Auction Sales under Railways

Submitted by- Ankit Shubham

Roll no.- 1424

UG- IIIrd Semester

Submitted to- Mr. Bipin Kumar

Faculty of law
 Auction Sales

S. 64 of The Sale of Goods Act, 19301 deals particularly with sale of goods through
auctions. All the previously stated conditions and performance of the auctions have been enlisted
under this section.

The said section states

64. Auction sale. -In the case of sale by auction-

(1) Where goods are put up for sale in lots, each lot is prima facie deemed to be the
subject of a separate contract of sale;

(2) The sale is complete when the auctioneer announces its completion by the fall of
the hammer or in other customary manner; and, until such announcement is
made, any bidder may retract his bid;

(3) A right to bid may be reserved expressly by or on behalf of the seller and, where
such right is expressly so reserved, but not otherwise, the seller or any one person
on his behalf may, subject to the provisions hereinafter contained, bid at the
auction;

(4) Where the sale is not notified to be subject to a right, to bid on behalf of the
seller, it shall not be lawful for the seller to bid himself or to employ any person to
bid at such sale, or for the auctioneer knowingly to take any bid from the seller or
any such person; and any sale contravening this rule may be treated as fraudulent
by the buyer;

(5) The sale may be notified to be subject to a reserved or upset price;

(6) If the seller makes use of pretended bidding to raise to price, the sale is voidable
at the option of the buyer.

As mentioned above each lot shall be treated as a separate contract. This is the general
rule. Every bidding in an auction is nothing more than an offer on one side, which is not binding

1
The Sale of Goods Act, 1930 (Act No. 3 of 1930)
on the other side till assented to. Hence the bidder may withdraw his bid anytime before the fall
of the hammer.2

It is common to insert in conditions of sale, a proviso that biddings shall not be retracted,
such a condition might be argued to be inoperative in law, on the ground that one-sided
declaration cannot alter the bidder’s rights under the general law; but the bidders may well be
held to have agreed to this by attending the sale with notice of the conditions.3

An indication that the auction has closed at the highest bid signifies an intention to
finalise the contract on the last bid. Intention to finalise the contract becomes more manifest
when such highest bidder is required to make the deposit after the auction had closed to his bid.4

On the fall of the hammer, signaling the end of the auction, the offer is accepted and the goods
become the property of the buyer.5 At an auction sale all that happens with the signaling of the
closing of the bidding is that a contract of sale has come into existence and the parties get into a
relationship of a promisor and a promise in an executory contract. If the sale is notified to be
subject to a reserve price, the bidding and acceptance of a bid are subject to the condition that
the reserved price has been reached. A conditional acceptance of a conditional offer cannot
amount to a binding contract.6

Sub section 6 of the present proviso clearly states that if the seller bid or employed others to bid
for him without reserving the price so as to increase the price and entice others to buy at a higher
price, such a sale can be held voidable at the option of the buyer.

A combination between the bidders not to bid against each other is known as knock-out.7

2
AV Thomas & Co. Ltd. v. Deputy Commissioner Of Agricultural Income Tax And Sales Tax, Trivandum, AIR
(1964) SC 569; Dudhia Forest Co-Op Labourers & Artisans Society Ltd. v. M/s Mohmed Saiyed & Abdul Rehman’s
Co & or., (1980) 21 GLR 272
3
Pollock & Mulla, The Sale of Goods Act, Sixth edn (ed Justice K Ramamoorthy), Butterworths India, New Delhi,
year 2002, pg. 467.
4
Zila Parishad, Muzafffarnagar & anr. v. Udai Veer Singh, AIR (1970) All 64.
5
AV Thomas & Co. Ltd. v. Deputy Commissioner Of Agricultural Income Tax And Sales Tax, Trivandum, AIR
(1964) SC 569
6
McManus v. Fortescue, (1907) 2 KB 1
7
Jyoti v. Jhoowmull, (1909) 36 Cal 134
 WHY AUCTION?

When a transparent sale process is required: An open outcry auction allows for full
public disclosure and participation with no portion of the process concealed from view. This
can be particularly beneficial for trustees or situations involving ownership disputes. Buyers
also love the transparency of auctions. Unlike the traditional way of selling real estate--in
which buyers first make a bid, sign a sales contract, then pay for the inspections and
renegotiate the price--auctions let them do their due diligence before the sale.

