To ensure that these auctions remain fair and transparent, Section 220 of the Bharatiya Nyaya Sanhita (BNS), 2023 makes it an offence for certain persons to participate in an unlawful manner.

What does Section 220 say?

Section 220 mainly deals with two types of people who should not participate in a government auction:

• People who are legally not allowed to bid in the auction because they are disqualified under the applicable law, government order, or auction rules.
• People who place bids without intending to complete the purchase, but only to disrupt the auction, inflate the price, or interfere with the bidding process.

Who Cannot Participate in a Government Auction?

While the law does not list every category, legal experts explain that, depending on the law governing the auction, the people with legal incapacity to participate in bidding are :

• Government officials.
• The auctioneer or officer conducting the sale.
• Persons specifically barred by a court or government order.
• Minors who cannot legally enter into contracts.
• Persons who are legally incapable of carrying out commercial transactions.
• Any other person disqualified under the applicable law or the auction conditions.

The exact list of disqualified persons depends on the rules governing that particular auction.

Bidding on Behalf of a Barred Person Is Also an Offence

A person cannot avoid the law by asking someone else to bid on their behalf.

If a friend, relative, employee, or any other person knowingly participates in an auction for someone who is legally barred from purchasing the property, both may be held liable under Section 220.

Eg: Benami bidding:

Suppose a government department auctions a seized property.

• A government official is legally barred from bidding.
• He asks his friend to bid on his behalf.
• The friend knows he is acting for the disqualified official.

Fake Bidding Is Also Illegal

The law also targets people who participate in an auction without any intention of completing the purchase.

Eg: Fake bidding:

A person repeatedly bids ₹1 crore for a property even though:

• they have no money,
• never intended to pay,
• only wanted to increase the price or force the auction to fail.

Punishment Under Section 220

A person found guilty under Section 220 of the Bharatiya Nyaya Sanhita may face

• Imprisonment for up to one month,
• a fine of up to ₹200, or
• both.

The offence is classified as non-cognizable, meaning the police cannot arrest a person without a court’s permission. It is also a bailable offence, allowing the accused to seek bail as a matter of right, and the case is triable by any Magistrate.

When Does This Law Apply?

For Section 220 to apply, two important conditions must generally be satisfied:

• The auction must be conducted by a public servant who has the lawful authority to conduct the sale.
• The bidder must know that they, or the person they represent, are legally disqualified from participating, or must knowingly bid without intending to fulfil the obligations of the purchase.

Why Should Buyers Be Careful?

Before participating in a government auction, always check:

• Whether you are legally eligible to bid.
• Whether the auction notice places any restrictions on participation.
• That you are not bidding on behalf of a person who is legally barred.
• That you have the financial ability and genuine intention to complete the purchase if your bid is successful.

Ignoring these requirements can result in criminal liability, even if the bid is never completed.

For assistance, you may contact the Legal experts of the  verified real estate team to review the norms and conditions of the auction process as well as conduct legal checks on properties listed for auction.

Final Thoughts

Government auctions are meant to ensure fairness and transparency in the sale of public assets. Section 220 of the Bharatiya Nyaya Sanhita helps prevent proxy bidding, fake bidders, and participation by persons who are legally disqualified. Understanding these rules can help buyers participate confidently while avoiding unnecessary legal consequences.

Partitioning property between co-owners or family members can be a complicated process, often leading to disputes and misunderstandings. Understanding the legalities, cultural practices, and the nuances of partition deeds is essential to ensure a smooth and fair distribution of property. This guide will walk you through the key points to consider during property partition.

1. Challenging Unfair Partition

If a property is partitioned in a way that unfairly benefits one party, the affected person can challenge the partition in court. If the court finds that the partition is not just, it may declare the partition deed invalid.

2. Equal Distribution is Not Mandatory

Contrary to popular belief, equal distribution is not required. However, if the property is divided into unequal shares, the partition deed must clearly outline the reasoning behind the uneven distribution. This prevents future disputes among co-owners.

