020 issued for properties attached under the Maharashtra Protection of Interest of Depositors (MPID) Act in connection with the NSEL scam, holding that the auction process was inadequate and risked underbidding and fraud.

Background

A batch of appeals, led by Criminal Appeal No. 337 of 2026 filed by Primezone Developers Private Limited, challenged the sale of attached properties to Rudraveerya Developers Limited. The Competent Authority appointed under the MPID Act had relied on a valuation by Quiker Realty Ltd. and proceeded to issue a Sale Certificate dated 31 August 2020 in favour of Rudraveerya Developers. The appellants, who include investors and depositors affected by the NSEL collapse, challenged the manner in which the auction was conducted.

The Court's Concern

The Division Bench of Justice A.S. Gadkari and Justice Kamal Khata observed that when public properties attached under a special statute like the MPID Act are sold, the process must give intending bidders a meaningful opportunity to participate so that the maximum realisable value of the property is fetched. The Bench recorded that if that path is cut down or closed, the possibility of fraud, inadequate price or underbidding would loom large. In such circumstances, the Court held, it is the duty of the Court to exercise its discretion wisely and with circumspection.

Directions Issued

The Bench passed a common order with the following directions. The State shall appoint a new Competent Authority within four weeks. The new Competent Authority shall appoint another valuer to value and sell the properties attached in the NSEL scam. A fresh auction shall then be conducted with wide publicity in local newspapers and electronic media. The Sale Certificate dated 31 August 2020 is set aside, though the attachment over the properties shall continue pending the reauction. The amounts received from Rudraveerya Developers Ltd. are to be returned within four weeks of the order being uploaded.

Accountability

Going further, the Court directed the State 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. Appeal No. 932 of 2022 was allowed and the connected appeals were disposed of in the same terms, with all interim applications closed.

Takeaway

For practitioners handling MPID Act recoveries and economic offence asset sales, the ruling reinforces that auction sales of attached properties must be transparent, widely publicised and backed by a credible valuation, failing which the sale itself can be unwound.