When time is of the essence: This includes properties that must be sold by a certain
date, probate sales, trust, bankruptcy, divorce, inheritance and partnership dissolution sales.
The benefit here is that the seller has a certain date by which the property is sold and money
received. Additionally, the shortened period for an auction program can save a seller three to
six months' additional costs of taxes, insurance, maintenance, etc.8

When release of liability is required: Properties with unique circumstances for which
the seller wishes to be relieved of any and all liabilities, such as potential environmental
hazards or structural defects. In other words, the property is sold "as is, where is." Auction is
the best method as the buyers have the option to ascertain the quality of the property/goods
being sold and when it comes to sale of property which are in a dilapidated condition it is
really hard for the seller to set a minimum price. This way he is assured of getting the best
price possible.

When simply listing the property has not attracted buyers or resulted in a sale. Auction
programs can offer an expansive marketing, advertising and promotional campaign to attract
the largest pool of buyers and subsequently the highest possible price. This typically goes well
beyond what a normal listing broker would do.

To recover assets: This is done usually by the courts and governments to recover assets
that it has lost. For example Telgi’s properties in Bangalore were put up for auction to recover
the money that the government had lost due to the stamp paper scam. It would have been

8
Supra note 1
impossible to sell off the property ordinarily. And the best way to get the greatest value for the
property is to put it up for auction.
 IMPORTANT CASES

Kunjukrishnan v. State of Kerala.9

The third defendant had notified the sale of timber. As per the terms of this notification, the
3rd defendant was to accept the bid, and the 2nd defendant was to confirm the acceptance for
completing the contract of sale. On acceptance of the bid by the 3rd defendant, the successful
bidder had to deposit Rs. 10,000/-or 1/3 of the bid amount whichever is less as part payment of
earnest money. The bidder had also to execute an agreement with the 3rd defendant providing
that the bidder would not withdraw the bid before confirmation of the acceptance by the 2nd
defendant. On confirmation by the 2nd defendant, the bidder would deposit one third of the bid
amount as earnest money and execute a formal agreement with the State incorporating the
terms and conditions governing the contract of sale. In the auction held on 20-11-1975 the
plaintiff participated and bid the coupe for Rs. 2,09,000/-. Since the plaintiff's bid was the
highest, the 3rd defendant accepted it, subject to confirmation by the second defendant. The
plaintiff deposited Rs. 10,000/- with the 3rd defendant as per the terms of the notification. The
plaintiff also executed an agreement with the 3rd defendant agreeing to execute a formal
agreement with the 1st defendant after the acceptance of the bid was confirmed by the 2nd
defendant. As per the terms of the agreement, if the plaintiff failed to execute the formal
agreement the 1st defendant shall have the power and authority to recover from the plaintiff
any loss or damage caused to the Government as might be determined by the Government. The
Government could also recover the loss or damage by appropriating the above earnest money
deposited by the plaintiff and if that was found inadequate, the balance could be recovered
from the plaintiff and his properties. The 2nd defendant confirmed the acceptance of plaintiff's
bid by the 3rd defendant as per his proceedings dated 10-12-1975. The confirmation of
acceptance was communicated to the plaintiff on 20-12-1975. There was a sudden decline in
the price of timber due to various reasons. This was not a situation contemplated at the time
when the plaintiff bid in auction. It was humanly impossible for the plaintiff to sell timber
from the plaint coupe within 31-3-1976. The plaintiff and other persons who bid at the auction
held on 10-11-1975 represented to the defendant for extension of the term by 10 months as a
condition for executing the formal agreement. No reply was given by the defendants. As the

9
AIR (1983) Ker 73
plaintiff did not execute the formal agreement, on 20-2-1976 the 3rd defendant issued a notice
to the plaintiff intimating him that if he did not execute the formal agreement by 27-2-1976,
the residuary tree growth from the plaint coupe would be resold by public auction. The
plaintiff was also intimated that the part of the earnest money deposited by him would be
forfeited, and the loss, if any, sustained by the 1st defendant as a result of the resale would be
recovered from him. The 3rd defendant resold the residuary tree growth of the plaint coupe by
publication on 30-3-1976. One S. Prasanna Kumar was the highest bidder in the auction. The
bid was for Rs. 1,38,200/-. The 3rd defendant accepted the bid; and the 2nd defendant
confirmed it. On 9-6-1976 the 3rd defendant issued a notice to the plaintiff demanding to pay
Rs. 70,800/- as loss resulting from resale and a sum of Rs. 600.77, the proportionate cost for
advertising the resale.