Public Servant Concerned in Sale Not to Purchase | BNSS 2023

A Public Servant Concerned in a Sale Not to Purchase the Property: Section 527 of the BNSS, 2023, the Conflict of Duty and Interest, and the Consequences of a Breach

Section 527 is the shortest provision in the Sanhita and one of the easiest to overlook: no public servant having any duty to perform in connection with the sale of any property under this Sanhita shall purchase or bid for the property.

The reason is straightforward. A person who conducts a sale controls the information, the timing and the conditions on which others may buy. If he may also buy, he has an interest in a low price where his duty is to obtain the best price — and no man can serve two masters whose interests conflict.

1. The Provision

Figure 1: Section 527

Section 527, BNSS 2023

No public servant having any duty to perform in connection with the sale of any property under this Sanhita shall purchase or bid for the property.

Element	Position
Where sales arise under the Sanhita	Section 85: attachment and sale of the property of a proclaimed person. Sections 461 to 463: the warrant for levy of a fine, by attachment and sale of movable property. Sections 497, 504 and 505: the sale of property which is perishable, or which no claimant has claimed within six months
Who is caught	Any public servant having any duty to perform in connection with the sale — the officer who attaches, values, advertises, conducts the auction or holds the proceeds. The words are wide, and the duty need not relate to that particular item alone
What is forbidden	He shall neither purchase nor bid. The prohibition reaches the bid as well as the purchase, because a bid by such a person distorts the auction even where he does not succeed
Why the bid is included	A prohibition confined to purchase would be defeated by a bid made through another, or by a bid designed to depress or manipulate the bidding of others
The parallel in civil procedure	Order XXI rule 73 of the Code of Civil Procedure, 1908 forbids an officer or other person having any duty to perform in connection with an execution sale from bidding for or acquiring any interest in the property — in almost identical terms, and for the same reason

2. The Principle, and the Consequences

Figure 2: The fiduciary principle and the effect of a breach

The rule is a particular application of a principle which runs through the whole law: a person in a position of trust may not place himself where his duty and his interest conflict. He must act solely in the interest of those for whom he acts; he must not make a profit from his position beyond the remuneration the law allows; and the rule operates on the possibility of a conflict rather than on proof that the conflict caused harm.

📖 Delhi Development Authority v. Skipper Construction Company (P) Ltd., (1996) 4 SCC 622

Facts: A person in a position of advantage had obtained and dealt with property and the moneys of others in circumstances in which, it was found, the advantage had been used for personal gain. The Supreme Court considered the principles on which the law strips a person of a benefit so obtained.

Held: The Supreme Court held that the principle that no person can be permitted to profit from his own wrong is a basic one, and that where a person in a fiduciary or advantageous position has obtained a benefit by reason of that position, equity treats him as holding it for the person entitled — a constructive trust arising by operation of law and not by agreement. The Court held that the doctrine is not confined to recognised categories of trustee, and applies wherever a person has obtained an advantage by reason of a position of confidence or duty; and that it operates irrespective of good faith, since the rule exists to remove the temptation rather than to punish a proven abuse. It emphasised that a court has ample power to fashion a remedy so as to ensure that the wrongdoer does not retain the fruits, and that the law’s concern in such cases is not merely to compensate the person injured but to prevent the position of trust from being turned to account.

Ratio: No person may profit from his own wrong. Where a person in a fiduciary or advantageous position obtains a benefit by reason of that position, equity treats him as a constructive trustee of it — and the rule operates irrespective of good faith.

The consequence	Explanation
The sale may be set aside	At the instance of the person aggrieved — the owner, the person whose property was attached, or a rival bidder who was displaced
The profit is held for the person entitled	Where the public servant has made a gain, the law treats him as a constructive trustee of it. He cannot retain the fruits of the position he abused
Departmental action	The breach is of a statutory prohibition governing his office, and is actionable as misconduct independently of any loss
And it may be an offence	The conduct may attract the provisions of the Bharatiya Nyaya Sanhita, 2023 dealing with a public servant unlawfully buying or bidding for property in which he is concerned in his official capacity

⚠ Two points on the scope of the prohibition

It is absolute and requires no proof of prejudice. It is no defence that the price obtained was fair, that the sale was properly conducted, or that the public servant did not in fact use his position. The rule forbids him to be in the position at all.

And it cannot be evaded through a nominee. A purchase in the name of a relative, an employee, or a company he controls is a purchase by him for this purpose — since otherwise the section would be defeated by the simplest of devices.

The same reasoning explains why the section catches the bid and not merely the completed purchase: a person permitted to bid can shape the auction whether or not he ends up buying.

And note the breadth of “any duty to perform in connection with”. It is not confined to the officer who wields the hammer; it reaches everyone whose official function touches the sale.

3. Key Takeaways

The position stated shortly

1. Section 527: no public servant having any duty to perform in connection with the sale of any property under the Sanhita shall purchase or bid for the property.

2. Sales arise under section 85 (property of a proclaimed person), sections 461 to 463 (levy of a fine), and sections 497, 504 and 505 (perishable and unclaimed property).

3. The words “any duty to perform in connection with” are wide: they reach the officer who attaches, values, advertises, conducts the auction or holds the proceeds.

4. The prohibition catches the bid as well as the purchase, because a bid distorts the auction even where it does not succeed.

5. The rule is an application of the principle that a person in a position of trust may not place himself where duty and interest conflict.

6. It operates on the possibility of a conflict, not on proof that harm resulted — so it is no defence that the price was fair or that the position was not in fact used.

7. No person may profit from his own wrong: a benefit obtained by reason of a fiduciary position is held as a constructive trustee for the person entitled, irrespective of good faith: Skipper Construction.

8. A sale in breach may be set aside at the instance of the person aggrieved, and any profit disgorged.

9. The breach is also misconduct, and may attract the provisions of the Bharatiya Nyaya Sanhita dealing with a public servant unlawfully buying property in which he is officially concerned.

10. And it cannot be evaded through a nominee — a purchase in the name of a relative, employee or controlled company is a purchase by him.

4. Frequently Asked Questions

What does section 527 forbid?

That a public servant having any duty to perform in connection with the sale of any property under the Sanhita should purchase or bid for that property.

Which sales does it cover?

Sales under the Sanhita — the attachment and sale of the property of a proclaimed person under section 85, sale in execution of a warrant for levy of a fine under sections 461 to 463, and the sale of perishable or unclaimed property under sections 497, 504 and 505.

Why does it forbid bidding as well as purchasing?

Because a bid by such a person distorts the auction even where he does not succeed, and a prohibition confined to purchase would be defeated by a bid made through another or designed to influence the bidding of others.

Is it a defence that the price obtained was fair?

No. The prohibition is absolute and requires no proof of prejudice. The rule forbids the public servant to be in the position at all, and operates on the possibility of a conflict rather than on proof that the conflict caused harm.

What happens if the prohibition is breached?

The sale may be set aside at the instance of the person aggrieved; any profit is held for the person entitled, the law treating the public servant as a constructive trustee; he is liable to departmental action; and the conduct may amount to an offence.

Can it be avoided by buying in another’s name?

No. A purchase in the name of a relative, an employee or a company he controls is a purchase by him for this purpose, since otherwise the section would be defeated by the simplest of devices.

Related Topics

Miscellaneous Provisions: Sections 520 to 531, BNSS
Disposal of Property: Sections 497 to 505, BNSS
Proclamation and Attachment: Sections 84 to 89, BNSS
Execution, Suspension, Remission and Commutation: Sections 453 to 477
A Judge or Magistrate Personally Interested in a Case: Section 525
An Advocate Practising before a Court Sitting as a Magistrate