Company Court Auction Fixes True Market Value; Bombay High Court Says Maharashtra Cannot Use Higher Ready Reckoner Value to Compute Transfer Premium Under Section 37A
Can Government Ignore Court-Auction Price and Charge Premium on Ready Reckoner Value? Bombay High Court Says No, Orders Recalculation and Refund
Facts
The case concerned Office Unit No. 134-A, Mittal Court, Nariman Point, Mumbai, belonging to Sonal Garments (India) Pvt. Ltd., which had been ordered to be wound up on 16 April 2012.
During liquidation, the Official Liquidator auctioned the office under the supervision of the Company Court. On 10 October 2018, the Company Court approved the sale to Rohstoffe International Pvt. Ltd. for ₹2.65 crore. ROHSTOFFE ROHSTOFFE
The complication arose because the building stood on land belonging to the State of Maharashtra and leased to the premises society. Section 37A of the Maharashtra Land Revenue Code, 1966 therefore required State permission for the transfer and enabled the State to recover a transfer premium. ROHSTOFFE
Under the Government Resolution dated 7 July 2017, the applicable premium for commercial/industrial units was the higher of:
₹2,000 per sq. ft.; or 6% of the relevant market value. ROHSTOFFE
The State treated the Ready Reckoner Value of ₹5,93,26,567 as the market value and demanded approximately ₹35,59,600 as transfer premium.
Rohstoffe contended that the true market value was the ₹2.65 crore price actually discovered in the Company Court-supervised auction. Six per cent of that amount was ₹15.90 lakh. ROHSTOFFE
Thus, the core dispute was stark:
₹2.65 crore Court-auction value vs. ₹5.93 crore Ready Reckoner value.
There was also a separate dispute concerning ₹3,92,515 charged by Mittal Court Premises Co-operative Society towards its common amenity fund.
Issues
The Bombay High Court identified three questions:
- Whether Maharashtra could charge a transfer premium at all when an individual unit in a building standing on State-owned leasehold land was transferred.
- Whether the 6% component of the transfer premium should be calculated on the ₹5.93 crore Ready Reckoner Value or ₹2.65 crore Auction Purchase Value.
- Whether the Society’s common amenity fund charge was valid and, if so, whether it was payable by the auction purchaser or from the liquidation estate. ROHSTOFFE
Auction Purchaser’s Arguments
Rohstoffe initially questioned the State’s entitlement to charge any transfer premium at all. During arguments, however, it accepted that the issue stood concluded by the Division Bench decision in State of Maharashtra v. Kamal R. Bulchandani.
The real contest therefore shifted to valuation.
Rohstoffe argued that an actual Court-supervised auction represented real-world price discovery. The ₹2.65 crore purchase price reflected the specific attributes, advantages and disadvantages of this particular property.
It relied principally upon Pinak Bharat, Bharat Bijlee and Transpower, contending that a value discovered and approved through a judicial auction cannot subsequently be displaced by an artificial Ready Reckoner valuation. ROHSTOFFE
State of Maharashtra’s Arguments
The State argued that the Court-auction price was irrelevant to computation under Section 37A.
According to it, the 2017 GR expressly prescribed the Ready Reckoner mechanism. The Collector was therefore not reassessing the Court-approved auction price but simply applying an independent statutory formula.
It further argued that Section 37A created a statutory charge attached to Government land and that Rohstoffe had purchased the property on an “as is where is and whatever there is” basis. ROHSTOFFE
The State sought to distinguish the Stamp Act valuation regime from the Maharashtra Land Revenue Code, contending that the two statutes served different legislative purposes. ROHSTOFFE
State Can Charge Transfer Premium
On the first question, the Court ruled for the State.
Section 37A defines “Government land” broadly enough to include a right, benefit or share arising out of a building erected on Government land.
Consequently, when Government land is leased to a society and a unit in the society’s building is transferred, State permission can be required and a transfer premium can be imposed. ROHSTOFFE
The Court held that Bulchandani conclusively governed the issue. Following the introduction of Section 37A, the earlier decision in Aspi Chinoy could no longer be invoked to deny the State’s power to charge premium.
Thus, even a transfer resulting from a Company Court-approved auction is not exempt from the statutory transfer premium. ROHSTOFFE
The Crucial Question: What Is “Market Value”?
