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.

The Growing Importance of Property Due Diligence in Lending

When financial institutions lend against land or property, the asset itself becomes the security for the loan. Any defect in the collateral can significantly affect the lender’s ability to recover its dues in the event of a default.

Some of the most common risks faced by lenders include:

• Defective or incomplete title chains
• Undisclosed mortgages or encumbrances
• Pending litigation involving the property
• Illegal constructions and planning violations
• Incorrect land classifications
• Forged or manipulated documents
• Boundary and survey discrepancies
• Invalid powers of attorney and succession disputes

A comprehensive due diligence process helps lenders identify these issues before disbursing loans.

Collateral and Title Verification and Matters

Collateral verification goes beyond merely collecting property documents from borrowers. It involves an in-depth examination of the asset’s legal, regulatory and physical status.

So, before approving a loan against real estate, lenders must ensure that the property has a clear and marketable title and is free from legal or financial complications.

This involves :

• verifying ownership records,
• checking for encumbrances and existing charges,
• reviewing the chain of title,
• examining registration and revenue records,
• identifying litigation or succession issues, and
• confirming survey boundaries and access rights.

A thorough verification process helps financial institutions avoid lending against disputed, defective, or legally unenforceable assets.

Regulatory and Zoning Due Diligence Cannot Be Ignored

Even when a property’s title is clear, regulatory violations can create major risks for lenders.

Due diligence should therefore include:

• Land use verification
• CMDA and DTCP compliance checks
• Building approval verification
• Layout approval review
• Planning permissions
• Development restrictions
• Floor Space Index (FSI) compliance

Properties that violate planning regulations often face difficulties in financing, redevelopment, and enforcement proceedings.

Continuous Monitoring of Collateral is Equally Important

The legal status of a property can change after loan disbursement. New encumbrances, litigation or government actions may arise during the loan tenure.

Therefore, lenders increasingly require:

• Periodic property reviews
• Monitoring of government records
• Tracking new litigations
• Identification of fresh encumbrances
• Portfolio-level risk assessment

Continuous monitoring helps institutions proactively manage their exposure and identify emerging risks.

Recovery Support During Enforcement Proceedings

When borrowers default, lenders must ensure that the collateral remains legally enforceable.

Property due diligence can support:

• Verification before initiating enforcement proceedings
• Documentation review
• Identification of legal impediments
• Assessment of title issues
• Due diligence during SARFAESI proceedings
• Decision-making during recovery actions

Early identification of risks can significantly improve recovery outcomes.

Corporate By Verified RealEstate: Turns Property Data into Lending Intelligence

Real estate-backed lending involves risks that often go beyond the documents submitted by borrowers. Hidden encumbrances, title defects, regulatory violations and ownership disputes can significantly impact the value and enforceability of a lender’s collateral.

To address these challenges, Verified Real Estate offers specialised solutions for the BFSI sector, including Banks and NBFCs, combining technology, data intelligence and legal expertise to deliver comprehensive property due diligence and collateral risk management services for financial institutions.

The platform helps lenders by:

• Verifying ownership and title records.
• Examining Encumbrance Certificates, Patta and revenue records.
• Reviewing planning and building approvals.
• Analysing historical transaction data and litigation indicators.
• Identifying regulatory and zoning risks.
• Generating structured, evidence-based due diligence reports.

The ecosystem is backed by:

• 30-point verification framework
• 40 million+ land parcels analysed
• 9+ live government portals integrated
• 50 years of transaction history reviewed
• 35+ specialised diligence tools
• 15+ years of Tamil Nadu real estate expertise

The outcome for banks and NBFCs:

• Better underwriting and credit decisions.
• Early identification of legal and title risks.
• Stronger collateral risk management.
• Continuous portfolio monitoring.
• Improved recovery and enforcement strategies.

By transforming fragmented property information into actionable intelligence, Verified Real Estate enables banks and NBFCs to lend with greater confidence while reducing the risks associated with real estate-backed financing.

Conclusion

In an environment where property-related disputes and documentation issues remain prevalent, comprehensive due diligence is no longer optional for banks and NBFCs. Effective collateral verification, title assessment, regulatory checks and continuous monitoring can significantly reduce lending risks and improve recovery prospects. Institutions that adopt a robust property verification framework are better equipped to protect their portfolios and make informed credit decisions.