Auction sale set aside for gross undervaluation, misdescription of property, and fraudulent lack of publicity.

Primezone Developers ("Appellant") was developing residential projects in Haryana.

In 2013, Ranjeev Agarwal took control of the company, allegedly laundering ₹31 crores siphoned from the National Spot Exchange Limited (NSEL) scam into the projects.

The Economic Offence Wing (EOW) arrested Agarwal, and the properties were attached under the Maharashtra Protection of Interest of Depositors (MPID) Act.

An initial valuation in 2018 by Quiker Realty Ltd. estimated the land at ₹74.74 crores (distress value ₹56 crores) for residential use.

After failed auctions, a 2020 valuation reclassified the land as "agricultural," slashing its value to ₹10.41 crores.

Respondent No. 5 purchased the property for ₹10.09 crores in a closed-bid auction.

The Appellant, along with a secured creditor (Union Bank of India) and individual homebuyers, challenged the absolute attachment and the subsequent auction sale.

1. Whether the auction sale of the attached properties was conducted with material irregularity, fraud, or gross undervaluation.

2. Whether the Competent Authority and the valuer (Quiker Realty) fulfilled their fiduciary duty to secure the highest possible price for defrauded investors.

3. Whether the sale should be set aside despite the issuance of a Sale Certificate and completion of the auction process.

The court primarily applied Section 4 (attachment) and Section 7 (making attachment absolute) of the MPID Act.

It relied on the principle that the court is the custodian of the interests of creditors and must ensure an adequate price is fetched during an auction (Navalkha & Sons v. Ramanya Das).

It applied the doctrine that fraud vitiates all solemn acts (S.P. Chengalvaraya Naidu v. Jagannath).

It followed the precedent that material irregularity or fraud in a public auction warrants setting aside the sale, even if the highest bidder is a third party (K. Kumara Gupta v. Sri Markendaya).

The court found the 2020 valuation to be a "scam within the scam".

It reasoned that the Competent Authority and Quiker Realty deliberately misclassified the land as "agricultural" to justify a price drop from ₹60 crores to ₹10 crores, ignoring its residential zoning and development potential.

The court noted that the first auction notices were published in editions with no local circulation (Chandigarh Punjabi/Hindi editions for a Karnal property), ensuring no real bidders participated.

The court highlighted a conflict of interest, noting a common director between two competing bidders, suggesting the auction was pre-planned to favor Respondent No. 5.

The court observed that the valuer used a wrong map and failed to conduct a site inspection for the second report.

Given the fiduciary duty to 13,000 victims of a ₹5,600 crore scam, the court held that the procedural "illusion of compliance" could not mask the gross undervaluation.

It held that the auction was a fraud upon the State and the investors.

The court directed: (a) the appointment of a new Competent Authority within four weeks; (b) the appointment of a new valuer; (c) a fresh auction with wide publicity; and (d) the refund of the purchase amount to Respondent No. 5.

The State was ordered to disqualify Quiker Realty from government auctions for five years and investigate the conduct of the former Competent Authority members.

The attachment of the properties continues pending the re-auction.