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Planning to buy property being auctioned? I would suggest that you tread carefully. Get all the information on the property. Make sure that the property is free of encumbrances (ask for an encumbrance certificate and check it’s authenticity) and there is a clear title to the property, and that it would be transferred to your name without any problem. Or, to put it differently, check the legal status of the land, land use, title deeds, tax receipts and the encumbrance certificate (encumbrance is a general term for any claim on the property that restricts or impairs its transfer or renders it less marketable). Visit the property and make sure that it actually exists. Also, read the terms and conditions pertaining to the auction very carefully, and go ahead only if you have no problem with those. And bid only if you can pay the bid amount within the stipulated time. I say all this because if something were to go wrong, you cannot seek the intervention of the court. Most consumers are unaware of the fact that courts do not adjudicate over problems arising from or related to property bought in an auction. In one of the earliest cases of that nature (Ashok Tayal vs the Delhi Development Authority) brought before it, the national consumer disputes redressal commission held that there was no hiring of service in an auction sale, and, therefore, the transaction did not come under the purview of the courts. This has been the consistent view of the courts ever since. In Ashok Tayal’s case, the complainant was the highest bidder in an auction of a commercial plot by the Delhi Development Authority. However, after taking possession of the plot, when he visited it, he found a board stating that it belonged to the post office. The complainant filed a civil writ in the Delhi High Court and was informed by the Postal Department that it was the earlier purchaser of the land, and it belonged to the department. Tayal then filed a complaint before the national commission, alleging negligence on the part of the DDA, and seeking compensation for the loss suffered. The national commission, however, dismissed the complaint, saying that it was an outright sale of immovable commercial property in a public auction, and the complaint was not maintainable. In subsequent cases pertaining to auctions, the apex court held a similar view. Now, in a recent order, it has re-examined this issue and reiterated its earlier opinion. In this particular case (Rajasthan Financial Corporation vs MK Bhoot, RP No 740 of 2006), the complainant participated in an auction held by the Rajasthan Financial Corporation in respect of movable and immovable properties. His bid of Rs 34,50,000, being the highest, was accepted and approved. As per the terms of the auction, the complainant had deposited Rs 1,75,000 as earnest money at the time of the bid but could not pay 25 per cent of the bid amount within 30 days of acceptance of the bid, as stipulated in the terms and conditions of the auction. Consequently, he lost the bid and also forfeited the earnest amount. The national commission, in this case, observed that in its considered view, purchase of property in an auction was tantamount to outright sale of immovable property, and there was no arrangement of hiring of service for consideration between the parties Therefore, disputes pertaining to such transactions could not be adjudicated upon by the courts. In fact, in the initial years following the enactment of the consumer protection law, housing boards and land development authorities had argued that courts could not adjudicate over disputes pertaining to allotment of plots or houses as those were issues of sale or transfer of immovable property. Dismissing this view, the national commission, and later the Supreme Court, had clarified that when a private builder or a statutory authority develops land and allots a site or constructs a house for the benefit of the customer, there is an element of ’ as defined under the law.
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