All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.
Auction sales are permissible, as evidenced by the narration of Anas Ibn Malik (May Allah Be Pleased with him): A man from the Ansar came to the Prophet (peace and blessings be upon him) asking for assistance. The Prophet (peace and blessings be upon him) said: "Do you not have anything in your house?" He replied: "Yes, a blanket that we wear partly and spread partly, and a cup from which we drink water." The Prophet (peace and blessings be upon him) said: "Bring them to me." So the man brought them, and the Messenger of Allah (peace and blessings be upon him) took them in his hand and said: "Who will buy these?" A man said: "I will take them for a dirham." The Prophet (peace and blessings be upon him) said: "Who will offer more than a dirham?" twice or thrice. Another man said: "I will take them for two dirhams." So he gave them to him, took the two dirhams, and gave them to the Ansari. [Abu Dawud].
Therefore, it is permissible for a judge to sell the property of a debtor or bankrupt individual to settle their debts, provided that the sale serves the owner's best interest and yields the highest possible benefit, and that it is free from collusion among merchants and prospective buyers to fix a price.
In this regard; Al-Imam Al-Khatib Al-Shirbini (may Allah have mercy on him) stated: "The judge should ideally conduct the sale in the presence of the bankrupt individual, their agent, or the creditors or their agents, as this dispels suspicion and brings peace of mind. The bankrupt individual may disclose any defects in the property to avoid its return, or highlight its desirable qualities to attract buyers. They are also more knowledgeable about the value of their property, thus avoiding undervaluation. Creditors may also bid higher for the item. It is preferable for the owner or their agent, with the judge’s permission, to conduct the sale. This ruling is not limited to bankrupt individuals but applies to any debtor who refuses to pay; however, for non-bankrupt debtors, the judge has the discretion to choose between conducting the sale or compelling the debtor to sell, as mentioned in Ziyadat Al-Rawdah from the fellow scholars (Shafi scholars).
The sale should ideally be conducted in the appropriate market for each item, as demand is higher there and suspicion is minimized. Real estate should be publicly announced to attract interested buyers. If the item is sold outside its typical market for a price equivalent to its market value, it is permissible. However, if there is a specific interest for the bankrupt individual or the creditors in holding the sale in a particular market, it becomes obligatory... The sale must be conducted for a price equal to or greater than the market value, payable in the local currency, as explicitly stated in "Al-Muharrar." Since the transaction is conducted on behalf of others, the agent must prioritize their interests, as outlined. If the judge deems it in the interest of the parties to sell for an amount equivalent to their claims, it is permissible." [Mughni Al-Muhtaj/vol.3/pp.105].
In contemporary court practices, the judge is entrusted with overseeing such matters to ensure the interests of the disputing parties are upheld.
In conclusion, it is permissible to conduct public auction sales, provided they yield the most beneficial price for the owner. And Allah The Almighty Knows Best.
