SC: Public Auction Carried out by Court Process is Most Transparent for Obtaining Actual Market Value of Property

Supreme Court Law Insider

Sakina Tashrifwala

Published on: 11 November 2022 at 18:46 IST

The Supreme Court stated that a registering authority cannot participate in an appeal about a court ruling allowing a sale at a specific price.

The bench comprising Justices Sanjay Kishan Kaul, Abhay S. Oka, and Vikram Nath stated that a public auction conducted through a judicial procedure or receiver is the most transparent way to determine the true market value of the property.

When responding to a request from a two-judge bench about the application of Section 47A of the India Stamp Act, the bench made this observation (as applicable to West Bengal).

High Court Decision

According to the impugned judgment by the Full Bench of the Calcutta High Court, it was ruled that the West Bengal Stamp (Prevention of Undervaluation of Instruments) Rules, 2001, Rule 3 of the Act, and Section 47A of the Act as applicable to West Bengal were held to be inapplicable to an instrument executed by a Receiver in accordance with an order of sale issued by a civil court, after publication in newspapers.

The following requirements must be met for the sale conducted by the court through its officers to qualify as an open market sale: a) the proposed sale must receive extensive publicity, in particular, an advertisement in at least one newspaper with broad circulation in the relevant city, town, or district. b) It was noted that the buyer of the property could not be affiliated with or related to the authority or person overseeing the sale.


The judgement in Additional Distt. Sub-Registrar, Siliguri v. Pawan Kumar Verma, which concluded that a Registering Authority cannot be compelled to accept the value set by the court for purposes of suit valuation, was questioned by the two-judge bench while it was examining the appeal.

The three judges on the bench made the following observations in response to the reference:

“It is no doubt true that in a court auction, the price obtainable may be slightly less as any bidder has to take care of a scenario where the auction may be challenged which could result in passage of time in obtaining perfection of title, with also the possibility of it being overturned. But then that is a price obtainable as a result of the process by which the property has to be disposed of.

Objective Behind Amendment

The court were of views that, in order to prevent the State from losing revenue in the case of undervaluing property, which is a common occurrence in our nation and may involve consideration passing through two modes—first the declared price, then an undeclared component—we must not lose sight of the very purpose of the introduction of the Section, whether under the West Bengal Amendment Act or in any other State.

“The objective is to take care of such a scenario so that the State revenue is not affected and the price actually obtainable in a free market should be capable of being stamped. If one may say, it is, in fact, a reflection on the manner in which the transfer of an immovable property takes place as the price obtainable in a transparent manner would be different.”

“An auction of a property is possibly one of the most transparent methods by which the property can be sold. Thus, to say that even in a court monitored auction, the Registering Authority would have a say on what is the market price, would amount to the Registering Authority sitting in appeal over the decision of the Court permitting sale at a particular price.”

Any intervention with the pricing of the transaction by the Registering Authority would be completely unjustified.

It’s not like a public auction is conducted in that manner. Fixing a minimum price and taking care of other issues are prerequisites that must be met for the bidding process to be transparent. The court has the right to reject a bid even after the bidding process is over, and such bids are subject to approval by the court.

Any interference by the Registering Authority on the element of transaction price would be totally unwarranted once the court is convinced that the bid price is the acceptable price based on the material before it and gives it its approval. The Registering Officer cannot have any cause to think that the market worth of the property was not accurately stated in a judicial auction conducted in accordance with its own rules.

Forced sale with some competitiveness

A court-monitored auction is undoubtedly a forced sale, but it also has the competitive aspect of a public auction to get the greatest price. This is the procedure the court uses in many court proceedings to achieve the best price possible while exercising proper caution.

A court sale would not be subject to independent determination by a Registering Officer, just a private transaction.

The Registering Authority can hardly be said to be the only authority with knowledge of the subject to the exclusion of the court; the independent determination by a Registering Officer would not apply to a court sale but to a private transaction; the Sta cannot be allowed to doubt the liquidation proceedings as having some superior knowledge when it is a court monitored process where the court would handle aspects such as cartelization.

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