Supreme Court Orders Refund with Interest for Invalid Auction by Improvement Trust Authorities' Failure to Disclose Litigation Details in Public Auction Leads to Supreme Court's Restitution Directive
In a significant ruling, the Supreme Court of India has directed the Improvement Trust, Ludhiana, to refund Rs. 1.57 crore with 9% interest per annum to Viney Kumar Sharma, who was declared the highest bidder in a public auction for a property that was subject to undisclosed litigation. The judgment, delivered by Justices J.B. Pardiwala and K.V. Viswanathan, underscores the legal obligation of authorities to disclose all known encumbrances and pending litigation in auction notices to ensure transparency and protect the interests of bona fide purchasers.
The case arose when Viney Kumar Sharma, the appellant, participated in a public auction conducted by the Improvement Trust on May 28, 2021, and deposited Rs. 1.55 crore for a plot in Maharishi Balmiki Nagar, Ludhiana. However, the Trust later declined to execute the conveyance deed, citing a pending suit from 2020 involving another party. Despite Sharma's appeal for the execution of the conveyance deed, the Punjab and Haryana High Court dismissed his writ petition, leading to the present appeal in the Supreme Court.
The Supreme Court found that the Trust's failure to disclose the ongoing litigation constituted a serious breach of its duty to provide all material information regarding the property. The Court noted that such suppression invalidates the auction and renders it fraudulent or vitiated by material irregularity. Highlighting the principle of restitution, the Court emphasized that auction purchasers acting in good faith, who deposit the purchase price believing in the auction's legitimacy, are entitled to restitution to prevent unjust enrichment and restore them to their original position.
The Court referred to its previous decision in the case of Delhi Development Authority v. Corporation Bank, reaffirming that restitution is both a legal and moral imperative. The judgment mandates the Improvement Trust to refund the full amount deposited by Sharma, along with interest from the date of deposit, within six weeks.
This ruling serves as a critical reminder to public authorities of their obligations in conducting transparent and fair auctions, ensuring that potential buyers are fully informed of any encumbrances or legal disputes associated with auctioned properties.
Bottom Line:
Authorities conducting public auctions are legally obligated to disclose all known encumbrances and litigation relating to the property. Suppressing such material facts renders the auction fraudulent or vitiated by material irregularity. Auction purchasers acting in good faith are entitled to restitution, including a refund of the deposited amount with interest.
Viney Kumar Sharma v. Improvement Trust, (SC) : Law Finder Doc Id # 2841378
