All perfect praise be to Allah. Blessings and peace be upon Prophet Mohammad and upon his family and righteous companions.
It is permissible for the Sharia judge to sell the property of the debtor, or the insolvent to pay their creditors, provided that the price is in the best interest of the owner. At least, the property should be sold in its market price, and that the judge adheres to the rulings stated in the books of the Muslim jurists.
The evidence for its permissibility is the Hadith reported from Anas Bin Malik in Sunan Abu Dawood and al-Tirmizi: "a person came to the Prophet (Sallallahu Alaihi wa Sallam) begging from him. He asked: "Have you nothing in your house?" He replied: 'Yes', a piece of cloth, a part of which we wear and the other part of it we use as mat, and a wooden bowl from which we drink water'. The Prophet (Sallallahu Alaihi wa Sallam) said: "Bring them to me". He then brought these articles to him and he the Prophet (Sallallahu Alaihi wa Sallam) took them in his hands and asked: "Who will buy these?" A man said: 'I shall buy them for one Dirham'. Then the Prophet (Sallallahu Alaihi wa Sallam) asked twice or thrice: "Who will offer more than one Dirham?" A man said: 'I shall buy them for two Dirhams', … etc.”
[Moghni Al-Mohtajj] a Shafite book, states: “It is recommended that the judge conducts the selling process in the presence of the insolvent, or his deputy, and the creditors, or their deputy because this way protects the judge from any accusations and achieves satisfaction. It also allows the insolvent to point out the defects of his property so that the buyer doesn`t return it. The insolvent also makes sure that he isn`t being tricked because he knows the value of his property. This way also prevents the creditors from selling the property for more than its price and get more than what the debtor owns them.
It is better that the owner of the property (debtor), or his deputy conduct the sale after obtaining the permission of the judge.
The aforesaid ruling also applies to every debtor abstaining from repayment since the judge has the authority to make him sell his property in order to pay his creditors.
It is also recommended that the judge sells every property in its own market since there is more demand for it and the judge alienates himself from any sort of accusation. It is recommended that he announces that the real estate is for sale so that buyers would know about it. He is also allowed to sell it for its market price in a place other than its market."
The judge should also sell it for its market price, or higher than it in instant cash. Nowadays, such transactions are conducted by courts in the best interest of the litigants.
If the sale was conducted in line with the aforesaid conditions, then it is permissible and lawful. However, if the buyer, the one on whom the auction settled, knew that the price of the property was lower than its market price, and that the owner (debtor) wasn`t happy about it, then it is better that he doesn`t buy it. And Allah Knows Best.