3. Divisible Property

When a property can be easily divided into separate parts, partitioning is straightforward. However, if dividing the property results in impractically small or unmanageable portions, it is termed “Not Divisible by Metes and Bounds”—meaning it cannot be divided based on specific measurements.

4. Relinquishment of Share

For indivisible properties, one co-owner can voluntarily give up their share in exchange for compensation through a release deed. In this case, a partition deed may not be necessary.

5. Auctioning the Property

If none of the co-owners are willing to relinquish their share and the property cannot be divided, auctioning the property may be the best solution. The proceeds from the auction are then divided among the co-owners based on their shares.

6. Debt Settlement in Partition

If one co-owner has paid off debts associated with the property, they have the legal right to claim reimbursement from the other co-owners when the property is partitioned. This ensures fairness in handling shared financial obligations.

7. Construction on Shared Property

If a co-owner has made improvements, such as building a wall or adding a floor, with the consent of the other co-owners, they are entitled to claim compensation for the construction during partition.

8. Revoking Consent

If the co-owners initially gave consent for the construction but later refuse to acknowledge it, the co-owner who made the improvements may face difficulty claiming compensation. Written agreements or proof of consent are essential to avoid disputes.

9. Elders’ Role in Partition

In many cultures, particularly in India, elders are traditionally expected to relinquish their share of the property during partition. This cultural expectation stems from the belief that elders make sacrifices for the younger generation.

10. Younger Members Can Relinquish Too

While elders typically relinquish their shares, younger family members can also choose to do so. However, in most cases, the expectation is for the elders to lead by example.

11. Vertical or Horizontal Partition

Property can be divided either horizontally or vertically, depending on the layout and agreement among co-owners:

• In vertical partitions, the youngest typically receives the first share on the eastern side of the property, while the eldest receives the last portion on the western side.
• In horizontal partitions, the division happens from north to south, with the youngest getting the first portion on the northern side and the eldest receiving the southernmost portion.

12. North-South Partition Tradition

A north-south partition follows the traditional practice of ensuring that younger members are closer to the eldest members. This custom is based on the belief that younger members will provide support to the elders in their old age.

Conclusion

Partitioning property requires careful consideration of both legal and cultural aspects. Whether you’re dealing with divisible or indivisible property, addressing debts, or dealing with construction claims, it’s important to approach the process fairly and legally. Understanding the nuances of partition, including traditional practices, can help avoid disputes and ensure a smooth transfer of ownership.

If you’d prefer to have everything handled for you seamlessly, you can click  here and contact us at verified.realestate. Our team of experts is here to provide comprehensive support and ensure a smooth and secure property buying experience.

What is the SARFAESI Act?

The SARFAESI Act empowers financial institutions to auction residential, commercial, or industrial properties without court intervention when a borrower defaults on a secured loan. It streamlines the recovery of debts by providing creditors with the ability to seize and sell the borrower’s assets. This process can be beneficial for banks, but for buyers looking to purchase such properties, due diligence is key.

