How we disputed a land auction held without considering the participant's price

On August 12, 2024, the Voronezh Region Arbitration Court granted OOO SKhP Novomarkovskoye's claim to invalidate the auction, contract, and apply the transaction's invalidity consequences. 

We previously reported on the beginning of this story. During an in-person auction to finalize a lease agreement for an agricultural land plot, the auction organizer overlooked OOO SKhP Novomarkovskoye's raised card, recognized another legal entity as the winner. So the lease agreement was signed with it. 

In the Office of the Federal Antimonopoly Service, we were able to establish the presence of antimonopoly violations during the auction. This decision served as a catalyst for us to proceed because the lease agreement had already been signed with another person, and the land had already been used for his activities. Unfortunately, once the contract is signed at the auction, the Antimonopoly Service is not able to influence it. The auction and the contract concluded as a result of its holding can only be challenged in court, as we did. 

Recognizing that legal proceedings do not always proceed quickly, we, among other things, filed an application with the court requesting the application of interim measures to the parties to the concluded contract. These measures take the form of a ban on the disposal of lease rights to the land plot in order to prevent the transfer of the lease right to a bona fide third party. Because these actions would eliminate for us the possibility of applying the consequences of the transaction's invalidity. 

We needed to confirm that the plaintiff was an interested party in the claim before we could file it. Participants in such a procedure are among the interested parties who have the right to challenge the mandatory procedure and the contract entered into with the winner (contestable transaction). Our client was a participant in the auction, as confirmed by the protocol for participant recognition. 

Our main evidence was the same decision of the Office of the Federal Antimonopoly Service that established antitrust violations in the auction organizer's actions, the legality of which the auction organizer was unable to contest in court. 

To declare the auction and the resulting contract invalid, a number of conditions must be met: 

• The existence of a violation of Article 17 of the Federal Law "On the Protection of Competition". In our case, the procedure for determining the winner of the tender was violated, as it was confirmed by the FAS decision;
• Infringement of the applicant's rights as a market participant; the legally protected interest of the interested party in such recognition and application of the consequences. In particular, whether there is an actual possibility of restoring the plaintiff's rights. For example, could this person become the winner in the absence of violations of the procedure, competitive procurement based on the entire set of conditions of the auction? In this case, the violation of the procedure for determining the winner of the auction led to the violation of the plaintiff's rights in the sphere of economic activity deprived him of victory in the auction and the right to conclude a lease agreement for a land plot necessary for carrying out agricultural activities. The plaintiff could become the winner of the procurement in the absence of violations of the procedure, because he was ready to offer a price for the annual rent higher than that offered by the winner of the auction. 

The court found our arguments to be well-founded, satisfied the claim, declared the auction and the contract that resulted from it invalid, and applied the consequences of the transaction's invalidity in the form of the parties returning everything received under it.