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of <h1>High Court rejects bid approval in property auction under liquidation due to leasehold status. Refund ordered.</h1> The High Court of Karnataka rejected an application for approval of a bid in an auction for a property under liquidation. The Court determined that the ... - Issues involved: Application for approval of bid in auction, ownership of property under liquidation, confirmation of sale, rights of auction purchaser.The High Court of Karnataka considered an application filed by a company, the successful bidder in an auction conducted by the Official Liquidator, seeking approval of its bid of Rs. 317.50 lakhs for a land and building. The company had initially quoted a lower bid which was subsequently increased through intense bidding. The applicant had deposited an earnest money amount as per auction terms. The Official Liquidator confirmed the receipt of the earnest money. The application requested approval of the bid and confirmation of the sale in favor of the applicant, along with possession handover. Another entity, M/s. M.J. Mehta and Company, raised objections claiming ownership of the property under liquidation, opposing the sale confirmation. The Court was tasked with determining the ownership of the auctioned property and the rights of the auction purchaser.The Court delved into the legal principle that in a court auction, the auction purchaser acquires the rights, title, and interest of the judgment debtor, without the Court guaranteeing or rectifying any title defects. The Court emphasized the responsibility to ensure transparency for the auction purchaser regarding the judgment debtor's rights. In this case, the Company under liquidation was not the owner of the property on the auction day. The Court sought clarification from the Official Liquidator on how the company had acquired title to the property. The property in question originally belonged to KIADB and was subleased to M/s. M.J. Mehta & Co., who further subleased it to the company under liquidation. However, no sale deed had been executed in favor of either party, indicating that the title remained with KIADB. The auction notice described the sale as 'as is where is,' without specifying the nature of the rights being sold. The Court informed the auction purchaser that the company under liquidation did not own the property, offering the purchaser the option to proceed with the purchase under the current conditions.The auction purchaser expressed willingness to proceed with the purchase under the understanding that they would obtain absolute title to the property, unaware of the leasehold nature of the company's rights. The purchaser suggested that if directed, the Official Liquidator could obtain a sale deed to convey absolute title, and the purchaser would still proceed with the purchase. However, upon realizing the leasehold status, the auction purchaser retracted the offer. The Court clarified that the property was sold in a leasehold condition, and the auction purchaser's expectation of absolute title was incorrect. As the auction purchaser was not willing to proceed with the purchase under the leasehold terms, the Court rejected the application for sale confirmation and directed the refund of the earnest money deposit to the auction purchaser within a specified timeframe.Separate Judgement: None.
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