Court Orders Revaluation and Fresh Auction Following Undervaluation and Misclassification of Land
In a significant ruling, the Bombay High Court has set aside the auction sale of properties belonging to Primezone Developers Private Limited, citing fraudulent undervaluation and procedural irregularities. The court found that the properties were grossly undervalued and misclassified as agricultural land to engineer a predetermined sale, thereby affecting the interests of defrauded investors in the NSEL scam, which involves over 13,000 victims and a sum of Rs. 5,600 crores.
The properties in question, located in Assandh, Karnal, Haryana, were initially valued at Rs. 60 crores in 2018 but were subsequently reduced to Rs. 10 crores in a 2020 valuation. The court noted that the Competent Authority and the appointed valuer, Quiker Realty, colluded to misclassify the land and undervalue the properties. The auction notices were misleadingly published in newspapers with limited reach, and inadequate publicity was given to potential bidders.
The judgment, delivered by Justices A.S. Gadkari and Kamal Khata, emphasized the necessity of ensuring maximum value for investors who were victims of the financial fraud. The court highlighted that the actions of the Competent Authority and Quiker Realty amounted to fraud on the court and the investors, and directed fresh valuation and auction with a new Competent Authority and valuer.
The court has ordered the State of Maharashtra to investigate the conduct of the Competent Authority and Quiker Realty and take appropriate action against them. It also directed the refund of amounts paid by the auction purchaser, Rudraveerya Developers Ltd., and continuation of property attachment pending reauction.
This ruling underscores the judiciary's role in safeguarding public trust and ensuring fair and transparent processes in auction sales under the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (MPID Act).
Bottom line:-
Auction of properties under the Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 (MPID Act) must ensure maximum value for defrauded investors. Fraudulent undervaluation and procedural irregularities in auction process can render the sale void.
Statutory provision(s): Maharashtra Protection of Interest of Depositors (In Financial Establishments) Act, 1999 Sections 4, 7, 8, and 9
