Bidder Can't Question Obstructions To Property Post-Auction, When Opportunity For Inspection Was Availed Prior To Bid: Allahabad HC

In a case concerning delay in payment pursuant to auction of a property, the Allahabad High Court said that where a bidder had the opportunity to inspect a property prior to bidding on it and the auction was to proceed on an 'as is where is and whatever there is basis', then they cannot question the results on discovering obstructions to the property post such bid.

In doing so the court said that on account of inaction or lethargy by the appellant bidder the respondent cannot be held responsible once the terms set forth in the e-auction notice is on an as is where is and whatever there is basis; and so there is also no question of non-disclosure of vital fact. The court observed that the notice for e-auction provided an opportunity to the appellant to make an inspection of the properties on two dates–January 2 and 3, 2023, both of which were before the submission of the earnest money–on January 9, 2023 and the date of the bid which was on January 10, 2023.

A division bench of Chief Justice Arun Bhansali and Justice Vikas Budhwar in its order said:

“Certainly, for the inaction or lethargy on the part of the appellant, the respondent cannot be held to be responsible. Further more, once the terms and the conditions as set forth in the e-auction notice itself recites that the auction “AS IS WHERE IS AND WHATEVER THERE IS BASIS” then there is no question of non disclosure of the vital fact. Not only this, it is on the instance of the appellant itself that the auction stood settled in his favour by the Company Judge on 26.7.2023 and by order dated 1.12.2023 whereby, on the request of the appellant time was extended for a period of one month to make the entire payments of the bid amount. Once the said orders have been passed on the request and the undertaking of the appellant and have attained finality then it does not lie in the mouth of the appellant to question the auction".

Factual Background

Appellant wished to purchase land put up for auction following the liquidation of a company. He bid the highest amount and was awarded the property in question. The Company Court accepted the bid and passed an order dated 26.07.2023, directing the appellant to deposit the required amount within 60 days of the aforementioned order.

Requiring additional time to deposit the money, the appellant filed a Time Extension Application, which was allowed. However, on failing to meet the deadline granted, appellant filed a second Time Extension Application, which was rejected. Aggrieved, he filed the present appeal.

Counsel for appellant contended that due to ill-health, appellant was unable to visit the property on the stipulated inspection days, that were, 02.01.2023 and 03.01.2023. Subsequently, when he finally made the inspection on 18.11.2023, it was found that there were a number of constructions on the land which had not been disclosed prior to the auction. Appellant contended that the e-notice was required to disclose all information of facts and that due to non-disclosure of vital facts, fraud had been practised on him. It was submitted that the he would pay the remainder of the money once the obstructions on the land had been removed.

Per Contra, respondents argued that since the e-auction notice gave a date for inspection of the property, it was up to the appellant to participate in it, and then take part in the bid. Further, the e-auction was to be on a “as is where is and whatever there is basis” and thus once the appellant had made his bid, it was no longer open to him to question the proceedings.

It was submitted that by order dated 01.12.2023, the extension granted to the appellant gave him time to deposit half the required amount by 15.12.2023, and the remaining within the next 15 days. The appellant instead of honouring this order which clearly stipulated that no further time would be given, filed for another extension. Therefore, the present appeal of the appellant was liable to be dismissed.

Findings

The High Court relied on the court's division bench's judgment in Palika Towns LLP v. State of U.P and Ors. (2022) to interpret the meaning of 'as is where is and whatever there is basis'.

“This doctrine puts the duty on the purchaser to carry out all necessary inspection of the property before entering into an agreement. If the purchaser fails to conduct such an inspection, then later, on identification of defects in the property may not be a ground to revoke or claim damages under the contract,” the court had said in Palika towns.

The High Court held that the orders dated July 26, 2023 and December 1, 2023 on time extension applications, had both attained finalities as neither of them had been challenged and the appellant had already been awarded his last opportunity to pay the bid money.

Further, regarding the contention of the appellant that he would make the payment subject to the removal of the obstructions on the property, the Court held that this could not be allowed as it was not within the scope of powers of the Court to re-write the terms of the auction executed between the parties.

Finding no infirmity in the company judge's order the court dismissed the appeal.

Case Title: Mrs. Jayashree Kailash Vani v. Official Liquidator [SPECIAL APPEAL No. - 963 of 2024]

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