Setting Aside an MPID Auction for Underbidding and Inadequate Publicity

The Bombay High Court has set aside the Sale Certificate dated 31 August 2020 issued in respect of properties attached under the Maharashtra Protection of Interest of Depositors (MPID) Act in the NSEL scam, and directed a fresh auction with proper publicity.

Background

The properties in question were attached as part of the NSEL scam proceedings. The Competent Authority under the MPID Act conducted a sale and issued a Sale Certificate dated 31 August 2020 in favour of Rudraveerya Developers Limited. Quiker Realty Ltd. acted as the valuer. The sale was challenged in a batch of criminal appeals before the High Court, including Criminal Appeal No.337 of 2026 filed by Primezone Developers Private Limited and connected appeals filed by depositors based in Karnal and elsewhere.

Issue

Whether the auction process leading to the Sale Certificate of 31 August 2020 was conducted in a manner that ensured wide participation by intending bidders and a fair, realisable price for the attached properties, or whether it was vitiated by inadequate publicity and possible underbidding.

Reasoning of the Court

The Division Bench of Justice A.S. Gadkari and Justice Kamal Khata held that in an auction of attached properties, the duty of the Competent Authority is to give every opportunity to intending bidders to participate so that the highest realisable value of the property is fetched. The Court observed that if that path is cut down or closed, the possibility of fraud, inadequate price, or underbidding looms large. In such circumstances, the Court must exercise its discretion wisely and with circumspection on the facts of each case.

Applying this standard, the Bench found the existing process unsatisfactory and concluded that a fresh process was required, with wide publicity in local newspapers and on electronic media.

Directions

The Court passed a common order in the connected appeals. The State has been directed to appoint a new Competent Authority within four weeks. The new Competent Authority shall appoint a fresh valuer and conduct a fresh auction of the NSEL attached properties with wide publicity in print and electronic media. The Sale Certificate dated 31 August 2020 stands set aside, while the underlying attachment continues pending reauction. Amounts received from Rudraveerya Developers Ltd. are to be refunded within four weeks of the order being uploaded.

The Court also 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 after six months. Appeal No.932 of 2022 was allowed and the other connected appeals were disposed of in the same terms.

Takeaway

MPID auctions of attached scam properties must be conducted with wide publicity and transparent valuation, and any process that risks underbidding can be set aside even after issuance of a Sale Certificate.