Step-by-Step Guide to the SARFAESI Auction Process

1. Identification of Loan Default When a borrower misses multiple payments, typically three or more, the bank marks the loan as a Non-Performing Asset (NPA) under the RBI’s guidelines, which state that any loan with overdue interest or principal for more than 90 days is an NPA.
2. Issuance of Demand Notice Once the loan is classified as an NPA, the bank sends a demand notice under Section 13(2) of the SARFAESI Act. This notice gives the borrower 60 days to repay the outstanding loan amount. Failure to settle within this period leads to the next step.
3. Possession of Property If the borrower does not repay or negotiate within the stipulated 60 days, the bank takes possession of the property under Section 13(4). This can be:
   • Physical Possession: The bank takes physical control of the property.
   • Symbolic Possession: The bank takes legal control, but the borrower or tenants may still occupy the property.
4. Valuation of Property The bank appoints an independent valuer to assess the property’s market value. The valuer looks at factors such as location, condition, and market demand to determine the reserve price, which is the minimum bid amount for the auction.
5. Public Notice of Auction The bank then publishes a public notice in at least two newspapers (one in a local language and one in English) as per Rule 8(6) of the SARFAESI Rules. This notice includes:
   • Property description
   • Auction date, time, and venue
   • Reserve price and Earnest Money Deposit (EMD)
   • Borrower’s loan account details
6. Earnest Money Deposit (EMD) Prospective buyers must deposit an EMD, typically 10% of the reserve price, to participate in the auction. The EMD can be submitted via bank transfer or demand draft and is refundable to non-winning bidders.
7. Auction Process The auction is usually held online through an e-auction platform. Bidders submit their bids above the reserve price. The highest bid wins, but only if it meets or exceeds the reserve price.
8. Winning the Auction The winning bidder must pay 25% of the bid amount within 24 hours. The remaining 75% must be paid within 15-30 days. If the bidder fails to pay the full amount on time, the EMD and any additional payments are forfeited, and the bank may re-auction the property.
9. Issuance of Sale Certificate Once the full payment is made, the bank issues a Sale Certificate, transferring legal ownership to the buyer. The buyer must then register the sale certificate with the local sub-registrar’s office to complete the transfer.
10. Possession of Property After the sale certificate is issued, the buyer can take physical possession of the property. If the property is still occupied, the bank helps the buyer take control through legal means.
11. Use of Sale Proceeds The bank uses the proceeds from the auction to recover the borrower’s dues. Any surplus after covering the loan, interest, and legal fees is returned to the borrower. If the sale does not fully cover the loan, the bank may pursue further legal action to recover the remaining balance.

Risks and Disadvantages of Buying SARFAESI Auction Properties

1. Limited Inspection Opportunities Buyers may not have sufficient access to the property for thorough inspection before bidding. This could result in unknown structural damages, illegal constructions, or maintenance issues, which the buyer will be responsible for fixing.
2. Legal Disputes and Encumbrances Auctioned properties may have unresolved legal issues. Borrowers may contest the auction, and there may be claims from other creditors or disputes involving tenants. These can result in delays or even cancellation of the sale.
3. No Warranty or Guarantees Auction properties are sold “as-is, where-is,” meaning the bank provides no warranties regarding the property’s condition or title. If there are hidden defects, unpaid taxes, or other problems, the buyer is responsible for resolving them.
4. Possession Issues Taking possession of auctioned properties can be challenging if the borrower or tenants are still occupying it. Eviction proceedings may be necessary, which can be costly and time-consuming.
5. Unclear Title There is always a risk of unclear or disputed titles. The property could have multiple claims against it, or it could be mortgaged to multiple institutions. Buyers should conduct a thorough title search to avoid future litigation.
6. Upfront Payment and Forfeiture Winning bidders must make a significant payment upfront (25% within 24 hours) and complete the full payment within a short period (15-30 days). Failure to do so results in forfeiture of the EMD and any additional payments.
7. No Price Negotiation Auctions don’t offer room for negotiation. Bidders must pay the full bid amount even if it exceeds the market value.

Precautions for Buyers

1. Title Search and Legal Due Diligence Hire a legal expert to verify the title and check for any legal encumbrances, unpaid taxes, or liens on the property.
2. Review the Auction Notice Carefully review the auction notice for terms of sale, reserve price, auction date, and other essential details.
3. Inspect the Property Conduct a physical inspection, if possible, to assess the condition of the property and estimate any repairs or renovations needed.
4. Check the Possession Status Determine whether the bank has physical or symbolic possession of the property. If it’s symbolic, be prepared for possible legal action to take physical possession.
5. Verify Bank’s Authorization Ensure the bank is legally authorized to auction the property under the SARFAESI Act.
6. Check Financing Options Confirm whether the bank offers loans for auction properties and get pre-approval before bidding.

Conclusion

The SARFAESI property auction process offers opportunities to purchase properties at competitive prices but comes with inherent risks. Understanding the legal and financial challenges is essential for making an informed decision. Conduct thorough due diligence, consult with experts, and be cautious throughout the auction process to ensure a successful purchase.ss, and proper preparation.

If you’d prefer to have everything handled for you seamlessly, you can click  here and contact us at verified.realestate. Our team of experts is here to provide comprehensive support and ensure a smooth and secure property buying experience.