Can an auction house legally bid on its own lots — and what is shill bidding under Indian law?
Section 64 of the Sale of Goods Act creates a clear distinction: if the seller has expressly reserved and disclosed the right to bid, a seller-side bid is legal. If not disclosed, any bidding by the seller — or by any person knowingly employed by the seller to bid — allows the buyer to treat the sale as fraudulent. 'Pretended bidding' to artificially raise the price makes the sale voidable at the buyer's option. Undisclosed shill bidding is also potentially criminal under BNS §318 (cheating).
Sections 64(c), 64(d), and 64(f) — the complete shill bidding framework
| SGA §64(c) | A right to bid may be reserved expressly by or on behalf of the seller and, where such right is reserved, but not otherwise, the seller or any one person on his behalf may bid at the auction. |
| SGA §64(d) | Where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; any sale contravening this rule may be treated as fraudulent by the buyer. |
| SGA §64(f) | If the seller makes use of any pretended bidding to raise the price, a sale may be treated as voidable at the option of the buyer. |
These three provisions together create the complete framework. Disclosed vendor bid: legal (§64(c)). Undisclosed seller bidding: fraudulent — sale voidable by buyer (§64(d)). Shill bidding (pretended bids to inflate price): sale voidable (§64(f)). The remedy under SGA is civil — the buyer can void the sale and recover their money. But shill bidding can also be criminal.
Criminal liability — BNS §318 and IT Act §66D
Undisclosed shill bidding at a numismatic auction is a false representation that induces the buyer to pay more than they otherwise would have — a textbook cheating scenario within BNS Section 318. A seller or auction house that plants a bidder in an online auction to drive up prices, knowing the bidder will not actually buy the lot, is making a false representation (that there are genuine competing bidders) that induces higher bids from genuine bidders. This is BNS §318 cheating.
For online shill bidding where the shill uses a false account or another person's identity: IT Act Section 66D (cheating by personation using computer resources) additionally applies. An auction house that creates multiple fake bidder accounts to inflate prices has committed both BNS §318 cheating and IT Act §66D personation — a serious combination carrying significant criminal exposure.
Laws & authorities referenced in this chapter
Sale of Goods Act 1930 — §64(c) (disclosed vendor bid: legal), §64(d) (undisclosed: fraudulent), §64(f) (pretended bidding: voidable)
BNS 2023 — §318 (cheating — shill bidding is criminal misrepresentation)
IT Act 2000 — §66D (cheating by personation using computer resources — online shill bidding)
Vendor bidding: legal ONLY if disclosed before auction (SGA §64(c)). Undisclosed seller bidding: sale is fraudulent and voidable by buyer (§64(d)). Shill/pretended bidding: sale voidable at buyer's option (§64(f)). Criminal liability: BNS §318 (cheating — false representation inflating bids). Online shill with fake accounts: IT Act §66D (personation) additionally applies. Buyer remedy: void the sale and recover payment. Practical check: verify if seller's right to bid was disclosed before bidding.
This is educational content, not legal advice. For a specific situation, please consult a qualified legal professional. Excerpted from Currency, Coins & The Law by Mayank Agarwal, Part 17: Auctions — Formal Houses, Facebook Live & the Complete Legal Framework.