AUCTION AS AN AVENUE FOR VALUERS
By Lt. Col. J.S.Danke (Nashik)
1. INTRODUCTION- Although everybody is generally conversant with auction it is considered worthwhile to know more about this subject as an avenue for valuers. I was introduced to this subject in MES; however I got a better idea in PVA (I) seminar held at Khandala where our founder president Mr. Shreekant Joglekar had explained intricacies in the subject.
2. TYPES OF AUCION-
(a) Public Auction-A sale by public auction is held at a publicly advertised time and place. This is best to achieve highest sale value. Subject to the sale content and the probable realization , the advertising budget must be drawn to use as much of the print media as the sale content warrants.
However there can be and will be restrictions laid down by the auctioneer. Following extract in this regards is pertinent- “ Auctioneer is God in his own auction room” is a phrase that has been used in the past and, violation of the laws of the land excepted, the auctioneer can conduct the auction sale as he sees fit. All the attendant public is there by his invitation which can be withdrawn if he so decides. He can refuse to accept bids but cannot vary published conditions of sale after the fall of hammer, nor at the close of the sale or before offering a particular lot. However he can impose additional conditions of sale verbally prior to either the start of the sale or before offering a particular lot. Mistakes in description or other published details of the sale must be rectified before the start of the sale or preceding the offering of the lot described in error.
(b) Private Auction-This type of sale is prepared and executed in exactly the same way as a public sale, except that the marketing is confined to diret invitations to to particular individuals or companies only, usually arranged by thevendor. For the same reason as apply to a sale by private tender, the restrictions of invitation to a small number by reason of exceptional circumstances is almost self-defeating and is usually never used in the disposal of industrial plant and machinery.
(c) ‘Dutch Auction’-This is so called because it is a common method of sale in Holland at the port auction halls for perishable goods. It operates in reverse in that the auctioneer starts by asking for a particular purchase bid in excess of a probable market value of the lot at the moment of offer and then reduces his bid request at stage intervals, indicated by a bid time clock visible to all.The first buyer to agree a lot purchase as the offer price descends is the buyer of the lot.
3. MARKETING OF ASSETS- It is of little avail to execute the sale instructions efficiently in the layout and cataloguing and to be fairly accurate in estimate of realization if the publicizing of the sale is weak and ineffective. A public advertising programme needs to be as cost effective as possible and subject to the likely sale realization. Hence advertisement should be done in local, national and if required international advertisements with some advertisement to attract general public and some to attract users and dealers in the trade concerned.
4. Advertisement must appear three to four weeks prior to the sale in perhaps two to three trade publications and it is a good practice to use reminder advertisements a week before the sale. Copy dates of publications must taken into account since some publications require a month’s copy date.Secialist publications require two months lead time. Time for distribution and their method of distribution should be taken into account. As the advertisements will need catalogues the same need to be agreed with the client, printed, bound and ready for distribution by the time first advertisement appears. Specialist publications for which bidders subscribe must be found and advertised accordingly.
5. Other methods of publishing the sale is to direct mail cards to relevant agency general mailing list, email, tele-fax, yellow pages etc.
6. The third source of likely buyers can be vendor client themselves. Their trade competitors will perhaps have known. If the assets to be sold are unusual then the vendor will be aware of the fact and a list of possible buyers from such a vendor in an unusual trade can be almost vital.
7. The fourth group can be manufacturers of the various items of plant and machinery.Many major manufacturers operate a used machine disposal department and are in the best position to renovate their own machines for resale. Others will have a company policy to re-purchase their machine so as to improve the possibility of their sale of newer models by disposing of the used plant to overseas buyers.
8. Finally time must be sent on telephone contacting users and dealers whom it is known will be interested in some or all of the assets on offer. As the advertisements are usually non cmmital about the condition of the assets to be sold, confirmation by telephone from the sale agent that the sale is worth the time and trouble to attend will often encourage a buyer to attend. However, possible buyers should not be encouraged to attend a sale of poor content by untrue descriptions of the condition of the lots to be sold or future attempts or future attempts to persuade may be ignored.
9. ADMINISRATIVE ARRANGEMENTS
(b) Contolled entry.
(d) PA System.
(e) Police as required.
10. IMPORTANCE OF DISCIPLINE- All categories of people attend the auction including those who have intention to foil the proceedings of auction; especially where attached properties are being auctioned. Therefore a systematic conduct and enforcement of discipline helps in the smooth conduct of auction. Evidently there is a better chance of getting higher bid when bidders get interested in the proceedings of auction and are able to hear the bid clearly. Help of police must be requested where disturbance is anticipated.
11. WHAT DOES OPEN AUCTION INVOLVE-
(i) Inspection & inventory of items to be auctioned and numbering at site.
(iii) Valuation-FSV & MRP.
(b) Advertisement in news paper for date & time of auction, caution money etc.
(c) Inspection of assets by interested parties in the stipulated period.
(d) Administrative arrangements.