The central question was not whether premium was payable but on what value the 6% premium should be calculated.
The Court examined Rule 4(6) of the Maharashtra Stamp (Determination of True Market Value of Property) Rules, 1995.
That Rule ordinarily permits comparison with the annual statement of rates. But its proviso recognizes that where property is sold or allotted by specified public authorities at a determined price, that determined value is treated as the true market value. ROHSTOFFE
This became important because the 2017 GR itself had chosen the Stamp Duty valuation framework as the benchmark for calculating transfer premium.
The State therefore could not borrow the Ready Reckoner mechanism from the Stamp regime while ignoring the qualifications built into the very same valuation framework.
One Transaction Cannot Rationally Have Two Market Values
The Court identified the practical anomaly in the State’s case.
For Stamp Duty purposes, the property would effectively be valued at its ₹2.65 crore Court-approved auction price.
Yet for transfer premium, Maharashtra wanted to treat exactly the same property and exactly the same transaction as having a market value of approximately ₹5.93 crore.
The Court found that approach irrational.
The difference between the two figures was approximately 123% of the auction purchase value. ROHSTOFFE
Justice Somasekhar Sundaresan held that the Ready Reckoner value is:
“not a value cast in stone”
Where the valuation framework itself recognizes a properly determined transaction value as true market value, that principle must also inform computation of the Section 37A premium. ROHSTOFFE
Court-Monitored Auction Represents Genuine Price Discovery
The Court attached considerable importance to the nature of the transaction.
This was not a private bargain between two parties capable of suppressing the consideration. The property had been auctioned by the Official Liquidator under supervision of the Company Court, and the sale price had received judicial approval.
The Court relied upon the Supreme Court’s decision in Registrar of Assurances v. ASL Vyapar Pvt. Ltd., which recognizes a public auction through a Court process as one of the most transparent mechanisms for discovering the correct market value of property. ROHSTOFFE
The Court accordingly held that the Auction Purchase Value represented the true market value and could not simply be ignored in favour of a notional Ready Reckoner figure. ROHSTOFFE
Silence in the 2017 GR Could Be Filled by Common Sense
The 2017 GR did not expressly say what should happen where the property was sold through a Company Court-monitored auction at a judicially approved price.
The Court treated this as a legislative/policy silence, rather than an instruction requiring blind application of the Ready Reckoner.
Relying upon the Supreme Court’s reasoning in Union of India v. G.S. Chatha Rice Mills, Justice Sundaresan observed that every conceivable factual situation cannot be anticipated when legislation or subordinate instruments are framed.
The silence therefore had to be resolved through a rational interpretation consistent with the statutory framework, rather than an interpretation producing an absurd result. ROHSTOFFE
Holding on Transfer Premium
The Court ultimately formulated a significant proposition:
Where an interest in Government land is sold through an auction conducted under the oversight of the Company Court and approved by the Company Court, the Court-approved auction price is the value upon which the 6% component under the 2017 GR must be calculated. ROHSTOFFE
Accordingly, in this case the relevant base value is:
₹2,65,00,000 — not ₹5,93,26,567.
However, this does not automatically mean that ₹15.90 lakh is necessarily the final premium.
The 2017 GR formula must still be applied. The amount payable is the higher of:
₹2,000 per sq. ft.; or 6% of ₹2.65 crore.
The Court directed the State to recompute the premium accordingly.
Refund With 6% Interest
The auction purchaser had already deposited ₹35,59,600 pursuant to the interim arrangement.
The Court directed that after recalculation under the correct formula, whatever amount had been paid in excess must be refunded with interest at 6% per annum from the date of deposit until actual payment.
The refund must be made within eight weeks from uploading of the judgment on the Bombay High Court website. ROHSTOFFE
Common Amenity Fund — Society Succeeds
Rohstoffe did not succeed on the second financial dispute.
Mittal Court Premises Co-operative Society claimed ₹3,92,515 as contribution towards its common amenity fund.
The Court examined the Society’s bye-laws and the resolution passed by its general body. It also considered the Supreme Court’s decision in Venkatesh Premises, which recognized the legitimacy of such common amenity funds for premises societies. The Court noted that the relevant restriction applicable to housing societies did not invalidate this premises society’s levy. ROHSTOFFE
Under Clause 14 of the auction conditions, outgoings arising after confirmation of sale were to be borne by the auction purchaser.
