In Case Of Court-Executed Public Auction, Fair Market Value Of Property Must Be Obtained By Court Before Confirming Sale: Bombay HC [Read Judgment]

In an important judgment, the Bombay High Court has held that in case of a court-executed public auction of an immovable property, before confirming the sale, the Prothonotary and Senior Master of the High Court will obtain the applicable valuation of the property and send an authenticated copy to the office of Deputy Sherriff/Collector along with the sale certificate.

Justice GS Patel was hearing an execution application filed by Pinak Bharat and Co. and Bina Advani, decree holders of the property in question near Portuguese Church, Dadar. The entire property was the subject matter of three attempts at auction sales. The first two attempts failed. The decree holders then offered a price of Rs. 15.30 crores.

The Collector of Stamps assessed the property's value at Rs. 155 crores. Thereafter, Justice Patel directed Dadarao Datkar, Collector of Stamps, to remain present in Court, which he was.

His counsel Jyoti Chavan submitted that the earlier assessment was tentative or preliminary, without having all necessary information at hand. Now that additional material is available, including a confirmation that there were sitting tenants on the property, the market value has been reckoned again and is likely to be assessed in the range of about Rs.35 crores approximately, Chavan said.

After examining the Maharashtra Stamp Act and Article 16 of the said Act, the court said-

"A sale effected by a Receiver in execution is not, technically, a sale by the Court. It is a sale by the Receiver appointed in execution and the Receiver may, of course, with leave of the Court sell either by public auction or by private treaty. Wherever a sale by public auction, there is an assurance of an open bidding process and very often that bidding process takes place in Court itself (as in the present case).

Courts always obtain a valuation. They need to do this so that they can set a reserve price to ensure that properties are not sold at an undervaluation and to avoid cartelization and an artificial hammering down of prices."

The court went on to distinguish the process of public auction through court-

"I have no manner of doubt and I have absolutely no hesitation in saying that if the sale either by the Deputy Sheriff with permission of the Court, or by the Court Receiver with leave of the Court, is by private treaty, then it is for the adjudicating authority to certainly determine the true market value.

Very different considerations will, however, arise where there is a sale by public auction through a Court, and this sale is preceded by a valuation obtained by the Court as part of that public auction process. In a situation like that, I do not see why such a sale or transaction should stand on any different footing from those that are part of the proviso to sub-rule (6) of Rule 4 of the Maharashtra Stamp Rules."

"At a practical level it will thus be necessary for the Deputy Sheriff to ensure that on each occasion when a sale certificate is lodged for adjudication as to stamps, it is accompanied by an authenticated copy of the applicable valuation. That authentication will be done by the Prothonotary and Senior Master of the High Court at the time of issuance of confirmation of sale certificate and it is the sale certificate as accompanied by the valuation that will be taken up"

Thus, Justice GS Patel held that as a matter of general practice, the following procedures can be followed in different types of cases-

(a) Where there is a sale by private treaty, the usual course stipulated in the Maharashtra Stamp Act will apply;

(b) Where the sale is by the court, i.e., through the office of the Sheriff, or by the Court Receiver in execution, and is by public auction pursuant to a valuation having been previously obtained, then—

If the sale price is at or below the valuation obtained, then the valuation will serve as the current market value;

(ii) If the final sale price, i.e., the final bid, is higher than the valuation, then the final bid amount and the not the valuation will be taken as the current market value for the purposes of stamp;

(iii) Where there are multiple valuations obtained, then the highest of the valuations most recent, i.e., most proximate in time to the actual sale, should be taken as the current market value. 

Read the Judgment Here