(e) Receiving caution money, issue of token numbers & documentation.
(f) Clarification on terms of reference.
(g) Start of bidding.
(i) Recording of bidding.
(j) Acceptance of highest bid.
(k) Documentation of highest bidder and photograph.
(l) Tea etc. as convenient.
(m) Establishment of security/ lock.
(n) Payment of first installment by highest bidder as decided.
(o) Payment of final installment.
(p) Dismantling and removal of assets by the party under supervision of custodian.
12. TERMS & CONDITIONS (ATT)
(b) Last minute entries.
(c) Offering cash instead of draft.
(d) Sponsored bidders.
14. WHERE BUSINESS CAN BE EXPLORED-
(c) Private parties.
(d) Unclaimed properties at yards to be disposed.
Employes Providend Fund Organisation,
Auction on Friday, 29th June 2005.
This documents forms part of auction catalogue.
1. Price of printed catalogue. : Rs. 100/- ( non refundable ) and to be produced while entering the Auction Hall.
2. Date & Time for inspection : 27th June2005- Between 10.00 to 17.00 hr 28th June2005- Between 10.00 to 16.00 hrs.
3. Venue of inspection : Metal Carbides, plot No.xx,MIDC,xx
4. Venue of Auction Metal Carbides, plot No.xx,MIDC,xx
4. Day, date and starting time of auction Friday,29th June2005 at 10.00hrs.
5. Registration for participating bidders One hour before the starting time. Bidders
are requested to occupy their seats allotted
to them at least ten minutes before the
Condition for participation
1. This stubbed portion would be collected at the entrance of the Auction Hall.
(This is just Entry Permit for the Auction being held on Friday, 29th June 2005. for our client Container Corporation of India Ltd.)
2. Unless you are depositing a Caution Money of Rs. 25,000/- ( Rupees Twenty five thousand only) by Demand Draft, you would not be permitted to participate in the Bidding CASH WILL NOT BE ACCEPTED.
3. Caution money Deposited will be adjusted against Earnest Money of Bid Amout.
4. Use of Mobile Phone and cross talks is strictly prohibited.
The above referred date for auction is liable to be postponed in case of any un- scheduled/ unforeseen Holiday/ Bandh etc. Please reconfirm the time and venue OR record it from the Notice displayed at the venue of auction.
DISPOSAL BY PUBLIC AUCTION
Items listed in this catalogue are for reference only.
GENERAL CONDITIONS OF SALE
1. SELLER – Seller referred in these conditions of sale, is the Employees Provident Fund Organisation, Nashik through their officers. All Payments are to be drawn in favour of the Regional Commissioner of EPFO, Nashik payable at Nashik.
2. AUCTIONEER – XYZ is an auctioneer to facilitate organizing and conducting an auction and are considered as third party not particularly interested in the item being sold for and on behalf of the Employees Provident Fund Organisation, Nashik.
3. REGISTERD BIDDER- Any person representing as an individual OR as proprietor OR as a partner OR as an authorized representative of any company and who is paying the caution money deposit of Rs. 25,000/-and getting registration at the reception is considered as a registered bidder. One individual can represent as a bidder on his own behalf and on behalf of other companies provided he registers himself in those capacities. Bidder must read the terms and conditions of the auction sale very carefully and then only place his signature on the form. “Confirmation of Acceptance of Sale Conditions”. He is also expected to record his address in a BOLD capital letters, Telephone Numbers, Fax No. as the communication would be forwarded only at that address.
4. The prospective bidders shall have to deposit a caution money of Rs. 25,000/- (refundable) adjustable against Earnest Money by way of Demand Draft favouring Regional Commissioner of EPFO, Nashik payable at Nashik. CASH WILL NOT BE ACCEPTED..
5. Use of mobile phones and cross talk is strictly prohibited . Bidders are requested to keep the mobile phone out of the auction hall and / or deposit with the security. However, if anyone is receiving a call on mobile OR is found making any call from mobile instrument, his caution money of Rs. 25000/- would be immediately forfeited and debarred from participation.
6. Once the bidder is making his offer for a particular lot, when auction is in progress, them he should only look at the auctioneer ( CRYER) and should not interact with anyone OR make nay signals OR pass any messages through a friend accoumpanying him. Violation this condition means losing your caution money, may please be noted.
7. Bidders are expected to adhere to the business ethics and necessary discipline.
8. Bidders are expected to occupy the seats allotted to them and preferably in the front rows and should not shift to any other seat. Violation of this condition means losing your caution money, may please be noted.
9. If the bidders fails to pay the required Earnest Money proportionate to the full bid price as required after the lot is knocked down in his favour, the bid shall forth with stands cancelled and the lot shall be re-auctioned at the risk and cost of the defaulting purchaser who shall be responsible for the deficit if any in the price, but shall not be entitled to any increase arising from such re-sale. EMPLOYEES PROVIDENT FUND ORGANISATION, NASHIK RESERVES THE RIGHT TO TAKE SUCH ACTION AGAINST DEFAULTING BIDDERS AS IT DEEMS FIT AND/ OR CAN DEBAR THE SAID BIDDER FROM BIDDING IN THE CURRENT AND / OR FUTURE AUCTIONS ALSO.