The common amenity contribution therefore legitimately fell upon Rohstoffe and could not be shifted onto the liquidation estate.
The Court expressly held that there would be no refund of the ₹3,92,515 common amenity fund contribution.
Any other amount paid by Rohstoffe towards past Society dues already discharged from the liquidation sale proceeds, however, was required to be refunded with 6% interest. ROHSTOFFE
Precedent Analysis
Aspi Chinoy v. State of Maharashtra: The earlier proposition restricting premium demands could no longer govern after the statutory introduction of Section 37A.
State of Maharashtra v. Kamal R. Bulchandani: Established that Section 37A supplies the statutory basis for charging premium upon transfer of units constituting an interest in Government leasehold land. The Single Judge treated this as binding.
Hindustan Unilever Ltd. v. State of Maharashtra: Supported the validity of Sections 37A and 295 while recognizing that an onerous, excessive or unreasonable Government valuation methodology could independently be challenged. ROHSTOFFE
Bharat Bijlee Ltd. v. State of Maharashtra and Collector of Stamps v. Pinak Bharat: Though arising under Stamp Duty law rather than Section 37A, these authorities provided strong guidance that a value genuinely determined through an authoritative sale process represents true market value. ROHSTOFFE
MIDC v. Transpower Engineering: Distinguished because the charges there were contractual rather than the statutory Section 37A premium. Nevertheless, it supported recognition of the special character of a Company Court-supervised involuntary sale. ROHSTOFFE
Registrar of Assurances v. ASL Vyapar Pvt. Ltd.: Particularly important. The Supreme Court recognized a Court-monitored public auction as a highly transparent mechanism for discovering market value and cautioned against revenue authorities effectively sitting in appeal over a Court-approved price. ROHSTOFFE
Court’s Reasoning
The judgment draws an important distinction between liability to pay premium and valuation for computing that premium.
The State undoubtedly retained statutory power under Section 37A to charge transfer premium even though the transfer resulted from liquidation proceedings.
But that statutory power did not justify treating a notional Ready Reckoner figure as sacrosanct where a transparent Company Court auction had already established the actual value of the specific property.
Because the 2017 GR itself imported the Stamp Duty valuation framework, the State could not selectively rely upon the Ready Reckoner while disregarding the same framework’s recognition of authoritative transaction values.
The Court therefore harmonised the two regimes rather than allowing the same transaction to carry fundamentally inconsistent “market values.”
Conclusion
The Bombay High Court held that:
The State may levy transfer premium under Section 37A, but in a Company Court-approved auction the 6% component must be calculated using the ₹2.65 crore Auction Purchase Value, not the ₹5.93 crore Ready Reckoner Value.
The State must recompute the premium using the 2017 GR formula—the higher of ₹2,000 per sq. ft. or 6% of ₹2.65 crore—and refund any excess already collected with 6% annual interest within eight weeks.
The Society’s ₹3,92,515 common amenity fund demand was upheld and remained payable by Rohstoffe. Any duplicate/excess payment relating to past Society dues was to be refunded with 6% interest.
The Interim Application was disposed of with no order as to costs. The Court clarified that separate pending applications concerning the Official Liquidator’s adjudication were not being decided by this judgment.
Case Details
Case: Rohstoffe International Pvt. Ltd., in the matter concerning the Official Liquidator of Sonal Garments (India) Pvt. Ltd. v. Collector, Mumbai & Ors.
Neutral Citation: 2026:BHC-OS:21403
Court: High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction
Proceeding: Interim Application No. 2173 of 2019 in Official Liquidator Report No. 153 of 2019 in Company Petition No. 9 of 2010 ROHSTOFFE
Judge: Justice Somasekhar Sundaresan
Date: 30 September 2026 ROHSTOFFE
Property: Office Unit No. 134-A, Mittal Court, Nariman Point, Mumbai
Auction Purchase Value: ₹2.65 crore
Ready Reckoner Value: ₹5,93,26,567
Core provision: Section 37A, Maharashtra Land Revenue Code, 1966
Result: Auction purchaser succeeded on the valuation issue; State’s power to levy transfer premium and Society’s common amenity fund charge were upheld.
