Acquiring industrial land through foreclosure or auction involves a formal legal and procedural process governed by financial institutions or government bodies. These processes are designed to recover dues from defaulting borrowers by liquidating the asset and come with specific rules regarding timelines, eligibility, and terms of purchase. Understanding the governing framework is essential for successful acquisition. Below are five structured areas that define these processes:
1. Governing Legal Framework
- In India, most foreclosure auctions are conducted under the SARFAESI Act (2002) by banks and financial institutions.
- State revenue departments or municipal bodies may conduct auctions for tax-defaulted land under local land revenue or municipal laws.
- The process is overseen by authorized officers, not courts, though legal oversight may be available through appeals or writs.
- Land under government acquisition may also be auctioned under specific industrial or urban development authority statutes.
2. Public Notification and Bidder Registration
- Auctions must be publicly notified through newspapers, websites, or official gazettes at least 30 days in advance.
- Notices typically include property details, reserve price, inspection dates, and terms of bidding.
- Interested buyers must register with the auctioning authority or financial institution.
- Registration may involve submitting KYC documents, PAN, address proof, and financial statements.
- Site visits or document verification may be allowed before the bidding date.
3. Earnest Money Deposit (EMD) and Bidding Terms
- Bidders are required to deposit a refundable Earnest Money Deposit (EMD)—usually 5% to 10% of the reserve price.
- EMD must be paid through bank drafts, NEFT, or RTGS to the authority’s account.
- Bidding is conducted either offline (sealed bid or open auction) or online through e-auction platforms.
- The highest bidder is selected, subject to fulfillment of terms and approval by the auctioning entity.
4. Payment Schedule and Title Transfer
- The successful bidder must pay a percentage of the sale amount (typically 25%) within 24 hours of winning.
- The remaining balance is generally due within 15 to 30 days, failing which the EMD and initial payment may be forfeited.
- After full payment, the authority issues a Sale Certificate, confirming the transfer of rights.
- Title transfer, mutation, and registration must then be completed at the local sub-registrar’s office.
- Buyer assumes all risks, responsibilities, and liabilities post-sale unless specified.
5. Conditions and Risks of Auction Purchases
- Assets are sold on an “as-is-where-is” and “as-is-what-is” basis.
- No guarantee is given regarding encumbrances unless explicitly cleared by the auctioning body.
- Buyer must conduct independent due diligence regarding title, possession, zoning, and municipal dues.
- Delays may occur due to pending litigation, tenant disputes, or appeals from the defaulting borrower.
- It’s advisable to seek legal and technical verification before placing a bid.