10. Please note that the badge showing Bidder No. is visible to the CRYER/ AUCTIONEER while making a bid.
11. Once the auction starts, please do not change your seating location.
CONDITONS OF SALE
12. Goods are being sold on ‘ AS IS and WHERE IS BASIS’
13. The lot or lots shall be removed in full from the site with whatever faults and flaws in description or otherwise and no selection or sorting of the material will be allowed. Quantities, Quality, sizes, measurements, numbers and weights stared are approximate.
14. Goods are sold on the assumptions that the bidder has inspected the lot prior to bidding and knows what he is bidding for. No complaint shall be entertained after the lot is once knocked down in bidder’s favour.
15. List of items has been given as a general information only however it is clearly understood that the condition of machines, quantities etc. may not necessarily be of exact description, quantity, weight, size, dimensions, specifications, features etc.
16. The assets offered may be with drawn from the sale at any time before it is actually physically delivered out of the campus without disclosing the reasons for such withdrawal. However, if any payment has been made it would be refunded.
17. The highest bid shall be subject to confirmation by the auctioneer. In the event of any dispute at last or highest bid, the same shall be resolved by EPFO, Nashik and if need be the assets in question may re-auctioned at the discretion of EPFO,Nashik.
18. Announcements during the auction including announcements of additional conditions OR correction in the catalogue and / or additions or deletions of items being offered for sale will be done EPFO, Nashik and it is binding on the bidder.
S.T.A./ S. T.C.
19. Offers taken as Subject To Approval / Subject to Confirmation shall be decided on or before fifteen working days excluding the day of auction and holidays and the terms of payment would be on the same principles as is recoded in the Clause No. 22 i.e. Payment of Balance Money. for the purpose of calculating the number of days, the date of communication would be considered as if it is the date of auction.
PAYMENT OF EARNEST MONEY
20. As a natural practice, at the fall of hammer the auction call for a particular lot is deemed to be concluded and the bidder in whose favour the hammer falls has to pay by Demand Draft or in cash 25% of bid money in case of confirmed acceptance and 10% in case of subject to confirmation/ approval has to be deposited as the spot payment.
21. No Bidder shall after bidding, pay an amount, which is less than the amount fixed by the auctioneer, or retract a bid.
PAYMENT OF BALANCE MONEY (Example only)
22. The buyer shall pay Balance of the purchase price within seven days of auction. (05 July 2005-The last date for payment )
23. If the purchaser fails to make payment and / or take delivery of the material. EPFO shall have the right to auction the un-delivered material immediately in the next auction without any intimation to the successful bidder and the bid money deposited by the bidder shall be forfeited.
24. The cost of material handling i.e. removal, transportation etc. shall be borne by the bidder at his own cost.
25. Dismantling and removal should commence within 2 days ( FREE PERIOD) from the date full payment is made( Clause No.21) and in any case within 7 days.
26. All ‘bids’ invited are for the net amount accruable to EPFO and all relevant taxes, levies, excise etc. as applicable shall be payable by the bidder and these taxes shall be treated as extra and are expected to be paid before taking delivery.
27. It is expressly made clear that, all the taxes, i.e. State Excise Duty, Sale Tax, Octroi etc. shall be borne by the purchaser. However, Sales Tax shall be paid before removal of plant & machinery EPFO.
28. The plant & machinery shall be lying in the premises after the conclusion of the bidding at the sole risk and cost of he purchase in all respect and the bidder should employ his security and take remove the same at his own expenses at the earliest and in any case not later than the period prescribed above.
29. Delivery of goods will commence effective from 3rd July 2005 subject to receipt of full payment by the EPFO.
30. Goods are being sold on “ As is and Where is basis” i.e.basis. Items indicated OR quantities recorded in the list are approximate. EPFO, Nashik shall not take the responsibility with reference to items and quantities, condition etc. Bidders are participating for the plant and machinery which is offered. The decision of EPFO, Nashik shall be final and binding in this regard.
31. EPFO, Nashik reserves the right to modify and amend ‘Terms and Condition’ and announce the same if need be while the auction is in progress of prior to commencement of auction.
32. EPFO is not bound to accept the highest offer.
DISPUTES ( Example only deleted for EPFO BEING NOT APPLICABLE)
33. In case of any dispute, the same shall be referred to a single arbitrator, to be appointed by the EPFO and the Arbitration proceedings would be governed by ‘Arbitraion and Concilaton Act’ 1996.
34. The fees and expenses towards arbitration proceeding shall be shared, equally, by the parties to the dispute and shall be paid in advance to the auctioneer. The jurisdiction for appealing against the award in a court, or any other proceeding under the Arbitration Act, shall be that of courts in Nagpur City only.