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Section 123: Sections 76 to 123 [Repealed by the Indian Sale of Goods Act, 1930]

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
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Act 1872
Section 122 All 266 Sections of Indian Contract Act Section 124

Legal Commentary & Landmark Judgments: Section 123

Historical Section 123 of the Indian Contract Act, 1872 established the statutory rules governing sales of goods by auction, regulating the completion of the sale by the fall of the hammer, the right of the seller to set a reserve price, and the absolute prohibition against fraudulent bidding or 'puffing' by the seller. Codified into Section 64 of the Sale of Goods Act, 1930, this section establishes market transparency in commercial auctions.

  • Completion upon Fall of Hammer: In an auction sale, each lot is prima facie deemed to be the subject of a separate contract of sale, and the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; until such announcement, any bidder may retract his bid.
  • Reserve Price and Bidding Rights: A sale may be notified to be subject to a reserved or upset price, and a right to bid may be expressly reserved by or on behalf of the seller.
  • Prohibition Against Puffing / Sham Bidders: If the seller makes use of pretended bidding to raise the price without notifying the bidders of his right to bid, the sale is voidable at the option of the successful purchaser on grounds of statutory fraud.
Key Landmark Precedents:
  • K.N. Guruswamy v. State of Mysore AIR 1954 SC 592: The Supreme Court held that public auctions conducted by the State or public authorities must adhere strictly to fair competition and public notice rules; private negotiations conducted behind the backs of auction bidders violate Article 14 and auction law principles.
  • Green v. Baverstock (1863) 14 CB (NS) 204: Foundational common law precedent holding that where an auction sale is advertised without reserve, the secret employment of a puffer by the vendor to bid up the price renders the transaction voidable at the instance of the purchaser.
Courtroom Practice & Strategic Litigation Guidance:

When challenging an auction sale (whether SARFAESI, insolvency, or commercial), examine whether the auctioneer permitted secret bids or failed to disclose a reserve price. If puffing is suspected, file an application to summon the bidder logs and KYC records of rival bidders to prove collusive price inflation, entitling the client to avoid the sale under Section 64(6).

Section 122 All 266 Sections of Indian Contract Act Section 124